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

3 Months Ended

Mar. 31, 2023

Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities [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 on 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 to the Consolidated Financial Statements in the Company’s 2022 Form 10-K for additional details. For a discussion on the Company’s impairment evaluation and monitoring process of tax credit investments, refer to Note 3 — Fair Value Measurement and Fair Value of Financial Instruments — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net to the Consolidated Financial Statements in this Form 10-Q.

The following table presents investments and unfunded commitments of the Company’s qualified affordable housing partnerships, tax credit, and other investments as of March 31, 2023 and December 31, 2022:



	March 31, 2023				December 31, 2022
($ in thousands)	Assets		Liabilities - Unfunded Commitments (1)		Assets		Liabilities - Unfunded Commitments (1)

Investments in qualified affordable housing partnerships, net	$	388,926	$	241,371	$	413,253	$	266,654
Investments in tax credit and other investments, net	352,428		190,010		350,003		185,797
Total	$	741,354	$	431,381	$	763,256	$	452,451

(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 $24.4 million and $24.0 million as of March 31, 2023 and December 31, 2022, respectively. The Company invests in these mutual funds for CRA purposes. The Company also held equity securities without readily determinable fair values totaling $36.0 million and $36.5 million as of March 31, 2023 and December 31, 2022, respectively.

The following table presents additional information related to the investments in qualified affordable housing partnerships, tax credit and other investments for the three months ended March 31, 2023 and 2022:



	Three Months Ended March 31,
($ in thousands)	2023		2022
Investments in qualified housing partnerships, net
Tax credits and other tax benefits recognized	$	16,094	$	12,830
Amortization expense included in income tax expense	$	12,666	$	10,025
Investments in tax credit and other investments, net
Amortization of tax credit and other investments (1)	$	10,110	$	13,900
Unrealized gains (losses) on equity securities with readily determinable values	$	361	$	(1,161)

(1)Includes $174 thousand in impairment recovery related to the $3.7 million cash settlement received from the Company’s investment in DC Solar that was previously written off.

Variable Interest Entities

The majority of both the investments in affordable housing partnerships and tax credit and other investments discussed above are variable interest entities (“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.