Qualified Affordable Housing

6 Months Ended

Jun. 30, 2020

Investments in Affordable Housing Projects [Abstract]

QUALIFIED AFFORDABLE HOUSING

QUALIFIED AFFORDABLE HOUSING

As part of our responsibilities under the Community Reinvestment Act and due to their favorable federal income tax benefits, we invest in Low Income Housing partnerships, or LIHPs. As a limited partner in these operating partnerships, we receive tax credits and tax deductions for losses incurred by the underlying properties. We use the cost method to account for these partnerships. These investments are recorded in other assets on our balance sheet. Our maximum exposure to loss associated with these investments consists of the investments' fair value plus any unfunded commitments as well as the denial of the tax credits if the project is deemed non-compliant. We do not have any loss reserves recorded related to these investments because we believe the likelihood of any loss to be remote. Our investments in LIHPs represent unconsolidated variable interest entities, or VIEs, and the assets and liabilities of the partnerships are not recorded on our balance sheet. We have determined that we are not the primary beneficiary of these VIEs because we do not have the power to direct the activities that most significantly impact their economic performance.

Our total investment in qualified affordable housing projects was $7.4 million at June 30, 2020 and $4.8 million at December 31, 2019. Amortization expense, included in other noninterest expense in the Consolidated Statements of Comprehensive (Loss) Income, was $0.5 million and $1.1 million for the three and six months ended June 30, 2020 and $0.7 million and $1.4 million for the three and six months ended June 30, 2019. The amortization expense was offset by tax credits of $0.6 million and $1.1 million for the three and six months ended June 30, 2020 and $0.7 million and $1.5 million for the three and six months ended June 30, 2019 as a reduction to our federal tax provision.

On September 11, 2019, we entered into a new qualified affordable housing project and committed to an investment of $10.2 million. As of June 30, 2020, we have invested $5.1 million in this new project. No amortization expense or tax credits will be recognized for this new project until complete, which we expect to be later in 2020.