Tax Credit Investments

9 Months Ended

Sep. 30, 2015

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. 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 September 30, 2015 and December 31, 2014.



	September 30, 2015		December 31, 2014
	(in thousands)
Other Assets:
Affordable housing tax credit investments, net	$	33,514	$	36,009
Other tax credit investments, net	54,872		66,023
Total tax credit investments, net	$	88,386	$	102,032
Other Liabilities:
Unfunded affordable housing tax credit commitments	$	8,080	$	8,800
Unfunded other tax credit commitments	418		418
Total unfunded tax credit commitments	$	8,498	$	9,218

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three and nine months ended September 30, 2015 and 2014:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(in thousands)
Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits	$	1,660	$	2,164	$	4,774	$	6,148
Other tax credit investment credits and tax benefits	7,510		3,269		16,031		9,953
Total reduction in income tax expense	$	9,170	$	5,433	$	20,805	$	16,101
Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses	$	543	$	1,073	$	1,516	$	2,291
Affordable housing tax credit investment impairment losses	451		375		979		2,889
Other tax credit investment losses	144		747		934		1,829
Other tax credit investment impairment losses	4,086		2,435		10,802		7,139
Total amortization of tax credit investments recorded in non-interest expense	$	5,224	$	4,630	$	14,231	$	14,148