Tax Credit Investments

6 Months Ended

Jun. 30, 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 June 30, 2017 and December 31, 2016.



	June 30, 2017		December 31, 2016
	(in thousands)
Other Assets:
Affordable housing tax credit investments, net	$	28,559	$	29,567
Other tax credit investments, net	36,204		44,763
Total tax credit investments, net	$	64,763	$	74,330
Other Liabilities:
Unfunded affordable housing tax credit commitments	$	4,690	$	4,850
Unfunded other tax credit commitments	3,582		7,276
Total unfunded tax credit commitments	$	8,272	$	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 and six months ended June 30, 2017 and 2016:



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
	(in thousands)
Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits	$	1,271	$	1,065	$	2,555	$	2,130
Other tax credit investment credits and tax benefits	8,680		3,268		14,966		6,536
Total reduction in income tax expense	$	9,951	$	4,333	$	17,521	$	8,666
Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses	$	358	$	775	$	754	$	1,359
Affordable housing tax credit investment impairment losses	130		60		254		200
Other tax credit investment losses	1,060		594		1,827		668
Other tax credit investment impairment losses	6,184		6,217		10,221		12,683
Total amortization of tax credit investments recorded in non-interest expense	$	7,732	$	7,646	$	13,056	$	14,910