INCOME TAXES

12 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 21 - INCOME TAXES

Income taxes are accounted for under the asset and liability method, resulting in two components of income tax expense: current and deferred. Current income tax expense approximates taxes to be paid or refunded for the current period while deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Gross deferred tax assets and liabilities represent changes in taxes expected to be paid in the future due to the reversal of temporary differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases.

The Company assesses the probability that positions taken, or expected to be taken, in its income tax returns will be sustained by taxing authorities. A “more likely than not” (i.e., more than 50 percent) recognition threshold must be met before a tax benefit can be recognized. Tax positions that are more likely than not to be sustained are reflected in the Company’s Consolidated Financial Statements.

All of the Company’s Income before income tax expense as reported in the Consolidated Statements of Operations for the years ended December 31, 2025, 2024, and 2023 is attributable to domestic operations. Federal income tax expense is impacted by the amortization of certain tax-advantaged investments. See Note 9 for further details of these investments.

The following table presents the components of income tax expense:

(dollars in millions)	Current	Deferred	Total
Year Ended December 31, 2025
Federal	$472	($78)	$394
State and local	107	(4)	103
Total	$579	($82)	$497
Year Ended December 31, 2024
Federal	$447	($127)	$320
State and local	109	(50)	59
Total	$556	($177)	$379
Year Ended December 31, 2023
Federal	$497	($135)	$362
State and local	167	(107)	60
Total	$664	($242)	$422

The following table presents a reconciliation between the U.S. federal statutory tax rate and the Company’s effective tax rate:

	Year Ended December 31,
	2025			2024			2023
(dollars in millions)	Amount	Rate		Amount	Rate		Amount	Rate
U.S. federal statutory tax rate	$489	21.0	%	$396	21.0	%	$426	21.0	%
State and local income taxes, net of federal income tax effect(1)	82	3.5		46	2.5		58	2.9
Tax credits
Low income housing tax-advantaged investments(2)	(56)	(2.4)		(52)	(2.8)		(56)	(2.8)
Renewable energy tax-advantaged investments(2)	(19)	(0.8)		(30)	(1.6)		(21)	(1.0)
Other	(2)	(0.1)		(2)	(0.1)		(3)	(0.1)
Changes in valuation allowances	1	—		3	0.1		—	—
Nontaxable or nondeductible items
FDIC insurance premiums	32	1.3		34	1.8		35	1.7
Bank-owned life insurance	(24)	(1.0)		(22)	(1.2)		(20)	(1.0)
Other	(3)	(0.1)		(3)	(0.1)		(3)	(0.2)
Changes in unrecognized tax benefits	—	—		—	—		5	0.2
Other adjustments	(3)	(0.1)		9	0.5		1	0.1
Effective tax rate	$497	21.3	%	$379	20.1	%	$422	20.8	%

(1) States and local jurisdictions that make up the majority (greater than 50 percent) of the tax effect in this category include Massachusetts, New York, and New York City for 2025, 2024, and 2023.

(2) Includes tax credits, other tax benefits, and certain costs associated with tax-advantaged investments.

The following table presents income taxes paid by the Company:

	Year Ended December 31,
(dollars in millions)	2025	2024	2023
Federal	$25	$74	$173
State or jurisdiction(1)
California	11	12	—
Massachusetts	—	—	31
New Jersey	16	11	—
New York	17	19	37
New York City	24	23	23
Rhode Island	17	18	21
Other	41	51	90
Total income taxes paid	$151	$208	$375

(1) The amount of income taxes paid to a particular state or jurisdiction is disclosed only for those states and jurisdictions that meet the 5% disaggregation threshold in a given year. Taxes paid to states and jurisdictions that do not meet the 5% disaggregation threshold in a given year are included in Other.

The following table presents the significant components of the Company’s deferred tax assets and liabilities:

	December 31,
(dollars in millions)	2025	2024
Deferred tax assets:
Other comprehensive income	$669	$1,242
Allowance for credit losses	517	552
Federal and state net operating and capital loss carryforwards	58	69
Accrued expenses	1,193	1,198
Investment and other tax credit carryforwards	342	214
Partnerships	26	4
Other	10	10
Total deferred tax assets	2,815	3,289
Valuation allowance	(105)	(120)
Deferred tax assets, net of valuation allowance	2,710	3,169
Deferred tax liabilities:
Leasing transactions	207	208
Amortization of intangibles	424	425
Depreciation	521	570
Pension and other employee compensation plans	148	146
Partnerships	—	—
Deferred Income	62	24
MSRs	252	243
Total deferred tax liabilities	1,614	1,616
Net deferred tax asset (liability)	$1,096	$1,553

Deferred tax assets are recognized for net operating loss, capital loss, and tax credit carryforwards. Valuation allowances are recorded to reduce deferred tax assets to the amount that management concludes is more likely than not to be realized.

At December 31, 2025, the Company had federal and state tax net operating loss carryforwards of $505 million, capital loss carryforwards of $116 million, and federal and state tax credit carryforwards of $342 million. The majority of the federal and state tax net operating loss carryforwards, if not utilized, will expire in varying amounts through 2044, while the capital loss and tax credit carryforwards expire in varying amounts through 2026 and 2045, respectively. Limitations on the ability to realize these carryforwards are reflected in the associated valuation allowance. At December 31, 2025, the Company had a valuation allowance of $105 million against various deferred tax assets related to federal and state net operating losses, capital losses, and state tax credits, as the Company’s current assessment is that it is more likely than not that a portion of the deferred tax assets related to these items will not be realized.

At December 31, 2025, retained earnings included base year reserves of acquired thrift institutions for which no deferred income tax liability has been recognized. Under current tax law, these base year reserves may become taxable if certain distributions are made with respect to the stock of the Company, CBNA ceases to qualify as a bank for tax purposes, or the reserves are used for purposes other than to absorb bad debt losses. The amount of the unrecognized deferred tax liability related to the Company’s base year reserves was approximately $117 million at December 31, 2025. No actions are planned that would cause any portion of these reserves to become taxable.

The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions. The Company is no longer subject to U.S. federal tax examinations by major tax authorities for years before 2022 and, with few exceptions, before 2021 for state and local jurisdictions.

The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits:

	December 31,
(dollars in millions)	2025	2024	2023
Balance at the beginning of the year	$5	$7	$6
Gross increase for tax positions related to current year	10	1	1
Gross increase for tax positions related to prior years	—	1	1
Decrease for tax positions as a result of the lapse of the statutes of limitations	(1)	(1)	—
Decrease for tax positions related to settlements with taxing authorities	(9)	(3)	(1)
Balance at end of year(1)	$5	$5	$7

(1) All amounts represent unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate.

Tax positions are measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority. The difference between the benefit recognized and the tax benefit claimed on a tax return is referred to as an unrecognized tax benefit. Any adjustment to unrecognized tax benefits is recorded in Income tax expense in the Consolidated Statements of Operations.

Interest and penalties related to unrecognized tax benefits are reported in Income tax expense in the Consolidated Statements of Operations. The Company’s liability for accrued interest and penalties related to unrecognized tax benefits was $4 million and $1 million as of December 31, 2025 and 2024, respectively. In addition, the income tax expense (benefit) recognized for interest and penalties related to unrecognized tax benefits was $3 million, $(1) million, and $3 million for the years ended December 31, 2025, 2024, and 2023, respectively.