Tax Credit Equity Investments

9 Months Ended

Sep. 30, 2024

Equity Method Investments and Joint Ventures [Abstract]

TAX CREDIT EQUITY INVESTMENTS

TAX CREDIT EQUITY INVESTMENTS

As part of our responsibilities under the Community Reinvestment Act and due to their favorable federal income tax benefits, we invest in LIHTC and HTC partnerships. As a limited partner in these operating partnerships, we receive tax credits and tax deductions for losses incurred by the underlying properties. Effective January 1, 2024, we adopted ASU 2023-02 and elected to apply the PAM to both LIHTC and HTC equity investments. The adoption of this ASU resulted in a $1.0 million cumulative effect adjustment, which decreased retained earnings and other assets. Tax credit equity investment balances of $41.9 million were included in other assets in the Consolidated Balance Sheets at September 30, 2024. Unfunded commitments of $6.7 million were included in other liabilities in the Consolidated Balance Sheets at September 30, 2024.

For the three and nine months ended September 30, 2024, amortization expense of $1.4 million and $2.9 million as well as tax credits and other tax benefits of $1.7 million and $3.5 million were recognized in income tax expense in the Condensed Consolidated Statements of Comprehensive Income. No impairment losses were recognized for the three and nine months ended September 30, 2024.

Prior to the adoption of ASU 2023-02, the cost method was used to account for our investments in tax credit equity investments. For the three and nine months ended September 30, 2023 amortization expense of $0.5 million and $1.6 million were included in other expense and tax credits of $0.5 million and $1.6 million were recognized as a reduction to income tax expense on our Consolidated Statements of Comprehensive Income. Other tax benefits of $3.8 million were included in deferred tax assets on our Consolidated Balance Sheets at September 30, 2023.