Note 5 - Low Income Housing Tax Credit Partnerships

3 Months Ended

Mar. 31, 2021

Notes to Financial Statements

Qualified Affordable Housing Project Investments [Text Block]

NOTE 5. LOW INCOME HOUSING TAX CREDIT PARTNERSHIPS

We have invested in five separate Low Income Housing Tax Credit (“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 23-year period. 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 2% and 6% over the life of the investment.

Our investments in LIHTC partnerships totaled $2.8 million at March 31, 2021. These investments are recorded in Other Assets with a corresponding funding obligation of $1.2 million recorded in Other Liabilities in our Consolidated Balance Sheets. None of the original investments will be repaid. 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 tables present our original investment in LIHTC partnerships, the current recorded investment balance, and the unfunded liability balance of each investment at March 31, 2021 and December 31, 2020. In addition, the tables reflect 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, 2021 and 2020.

	At March 31, 2021						For the Three Months Ended March 31, 2021
	Original		Current		Unfunded		Tax Credits		Amortization		Net
	Investment		Recorded		Liability		and		of		Income Tax
(Amounts in thousands)	Commitment		Investment		Obligation		Benefits		Investments		Benefit
LIHTC Partnerships:
Raymond James California Housing Opportunities Fund II	$	2,000	$	632	$	16	$	48	$	44	$	4
WNC Institutional Tax Credit Fund 38, L.P.		1,000		290		—		24		21		3
Merritt Community Capital Corporation Fund XV, L.P.		2,500		784		316		53		57		(4	)
California Affordable Housing Fund		2,454		146		—		3		6		(3	)
Boston Capital		1,000		925		887		28		22		6
Total	$	8,954	$	2,777	$	1,219	$	156	$	150	$	6

	At December 31, 2020						For the Three Months Ended March 31, 2020
	Original		Current		Unfunded		Tax Credits		Amortization		Net
	Investment		Recorded		Liability		and		of		Income Tax
(Amounts in thousands)	Commitment		Investment		Obligation		Benefits		Investments		Benefit
LIHTC Partnerships:
Raymond James California Housing Opportunities Fund II	$	2,000	$	676	$	16	$	50	$	45	$	5
WNC Institutional Tax Credit Fund 38, L.P.		1,000		311		—		26		21		5
Merritt Community Capital Corporation Fund XV, L.P.		2,500		841		316		56		54		2
California Affordable Housing Fund		2,454		152		—		6		10		(4	)
Boston Capital		1,000		947		987		16		10		6
Total	$	8,954	$	2,927	$	1,319	$	154	$	140	$	14

The following table presents our generated tax credits and tax benefits from investments in LIHTC partnerships for the three months ended March 31, 2021 and 2020.

	For the Three Months Ended
	March 31, 2021				March 31, 2020
	Generated		Tax Benefits From		Generated		Tax Benefits from
(Amounts in thousands)	Tax Credits		Taxable Losses		Tax Credits		Taxable Losses
LIHTC Partnerships:
Raymond James California Housing Opportunities Fund II	$	43	$	5	$	43	$	7
WNC Institutional Tax Credit Fund 38, L.P.		21		3		22		4
Merritt Community Capital Corporation Fund XV, L.P.		47		6		48		8
California Affordable Housing Fund		—		3		—		6
Boston Capital		22		6		11		5
Total	$	133	$	23	$	124	$	30

The following table reflects the anticipated net income tax benefit and (expense) at March 31, 2021 that is expected to be recognized over the remaining lives of the investments.

(Amounts in thousands)
LIHTC Partnerships:													2025
Anticipated income tax benefit, net less													and
amortization of investments	2021			2022			2023			2024			thereafter			Total
Raymond James California Housing Opportunities Fund II	$	18		$	14		$	11		$	6		$	10		$	59
WNC Institutional Tax Credit Fund 38, L.P.		13			9			8			5			6			41
Merritt Community Capital Corporation Fund XV, L.P.		(16	)		(13	)		(9	)		(2	)		(12	)		(52	)
California Affordable Housing Fund		(14	)		(58	)		—			—			—			(72	)
Boston Capital		29			24			23			23			148			247
Total income tax benefit, net	$	30		$	(24	)	$	33		$	32		$	152		$	223