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Note 6 - Other Assets and Other Liabilities

9 Months Ended

Sep. 30, 2023

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,
	2023		2022
	(In thousands)
Cost method equity investments:
Federal Reserve Bank stock ⁽¹⁾	$	14,069	$	11,743
Other investments		158		158
Total cost method equity investments		14,227		11,901
Life insurance cash surrender value		65,606		63,816
Net deferred tax asset		136,458		125,140
Right-of-use asset		18,593		15,746
Limited partnership investments		30,107		34,421
Interest receivable		55,597		53,558
Prepaid assets		4,447		4,894
Other assets		8,941		9,670
Total other assets	$	333,976	$	319,146

⁽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 October 2, 2023. 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 1.5902 to 1.5875 per share, effective as of September 28, 2023. Visa Inc. class A common stock had a closing price of $230.01 per share on September 29, 2023, the last day of stock market trading for the third quarter 2023. 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, 2023, these investments totaled $30,107 thousand and $16,138 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2022, these investments totaled $34,421 thousand and $22,647 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At September 30, 2023, the $16,138 thousand of outstanding equity capital commitments are expected to be paid as follows: $4,483 thousand in the remainder of 2023, $10,499 thousand in 2024, $359 thousand in 2025, $59 thousand in 2026, $190 thousand in 2027, and $548 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,
	2023		2022		2023		2022
	(In thousands)
Investment loss included in pre-tax income	$	1,440	$	1,431	$	4,314	$	4,293
Tax credits recognized in provision for income taxes		765		804		2,820		2,412

Other liabilities consisted of the following:

	At September 30,		At December 31,
	2023		2022
	(In thousands)
Operating lease liability	$	18,593	$	15,746
Other liabilities		85,918		49,379
Total other liabilities	$	104,511	$	65,125

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, 2023.

As of September 30, 2023, the Company’s lease liability and right-of-use asset were $18,593 thousand. The weighted average remaining life of operating leases and weighted average discount rate used to determine operating lease liabilities were 3.6 years and 2.78%, respectively, at September 30, 2023. The Company did not have any material lease incentives, unamortized initial direct costs, prepaid lease expense, or accrued lease expense as of September 30, 2023.

Total lease costs were $1,633 thousand and $4,949 thousand in the three and nine months ended September 30, 2023, respectively, and were recorded within occupancy and equipment expense. During the three and nine months ended September 30, 2022, total lease costs of $1,664 thousand and $4,934 thousand, respectively, were recorded within occupancy and equipment expense. The Company did not have any material short-term or variable lease costs or sublease income during the nine months ended September 30, 2023 and September 30, 2022.

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

	Minimum future lease payments
	At September 30,
	2023
	(In thousands)
The remainder of 2023	$	1,612
2024		5,914
2025		4,765
2026		3,095
2027		2,200
Thereafter		2,154
Total minimum lease payments		19,740
Less: discount		(1,147	)
Present value of lease liability	$	18,593