Variable Interest Entities

12 Months Ended

Dec. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interest Entities

VARIABLE INTEREST ENTITIESWe evaluate our interest in certain entities to determine if these entities meet the definition of a VIE and whether we are the primary beneficiary and required to consolidate the entity based on the variable interest we held both at inception and when there is a change in circumstances that requires a reconsideration.

Unconsolidated VIEs

The following tables provide a summary of the assets and liabilities included in our Consolidated Financial Statements, as well as the maximum exposure to losses, associated with our interests related to VIEs for which we hold an interest, but are not the primary beneficiary, at December 31, 2020 and December 31, 2019.

TABLE 11.1

(in millions)	Total Assets		Total Liabilities		Maximum Exposure to Loss
December 31, 2020
Trust preferred securities (1)	$	1	$	66	$	—
Affordable housing tax credit partnerships	119		45		119
Other investments	26		8		26
Total	$	146	$	119	$	145
December 31, 2019
Trust preferred securities (1)	$	1	$	66	$	—
Affordable housing tax credit partnerships	120		60		120
Other investments	33		10		33
Total	$	154	$	136	$	153
(1) Represents our investment in unconsolidated subsidiaries.

Trust-Preferred Securities

We have certain wholly-owned trusts whose assets, liabilities, equity, income and expenses are not included within our Consolidated Financial Statements. These trusts have been formed for the sole purpose of issuing TPS, from which the proceeds are then invested in our junior subordinated debentures, which are reflected in our Consolidated Balance Sheets as subordinated notes. The TPS are the obligations of the trusts, and as such, are not consolidated within our Consolidated Financial Statements. See the Borrowings footnote for additional information relating to our TPS.

Each issue of the junior subordinated debentures has an interest rate equal to the corresponding TPS distribution rate. We have the right to defer payment of interest on the debentures at any time, or from time-to-time for a period not exceeding five years provided that no extension period may extend beyond the stated maturity of the related debentures. During any such extension period, distributions to the TPS will also be deferred and our ability to pay dividends on our common stock will be restricted. Periodic cash payments and payments upon liquidation or redemption with respect to TPS are guaranteed by us to the extent of funds held by the trusts. The guarantee ranks subordinate and junior in right of payment to all of our indebtedness to the same extent as the junior subordinated debt. The guarantee does not place a limitation on the amount of additional indebtedness that may be incurred by us.

Affordable Housing Tax Credit Partnerships

We make equity investments as a limited partner in various partnerships that sponsor affordable housing projects utilizing the LIHTC pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to support initiatives associated with the CRA while earning a satisfactory return. The activities of these LIHTC partnerships include the development and operation of multi-family housing that is leased to qualifying residential tenants. These partnerships are generally located in communities where we have a banking presence and meet the definition of a VIE; however, we are not the primary beneficiary of the entities, as the general partner or managing member has both the power to direct the activities that most significantly impact the economic performance of the entities and the obligation to absorb losses beyond our own equity investment. We record our investment in LIHTC partnerships as a component of other assets.

We use the proportional amortization method to account for a majority of our investments in LIHTC partnerships. Investments that do not meet the requirements of the proportional amortization method are recognized using the equity method. Amortization related to investments under the proportional amortization method are recorded on a net basis as a component of the provision of income taxes on the Consolidated Statements of Income, while write-downs and losses related to investments under the equity method are included in non-interest expense.

The following table presents the balances of our affordable housing tax credit investments and related unfunded commitments:

TABLE 11.2

December 31	2020		2019
(in millions)
Proportional amortization method investments included in other assets	$	71	$	55
Equity method investments included in other assets	3		5
Total LIHTC investments included in other assets	$	74	$	60
Unfunded LIHTC commitments	$	45	$	60

The following table summarizes the impact of these LIHTC investments on specific line items of our Consolidated Statements of Income:

TABLE 11.3

	Year Ended December 31
(in millions)	2020		2019		2018
Non-interest income:
Amortization of tax credit investments under equity method, net of tax benefit	$	1	$	1	$	2
Provision for income taxes:
Amortization of LIHTC investments under proportional method	$	11	$	8	$	5
Low-income housing tax credits	(12)		(9)		(6)
Other tax benefits related to tax credit investments	(2)		(2)		(1)
Total provision for income taxes	$	(3)	$	(3)	$	(2)

Other Investments

Other investments we also consider to be unconsolidated VIE’s include investments in Small Business Investment Companies, Historic Tax Credit Investments, and other equity method investments.