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Note 5 - Low Income Housing Tax Credit Partnerships

6 Months Ended

Jun. 30, 2021

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 income tax credits and with operating loss tax benefits over an approximately 23-year period. The income 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 $2.6 million at June 30, 2021. These investments are recorded in Other Assets with a corresponding funding obligation of $945 thousand 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 income 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 June 30, 2021 and December 31, 2020. In addition, the tables reflect the income tax credits and operating loss tax benefits, amortization of the investment and the net impact to our income tax provision for the six months ended June 30, 2021 and 2020.

	At June 30, 2021						For the Six Months Ended June 30, 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	$	588	$	16	$	95	$	88	$	7
WNC Institutional Tax Credit Fund 38, L.P.		1,000		269		—		47		42		5
Merritt Community Capital Corporation Fund XV, L.P.		2,500		728		306		107		113		(6	)
California Affordable Housing Fund		2,454		140		—		7		12		(5	)
Boston Capital		1,000		902		623		56		45		11
Total	$	8,954	$	2,627	$	945	$	312	$	300	$	12

	At December 31, 2020						For the Six Months Ended June 30, 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	$	99	$	90	$	9
WNC Institutional Tax Credit Fund 38, L.P.		1,000		311		—		52		43		9
Merritt Community Capital Corporation Fund XV, L.P.		2,500		841		316		112		109		3
California Affordable Housing Fund		2,454		152		—		12		19		(7	)
Boston Capital		1,000		947		987		33		24		9
Total	$	8,954	$	2,927	$	1,319	$	308	$	285	$	23

The following tables present our generated income tax credits and operating loss tax benefits from investments in LIHTC partnerships for the three and six months ended June 30, 2021 and 2020.

	For the Three Months Ended
	June 30, 2021				June 30, 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		1		6
Boston Capital		22		6		11		5
Total	$	133	$	23	$	125	$	30

	For the Six Months Ended
	June 30, 2021				June 30, 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	$	85	$	10	$	85	$	14
WNC Institutional Tax Credit Fund 38, L.P.		42		5		44		8
Merritt Community Capital Corporation Fund XV, L.P.		95		12		96		16
California Affordable Housing Fund		—		7		1		11
Boston Capital		44		12		22		11
Total	$	266	$	46	$	248	$	60

The following table reflects as of June 30, 2021, the anticipated net income tax benefit and (expense) 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	$	7		$	14		$	11		$	6		$	10		$	48
WNC Institutional Tax Credit Fund 38, L.P.		5			9			8			5			6			33
Merritt Community Capital Corporation Fund XV, L.P.		(6	)		(13	)		(9	)		(2	)		(12	)		(42	)
California Affordable Housing Fund		(5	)		(58	)		—			—			—			(63	)
Boston Capital		11			24			23			23			148			229
Total income tax benefit, net	$	12		$	(24	)	$	33		$	32		$	152		$	205