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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES The components of income tax expense from continuing operations were as follows:
| For the Years Ended December 31,
(amounts in thousands) | 2022 |  | 2021 |  | 2020
Current |  |  |  |  |
Federal | $ | 37,476 |  |  | $ | 50,971 |  |  | $ | 30,158 |
State | 18,880 |  |  | 18,215 |  |  | 10,825 |
Total current expense | 56,356 |  |  | 69,186 |  |  | 40,983 |
Deferred |  |  |  |  |
Federal | 7,249 |  |  | 14,957 |  |  | 4,882 |
State | (342) |  |  | 2,797 |  |  | 852 |
Total deferred expense | 6,907 |  |  | 17,754 |  |  | 5,734 |
Income tax expense | $ | 63,263 |  |  | $ | 86,940 |  |  | $ | 46,717 |
Effective tax rates differ from the federal statutory rate of 21% at December 31, 2022, 2021, and 2020, which was applied to income before income tax expense, due to the following:
| For the Years Ended December 31,
| 2022 |  | 2021 |  | 2020
(dollars in thousands) | Amount |  | % of pretax income |  | Amount |  | % of pretax income |  | Amount |  | % of pretax income
Federal income tax at statutory rate | $ | 61,173 |  |  | 21.00 | % |  | $ | 92,654 |  |  | 21.00 | % |  | $ | 39,849 |  |  | 21.00 | %
State income tax, net of federal benefit | 9,184 |  |  | 3.15 |  |  | 16,863 |  |  | 3.82 |  |  | 9,225 |  |  | 4.86 |
Tax-exempt interest, net of disallowance | (650) |  |  | (0.22) |  |  | (670) |  |  | (0.15) |  |  | (492) |  |  | (0.26) |
Bank-owned life insurance | (3,084) |  |  | (1.06) |  |  | (1,927) |  |  | (0.44) |  |  | (1,579) |  |  | (0.83) |
Tax credits, net of basis reduction | (8,644) |  |  | (2.97) |  |  | (11,284) |  |  | (2.92) |  |  | (1,062) |  |  | (0.61) |
Equity-based compensation | (2,293) |  |  | (0.79) |  |  | (8,237) |  |  | (1.87) |  |  | 185 |  |  | 0.10 |
Non-deductible executive compensation | 2,074 |  |  | 0.71 |  |  | 3,195 |  |  | 0.72 |  |  | 454 |  |  | 0.24 |
Unrecorded basis difference in foreign subsidiaries | — |  |  | — |  |  | — |  |  | — |  |  | (304) |  |  | (0.16) |
Recorded basis difference in foreign subsidiaries | — |  |  | — |  |  | (4,217) |  |  | (1.00) |  |  | — |  |  | — |
Unrecognized tax benefits | 3,633 |  |  | 1.25 |  |  | — |  |  | — |  |  | — |  |  | — |
Other | 1,870 |  |  | 0.65 |  |  | 563 |  |  | 0.54 |  |  | 441 |  |  | 0.28 |
Effective income tax rate | $ | 63,263 |  |  | 21.72 | % |  | $ | 86,940 |  |  | 19.70 | % |  | $ | 46,717 |  |  | 24.62 | %
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 asset and liabilities as December 31, 2022 and 2021:
| December 31,
(amounts in thousands) | 2022 |  | 2021
Deferred tax assets |  |  |
Allowance for credit losses on loans and leases | $ | 33,463 |  |  | $ | 36,111 |
Net operating losses | 734 |  |  | 825 |
Compensation and benefits | 7,748 |  |  | 8,356 |
Net deferred loan fees and costs | 11,330 |  |  | — |
Lease liability | 4,868 |  |  | 3,806 |
Net unrealized losses on securities | 57,302 |  |  | 1,748 |
Accrued severance | 4,741 |  |  | 4,740 |
Other | 3,569 |  |  | 3,080 |
Total deferred tax assets | 123,755 |  |  | 58,666 |
Deferred tax liabilities |  |  |
Net deferred loan fees and costs | — |  |  | (6,405) |
Tax qualified lease adjustments | (71,860) |  |  | (50,605) |
Right of use asset | (4,122) |  |  | (3,321) |
Other | (1,964) |  |  | (1,173) |
Total deferred tax liabilities | (77,946) |  |  | (61,504) |
Net deferred tax asset (liability) | $ | 45,809 |  |  | $ | (2,838) |
The net deferred tax asset (liability) is recorded in other assets or accrued interest payable and other liabilities at December 31, 2022 and 2021. Customers had approximately $3.5 million of federal and state net operating loss carryovers subject to the annual limitation under the Internal Revenue Code Section 382 at December 31, 2022, that begin to expire in 2028. The following table presents changes in unrecognized tax benefits for the years ended December 31, 2022, 2021, and 2020:
| For the Years Ended December 31,
(amounts in thousands) | 2022 |  | 2021 |  | 2020
Balance at January 1, | $ | — |  |  | $ | — |  |  | $ | — |
Increases related to prior year tax positions | 1,221 |  |  | — |  |  | — |
Decreases related to prior year tax positions | — |  |  | — |  |  | — |
Increases related to current year tax positions | 2,844 |  |  | — |  |  | — |
Settlements | — |  |  | — |  |  | — |
Lapse of statute | — |  |  | — |  |  | — |
Balance at December 31, | $ | 4,065 |  |  | $ | — |  |  | $ | — |
As of December 31, 2022, all of Customers unrecognized tax benefits, if recognized, would impact the effective tax rate. Not included in the table above is $1.1 million of federal income tax benefit on unrecognized state tax benefits recognized in deferred taxes which could also impact the effective tax rate. Customers recognizes interest related to unrecognized tax benefits in income tax expense and penalties in other non-interest expense. During the year ended December 31, 2022, Customers recognized $1.4 million of interest related to unrecognized tax benefits in income tax expense. 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, 2019, with the exception of New York State and New York City. In January 2023, Customers settled the audit examination with New York State. It is reasonably possible that the balance of unrecognized tax benefits could increase or decrease over the next twelve months due to the completion of tax authorities' examinations or the expiration of statutes of limitations. While the net effect on the total unrecognized tax benefits during the next twelve months cannot be reasonably estimated, Customers expects a $1.3 million reduction in unrecognized tax benefits in 2023 due to the settlement of the New York State examination, of which $0.6 million will affect the effective tax rate.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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