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

The Community Reinvestment Act (“CRA”) encourages banks to meet the credit needs of their communities for housing and other purposes, particularly in low or moderate income neighborhoods. The Company invests in certain affordable housing limited partnerships that qualify for CRA and tax credits. Such limited partnerships are formed to develop and operate apartment complexes designed as high-quality affordable housing for lower income tenants throughout the U.S. Each of the partnerships must meet the regulatory requirements for affordable housing for a minimum 15-year compliance period to fully utilize the tax credits. In addition to affordable housing limited partnerships, the Company also invests in new market tax credit projects that qualify for CRA credits and 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, while the investments in historic tax credits promote the rehabilitation of historic buildings and economic revitalization of the surrounding areas.

Investments in Qualified Affordable Housing Partnerships, Net

The Company records its investments in qualified affordable housing partnerships, net, using the proportional amortization method. Under the proportional amortization method, the Company amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received, and recognizes the amortization in Income tax expense on the Consolidated Statement of Income.

The following table presents the Company’s investments in qualified affordable housing partnerships, net, and related unfunded commitments as of September 30, 2018 and December 31, 2017:




($ in thousands)	September 30, 2018		December 31, 2017
Investments in qualified affordable housing partnerships, net	$	148,097	$	162,824
Accrued expenses and other liabilities — Unfunded commitments	$	50,168	$	55,815

The following table presents additional information related to the Company’s investments in qualified affordable housing partnerships, net, for the three and nine months ended September 30, 2018 and 2017:




($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2018		2017		2018		2017
Tax credits and other tax benefits recognized	$	9,425	$	15,840	$	27,520	$	35,027
Amortization expense included in income tax expense	$	7,236	$	8,944	$	21,009	$	22,945

Investments in Tax Credit and Other Investments, Net

The following table presents the Company’s investments in tax credit and other investments, net, and related unfunded commitments as of September 30, 2018 and December 31, 2017:




($ in thousands)	September 30, 2018		December 31, 2017
Investments in tax credit and other investments, net	$	232,194	$	224,551
Accrued expenses and other liabilities — Unfunded commitments	$	94,222	$	113,372

The following table presents additional information related to the Company’s investments in tax credit and other investments, net, for the three and nine months ended September 30, 2018 and 2017:




($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2018		2017		2018		2017
Amortization expense included in noninterest expense	$	20,789	$	23,827	$	58,670	$	66,059

As a result of the adoption of ASU 2016-01 in the first quarter of 2018, $30.8 million of equity securities with readily determinable fair values were included in Investments in tax credit and other investments, net, on the Consolidated Balance Sheet as of September 30, 2018. These equity securities are CRA investments and were measured at fair value with changes in fair value recorded in net income. The unrealized losses recognized during the three and nine months ended September 30, 2018 on these equity securities totaled $185 thousand and $798 thousand, respectively.

The Company is not the primary beneficiary of the investments in tax credit and other investments and, therefore, is not required to consolidate these investments on the Consolidated Financial Statements. Depending on the ownership percentage and the influence the Company has on the investments, the Company applies the equity or cost method of accounting, or the measurement alternative as elected under ASU 2016-01 for equity investments without readily determinable fair value.