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Note 6 - Other Assets and Other Liabilities

3 Months Ended

Mar. 31, 2024

Other Assets and Liabilities Disclosure [Text Block]

Note 6: Other Assets and Other Liabilities

Other assets consisted of the following:

	At March 31,		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		67,366		66,611
Net deferred tax asset		100,357		99,507
Right-of-use asset		19,975		18,814
Limited partnership investments		27,227		28,667
Interest receivable		54,000		54,568
Prepaid assets		4,454		5,200
Other assets		7,707		9,716
Total other assets	$	295,313	$	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 common stock which have transfer restrictions; the carrying value is $-0- thousand. Visa 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 class A common stock had a closing price of $279.08 per share on March 28, 2024, the last day of stock market trading for the first quarter 2024. The ultimate value of the Company’s Visa class B shares is subject to the extent of Visa’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. At its Annual Meeting held January 23, 2024, Visa proposed a Class B Exchange Offer Program authorizing Visa to conduct one or more exchange offers that would allow Class B stockholders to exchange portions of their Class B common stock into freely tradable shares. The proposal was approved by Visa stockholders. Under an initial exchange offer, the Company’s Class B shares were exchanged into Class B-1 shares. A Class B-1 stockholder can elect to exchange a portion of its Class B-1 shares for Class C common stock which is transferable and convertible to Class A common stock. Any exchange of Class B-1 shares into Class C common stock requires the stockholder to execute an indemnification agreement with Visa for Visa’s related unresolved litigation. At March 31, 2024, the Company did not record an adjustment to the carrying value of the Visa Class B 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 March 31, 2024, these investments totaled $27,227 thousand and $14,215 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 March 31, 2024, the $14,215 thousand of outstanding equity capital commitments are expected to be paid as follows: $12,731 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
	March 31,
	2024		2023
	(In thousands)
Investment loss included in pre-tax income	$	1,440	$	1,434
Tax credits recognized in provision for income taxes		975		1,020

Other liabilities consisted of the following:

	At March 31,		At December 31,
	2024		2023
	(In thousands)
Operating lease liability	$	19,975	$	18,814
Other liabilities		47,760		40,455
Total other liabilities	$	67,735	$	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 March 31, 2024.

As of March 31, 2024, the Company’s lease liability and right-of-use asset were $19,975 thousand. The weighted average remaining life of operating leases and weighted average discount rate used to determine operating lease liabilities were 3.3 years and 3.11%, respectively, at March 31, 2024. The Company did not have any material lease incentives, unamortized initial direct costs, prepaid lease expense, or accrued lease expense as of March 31, 2024.

Total lease costs were $1,678 thousand and $1,656 thousand in the three months ended March 31, 2024 and March 31, 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 three months ended March 31, 2024 and March 31, 2023.

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

	Minimum future lease payments
	At March 31,
	2024
	(In thousands)
2024	$	4,752
2025		5,681
2026		4,035
2027		3,152
2028		2,412
Thereafter		1,407
Total minimum lease payments		21,439
Less: discount		(1,464	)
Present value of lease liability	$	19,975