Tax Credit Investments

3 Months Ended

Mar. 31, 2017

Valley’s tax credit investments are primarily related to investments promoting qualified affordable housing projects, and other investments related to community development and renewable energy sources. Some of these tax-advantaged investments support Valley’s regulatory compliance with the Community Reinvestment Act (CRA). Valley’s investments in these entities generate a return primarily through the realization of federal income tax credits, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These tax credits and deductions are recognized as a reduction of income tax expense.

Valley’s tax credit investments are carried in other assets on the consolidated statements of financial condition. Valley’s unfunded capital and other commitments related to the tax credit investments are carried in accrued expenses and other liabilities on the consolidated statements of financial condition. Valley recognizes amortization of tax credit investments, including impairment losses, within non-interest expense of the consolidated statements of income using the equity method of accounting. An impairment loss is recognized when the fair value of the tax credit investment is less than its carrying value.

The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at March 31, 2017 and December 31, 2016.



	March 31, 2017		December 31, 2016
	(in thousands)
Other Assets:
Affordable housing tax credit investments, net	$	29,047	$	29,567
Other tax credit investments, net	39,959		44,763
Total tax credit investments, net	$	69,006	$	74,330
Other Liabilities:
Unfunded affordable housing tax credit commitments	$	4,690	$	4,850
Unfunded other tax credit commitments	7,276		7,276
Total unfunded tax credit commitments	$	11,966	$	12,126

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three months ended March 31, 2017 and 2016:



	Three Months Ended March 31,
	2017		2016
	(in thousands)
Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits	$	1,284	$	1,065
Other tax credit investment credits and tax benefits	6,286		3,268
Total reduction in income tax expense	$	7,570	$	4,333
Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses	$	396	$	584
Affordable housing tax credit investment impairment losses	124		140
Other tax credit investment losses	767		74
Other tax credit investment impairment losses	4,037		6,466
Total amortization of tax credit investments recorded in non-interest expense	$	5,324	$	7,264