INCOME TAXES

12 Months Ended

Dec. 31, 2025

INCOME TAXES

INCOME TAXES

NOTE 14—INCOME TAXES

Income Tax Expense

The Company calculates its provision for federal, state, and international income taxes based on current tax law. The reported tax provision differs from the amounts currently receivable or payable because some income and expense items are recognized in different time periods for financial reporting purposes than for income tax purposes. The Company adopted ASU 2023-09 as of December 31, 2025. The adoption of the ASU did not have a material impact on the Company’s disclosures. As permitted by the ASU, the Company prospectively

adopted the disclosure requirements since the additional disclosures in prior years would not provide material new information or trends to users of the financial statements.

The following is a summary of income tax expense for the years ended December 31, 2025, 2024, and 2023:

	For the year ended December 31,
Components of Income Tax Expense (in thousands)	2025		2024		2023
Current
Federal	$	20,734	$	29,389	$	25,712
State		7,034		5,673		8,401
International		74		(2,019)		(285)
Total current expense	$	27,842	$	33,043	$	33,828
Deferred
Federal	$	(2,611)	$	(1,713)	$	1,250
State		(1,271)		(125)		(434)
International		(1,947)		(662)		382
Total deferred expense (benefit)	$	(5,829)	$	(2,500)	$	1,198
Total income tax expense	$	22,013	$	30,543	$	35,026

The following table presents a reconciliation of the statutory federal tax expense to the income tax expense in the accompanying Consolidated Statements of Income:

	For the year ended December 31,
(in thousands)	2025				2024		2023
Statutory federal expense	$	16,590	21.0	%	$	27,615	$	29,021
Statutory state income tax expense, net of federal tax benefit(1)		3,246	4.1			4,216		6,465
Excess tax shortfalls (benefits), net of federal tax impact		1,414	1.8			(1,674)		(2,972)
Nondeductible expenses		1,707	2.2			3,381		3,064
Non-U.S. earnings (loss)		(1,480)	(1.9)			(2,117)		224
Other		536	0.7			(878)		(776)
Income tax expense	$	22,013	27.9	%	$	30,543	$	35,026

(1) In 2025, state and local income taxes in California, Maryland, Massachusetts and Tennessee comprise the majority of the statutory state income tax expense, net of federal effect category.

Under the provisions of Section 162(m) of the Internal Revenue Code (“162(m)”), the deductibility of executive compensation is limited to $1 million per year for each named executive officer (“NEO”). Based on the information available as of December 31, 2025, 2024, and 2023, the Company believed that it is more likely than not a significant portion of NEO stock-based and other deferred compensation book expense will exceed the $1 million limitation in future years when the shares vest, resulting in no tax deductibility for the book expense associated with these compensation agreements and no deferred tax assets. Additionally, for each of the years presented above, portions of NEO compensation other than stock and other deferred compensation were above the $1 million limitation, resulting in no tax deductibility for amounts above the $1 million limitation. The majority of the nondeductible expenses shown in the table above relate to these two impacts from 162(m).

Deferred Tax Assets/Liabilities

The tax effects of temporary differences between reported earnings and taxable earnings consisted of the following:

	As of December 31,
Components of Deferred Tax Liabilities, Net (in thousands)	2025		2024
Deferred Tax Assets
Compensation related	$	7,866	$	5,978
Credit losses		17,654		10,202
Other		12,321		6,484
Total deferred tax assets	$	37,841	$	22,664
Deferred Tax Liabilities
Mark-to-market of derivatives and loans held for sale	$	(8,418)	$	(6,247)
Mortgage servicing rights related		(189,018)		(196,678)
Acquisition related (1)		(67,969)		(52,936)
Depreciation		(9,437)		(8,189)
Total deferred tax liabilities	$	(274,842)	$	(264,050)
Deferred tax liabilities, net	$	(237,001)	$	(241,386)

(1) Acquisition-related deferred tax liabilities consist of book-to-tax differences associated with basis step ups related to the amortization of goodwill recorded from acquisitions and book-to-tax differences in intangible asset amortization.

The Company believes it is more likely than not that it will generate sufficient taxable income in future periods to realize the deferred tax assets. During the years ended December 31, 2025, 2024, and 2023, the Company recognized an insignificant amount of deferred tax assets or liabilities that are not included as a component of deferred tax expense. A significant portion of these differences relates to AFS securities. The Company is required to treat unrealized gains and losses on AFS securities as currently taxable income, impacting its deferred expense but not the deferred tax assets or liabilities. The Company’s pretax income (loss) from foreign operations was insignificant for all the periods presented.

Income Taxes Paid

As presented in our Statement of Cash Flows, the Company paid income taxes, net of cash refunds received of $22.6 million for the year ended December 31, 2025. For the year ended December 31, 2025, the Company made tax payments, net of cash refunds received of $16.5 million for its federal tax obligations, $6.1 million for its state and local obligations, and an insignificant amount for its foreign obligations. The Company made net tax payments of $1.9 million to the state of California during the year ended December 31, 2025. No other state was above 5% of worldwide net tax payments during the year ended December 31, 2025.

Tax Uncertainties

The Company periodically assesses its liabilities and contingencies for all periods open to examination by tax authorities based on the latest available information. Where the Company believes it is more likely than not that a tax position will not be sustained, management records its best estimate of the resulting tax liability, including interest and penalties, in the consolidated financial statements. As of December 31, 2025, based on all known facts and circumstances and current tax law, management believes that there are no material tax positions for which it is reasonably possible that the unrecognized tax benefits will significantly increase or decrease over the next 12 months, producing, individually or in the aggregate, a material effect on the Company’s results of operations, financial condition, or cash flows.

Pillar Two

A framework known as Pillar Two became effective for some countries in 2024. Pillar Two is designed to ensure large multinational enterprises pay a minimum level of tax on the income arising in each jurisdiction where they operate. Pillar Two has not had an impact on the Company’s tax liabilities as the Company’s corporate income tax rate in each of the jurisdictions it operates in is higher than the minimum thresholds established by Pillar Two.