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 March 31, 2018 and December 31, 2017.



	March 31, 2018		December 31, 2017
	(in thousands)
Other Assets:
Affordable housing tax credit investments, net	$	40,568	$	22,135
Other tax credit investments, net	35,976		42,015
Total tax credit investments, net	$	76,544	$	64,150
Other Liabilities:
Unfunded affordable housing tax credit commitments	$	5,256	$	3,690
Unfunded other tax credit commitments	12,682		15,020
Total unfunded tax credit commitments	$	17,938	$	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 months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
	2018		2017
	(in thousands)
Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits	$	1,821	$	1,284
Other tax credit investment credits and tax benefits	5,485		6,286
Total reduction in income tax expense	$	7,306	$	7,570
Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses	$	986	$	396
Affordable housing tax credit investment impairment losses	587		124
Other tax credit investment losses	537		767
Other tax credit investment impairment losses	3,164		4,037
Total amortization of tax credit investments recorded in non-interest expense	$	5,274	$	5,324