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Note 24 - Qualified Affordable Housing Project Investments

12 Months Ended

Dec. 31, 2014

Qualified Affordable Housing Project Investments [Abstract]

Qualified Affordable Housing Project Investments [Text Block]

NOTE 24. QUALIFIED AFFORDABLE HOUSING PROJECT INVESTMENTS

The Company’s investment in Qualified Affordable Housing Projects that generate Low Income Housing Tax Credits (“LIHTC”) at December 31, 2014 was $4.8 million. These investments are recorded in other assets with a corresponding funding obligation of $2.4 million 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 4% and 8%. 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 Consolidated Statements of Operations as a component of income tax expense (benefit).

The following table presents the Company’s original investment in the LIHTC projects accounted for using the proportional amortization method, the current recorded investment balance, and the unfunded liability balance of each investment at December 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)	Original		Current		Unfunded		Tax Credits		Amortization		Net
Qualified Affordable Housing Projects at	Investment		Recorded		Liability		and		of		Income Tax
December 31, 2014	Value		Investment		Obligation		Benefits ⁽¹⁾		Investments ⁽²⁾		Benefit
Raymond James California Housing Opportunities Fund II	$	2,000	$	1,846	$	736	$	160	$	154	$	31
WNC Institutional Tax Credit Fund 38, L.P.		1,000		888		314		105		112		26
Merritt Community Capital Corporation Fund XV, L.P.		2,500		2,050		1,374		340		450		58
Total – investments in qualified affordable housing projects	$	5,500	$	4,784	$	2,424	$	605	$	716	$	115

(Dollars in thousands)	Original		Current		Unfunded		Tax Credits		Amortization		Net
Qualified Affordable Housing Projects at	Investment		Recorded		Liability		and		of		Income Tax
December 31, 2013	Value		Investment		Obligation		Benefits ⁽¹⁾		Investments ⁽²⁾		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 $464 thousand for the year ended December 31, 2014 and $226 thousand for the year ended December 31, 2013. Additional tax benefits from the operating losses generated by the projects were $141 thousand and $53 thousand for the year ended December 31, 2014 and 2013 respectively. The tax credits and benefits were partially offset by the amortization of the principal investment balances of $716 thousand and $0 for the year ended December 31, 2014 and 2013 respectively.

The following table reflects the anticipated net income tax benefit at December 31, 2014 that is expected to be recognized by the Company over the remaining life of the investment:

(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		Total Net Income Tax Benefit
Anticipated net income tax benefit less amortization of investments:
2015	$	45	$	35	$	47	$	127
2016		45		37		47		129
2017		44		36		45		125
2018		44		35		45		124
2019 and thereafter		246		156		238		640
Total	$	424	$	299	$	422	$	1,145

In October 2006, the Company invested in the California Affordable Housing Fund – 2006 I, LLC in return for federal and state tax credits. The Company invested $2.5 million as of December 31, 2009. The Company received federal and state tax credits through the years ended December 31, 2011. Beginning in 2012, the state tax credit benefits expired, however the Company will continue to receive federal tax credit benefits through 2023.