Note 5 - Qualified Affordable Housing Partnership Investments

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Qualified Affordable Housing Project Investments [Text Block]

NOTE

5

. QUALIFIED AFFORDABLE HOUSING PARTNERSHIP INVESTMENTS

Our investments in Qualified Affordable Housing Partnerships that generate Low Income Housing Tax Credits (“LIHTC”) and deductible operating losses totaled

$3.7

million at

September 30, 2017.

These investments are recorded in

Other Assets

with a corresponding funding obligation of

$467

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

5%

and

8%

over the life of the investment. 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 Income

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

September 30, 2017

and

December 31, 2016.

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, 2017

and the year ended

December 31, 2016.

	At September 30, 2017						For the Nine Months Ended September 30, 2017
	Original		Current		Unfunded		Tax Credits		Amortization		Net
(Amounts in thousands)	Investment		Recorded		Liability		and		of		Income Tax
Qualified Affordable Housing Partnerships	Value		Investment		Obligation		Benefits		Investments		Benefit
Raymond James California Housing Opportunities Fund II	$	2,000	$	1,222	$	45	$	168	$	140	$	28
WNC Institutional Tax Credit Fund 38, L.P.		1,000		618		55		105		79		26
Merritt Community Capital Corporation Fund XV, L.P.		2,500		1,547		367		203		166		37
California Affordable Housing Fund		2,454		318		—		132		127		5
Total	$	7,954	$	3,705	$	467	$	608	$	512	$	96

	At December 31, 2016						For the Nine Months Ended September 30, 2016
	Original		Current		Unfunded		Tax Credits		Amortization		Net
(Amounts in thousands)	Investment		Recorded		Liability		and		of		Income Tax
Qualified Affordable Housing Partnerships	Value		Investment		Obligation		Benefits		Investments		Benefit
Raymond James California Housing Opportunities Fund II	$	2,000	$	1,361	$	45	$	178	$	136	$	42
WNC Institutional Tax Credit Fund 38, L.P.		1,000		698		73		107		78		29
Merritt Community Capital Corporation Fund XV, L.P.		2,500		1,713		367		199		171		28
California Affordable Housing Fund		2,454		445		—		154		155		(1)
Total	$	7,954	$	4,217	$	485	$	638	$	540	$	98

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, 2017

and

2016.

	For the Three Months Ended
	September 30, 2017				September 30, 2016
(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	$	46	$	13
WNC Institutional Tax Credit Fund 38, L.P.		28		7		27		9
Merritt Community Capital Corporation Fund XV, L.P.		54		14		51		15
California Affordable Housing Fund		31		13		40		12
Total	$	157	$	46	$	164	$	49

	For the Nine Months Ended
	September 30, 2017				September 30, 2016
(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	$	132	$	36	$	138	$	40
WNC Institutional Tax Credit Fund 38, L.P.		85		20		80		27
Merritt Community Capital Corporation Fund XV, L.P.		162		41		154		45
California Affordable Housing Fund		94		38		119		35
Total	$	473	$	135	$	491	$	147

The tax credits and benefits were partially offset by the amortization of the principal investment balances of

$177

thousand and

$512

thousand for the

three

and

nine

months ended

September 30, 2017

respectively, compared to

$180

thousand and

$540

thousand for the comparable periods of

2016.

The following table reflects the anticipated net income tax benefit at

September 30, 2017

that is expected to be recognized over the remaining life of the investments.

(Amounts in thousands)	Raymond James California		WNC		Merritt Community		California
Qualified Affordable Housing Partnerships: Anticipated income tax benefit, net less amortization of investments	Housing Opportunities Fund II		Institutional Tax Credit Fund 38, L.P.		Capital Corporation Fund XV, L.P		Affordable Housing Fund		Total Income Tax Benefit, Net
2017	$	10	$	9	$	9	$	3	$	31
2018		45		35		39		1		120
2019		45		30		38		1		114
2020		45		29		37		1		112
2021 and thereafter		204		102		143		3		452
Total	$	349	$	205	$	266	$	9	$	829