Low Income Housing Tax Credits and Other Tax Credit Investments

9 Months Ended

Sep. 30, 2024

Equity Method Investments and Joint Ventures [Abstract]

Low Income Housing Tax Credits and Other Tax Credit Investments

Low Income Housing Tax Credits and Other Tax Credit Investments

The Community Reinvestment Act (“CRA”) encourages banks to meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate income. The Company has primarily invested in separate Low Income Housing Tax Credits (“LIHTC”) projects, also referred to as qualified affordable housing projects, which provide the Company with tax credits and operating loss tax benefits over a period of 15 years. The return on these investments is generally generated through tax credits and tax losses. In addition to LIHTC projects, the Company invests in new market tax credit projects that qualify for CRA credits and eligible projects that qualify for renewable energy and historic tax credits.

As of September 30, 2024 and December 31, 2023, the Company had $226.2 million and $223.4 million, respectively, in tax credit investments that were included in other assets in the Company’s Consolidated Balance Sheets.

When permissible, the Company accounts for its investments in LIHTC projects and other qualifying investments using the proportional amortization method, under which it amortizes the initial cost of the investment in proportion to the amount of the tax credits and other tax benefits received and recognizes that amortization as a component of income tax expense. The net investment in the housing projects is included in other assets in the Company’s Consolidated Balance Sheets. The Company will continue to use the proportional amortization method on any new qualifying investments.

The following table presents the Company’s investments in LIHTC projects accounted for using the proportional amortization method for the periods indicated:

	As of September 30, 2024		As of December 31, 2023
	(In thousands)
Current recorded investment included in other assets (1)	$	224,166	$	221,190
Commitments to fund qualified affordable housing projects included in recorded investment noted above	108,642		149,207

(1)Includes LIHTC investments acquired in connection with our merger with Cambridge of $7.4 million. The amount of associated remaining commitments assumed was not significant. Refer to Note 3, “Mergers and Acquisitions” for further discussion of the merger.

The following table presents additional information related to the Company’s investments in LIHTC projects for the periods indicated:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
	(In thousands)
Tax credits and benefits recognized	$	5,837	$	1,602	$	16,128	$	8,169
Amortization expense included in income tax expense	4,068		745		13,230		6,322

The Company accounts for certain other investments in renewable energy projects using the equity method of accounting. These investments in renewable energy projects are included in other assets in the Company’s Consolidated Balance Sheets and totaled $2.0 million and $2.2 million as of September 30, 2024 and December 31, 2023, respectively. There were no outstanding commitments related to these investments as of either September 30, 2024 or December 31, 2023.