Customers Bancorp, Inc.CUBI
Customers Bancorp, Inc. Income Taxes Disclosure
INCOME TAXES
The components of income tax expense, disaggregated by federal, state and local jurisdictions, were as follows:
| For the Years Ended December 31, | |||||||||||||||||
| (amounts in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 52,698 | $ | 23,723 | $ | 42,485 | |||||||||||
| State and local | 22,635 | 20,324 | 15,935 | ||||||||||||||
| Total current expense | 75,333 | 44,047 | 58,420 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | (8,727) | (1,204) | 17,478 | ||||||||||||||
| State and local | (2,263) | 61 | 4,699 | ||||||||||||||
| Total deferred expense (benefit) | (10,990) | (1,143) | 22,177 | ||||||||||||||
| Total | |||||||||||||||||
| Federal | 43,971 | 22,519 | 59,963 | ||||||||||||||
| State and local | 20,372 | 20,385 | 20,634 | ||||||||||||||
| Total income tax expense | $ | 64,343 | $ | 42,904 | $ | 80,597 | |||||||||||
Customers did not have any income tax expense (benefit) in foreign jurisdictions for the years ended December 31, 2025, 2024 and 2023.
Effective tax rates differ from the federal statutory rate of 21% at December 31, 2025, 2024, and 2023, which was applied to income before income tax expense, due to the following:
| For the Years Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| (dollars in thousands) | Amount | % of pretax income | Amount | % of pretax income | Amount | % of pretax income | |||||||||||||||||||||||||||||
| Federal income tax at statutory rate | $ | 60,571 | 21.00 | % | $ | 47,118 | 21.00 | % | $ | 69,455 | 21.00 | % | |||||||||||||||||||||||
State and local income tax, net of federal income tax benefit (1) | 15,605 | 5.41 | 10,656 | 4.75 | 16,893 | 5.11 | |||||||||||||||||||||||||||||
Tax credits (2) | |||||||||||||||||||||||||||||||||||
Low income housing tax credits (3) | (1,157) | (0.40) | (1,859) | (0.83) | 241 | 0.07 | |||||||||||||||||||||||||||||
| Energy-related tax credits | (11,428) | (3.96) | (17,835) | (7.95) | (8,450) | (2.55) | |||||||||||||||||||||||||||||
| Other tax credits | — | — | (38) | (0.02) | — | — | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
| Tax-exempt interest, net of disallowance | (739) | (0.26) | (769) | (0.34) | (769) | (0.23) | |||||||||||||||||||||||||||||
Bank-owned life insurance (4) | (2,527) | (0.88) | (2,442) | (1.09) | 1,286 | 0.39 | |||||||||||||||||||||||||||||
| Non-deductible executive compensation | 5,276 | 1.83 | 2,572 | 1.15 | 1,725 | 0.52 | |||||||||||||||||||||||||||||
| FDIC premium limitation | 2,614 | 0.91 | 2,440 | 1.09 | 1,604 | 0.49 | |||||||||||||||||||||||||||||
| Other | 354 | 0.12 | 138 | 0.06 | 83 | 0.03 | |||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | 510 | 0.18 | 4,993 | 2.23 | (785) | (0.24) | |||||||||||||||||||||||||||||
| Other adjustments | |||||||||||||||||||||||||||||||||||
| Equity-based compensation | (4,460) | (1.55) | (1,888) | (0.84) | (679) | (0.21) | |||||||||||||||||||||||||||||
| Other | (276) | (0.09) | (182) | (0.09) | (7) | (0.01) | |||||||||||||||||||||||||||||
| Effective income tax rate | $ | 64,343 | 22.31 | % | $ | 42,904 | 19.12 | % | $ | 80,597 | 24.37 | % | |||||||||||||||||||||||
(1) For the years ended December 31, 2025 and 2024, state taxes in New York and local taxes in New York City made up the majority (greater than 50 percent) of the tax effect of this category. For the year ended December 31, 2023, state taxes in California and New York and local taxes in New York City made up the majority (greater than 50 percent) of the tax effect of this category.
(2) Tax credits are net of associated investment impacts, such as proportional amortization, tax benefits of flow through losses, and tax basis reductions.
(3) Low income housing tax credits for the year ended December 31, 2023 includes adjustments related to prior years.
(4) Bank-owned life insurance for the year ended December 31, 2023 includes tax on the surrender of bank-owned life insurance policies.
Deferred income taxes reflect temporary differences in the recognition of revenue and expenses for tax reporting and financial statement purposes, principally because certain items are recognized in different periods for financial reporting and tax return purposes. The following represents Customers’ deferred tax assets and liabilities as December 31, 2025 and 2024:
| December 31, | |||||||||||
| (amounts in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets | |||||||||||
| Allowance for credit losses on loans and leases | $ | 40,470 | $ | 35,733 | |||||||
| Impairment losses | 10,033 | — | |||||||||
| Net operating losses | 460 | 551 | |||||||||
| Compensation and benefits | 12,646 | 12,716 | |||||||||
| Net deferred loan fees and costs | 5,186 | 2,032 | |||||||||
| Lease liability | 10,932 | 9,951 | |||||||||
| Net unrealized losses on securities | 20,549 | 34,203 | |||||||||
| Accrued severance | 123 | 797 | |||||||||
| Other reserves | 9,413 | 3,364 | |||||||||
| Other | 2,147 | 4,103 | |||||||||
| Total deferred tax assets | 111,959 | 103,450 | |||||||||
| Deferred tax liabilities | |||||||||||
| Tax qualified lease adjustments | (97,122) | (86,522) | |||||||||
| Right of use asset | (9,000) | (9,278) | |||||||||
| Net unrealized gains on cash flow hedges | (1,065) | — | |||||||||
| Other | (6,824) | (5,974) | |||||||||
| Total deferred tax liabilities | (114,011) | (101,774) | |||||||||
| Net deferred tax asset (liability) | $ | (2,052) | $ | 1,676 | |||||||
The net deferred tax asset (liability) is recorded in other assets and other liabilities at December 31, 2025 and 2024.
Customers had approximately $2.2 million of federal net operating loss carryovers subject to the annual limitation under Section 382 of the Code at December 31, 2025, that begin to expire in 2030. At December 31, 2025, Customers had approximately $133.6 million of Pennsylvania net operating loss carryovers for which a deferred tax asset was not established because realization of the loss carryovers was considered remote.
The following table presents changes in unrecognized tax benefits for the years ended December 31, 2025, 2024, and 2023:
| For the Years Ended December 31, | |||||||||||||||||
| (amounts in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
Balance at January 1 | $ | 6,738 | $ | 1,796 | $ | 4,065 | |||||||||||
| Increases related to prior year tax positions | 1,435 | 4,987 | — | ||||||||||||||
| Decreases related to prior year tax positions | (134) | (104) | (1,474) | ||||||||||||||
| Increases related to current year tax positions | 364 | 289 | 361 | ||||||||||||||
| Settlements | — | (230) | (1,156) | ||||||||||||||
| Lapse of statute | (1,540) | — | — | ||||||||||||||
Balance at December 31 | $ | 6,863 | $ | 6,738 | $ | 1,796 | |||||||||||
As of December 31, 2025, all of Customers’ unrecognized tax benefits, if recognized, would impact the effective tax rate. Not included in the table above is $1.8 million of federal income tax benefit on unrecognized state and local tax benefits recognized in deferred taxes. Customers recognizes interest related to unrecognized tax benefits in income tax expense and penalties in other non-interest expense. During the years ended December 31, 2025, 2024 and 2023, Customers recognized $0.5 million, $1.3 million and $0.1 million, respectively, of interest related to unrecognized tax benefits in income tax expense.
The following table presents income taxes paid, net of refunds received, disaggregated by federal, state and local jurisdictions for the years ended December 31, 2025, 2024 and 2023. Customers did not have any income taxes paid to foreign jurisdictions for the years ended December 31, 2025, 2024, and 2023.
| For the Years Ended December 31, | |||||||||||||||||
| (amounts in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Federal | $ | 16,272 | $ | 36,560 | $ | 32,365 | |||||||||||
State: | |||||||||||||||||
California | 2,000 | * | 3,232 | ||||||||||||||
New York | 7,957 | 8,307 | 2,602 | ||||||||||||||
Other | 3,625 | 9,496 | 5,187 | ||||||||||||||
Total state | 13,582 | 17,803 | 11,021 | ||||||||||||||
Local: | |||||||||||||||||
New York City | 6,226 | 3,210 | * | ||||||||||||||
Other | — | 20 | 1,586 | ||||||||||||||
Total local | 6,226 | 3,230 | 1,586 | ||||||||||||||
Total income taxes paid, net of refunds received | $ | 36,080 | $ | 57,593 | $ | 44,972 | |||||||||||
* The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.
Customers is subject to U.S. federal income tax as well as income tax in various state and local taxing jurisdictions. Generally, Customers is no longer subject to examination by federal, state and local taxing authorities for years prior to the year ended December 31, 2022, with the exception of California, New York State, and New York City. In 2023, Customers settled the audit examination with New York State for the 2015-2017 tax years and with New York City for the 2016-2018 tax years. In 2025, Customers settled the audit examination with New Jersey for the 2018 tax year. Customers is currently under audit by New York City for the 2019-2021 tax years. Any potential adjustments for open audits have been considered in the balance of unrecognized tax benefits as of December 31, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 2, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Mar 8, 2017 | |
| 2015 | Feb 26, 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.