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Note 9 - Qualified Affordable Housing Project Investments

6 Months Ended

Jun. 30, 2015

Qualified Affordable Housing Project Investments [Abstract]

Qualified Affordable Housing Project Investments [Text Block]

NOTE 9. QUALIFIED AFFORDABLE HOUSING PROJECT INVESTMENTS

At June 30, 2015 the Company’s investments in Qualified Affordable Housing Projects that generate Low Income Housing Tax Credits (“LIHTC”) were $5.2 million. These investments are recorded in other assets with a corresponding funding obligation of $1.5 million recorded in other liabilities. The Company has invested in four separate LIHTC projects which provide the Company with CRA credit. Additionally, the investments 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 investments made by the Company and provide returns on the investments of between 4.36% and 7.14%. The investments in LIHTC projects are being accounted for using the proportional amortization method, under which the Company amortizes the initial cost of an 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 LIHTC projects, the current recorded investment balance, and the unfunded liability balance of each investment at June 30, 2015 and December 31, 2014. In addition, the table reflects the tax credits and tax benefits, amortization of the investment and the net impact to the Company’s income tax provision for the six months ended June 30, 2015 and the year ended December 31, 2014:

(Amounts in thousands)	Original		Current		Unfunded		Tax Credits		Amortization		Net
Qualified Affordable Housing Projects at	Investment		Recorded		Liability		and		of		Income Tax
June 30, 2015	Value		Investment		Obligation		Benefits ⁽¹⁾		Investments ⁽²⁾		Benefit
Raymond James California Housing Opportunities Fund II	$	2,000	$	1,645	$	628	$	113	$	91	$	22
WNC Institutional Tax Credit Fund 38, L.P.		1,000		836		248		69		51		18
Merritt Community Capital Corporation Fund XV, L.P.		2,500		1,935		610		139		115		24
California Affordable Housing Fund		2,454		748		—		104		104		—
Total	$	7,954	$	5,164	$	1,486	$	425	$	361	$	64

(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	$	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. Tax benefits are calculated using a 34% tax rate.
⁽²⁾ This amount reduces the tax credits and benefits generated by the Qualified Affordable Housing Projects.

The following table presents the Company’s generated tax credits and tax benefits from investments in qualified affordable housing projects for the three and six month periods ended June 30, 2015 and 2014.

	For the Three Months Ended
	June 30, 2015				June 30, 2014
(Amounts in thousands)	Generated		Tax Benefits From		Generated		Tax Benefits from
Qualified Affordable Housing Projects	Tax Credits		Taxable Losses		Tax Credits		Taxable Losses
Raymond James California Housing Opportunities Fund II	$	43	$	13	$	29	$	11
WNC Institutional Tax Credit Fund 38, L.P.		27		8		25		8
Merritt Community Capital Corporation Fund XV, L.P.		54		15		66		19
California Affordable Housing Fund		40		12		40		13
Total	$	164	$	48	$	160	$	51

	For the Six Months Ended
	June 30, 2015				June 30, 2014
(Amounts in thousands)	Generated		Tax Benefits From		Generated		Tax Benefits from
Qualified Affordable Housing Projects	Tax Credits		Taxable Losses		Tax Credits		Taxable Losses
Raymond James California Housing Opportunities Fund II	$	87	$	26	$	57	$	23
WNC Institutional Tax Credit Fund 38, L.P.		54		15		49		16
Merritt Community Capital Corporation Fund XV, L.P.		109		30		133		38
California Affordable Housing Fund		79		25		79		25
Total	$	329	$	96	$	318	$	102

The tax credits and benefits were partially offset by the amortization of the principal investment balances of $180 thousand and $361 thousand for the three and six months ended June 30, 2015 respectively, compared to $232 thousand and $405 thousand for the comparable periods of 2014.

The following table reflects the anticipated net income tax benefit at June 30, 2015 that is expected to be recognized by the Company over the remaining life of the investments:

	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	$	24	$	17	$	23	$	1	$	65
2016		46		37		47		1		131
2017		46		36		45		—		127
2018		45		35		45		—		125
2019 and thereafter		263		155		238		1		657
Total	$	424	$	280	$	398	$	3	$	1,105