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Note 5 - Premises, Equipment, Other Assets and Other Liabilities

12 Months Ended

Dec. 31, 2021

Note 5: Premises, Equipment, Other Assets and Other Liabilities

Premises and equipment consisted of the following:

	At December 31,
	Cost		Accumulated Depreciation and Amortization			Net Book Value
	(In thousands)
2021
Land	$	11,453	$	-		$	11,453
Building and improvements		43,009		(30,069	)		12,940
Leasehold improvements		7,567		(5,967	)		1,600
Furniture and equipment		26,642		(21,480	)		5,162
Total	$	88,671	$	(57,516	)	$	31,155
2020
Land	$	11,453	$	-		$	11,453
Building and improvements		42,960		(28,922	)		14,038
Leasehold improvements		6,944		(5,528	)		1,416
Furniture and equipment		26,227		(20,321	)		5,906
Total	$	87,584	$	(54,771	)	$	32,813

Depreciation and amortization of premises and equipment included in noninterest expense amounted to $2,978 thousand in 2021, $3,683 thousand in 2020 and $3,879 thousand in 2019.

Other assets consisted of the following:

	At December 31,
	2021		2020
	(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		63,107		60,444
Right-of-use asset		17,980		18,832
Limited partnership investments		37,145		18,335
Interest receivable		35,521		33,022
Prepaid assets		4,757		4,572
Other assets		12,678		10,471
Total other assets	$	185,415	$	159,903

⁽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 January 28, 2022, Visa Inc. disclosed a revised conversion rate applicable to its class B common stock in its filed Form 10-Q for the quarterly period ended December 31, 2021. 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, was reduced from 1.6228 to 1.6181 per share, effective as of December 29, 2021. Visa Inc. class A common stock had a closing price of $216.71 per share on December 31, 2021, the last day of stock market trading for the fourth quarter 2021. 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 December 31, 2021, this investment totaled $37,145 thousand and $26,485 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2020, this investment totaled $18,335 thousand and $12,202 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2021, the $26,485 thousand of outstanding equity capital commitments are expected to be paid as follows, $6,830 thousand in 2022, $11,826 thousand in 2023, $6,769 thousand in 2024, $241 thousand in 2025, $125 thousand in 2026, $203 thousand in 2027, and $491 thousand in 2028 or thereafter.

The amounts recognized in net income for these investments include:

	For the Years Ended December 31,
	2021		2020		2019
	(In thousands)
Investment loss included in pre-tax income	$	2,620	$	2,440	$	2,400
Tax credits recognized in provision for income taxes		2,300		900		875

Other liabilities consisted of the following:

	At December 31,
	2021		2020
	(In thousands)
Net deferred tax liability	$	2,501	$	25,778
Operating lease liability		17,980		18,832
Securities purchases pending settlement		-		29,000
Other liabilities		53,241		38,988
Total other liabilities	$	73,722	$	112,598

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 December 31, 2021.

As of December 31, 2021, the Company’s lease liability and right-of-use asset were $17,980 thousand. The weighted average remaining life of operating leases and weighted average discount rate used to determine operating lease liabilities were 4.2 years and 1.67%, respectively, at December 31, 2021. The Company did not have any material lease incentives, unamortized initial direct costs, prepaid lease expense, or accrued lease expense as of December 31, 2021.

Total lease costs during the year ended December 31, 2021 and December 31, 2020, of $6,581 thousand and $6,699 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 year ended December 31, 2021 and December 31, 2020.

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

	Minimum future lease payments
	At December 31,
	2021
	(In thousands)
2022	$	5,698
2023		4,984
2024		3,393
2025		2,201
2026		786
Thereafter		1,478
Total minimum lease payments		18,540
Less: discount		(560	)
Present value of lease liability	$	17,980

See Note 10 to the consolidated financial statements for additional information related to the net deferred tax liability.