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Note 6 - Other Assets and Other Liabilities

9 Months Ended

Sep. 30, 2022

Other Assets and Liabilities Disclosure [Text Block]

Note 6: Other Assets and Other Liabilities

Other assets consisted of the following:

	At September 30,		At December 31,
	2022		2021
	(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		63,111		63,107
Net deferred tax asset		139,887		-
Right-of-use asset		16,576		17,980
Limited partnership investments		35,852		37,145
Interest receivable		49,506		35,521
Prepaid assets		4,476		4,757
Other assets		17,239		12,678
Total other assets	$	340,874	$	185,415

⁽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. Visa Inc. disclosed a revised conversion rate applicable to its class B common stock in its Form 8-K dated July 6, 2022. 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 1.6181 to 1.6059 per share, effective as of June 29, 2022. Visa Inc. class A common stock had a closing price of $177.65 per share on September 30, 2022, the last day of stock market trading for the third quarter 2022. 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 September 30, 2022, these investments totaled $35,852 thousand and $25,017 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2021, these investments totaled $37,145 thousand and $26,485 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At September 30, 2022, the $25,017 thousand of outstanding equity capital commitments are expected to be paid as follows: $2,519 thousand in the remainder of 2022, $12,200 thousand in 2023, $9,169 thousand in 2024, $244 thousand in 2025, $128 thousand in 2026, $207 thousand in 2027, and $550 thousand in 2028 or thereafter.

The amounts recognized in net income for these investments include:

	For the Three Months Ended				For the Nine Months Ended
	September 30,
	2022		2021		2022		2021
	(In thousands)
Investment loss included in pre-tax income	$	1,431	$	620	$	4,293	$	1,820
Tax credits recognized in provision for income taxes		804		200		2,412		650

Other liabilities consisted of the following:

	At September 30,		At December 31,
	2022		2021
	(In thousands)
Net deferred tax liability	$	-	$	2,501
Operating lease liability		16,576		17,980
Other liabilities		49,319		53,241
Total other liabilities	$	65,895	$	73,722

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 September 30, 2022.

As of September 30, 2022, the Company’s lease liability and right-of-use asset were $16,576 thousand. The weighted average remaining life of operating leases and weighted average discount rate used to determine operating lease liabilities were 3.8 years and 1.79%, respectively, at September 30, 2022. The Company did not have any material lease incentives, unamortized initial direct costs, prepaid lease expense, or accrued lease expense as of September 30, 2022.

Total lease costs during the three and nine months ended September 30, 2022, of $1,664 thousand and $4,934 thousand, respectively, were recorded within occupancy and equipment expense. Total lease costs during the three and nine months ended September 30, 2021, of $1,637 thousand and $4,949 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 nine months ended September 30, 2022 and September 30, 2021.

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

	Minimum future lease payments
	At September 30,
	2022
	(In thousands)
The remainder of 2022	$	1,509
2023		5,687
2024		4,110
2025		2,872
2026		1,307
Thereafter		1,628
Total minimum lease payments		17,113
Less: discount		(537	)
Present value of lease liability	$	16,576