Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities

12 Months Ended

Dec. 31, 2022

Investments in Qualified Affordable Housing Partnerships, Net [Abstract]

Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities

The CRA encourages banks to meet the credit needs of their communities, particularly low- and moderate-income individuals and neighborhoods. The Company invests in certain affordable housing projects in the form of ownership interests in limited partnerships or limited liability companies that qualify for CRA consideration and tax credits. These entities are formed to develop and operate apartment complexes designed as high-quality affordable housing for lower income tenants throughout the U.S. To fully utilize the available tax credits, each of these entities must meet the regulatory affordable housing requirements for a minimum 15-year compliance period. In addition to affordable housing projects, the Company invests in small business investment companies and new market tax credit projects that qualify for CRA consideration, as well as eligible projects that qualify for renewable energy and historic tax credits. Investments in renewable energy tax credits help promote the development of renewable energy sources, and investments in historic tax credits promote the rehabilitation of historic buildings and economic revitalization of the surrounding areas. For the Company’s accounting policies and impairment evaluation and monitoring process of tax credit investments, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Securities and Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Note 2 — Fair Value Measurement and Fair Value of Financial Instruments to the Consolidated Financial Statements in this Form 10-K.

The following table presents investments and unfunded commitments of the Company’s qualified affordable housing partnerships, tax credit, and other investments as of December 31, 2022 and 2021:



	December 31,
	2022				2021
($ in thousands)	Assets		Liabilities - Unfunded Commitments (1)		Assets		Liabilities - Unfunded Commitments (1)

Investments in qualified affordable housing partnerships, net	$	413,253	$	266,654	$	289,741	$	146,152
Investments in tax credit and other investments, net	350,003		185,797		338,522		163,464
Total	$	763,256	$	452,451	$	628,263	$	309,616

(1)Included in Accrued expenses and other liabilities on the Consolidated Balance Sheet.

Investments in tax credit and other investments, net presented in the table above include equity securities that are mutual funds with readily determinable fair values of $24.0 million and $26.6 million, as of December 31, 2022 and 2021, respectively. The Company invests in these mutual funds for CRA purposes. The Company also held equity securities without readily determinable fair values totaling $36.5 million and $33.1 million as of December 31, 2022 and 2021, respectively.

The following table presents additional information related to the investments in qualified affordable housing partnerships, tax credit and other investments for the years ended December 31, 2022, 2021 and 2020:



($ in thousands)	Year Ended December 31,
	2022		2021		2020
Investments in qualified housing partnerships, net
Tax credits and other tax benefits recognized	$	52,132	$	50,643	$	45,971
Amortization expense included in income tax expense	$	38,759	$	33,248	$	37,132
Investments in tax credit and other investments, net
Amortization of tax credit and other investments	$	113,358	$	122,457	$	70,082
Unrealized (losses) gains on equity securities with readily determinable values	$	(2,928)	$	(746)	$	732
Impairment recoveries (losses), net (1)	$	469	$	1,250	$	(3,699)

(1)For the year ended December 31, 2022, impairment recoveries of $3.4 million were related to three energy tax credits and one historic tax credit, respectively, offset by impairment losses of $2.9 million related to two historic tax credits. For the year ended December 31, 2021, impairment recoveries were related to one historic tax credit and two energy tax credits. For the year ended December 31, 2020, impairment losses of $4.8 million and $360 thousand related to three historic tax credits and one non-marketable equity security, respectively, offset by impairment recoveries of $1.5 million related to one energy tax credit and three historic tax credits.

As of December 31, 2022, the Company’s unfunded commitments related to investments in qualified affordable housing partnerships, tax credit and other investments are estimated to be funded as follows:



($ in thousands)	Amount
2023	$	312,795
2024	64,576
2025	64,617
2026	3,936
2027	1,413
Thereafter	5,114
Total	$	452,451

Variable Interest Entities

The majority of both the investments in affordable housing partnerships and tax credit and other investments discussed above are VIEs where the Company is a limited partner in these partnerships, and an unrelated third party is typically the general partner or managing member who has control over the significant activities of these investments. While the Company’s interest in some of the investments may exceed 50% of the outstanding equity interests, the Company does not consolidate these structures due to the general partner’s or managing member’s ability to manage the entity, which is indicative of the general partner’s or managing member’s power over the entity. The Company’s maximum exposure to loss in connection with these partnerships consists of the unamortized investment balance and any tax credits claimed that may become subject to recapture.

Special purpose entities formed in connection with securitization transactions are generally considered VIEs. A CLO is a VIE that purchases a pool of assets consisting primarily of non-investment grade corporate loans, and issues multiple tranches of notes to investors to fund the asset purchases and pay upfront expenses associated with forming the CLO. The Company served as the collateral manager of a CLO that closed in 2019 and subsequently reassigned its portfolio manager responsibilities in 2020. The Company retained the top three investment grade-rated tranches issued by the CLO, for which the total carrying amount was $284.3 million and $291.7 million as of December 31, 2022 and 2021, respectively.