NOTE 7.         VARIABLE INTEREST ENTITIES (VIEs)

The Company utilizes special purpose entities (SPEs) that constitute investments in limited partnerships that undertake certain development projects to achieve federal and state tax credits. These SPEs are typically structured as VIEs and are thus subject to consolidation by the reporting enterprise that absorbs the majority of the economic risks and rewards of the VIE. To determine whether it must consolidate a VIE, the Company analyzes the design of the VIE to identify the sources of variability within the VIE, including an assessment of the nature of risks created by the assets and other contractual obligations of the VIE, and determines whether it will absorb a majority of that variability and has the power to direct the activities that most significantly impact the economic performance of the entity.

The Company has invested in limited partnerships as a funding investor.  The partnerships are single purpose entities that lend money to real estate investors for the purpose of acquiring and operating, or rehabbing, commercial property.  The investments qualify for New Market Tax Credits under Internal Revenue Code Section 45D, as amended, or Historic Rehabilitation Tax Credits under Code Section 47, as amended, or Low-Income Housing Tax Credits under Code Section 42, as amended.  For each of the partnerships, the Company acts strictly in a limited partner capacity.  The Company has determined that it is not the primary beneficiary of these partnerships because it does not have the power to direct the activities of the entity that most significantly impact the entities’ economic performance and therefore the partnerships are not consolidated in our financial statements.  The amount of recorded investment in these partnerships as of December 31, 2022 and 2021 was $46.3 million and $69.9 million, respectively.  During 2022, the Company invested in one Federal Historic Tax Credit partnership and two Low-Income Housing Tax Credit partnerships with recorded investment in each totaling $1.2 million and $7.6 million, respectively, at December 31, 2022.  There was no recorded investment included in loans of the Company at December 31, 2022. There amount of loans included in the Company’s recorded investment at December 31, 2021 was $32.0 million.  The remaining amounts are included in other assets.