WEST BANCORPORATION INCWTBA
WEST BANCORPORATION INC Income Taxes Disclosure
Income Taxes
The Company files income tax returns in the U.S. federal and various state jurisdictions. Income tax returns for the years 2022 through 2025 remain open to examination by federal and state taxing authorities. No material income tax related interest or penalties were recognized during the years ended December 31, 2025, 2024 or 2023.
The following table shows the components of income taxes for the years ended December 31, 2025, 2024 and 2023.
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 6,579 | $ | (645) | $ | 3,485 | |||||||||||
| State | 1,927 | 1,056 | 1,717 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 349 | 2,573 | 226 | ||||||||||||||
| State | 3 | 409 | 221 | ||||||||||||||
| Income taxes | $ | 8,858 | $ | 3,393 | $ | 5,649 | |||||||||||
Total income taxes for the years ended December 31, 2025, 2024 and 2023 differed from the amount computed by applying the U.S. federal income tax rate of 21 percent to income before income taxes, as shown in the following table.
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percent of Pretax Income | Amount | Percent of Pretax Income | Amount | Percent of Pretax Income | ||||||||||||||||||||||||||||||
| Income taxes at statutory federal tax rate | $ | 8,698 | 21.0 | % | $ | 5,763 | 21.0 | % | $ | 6,255 | 21.0 | % | |||||||||||||||||||||||
| State income tax expense, net of | |||||||||||||||||||||||||||||||||||
| federal income tax benefit | 1,588 | 3.8 | 1,267 | 4.6 | 1,395 | 4.7 | |||||||||||||||||||||||||||||
| Tax credits | |||||||||||||||||||||||||||||||||||
| Low income housing credits | (660) | (1.6) | (740) | (2.7) | (730) | (2.4) | |||||||||||||||||||||||||||||
| New markets tax credit | — | — | (768) | (2.8) | (768) | (2.6) | |||||||||||||||||||||||||||||
| Energy-related investment tax credit | (614) | (1.5) | (1,842) | (6.7) | — | — | |||||||||||||||||||||||||||||
| Nontaxable or Nondeductible Items | |||||||||||||||||||||||||||||||||||
| Tax-exempt interest income | (1,175) | (2.8) | (1,404) | (5.1) | (1,445) | (4.9) | |||||||||||||||||||||||||||||
| Nondeductible interest expense to | |||||||||||||||||||||||||||||||||||
| own tax-exempt securities | 973 | 2.3 | 1,261 | 4.6 | 1,057 | 3.5 | |||||||||||||||||||||||||||||
| Tax-exempt increase in cash value of | |||||||||||||||||||||||||||||||||||
| life insurance and gains | (253) | (0.6) | (236) | (0.9) | (364) | (1.2) | |||||||||||||||||||||||||||||
| Stock compensation | (72) | (0.2) | (2) | — | 5 | — | |||||||||||||||||||||||||||||
| Other, net | 373 | 0.9 | 94 | 0.3 | 244 | 0.8 | |||||||||||||||||||||||||||||
| Income taxes | $ | 8,858 | 21.3 | % | $ | 3,393 | 12.3 | % | $ | 5,649 | 18.9 | % | |||||||||||||||||||||||
In 2024, the Company recorded a tax benefit of $1,842 for an energy-related investment tax credit associated with the construction of the Company’s new headquarters building. The Company accounted for the investment tax credit using the flow-through method, recognizing the full benefit in 2024. In 2025, the Company recorded an additional tax benefit of $614 due to a change in estimate of the 2024 energy-related investment tax credit.
On July 4, 2025, the One Big Beautiful Bill Act (the Act) was enacted into law. The Act introduces significant changes to U.S. federal income tax provisions, including:
•Permanent reinstatement of 100 percent bonus depreciation for qualifying property placed in service after January 19, 2025.
•Immediate expensing of domestic research and experimental expenditures, effective for tax years beginning after December 31, 2024.
•IRC Section 139L provided for a 25 percent exclusion of gross interest income on eligible loans. For the tax year December 31, 2025, no eligible loans were identified.
•Under ASC 740, the effects of new tax legislation are recognized in the period that includes the enactment date. Accordingly, the Company included the recognized impact of these legislative changes as of the enactment date. These provisions did not have a material impact on the consolidated financial statements.
Net deferred tax assets consisted of the following components as of December 31, 2025 and 2024.
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Allowance for credit losses | $ | 7,889 | $ | 7,866 | |||||||
| Net unrealized losses on securities available for sale | 23,036 | 31,814 | |||||||||
| Lease liabilities | 1,019 | 1,120 | |||||||||
| Accrued expenses | 236 | 220 | |||||||||
| Restricted stock unit compensation | 1,041 | 1,077 | |||||||||
| State net operating loss carryforward | 2,325 | 2,042 | |||||||||
| Other | 200 | 494 | |||||||||
| 35,746 | 44,633 | ||||||||||
| Deferred tax liabilities: | |||||||||||
| Right-of-use assets | 981 | 1,083 | |||||||||
| Deferred loan costs | 227 | 224 | |||||||||
| Net unrealized gains on interest rate swaps | 462 | 2,375 | |||||||||
| Premises and equipment | 5,572 | 5,095 | |||||||||
| New markets tax credit loan | — | 474 | |||||||||
| Other | 254 | 138 | |||||||||
| 7,496 | 9,389 | ||||||||||
| Net deferred tax assets before valuation allowance | 28,250 | 35,244 | |||||||||
| Valuation allowance for deferred tax assets | (2,325) | (2,042) | |||||||||
| Net deferred tax assets | $ | 25,925 | $ | 33,202 | |||||||
As of December 31, 2025, the Company had approximately $58,134 of Iowa net operating loss carryforwards available to offset future Iowa taxable income. The Company has recorded a valuation allowance against the tax effect of the Iowa net operating loss carryforwards, as management believes it is more likely than not that a portion of such carryforwards will expire without being utilized. No Iowa net operating loss carryforwards expired in 2025. Iowa net operating losses incurred on or before 2022 have a 20-year carryforward period. Iowa net operating losses incurred in or after 2023 do not expire.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Mar 3, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.