Low-Income Housing Tax Credits

12 Months Ended

Dec. 31, 2024

Low-Income Housing Tax Credits [Abstract]

Low-Income Housing Tax Credits

Note 6. Low-Income Housing Tax Credits

The Company was invested in four separate housing equity funds at both December 31, 2024 and December 31, 2023. The general purpose of these funds is to encourage and assist participants in investing in low-income residential rental properties located in the Commonwealth of Virginia, develop and implement strategies to maintain projects as low-income housing, deliver Federal Low Income Housing Credits to investors, allocate tax losses and other possible tax benefits to investors, and preserve and protect project assets.

The investments in these funds were recorded as other assets on the consolidated balance sheets and were $686 thousand and $1.1 million at December 31, 2024 and December 31, 2023, respectively. The expected terms of these investments and the related tax benefits run through 2033. There were no additional capital calls expected for the funds at December 31, 2024 or 2023.

During 2024, the Company adopted ASU 2023-02, “Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits.  The adoption resulted in an adjustment of $455 thousand to the investment balances and deferred taxes, which reduced stockholders’ equity by the same amount.

During the year ended December 31, 2023, the Company recognized amortization expense of $367 thousand, which was included within noninterest expense on the Consolidated Statements of Income.  During the year ended, December 31, 2024, in accordance with ASU 2023-02 adoption, amortization of $268 thousand was recorded as a component of income tax expense.  The net impact of amortization of the investments, tax credits, and other tax benefits recognized as a component of income tax expense for 2024 was a benefit of $46 thousand.