Hoosier Banker 25 diligence or partner with a firm to assist with the diligence. There are typically three stages of diligence: • The bank should review the return profile and GAAP model with its tax and audit firms to validate the benefits illustrated by the solar developer and the anticipated impact of the investment on the bank’s earnings profile and capital. • The bank should work with regulatory counsel to identify the path to approval for the investment. Solar tax equity investments are permissible for national (little “n”) banks under an April 1, 2021, OCC Rule (12 CFR 7.1025). Banks have been making solar tax equity investments based on OCC-published guidance for more than a decade. In 2021, this new OCC rule codified that guidance. It provides a straightforward roadmap and goes so far as to encourage community banks to consider solar tax equity investments. Alternatively, under Section 4(c)(6) of the Bank Holding Company Act, holding companies under $10 billion in assets may also invest in a properly structured solar tax equity fund managed by a professional asset manager. • The bank must underwrite the solar developer and each individual solar project. Community banks should partner with a firm that has experience evaluating and underwriting solar projects, and the bank’s diligence should ensure that there are structural mitigants in place to fully address the unique risks associated with solar tax equity financings. Beyond the compelling return profile and stable and predictable cash flows offered by conservative, investment-grade solar projects, achieving energy independence and reducing carbon emissions are critical goals in and of themselves. Solar tax credit investments can be a key component to a bank’s broader ESG strategy. The bank can monitor and report the amount of clean energy generation being produced by the projects it has financed and include this information in an annual renewable energy finance impact report or a broader annual sustainability report. HB 888.587.1719 | www.mcmcpa.com | Let us be your advisor to help achieve your goals. BANKING ON YOUR SUCCESS. TAX SERVICES ASSURANCE SERVICES ADVISORY SERVICES Lake City Bank, Warsaw, welcomed its summer intern class of 2022 in July, providing the opportunity for 23 students to gain real-world experience and explore careers in banking. The interns were from local high schools and from post-secondary schools Year 2022 summer interns at Lake City Bank ranged from high school seniors to graduate school students. Lake City Bank Summer Intern Class of 2022 including Grace College, Huntington University, Indiana University, Indiana University-Purdue University Indianapolis, Indiana Wesleyan University, Purdue University, Stetson University, Texas Christian University and the University of Notre Dame. HB
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