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Note 9 - Qualified Affordable Housing Partnership Investments

3 Months Ended

Mar. 31, 2016

Qualified Affordable Housing Project Investments [Abstract]

Qualified Affordable Housing Project Investments [Text Block]

NOTE 9. QUALIFIED AFFORDABLE HOUSING PARTNERSHIP INVESTMENTS

Our investment in Qualified Affordable Housing Partnerships that generate Low Income Housing Tax Credits (“LIHTC”) and deductible operating losses was $4.6 million at March 31, 2016. These investments are recorded in other assets with a corresponding funding obligation of $1.0 million recorded in Other Liabilities in our Consolidated Balance Sheets. We have invested in four separate LIHTC partnerships, which provide the Company with CRA credit. Additionally, the investments in LIHTC partnerships provide us with tax credits and with operating loss tax benefits over an approximately 18 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 we made and provide returns on the investments of between 4% and 7%. The investments in LIHTC partnerships are being accounted for using the proportional amortization method, under which we amortize the initial cost of an investment in proportion to the amount of the tax credits and other tax benefits received, and recognize the net investment performance in the Consolidated Statements of Operations as a component of income tax expense.

The following table presents our original investment in LIHTC partnerships, the current recorded investment balance, and the unfunded liability balance of each investment at March 31, 2016 and December 31, 2015. In addition, the table reflects the tax credits and tax benefits, amortization of the investment and the net impact to our income tax provision for the three months ended March 31, 2016 and the year ended December 31, 2015.

(Amounts in thousands)	Original		Current		Unfunded		Tax Credits		Amortization		Net
Qualified Affordable Housing Partnerships at	Investment		Recorded		Liability		and		of		Income Tax
March 31, 2016	Value		Investment		Obligation		Benefits ⁽¹⁾		Investments ⁽²⁾		Benefit
Raymond James California Housing Opportunities Fund II	$	2,000	$	1,508	$	235	$	56	$	45	$	11
WNC Institutional Tax Credit Fund 38, L.P.		1,000		771		159		35		26		9
Merritt Community Capital Corporation Fund XV, L.P.		2,500		1,762		610		69		57		12
California Affordable Housing Fund		2,454		593		—		52		52		—
Total - investments in qualified affordable housing partnerships	$	7,954	$	4,634	$	1,004	$	212	$	180	$	32

(Amounts in thousands)	Original		Current		Unfunded		Tax Credits		Amortization		Net
Qualified Affordable Housing Partnerships at	Investment		Recorded		Liability		and		of		Income Tax
December 31, 2015	Value		Investment		Obligation		Benefits ⁽¹⁾		Investments ⁽²⁾		Benefit
Raymond James California Housing Opportunities Fund II	$	2,000	$	1,553	$	406	$	226	$	184	$	42
WNC Institutional Tax Credit Fund 38, L.P.		1,000		797		166		126		93		33
Merritt Community Capital Corporation Fund XV, L.P.		2,500		1,820		610		278		230		48
California Affordable Housing Fund		2,454		645		—		207		207		—
Total - investments in qualified affordable housing partnerships	$	7,954	$	4,815	$	1,182	$	837	$	714	$	123

⁽¹⁾ The amounts reflected in this column represent both the tax credits, and estimated tax benefits generated by the Qualified Affordable Housing partnerships operating loss for the year.
⁽²⁾ This amount reduces the tax credits and benefits generated by the Qualified Affordable Housing partnerships.

The following table presents our generated tax credits and tax benefits from investments in qualified affordable housing partnerships for the three months ended March 31, 2016 and 2015.

	For the Three Months Ended
	March 31, 2016				March 31, 2015
(Amounts in thousands)	Generated		Tax Benefits From		Generated		Tax Benefits from
Qualified Affordable Housing Partnerships	Tax Credits		Taxable Losses		Tax Credits		Taxable Losses
Raymond James California Housing Opportunities Fund II	$	44	$	12	$	43	$	13
WNC Institutional Tax Credit Fund 38, L.P.		28		7		25		7
Merritt Community Capital Corporation Fund XV, L.P.		55		14		54		15
California Affordable Housing Fund		40		12		40		12
Total	$	167	$	45	$	162	$	47

The tax credits and benefits were partially offset by the amortization of the principal investment balances of $180 thousand and $178 thousand for the three months ended March 31, 2016 and March 31, 2015, respectively.

The following table reflects the anticipated net income tax benefit at March 31, 2016 that is expected to be recognized over the remaining life of the investments.

(Amounts in thousands)	Raymond James		WNC Institutional		Merritt Community		California		Total Net
Qualified Affordable Housing	California Housing		Tax Credit		Capital Corporation		Affordable Housing		Income Tax
Partnerships	Opportunities Fund II		Fund 38, L.P.		Fund XV, L.P		Fund		Benefit
Anticipated net income tax benefit less amortization of investments:
2016	$	35	$	27	$	35	$	—	$	97
2017		46		35		45		1		127
2018		45		34		45		—		124
2019		45		30		44		—		119
2020 and thereafter		218		128		194		1		541
Total	$	389	$	254	$	363	$	2	$	1,008