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Note 6 - Other Assets and Other Liabilities

6 Months Ended

Jun. 30, 2024

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,
	2024		2023
	(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		68,056		66,611
Net deferred tax asset		100,828		99,507
Right-of-use asset		18,832		18,814
Limited partnership investments		25,787		28,667
Interest receivable		50,334		54,568
Prepaid assets		4,496		5,200
Other assets		19,203		9,716
Total other assets	$	301,763	$	297,310

⁽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. (“Visa”) Class B-1 common stock, which have transfer restrictions; the carrying value is $-0 - thousand. Following the resolution of certain litigation at Visa, shares of Visa’s Class B-1 stock will convert to shares of Visa Class A common stock based on a conversion factor ( 1.5875 as of September 28, 2023), which is periodically adjusted to reflect Visa’s ongoing litigation costs. Given the trading restrictions and continuing uncertainty regarding the likelihood, ultimate timing and eventual conversion of Visa Class B-1 common stock for shares of Visa Class A common stock or other marketable classes of Visa common stock, these shares are not considered to have a readily determinable fair value and have no carrying value. Visa Class A common stock trades on the New York Stock Exchange and had a closing price of $262.47 per share on June 28, 2024, the last trading day for the second quarter 2024. The ultimate value of the Company’s Visa Class B-1 shares is subject to the extent of Visa’s future litigation escrow fundings, the resulting conversion rate to Visa Class A common stock, and current and future trading restrictions on the Visa Class B-1 common stock. Effective January 24, 2024, all outstanding shares of Visa Class B common stock, including the 211 thousand shares then held by the Company, were redenominated as Visa Class B-1 common stock. During the quarter ended June 30, 2024, Visa conducted an exchange offer under which Visa Class B-1 stockholders could elect to exchange a portion of their Visa Class B-1 shares for a combination of Visa Class C common stock, which is convertible into publicly traded Visa Class A common stock, and Visa Class B-2 common stock, which remains restricted. As a condition to the exchange, Visa Class B-1 stockholders were required to execute an indemnification agreement with Visa related to Visa’s unresolved litigation. The Company did not exchange any Visa Class B-1 shares in the exchange offer, which expired on May 3, 2024. At June 30, 2024, the Company did not record an adjustment to the carrying value of the Visa Class B-1 shares.

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, 2024, these investments totaled $25,787 thousand and $12,614 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2023, these investments totaled $28,667 thousand and $15,561 thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At June 30, 2024, the $12,614 thousand of outstanding equity capital commitments are expected to be paid as follows: $11,130 thousand in the remainder of 2024, $600 thousand in 2025, $145 thousand in 2026, $189 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 Six Months Ended
	June 30,
	2024		2023		2024		2023
	(In thousands)
Investment loss included in pre-tax income	$	1,440	$	1,440	$	2,880	$	2,874
Tax credits recognized in provision for income taxes		975		1,035		1,950		2,055

Other liabilities consisted of the following:

	At June 30,		At December 31,
	2024		2023
	(In thousands)
Operating lease liability	$	18,832	$	18,814
Securities payable		9,051		-
Other liabilities		37,055		40,455
Total other liabilities	$	64,938	$	59,269

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, 2024.

As of June 30, 2024, the Company’s lease liability and right-of-use asset were $18,832 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 3.18%, respectively, at June 30, 2024. The Company did not have any material lease incentives, unamortized initial direct costs, prepaid lease expense, or accrued lease expense as of June 30, 2024.

Total lease costs were $1,679 thousand and $3,357 thousand in the three and six months ended June 30, 2024, respectively, and were recorded within occupancy and equipment expense. Total lease costs were $1,660 thousand and $3,316 thousand in the three and six months ended June 30, 2023, respectively, and 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, 2024 and June 30, 2023.

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

	Minimum future lease payments
	At June 30,
	2024
	(In thousands)
The remainder of 2024	$	3,166
2025		5,759
2026		4,110
2027		3,227
2028		2,487
Thereafter		1,432
Total minimum lease payments		20,181
Less: discount		(1,349	)
Present value of lease liability	$	18,832