Note 6 - Other Assets and Other Liabilities

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

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,
	2019		2018
	(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		56,528		56,083
Net deferred tax asset		15,375		42,256
Right-of-use asset		20,506		-
Limited partnership investments		8,743		10,219
Interest receivable		26,507		25,834
Prepaid assets		3,717		4,658
Other assets		14,709		9,629
Total other assets	$	160,312	$	162,906

⁽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 6 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 net deferred tax asset at June 30, 2019 of $15,375 thousand was net of deferred tax obligations of $5,509 thousand related to available for sale debt securities unrealized gains. The net deferred tax asset at December 31, 2018 of $42,256 thousand included deferred tax benefits of $16,787 thousand related to available for sale debt securities unrealized losses.

The Company owns 211 thousand shares of Visa Inc. class B common stock which have transfer restrictions; the carrying value is $-0- thousand. On July 5, 2018, Visa Inc. announced a new conversion rate applicable to its class B common stock resulting from its June 28, 2018 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, to 1.6298 per share. Visa Inc. class A common stock had a closing price of $173.55 per share on June 28, 2019, the last day of stock market trading for the second quarter 2019. 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, 2019, this investment totaled $8,743 thousand and $4,766[WU10]  thousand of this amount represents outstanding equity capital commitments that are included in other liabilities. At December 31, 2018, this investment totaled $10,219 thousand and $4,799[WU11]  thousand of this amount represented outstanding equity capital commitments. At June 30, 2019, the $4,766 thousand of outstanding equity capital commitments are expected to be paid as follows, $601 thousand in the remainder of 2019, $2,027 thousand in 2020, $138 thousand in 2021, $261 thousand in 2022, $134 thousand in 2023, $1,041 thousand in 2024 and $564 thousand in 2025 or thereafter.

The amounts recognized in net income for these investments include:

	For the Three Months Ended				For the Six Months Ended
	June 30,
	2019		2018		2019		2018
	(In thousands)
Investment loss included in pre-tax income	$	600	$	700	$	1,200	$	1,300
Tax credits recognized in provision for income taxes		225		336		450		672

Other liabilities consisted of the following:

	At June 30,		At December 31,
	2019		2018
	(In thousands)
Operating lease liability	$	20,506	$	-
Other liabilities		24,662		34,849
Total other liabilities	$	45,168	$	34,849

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 5 years. Certain lease arrangements contain extension options, which can be exercised at the Company’s option, for one or more additional 5 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, 2019.

As of June 30, 2019, the Company recorded a lease liability of $20,506 thousand and a right-of-use asset of $20,506 thousand, respectively. The weighted average remaining life of operating leases and weighted average discount rate used to determine operating lease liabilities were 3.94 years and 2.97%, respectively, at June 30, 2019.  The Company did not have any material lease incentives, unamortized initial direct costs, prepaid lease expense, or accrued lease expense as of June 30, 2019.

Total lease costs during the three and six months ended June 30, 2019, of $1,714 thousand and $3,419 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, 2019.    

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

	Minimum future lease payments
	At June 30,
	2019
	(In thousands)
Remaining six months of 2019	$	3,220
2020		6,091
2021		4,376
2022		3,485
2023		2,804
Thereafter		1,955
Total minimum lease payments		21,931
Less: discount		(1,425	)
Present value of lease liability	$	20,506

Minimum future rental payments under noncancelable operating leases as of December 31, 2018, prior to adoption of ASU 2016-02, are as follows:

	Minimum future rental payments
	(In thousands)
2019	$	5,996
2020		4,409
2021		2,741
2022		1,921
2023		1,223
Thereafter		1,044
Total minimum lease payments	$	17,334