Note 9 - Qualified Affordable Housing Project Investments

3 Months Ended

Mar. 31, 2015

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, 2015 was $5.3 million. These investments are recorded in other assets with a corresponding funding obligation of $1.9 million recorded in other liabilities. The Company has invested in four separate LIHTC projects which provide the Company with CRA credit. Additionally, the investment in LIHTC projects provide the Company with tax credits and with operating loss tax benefits over an approximately 16 year period. None of the original investments 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 provides returns on the investments between 4.28% and 7.14%. 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.

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 March 31, 2015 and December 31, 2014. In addition, the table reflects the tax credits and tax benefits recorded by the Company during 2015 and 2014, the amortization of the investment and the net impact to the Company’s income tax provision for 2015 and 2014:

(Amounts in thousands)	Original		Current		Unfunded		Tax Credits		Amortization		Net
Qualified Affordable Housing Projects at	Investment		Recorded		Liability		and		of		Income Tax
March 31, 2015	Value		Investment		Obligation		Benefits (1)		Investments (2)		Benefit
Raymond James California Housing Opportunities Fund II	$	2,000	$	1,692	$	628	$	57	$	46	$	11
WNC Institutional Tax Credit Fund 38, L.P.		1,000		862		302		35		26		9
Merritt Community Capital Corporation Fund XV, L.P.		2,500		1,992		923		69		58		11
California Affordable Housing Fund		2,454		803		—		48		48		—
Total – investments in qualified affordable housing projects	$	7,954	$	5,349	$	1,853	$	209	$	178	$	31

(Amounts 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
California Affordable Housing Fund		2,454		852		—		209		187		22
Total – investments in qualified affordable housing projects	$	7,954	$	5,636	$	2,424	$	814	$	903	$	137

(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.

(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 $164 thousand for the quarter ended March 31, 2015 and $120 thousand for the quarter ended March 31, 2014. Additional tax benefits from the operating losses generated by the projects were $48 thousand and $38 thousand for the quarter ended March 31, 2015 and 2014 respectively. The tax credits and benefits were partially offset by the amortization of the principal investment balances of $178 thousand and $74 thousand for the quarters ended March 31, 2015 and 2014 respectively.

The following table reflects the anticipated net income tax benefit at March 31, 2015 that is expected to be recognized by the Company over the remaining life of the investment:

	Raymond James		WNC Institutional		Merritt Community		California		Total Net
(Amounts in thousands)	California Housing		Tax Credit		Capital Corporation		Affordable Housing		Income Tax
Qualified Affordable Housing Projects	Opportunities Fund II		Fund 38, L.P.		Fund XV, L.P		Fund		Benefit
Anticipated net income tax benefit less amortization of investments:
2015	$	35	$	26	$	35	$	—	$	96
2016		46		37		47		1		131
2017		46		36		45		1		128
2018		45		35		45		—		125
2019 and thereafter		263		156		238		1		658
Total	$	435	$	290	$	410	$	3	$	1,138