Note 9 - Qualified Affordable Housing Project Investments

3 Months Ended

Mar. 31, 2014

Qualified Affordable Housing Project Investments [Abstract]

Qualified Affordable Housing Project Investments [Text Block]

NOTE 9. QUALIFIED AFFORDABLE HOUSING PROJECT INVESTMENTS

The Company’s investment in Qualified Affordable Housing Projects that generate Low Income Housing Tax Credits (“LIHTC”) at March 31, 2014 was $5.4 million with a recorded liability of $4.5 million in funding obligations recorded in other liabilities. The Company has invested in three separate LIHTC projects which provide the Company with CRA credit. Additionally, the investment in LIHTC projects provides the Company with tax credits and with operating loss tax benefits over an approximately sixteen year period. None of the original investment will be repaid. The tax credits and the operating loss tax benefits that are generated by each of the properties are expected to exceed the total value of the investment made by the Company and provide a return on the investment between 5% and 7%. The investment in LIHTC projects is being accounted for using the proportional amortization method, under which the Company amortizes the initial cost of the investment in proportion to the amount of the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit).

The following table presents the Company’s original investment in the LIHTC projects, the current recorded investment balance, and the unfunded liability balance of each investment at March 31, 2014 and December 31, 2013. In addition, the table reflects the tax credits and tax benefits recorded by the Company during 2014 and 2013, the amortization of the investment and the net impact to the Company’s income tax provision for 2014 and 2013:

(Dollars in thousands) Qualified Affordable Housing Projects at March 31, 2014	Original Investment Value		Current Recorded Investment		Unfunded Liability Obligation		Tax Credits and Benefits (1)		Amortization of Investments (2)		Net Income Tax Benefit
Raymond James California Housing Opportunities Fund II	$	2,000	$	1,985	$	1,858	$	40	$	15	$	8
WNC Institutional Tax Credit Fund 38, L.P.		1,000		986		467		33		14		8
Merritt Community Capital Corporation Fund XV, L.P.		2,500		2,455		2,173		85		45		14
Total – Investments in Qualified Affordable Housing Projects	$	5,500	$	5,426	$	4,498	$	158	$	74	$	30

(Dollars in thousands) Qualified Affordable Housing Projects at December 31, 2013	Original Investment Value		Current Recorded Investment		Unfunded Liability Obligation		Tax Credits and Benefits (1)		Amortization ofInvestments (2)		Net Income Tax Benefit
Raymond James California Housing Opportunities Fund II	$	2,000	$	2,000	$	1,858	$	30	$	-	$	6
WNC Institutional Tax Credit Fund 38, L.P.		1,000		1,000		592		49		-		12
Merritt Community Capital Corporation Fund XV, L.P.		2,500		2,500		2,346		203		-		35
Total – Investments in Qualified Affordable Housing Projects	$	5,500	$	5,500	$	4,796	$	282	$	-	$	53

(1) The amounts reflected in this column represent both the tax credits, as well as the tax benefits generated by the Qualified Affordable Housing Projects operating loss for the year.

(2) This amount reduces the tax credits and benefits generated by the Qualified Affordable Housing Projects.

The Company’s investments in affordable housing projects generated tax credits recorded by the Company of $120 thousand for the quarter ended March 31, 2014 and $0 for the quarter ended March 31, 2013. Additional tax benefits from the operating losses generated by the projects of $38 thousand and $0 for the quarter ended March 31, 2014 and 2013 respectively. The tax credits and benefits were partially offset by the amortization of the principal investment balances of $74 thousand and $0 respectively. The net income tax benefit included in the Company’s income tax provision was $30 thousand for the quarter ended March 31, 2014 and $0 for the quarter ended March 31, 2013.

The following table reflects the anticipated net income tax benefit that is expected to be recognized by the Company over the next several years:

(Dollars in thousands) Qualified Affordable Housing Projects	Raymond James California Housing Opportunities Fund II		WNC Institutional Tax Credit Fund 38, L.P.		Merritt Community Capital Corporation Fund XV, L.P		TotalNet Income Tax Benefit
Anticipated net income tax benefit less amortization of investments:
2014	$	23	$	24	$	44	$	91
2015		45		35		47		127
2016 and thereafter		379		246		375		1,000
Total	$	447	$	305	$	466	$	1,218