Tax Credit Investments

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 June 30, 2018 and December 31, 2017.



	June 30, 2018		December 31, 2017
	(in thousands)
Other Assets:
Affordable housing tax credit investments, net	$	40,226	$	22,135
Other tax credit investments, net	31,129		42,015
Total tax credit investments, net	$	71,355	$	64,150
Other Liabilities:
Unfunded affordable housing tax credit commitments	$	4,978	$	3,690
Unfunded other tax credit commitments	4,773		15,020
Total unfunded tax credit commitments	$	9,751	$	18,710

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three and six months ended June 30, 2018 and 2017:



	Three Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018		2017
	(in thousands)
Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits	$	1,429		$	1,271	$	3,250	$	2,555
Other tax credit investment credits and tax benefits	5,680			8,680		11,165		14,966
Total reduction in income tax expense	$	7,109		$	9,951	$	14,415	$	17,521
Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses	$	(319	)	$	358	$	667	$	754
Affordable housing tax credit investment impairment losses	515			130		1,102		254
Other tax credit investment losses	1,253			1,060		1,790		1,827
Other tax credit investment impairment losses	3,021			6,184		6,185		10,221
Total amortization of tax credit investments recorded in non-interest expense	$	4,470		$	7,732	$	9,744	$	13,056