CULLEN/FROST BANKERS, INC.CFR

CULLEN/FROST BANKERS, INC. Income Taxes Disclosure

10-KFiled Feb 5, 20263 min read
Income Taxes
Income tax expense was as follows:
202520242023
Current income tax expense$117,773 $125,025 $129,229 
Deferred income tax expense (benefit)5,372 (11,600)(14,829)
Income tax expense, as reported$123,145 $113,425 $114,400 
Effective tax rate16.0 %16.3 %16.1 %
A reconciliation between reported income tax expense and the amounts computed by applying the U.S. federal statutory income tax rate of 21% to income before income taxes is presented in the following table. There were no activities or transactions that had foreign income taxes or cross-border tax effects during the reported periods. State income/franchise taxes are primarily related to the State of Texas, while amounts related to other jurisdictions were not significant, in the aggregate, during the reported periods.
202520242023
AmountPercentAmountPercentAmountPercent
U.S. federal income tax expense computed at the statutory rate$162,057 21.0 %$146,153 21.0 %$149,598 21.0 %
State income/franchise taxes, net of U.S. federal income tax effects1,628 0.2 1,343 0.2 1,527 0.2 
Effect of changes in tax laws or rates enacted during the year— — — — — — 
Tax credits(131)— (141)— (162)— 
Non-taxable or non-deductible items:
Tax-exempt interest(45,497)(5.9)(38,498)(5.5)(43,114)(6.1)
FDIC premiums5,979 0.8 5,943 0.9 5,263 0.8 
Executive compensation2,572 0.3 1,629 0.2 2,591 0.4 
Meals and entertainment2,001 0.3 1,861 0.2 1,692 0.2 
Other(925)(0.1)1,211 0.2 34 — 
Tax benefit of 401(k) dividends(2,274)(0.3)(2,281)(0.3)(2,135)(0.3)
Net tax benefit from stock-based compensation(2,265)(0.3)(3,795)(0.6)(894)(0.1)
Income tax expense and effective tax rate, as reported$123,145 16.0 %$113,425 16.3 %$114,400 16.1 %
There were no unrecognized tax benefits during the reported periods. Interest and/or penalties related to income taxes are reported as a component of income tax expense. Such amounts were not significant during the reported periods.
Year-end deferred taxes are presented in the table below. Deferred taxes are based on the U.S. statutory federal income tax rate of 21%.
20252024
Deferred tax assets:
Net unrealized loss on securities available for sale and transferred securities$219,058 $327,184 
Allowance for credit losses69,992 67,697 
Lease liabilities under operating leases62,239 64,691 
Bonus accrual15,642 13,753 
Stock-based compensation6,623 6,321 
Net actuarial loss on defined benefit post-retirement benefit plans5,020 5,630 
Deferred loan and lease origination fees3,898 3,990 
FDIC deposit insurance special assessment1,195 8,647 
Other6,221 4,882 
Total gross deferred tax assets389,888 502,795 
Deferred tax liabilities:
Right-of-use assets under operating leases(54,427)(56,759)
Premises and equipment(36,614)(38,352)
Intangible assets
(21,605)(16,434)
Defined benefit post-retirement benefit plans
(14,149)(13,591)
Other(1,964)(2,422)
Total gross deferred tax liabilities(128,759)(127,558)
Net deferred tax asset (liability)$261,129 $375,237 
No valuation allowance for deferred tax assets was recorded at December 31, 2025 and 2024 as management believes it is more likely than not that all of the deferred tax assets will be realized against deferred tax liabilities and projected future taxable income. There were no unrecognized tax benefits during any of the reported periods.
We file income tax returns in the U.S. federal jurisdiction. We are no longer subject to U.S. federal income tax examinations by tax authorities for years before 2022.

Historical Timeline

Fiscal YearFiled
2025Feb 5, 2026Showing above
2024Feb 6, 2025
2023Feb 6, 2024
2022Feb 3, 2023
2021Feb 4, 2022
2020Feb 5, 2021
2019Feb 4, 2020
2018Feb 6, 2019
2017Feb 7, 2018
2016Feb 3, 2017
2015Feb 4, 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.

Other Available Disclosures

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