AUBURN NATIONAL BANCORPORATION, INCAUBN
AUBURN NATIONAL BANCORPORATION, INC Income Taxes Disclosure
NOTE 9: INCOME TAXES
For the years ended December 31, 2025 and 2024 the components of income tax expense from continuing operations are
presented below.
Year ended December 31
(Dollars in thousands)
2025
2024
Current income tax expense
Federal
$
1,676
991
State
409
571
Total current income tax expense
2,085
1,562
Deferred income tax (benefit) expense:
Federal
(102)
473
State
(27)
(35)
Total deferred income tax (benefit) expense
(129)
438
Total income tax expense
$
1,956
2,000
Cash paid for income taxes, net of refunds, consists of the following:
Year ended December 31
(Dollars in thousands)
2025
2024
Federal
$
346
725
State - Alabama
330
519
Total
676
1,244
Total income tax expense differs from the amounts computed by applying the statutory federal income tax rate of 21% to
earnings before income taxes. A reconciliation of the differences for the years ended December 31, 2025 and 2024, is
presented below.
2025
2024
Percent of
Percent of
pre-tax
pre-tax
(Dollars in thousands)
Amount
earnings
Amount
earnings
Earnings before income taxes
$
9,211
8,397
Income taxes at U.S. federal statutory rate
1,935
21.0
%
1,763
21.0
%
State income taxes, net of federal tax effect (1)
299
3.2
388
4.6
Tax credits:
New Markets Tax Credit (2)
(58)
(0.6)
(58)
(0.7)
Nontaxable or nondeductible items:
Tax-exempt interest
(203)
(2.2)
(290)
(3.5)
Bank-owned life insurance
(87)
(0.9)
(85)
(1.0)
Return-to-provision adjustment
—
—
263
3.1
Other
70
0.7
19
0.3
Total income tax expense
$
1,956
21.2
%
2,000
23.8
%
(1) State taxes in Alabama made up the majority (greater than 50 percent) of the tax effect in this category.
(2) Tax credit investments includes tax credits and the amortization of and projected tax losses from tax credit investments.
At December 31, 2025 and 2024, the Company had a net deferred tax asset of $6.9 million and $10.2 million, respectively,
included in other assets on the consolidated balance sheet. The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are presented
below.
December 31
(Dollars in thousands)
2025
2024
Deferred tax assets:
Allowance for credit losses
$
1,802
1,726
Unrealized loss on securities
6,502
9,929
Accrued bonus
270
207
Right of use liability
39
58
Other
78
99
Total deferred tax assets
8,691
12,019
Deferred tax liabilities:
Premises and equipment
1,180
1,212
Originated mortgage servicing rights
194
224
Right of use asset
39
58
Other
384
333
Total deferred tax liabilities
1,797
1,827
Net deferred tax asset
$
6,894
10,192
A valuation allowance is recognized for a deferred tax asset if, based on the weight of available evidence, it is more-likely-
than-not that some portion of the entire deferred tax asset will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and
projection for future taxable income over the periods which the temporary differences resulting in the remaining deferred
tax assets are deductible, management believes it is more-likely-than-not that the Company will realize the benefits of these
deductible differences at December 31, 2025. The amount of the deferred tax assets considered realizable, however, could
be reduced in the near term if estimates of future taxable income are reduced.
The change in the net deferred tax asset for the years ended December 31, 2025 and 2024, is presented
Year ended December 31
(Dollars in thousands)
2025
2024
Net deferred tax asset (liability):
Balance, beginning of year
$
10,192
10,252
Cumulative effect of change in accounting standard
—
183
Deferred tax expense (benefit) related to continuing operations
129
(438)
Stockholders' equity, for accumulated other comprehensive (income) loss
(3,427)
195
Balance, end of year
$
6,894
10,192
ASC 740,
Income Taxes,
as “more-likely-than-not” to be sustained by the taxing authority. This section also provides guidance on the de-
recognition, measurement, and classification of income tax uncertainties in interim periods. As of December 31, 2025, the
Company had no unrecognized tax benefits related to federal or state income tax matters. The Company does not anticipate
any material increase or decrease in unrecognized tax benefits during 2026 relative to any tax positions taken prior to
December 31, 2025. As of December 31, 2025, the Company has accrued no interest and no penalties related to uncertain
tax positions. It is the Company’s policy to recognize interest and penalties related to income tax matters in income tax
expense.
The Company and its subsidiaries file consolidated U.S. federal and State of Alabama income tax returns. The Company is
currently open to audit under the statute of limitations by the Internal Revenue Service and the State of Alabama for the
years ended December 31, 2022 through 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 17, 2026 | Showing above |
| 2024 | Mar 11, 2025 | |
| 2023 | Mar 14, 2024 | |
| 2022 | Mar 17, 2023 | |
| 2021 | Mar 8, 2022 | |
| 2020 | Mar 9, 2021 | |
| 2019 | Mar 6, 2020 | |
| 2018 | Mar 12, 2019 | |
| 2017 | Mar 13, 2018 | |
| 2016 | Mar 3, 2017 | |
| 2015 | Mar 10, 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.