Income Taxes

12 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following table presents the components of income before income taxes and income tax expense (benefit) for the years ended December 31, 2025, 2024 and 2023:

	Year Ended December 31,
($ in thousands)	2025		2024		2023
Income before income taxes:
U.S.	$	1,686,561	$	1,429,104	$	1,425,756
Foreign	38,899		52,757		34,014
Total income before income taxes	1,725,460		1,481,861		1,459,770
Current income tax expense:
Federal	250,521		166,268		172,428
State	149,291		153,891		173,080
Foreign	8,235		10,399		2,240
Total current income tax expense	408,047		330,558		347,748
Deferred income tax (benefit) expense:
Federal	(20,242)		(6,467)		(24,319)
State	12,897		(5,582)		(23,415)
Foreign	(430)		(2,234)		(1,405)
Total deferred income tax benefit	(7,775)		(14,283)		(49,139)
Total income tax expense:
Federal	230,279		159,801		148,109
State	162,188		148,309		149,665
Foreign	7,805		8,165		835
Total income tax expense	$	400,272	$	316,275	$	298,609

The following table presents the reconciliation of the federal statutory rate to the Company’s effective tax rate for the years ended December 31, 2025, 2024 and 2023:

	Year Ended December 31,
	2025				2024				2023
($ in thousands)	Amount		Percent		Amount		Percent		Amount		Percent
Statutory U.S. federal tax rate	$	362,347	21.0	%	$	311,191	21.0	%	$	306,552	21.0	%
U.S. federal
Tax credits (1)
Tax credits and benefits under the PAM, net of amortization	(29,268)		(1.7)		(26,147)		(1.8)		(4,299)		(0.3)
Energy tax credit — solar	(42,406)		(2.5)		(52,722)		(3.5)		(70,364)		(4.8)
Energy tax credit — energy storage	(34,408)		(2.0)		(11,143)		(0.7)		—		—
New markets tax credit	—		—		—		—		(21,378)		(1.5)
Other tax credits	(23,802)		(1.4)		(18,906)		(1.3)		(34,076)		(2.3)
Changes in valuation allowance	13,353		0.8		—		—		—		—
Nontaxable or nondeductible items
Nondeductible FDIC insurance premiums	8,474		0.5		7,719		0.5		7,007		0.5
Other nontaxable or nondeductible items	4,899		0.3		(15,041)		(1.0)		217		0.0
Other, net	7,549		0.4		(3,879)		(0.3)		(4,544)		(0.3)
U.S. state and local income taxes, net of U.S. federal income tax effect (2)	125,638		7.3		116,091		7.8		118,236		8.1
Foreign tax effects	7,805		0.5		8,165		0.5		835		0.1
Changes in unrecognized tax benefits	91		0.0		947		0.1		423		0.0
Effective tax rate	$	400,272	23.2	%	$	316,275	21.3	%	$	298,609	20.5	%

(1)Following the adoption of ASU 2023-02 on January 1, 2024, the Company expanded the PAM to include qualifying investments in new markets, historic, production and energy tax credit programs, in addition to affordable housing partnerships.

(2)California state taxes made up the majority (greater than 50 percent) of state and local taxes.

The following table presents the income taxes paid (net of refunds received) by the Company for the years ended December 31, 2025, 2024 and 2023:

	Year Ended December 31,
($ in thousands)	2025		2024		2023
Federal	$	65,981	$	68,371	$	140,000
State
California	120,000		102,061		100,000
New York	67,001		59,049		36,732
Other states	12,080		11,278		14,953
Foreign	13,120		6,186		—
Total	$	278,182	$	246,945	$	291,685

The following table summarizes the tax effects of temporary differences that give rise to a significant portion of deferred tax assets and liabilities as of December 31, 2025 and 2024:

	December 31,
($ in thousands)	2025		2024
Deferred tax assets:
Allowance for credit losses and nonperforming assets valuation allowance	$	251,494	$	233,879
Net unrealized losses on AFS debt and transferred securities	142,141		223,814
Stock compensation and other accrued compensation	46,825		41,118
Lease liabilities	40,714		27,644
Tax credit and capital loss carryforwards	51,193		11,122
Basis difference in investments	16,430		17,708
Nonaccrual loans’ interest income	8,306		8,809
State taxes	6,548		5,808
FDIC special assessment charge	2,615		16,843
Other	13,435		14,665
Total deferred tax assets	$	579,701	$	601,410
Valuation allowance	(13,353)		—
Total deferred tax assets, net of valuation allowance	$	566,348	$	601,410
Deferred tax liabilities:
Operating lease right-of-use assets	$	37,225	$	25,647
Basis difference in investments	26,203		25,587
Net unrealized gains on derivative hedges	14,704		—
Equipment lease financing	7,206		10,395
Other	7,006		26,437
Total deferred tax liabilities	$	92,344	$	88,066
Net deferred tax assets	$	474,004	$	513,344

The Company has not repatriated and does not intend to repatriate earnings from its foreign subsidiary. The Company determined such earnings are to be indefinitely reinvested in the local jurisdiction. The related unrecognized deferred tax liability on these earnings is immaterial.

As of December 31, 2025, the Company had deferred tax assets of $46 million related to tax credit carryforwards and $5 million related to state capital loss carryforwards. The Company’s tax credit carryforwards included $13 million of foreign tax credits as of December 31, 2025, which may not be fully utilized before they expire in 2034. The Company’s remaining carryforwards are expected to be fully utilized before they start to expire in 2028. The Company concluded that a valuation allowance was necessary to reduce the deferred tax assets associated with the foreign tax credits and recorded a $13 million valuation allowance as of December 31, 2025. For the remaining deferred tax assets it is more likely than not that there will be sufficient taxable income of appropriate nature in future years to realize these assets. For further information on the Company’s valuation policy on deferred taxes, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Income Taxes to the Consolidated Financial Statements in this Form 10-K.

The following table presents a reconciliation of the beginning and ending balances of unrecognized tax benefits for the years ended December 31, 2025, 2024 and 2023:

	Year Ended December 31,
($ in thousands)	2025			2024			2023
Beginning balance	$	4,670		$	1,193		$	477
Additions for tax positions related to prior years	—			2,698		(1)	459
Deductions for tax positions related to prior years	(446)			—			—
Additions for tax positions related to current year	547			779			257
Settlements with taxing authorities	(2,019)		(2)	—			—
Ending balance	$	2,752		$	4,670		$	1,193

(1)In 2024, the increase in positions related to prior years primarily related to proposed adjustments resulting from examination of the Company’s state tax returns.

(2)In 2025, the Company settled an issue related to the examination of the Company’s prior years’ state tax returns.

The Company recognizes interest and penalties, as applicable, related to the underpayment of income taxes as a component of Income tax expense on the Consolidated Statement of Income. The Company recorded net interest expense of $1 million for each of the years ended December 31, 2025 and 2024. In comparison, net interest and penalties expense was immaterial for the year ended 2023. Total accrued interest included in Accrued expenses and other liabilities on the Consolidated Balance Sheet was $232 thousand and $1 million as of December 31, 2025 and 2024, respectively.

The Company files federal income tax returns, as well as returns in various state and foreign jurisdictions. We are routinely examined by tax authorities in these various jurisdictions. The Company is subject to federal income tax examination for the tax years 2022 and forward. With few exceptions, the Company is also subject to tax examination in various state and local jurisdictions for the tax years 2021 and forward. The Company does not believe that the outcome of unresolved issues or claims in any of the tax jurisdictions is likely to have a material impact on the Company’s Consolidated Financial Statements. The Company believes that adequate provisions have been recorded for all income tax uncertainties consistent with ASC 740, Income Taxes as of December 31, 2025.