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Note 6 - Other Assets and Other Liabilities

6 Months Ended

Jun. 30, 2020

Other Assets and Liabilities Disclosure [Text Block]

Note 6: Other Assets and Other Liabilities

Other assets consisted of the following:

	At June 30,		At December 31,
	2020		2019
	(In thousands)
Cost method equity investments:
Federal Reserve Bank stock ⁽¹⁾	$	14,069	$	14,069
Other investments		158		158
Total cost method equity investments		14,227		14,227
Life insurance cash surrender value		59,182		57,810
Net deferred tax asset		-		11,085
Right-of-use asset		15,757		17,136
Limited partnership investments		19,535		20,773
Interest receivable		32,322		28,797
Prepaid assets		4,140		3,737
Other assets		22,403		10,767
Total other assets	$	167,566	$	164,332

⁽¹⁾A bank applying for membership in the Federal Reserve System is required to subscribe to stock in the Federal Reserve Bank (FRB) in its district in a sum equal to six percent of the bank’s paid-up capital stock and surplus. One-half of the amount of the bank's subscription shall be paid to the FRB and the remaining half will be subject to call when deemed necessary by the Board of Governors of the Federal Reserve System.

The Company owns 211 thousand shares of Visa Inc. class B common stock which have transfer restrictions; the carrying value is $-0- thousand. On September 30, 2019, Visa Inc. announced a revised conversion rate applicable to its class B common stock resulting from its September 27, 2019 deposit of funds into its litigation escrow account. This funding reduced the conversion rate of class B common stock into class A common stock, which is unrestricted and trades actively on the New York Stock Exchange, from 1.6298 to 1.6228 per share, effective as of September 27, 2019. Visa Inc. class A common stock had a closing price of $193.17 per share on June 30, 2020, the last day of stock market trading for the second quarter 2020. The ultimate value of the Company’s Visa Inc. class B shares is subject to the extent of Visa Inc.’s future litigation escrow fundings, the resulting conversion rate to class A common stock, and current and future trading restrictions on the class B common stock.

The Company invests in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for low-income housing tax credits. At June 30, 2020, this investment totaled $19,535 thousand and $15,054 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2019, this investment totaled $20,773 thousand and $16,231 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At June 30, 2020, the $15,054 thousand of outstanding equity capital commitments are expected to be paid as follows, $3,831 thousand in the remainder of 2020, $4,071 thousand in 2021, $5,983 thousand in 2022, $295 thousand in 2023, $24 thousand in 2024, $302 thousand in 2025, $74 thousand in 2026 and $474 thousand in 2027 or thereafter.

The amounts recognized in net income for these investments include:

	For the Three Months Ended				For the Six Months Ended
	June 30,
	2020		2019		2020		2019
	(In thousands)
Investment loss included in pre-tax income	$	600	$	600	$	1,200	$	1,200
Tax credits recognized in provision for income taxes		225		225		450		450

Other liabilities consisted of the following:

	At June 30,		At December 31,
	2020		2019
	(In thousands)
Net deferred tax liability	$	17,821	$	-
Operating lease liability		15,757		17,136
Securities purchases pending settlement		13,632		-
Other liabilities		54,021		27,453
Total other liabilities	$	101,231	$	44,589

The deferred tax liability at June 30, 2020 of $17,821 thousand, net of deferred tax benefits of $21,789 thousand, included deferred tax obligations of $39,341 thousand related to unrealized gains of $133,073 thousand on available for sale debt securities. The net deferred tax asset at December 31, 2019 of $11,085 thousand was net of deferred tax obligations of $10,934 thousand related to available for sale debt securities unrealized gains.

The Company has entered into leases for most branch locations and certain other offices that were classified as operating leases primarily with original terms of five years. Certain lease arrangements contain extension options, which can be exercised at the Company’s option, for one or more additional five year terms. Unexercised extension options are not considered reasonably certain of exercise and have not been included in the lease term used to determine the lease liability or right-of-use asset. The Company did not have any finance leases as of June 30, 2020.

As of June 30, 2020, the Company recorded a lease liability of $15,757 thousand and a right-of-use asset of $15,757 thousand, respectively. The weighted average remaining life of operating leases and weighted average discount rate used to determine operating lease liabilities were 3.8 years and 2.80%, respectively, at June 30, 2020. The Company did not have any material lease incentives, unamortized initial direct costs, prepaid lease expense, or accrued lease expense as of June 30, 2020.

Total lease costs during the three and six months ended June 30, 2020, of $1,657 thousand and $3,317 thousand, respectively, were recorded within occupancy and equipment expense. The Company did not have any material short-term or variable leases costs or sublease income during the six months ended June 30, 2020.

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The following table summarizes the remaining lease payments of operating lease liabilities:

	Minimum future lease payments
	At June 30,
	2020
	(In thousands)
The remaining six months of 2020	$	3,046
2021		4,645
2022		3,703
2023		2,980
2024		1,565
Thereafter		708
Total minimum lease payments		16,647
Less: discount		(890	)
Present value of lease liability	$	15,757