Note 8 - Qualified Affordable Housing Partnership Investments

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Qualified Affordable Housing Project Investments [Text Block]

NOTE 8. 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 $4.3 million at September 30, 2016. These investments are recorded in other assets with a corresponding funding obligation of $495 thousand 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.

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The following table presents our original investment in LIHTC partnerships, the current recorded investment balance, and the unfunded liability balance of each investment at September 30, 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 nine months ended September 30, 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
September 30, 2016	Value		Investment		Obligation		Benefits (1)		Investments (2)		Benefit
Raymond James California Housing Opportunities Fund II	$	2,000	$	1,418	$	51	$	171	$	136	$	35
WNC Institutional Tax Credit Fund 38, L.P.		1,000		719		77		105		78		27
Merritt Community Capital Corporation Fund XV, L.P.		2,500		1,648		367		206		171		35
California Affordable Housing Fund		2,454		490		—		155		155		—
Total - investments in qualified affordable housing partnerships	$	7,954	$	4,275	$	495	$	637	$	540	$	97

(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 operating losses.
(2)	This amount reduces the tax credits and benefits.

The following table presents our generated tax credits and tax benefits from investments in qualified affordable housing partnerships for the three and nine months ended September 30, 2016 and 2015.

	For the Three Months Ended
	September 30, 2016				September 30, 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	$	45	$	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	$	168	$	45	$	162	$	47

BANK OF COMMERCE HOLDINGS & SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

	For the Nine Months Ended
	September 30, 2016				September 30, 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	$	134	$	37	$	130	$	39
WNC Institutional Tax Credit Fund 38, L.P.		84		21		74		21
Merritt Community Capital Corporation Fund XV, L.P.		164		42		163		45
California Affordable Housing Fund		119		36		119		37
Total	$	501	$	136	$	486	$	142

The tax credits and benefits were partially offset by the amortization of the principal investment balances of $180 thousand and $540 thousand for the three and nine months ended September 30, 2016 respectively, compared to $181 thousand and $542 thousand for the comparable periods of 2015.

The following table reflects the anticipated net income tax benefit at September 30, 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	California Housing		Tax Credit		Capital Corporation		Affordable Housing		Income Tax
Housing Partnerships	Opportunities Fund II		Fund 38, L.P.		Fund XV, L.P		Fund		Benefit
Anticipated net income tax benefit less amortization of investments:
2016	$	11	$	9	$	12	$	—	$	32
2017		46		35		45		1		127
2018		45		34		44		—		123
2019		45		30		44		—		119
2020 and thereafter		218		128		194		1		541
Total	$	365	$	236	$	339	$	2	$	942