(6)	INVESTMENT IN HISTORIC TAX CREDIT ENTITY

On October 15, 2014, the Bank entered into an agreement to participate in the rehabilitation of a certified historic structure located in Louisville, Kentucky with a regional commercial developer. As part of the agreement, the Bank committed to invest $4.2 million into a limited liability company organized in the state of Kentucky by the commercial developer, for which it received a 99% equity interest in the entity and will receive an allocation of 99% of the operating profit and losses and any historic tax credits generated by the entity. The tax credits expected to be allocated to the Bank include federal rehabilitation investment credits totaling $4.7 million available under Internal Revenue Code Section 47. The Bank’s total investment in the entity will be $4.2 million, or 90% of the anticipated credits to be received by the entity. At September 30, 2016, the Bank had made all of its required investments to the entity except for $118,000, which is due when the project is fully completed and the final certificate of occupancy is received.

The Bank’s investment in the historic tax credit entity is accounted for using the equity method of accounting. Certificates of occupancy for substantially all of the project were received in 2016, which resulted in the recognition of $4.7 million in historic tax credits. As a result of the recognition of the historic tax credits, the Company also recognized a $4.2 million loss on its investment in the historic tax credit entity in order to reduce the amount of the investment to its estimated current fair value as of September 30, 2016. The net impact of the recognition of the historic tax credits and the impairment loss, including the tax impact and other accrual adjustments, was a $332,000 increase in net income for the year ended September 30, 2016.

At September 30, 2016, the Bank’s remaining unfunded capital contribution commitment of $118,000 is included in other liabilities in the accompanying consolidated balance sheet. At September 30, 2015, the Bank’s investment of $4.2 million was included in other assets and its unfunded capital contribution commitment of $3.3 million was included in other liabilities in the accompanying consolidated balance sheet.

The historic tax credit entity’s assets, liabilities and members’ equity totaled $4.5 million, $112,000 and $4.4 million, respectively, at September 30, 2016. The entity reported revenues of $1.1 million and net income of $244,000 for the year ended September 30, 2016. The historic tax credit entity’s assets, liabilities and members’ equity totaled $953,000, $119,000 and $834,000, respectively, at September 30, 2015. The entity did not report any revenues or net income for the year ended September 30, 2015 as operations had not yet commenced.