XML 61 R16.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

Goodwill and Intangible Assets | 12 Months Ended
--- | ---
Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets | GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill BancShares’ annual impairment test, conducted as of July 31 each year, or more frequently if events occur or circumstances change that may trigger a decline in the value of the reporting unit or otherwise indicate that a potential impairment exists, resulted in no indication of goodwill impairment. Subsequent to the annual impairment test, there were no events or changes in circumstances that would indicate goodwill should be tested for impairment during the interim period between annual tests. No goodwill impairment was recorded during 2019 or 2018. The following table presents the changes in the carrying amount of goodwill as of December 31, 2019 and 2018:
| Year ended December 31
(Dollars in thousands) | 2019 |  | 2018
Beginning Balance | $ | 236,347 |  |  | $ | 150,601 |
Recognized in the Biscayne Bancshares acquisition | 46,521 |  |  | — |
Recognized in the First South Bancorp acquisition | 13,896 |  |  | — |
Recognized in the Entegra acquisition | 52,634 |  |  | — |
Recognized in HomeBancorp acquisition | — |  |  | 57,616 |
Recognized in Capital Commerce acquisition | — |  |  | 10,680 |
Recognized in Palmetto Heritage acquisition | — |  |  | 17,450 |
Balance at December 31 | $ | 349,398 |  |  | $ | 236,347 |
Other Intangible Assets Other intangible assets include mortgage servicing rights on loans sold to third parties with servicing retained, core deposit intangibles which represent the estimated fair value of acquired core deposits and other customer relationships, and other servicing rights acquired. Mortgage Servicing Rights (“MSRs”) Our portfolio of residential mortgage loans serviced for third parties was $3.38 billion, $2.95 billion and $2.81 billion as of December 31, 2019, 2018 and 2017, respectively. The majority of these loans were originated by BancShares and sold to third parties on a non-recourse basis with servicing rights retained. At December 31, 2019, a portion of the MSRs were related to Entegra originations prior to acquisition. These retained servicing rights are recorded as a servicing asset and reported in other intangible assets. The mortgage servicing rights are initially recorded at fair value and then carried at the lower of amortized cost or fair market value. The amortization expense related to mortgage servicing rights is included as a reduction of mortgage income. The activity of the mortgage servicing asset for the years ended December 31, 2019, 2018 and 2017 is presented in the following table:
(Dollars in thousands) | 2019 |  | 2018 |  | 2017
Balance at January 1 | $ | 21,396 |  |  | $ | 21,945 |  |  | $ | 20,415 |
Servicing rights originated | 6,149 |  |  | 5,258 |  |  | 7,174 |
Servicing rights acquired in Entegra transaction | 1,873 |  |  | — |  |  | — |
Amortization | (6,233 | ) |  | (5,807 | ) |  | (5,648 | )
Valuation allowance (increase) decrease | (222 | ) |  | — |  |  | 4 |
Balance at December 31 | $ | 22,963 |  |  | $ | 21,396 |  |  | $ | 21,945 |
Contractually specified mortgage servicing fees, late fees and ancillary fees earned for the years ended December 31, 2019, 2018 and 2017, were $7.9 million, $7.5 million and $7.1 million, respectively, and reported in mortgage income. BancShares recorded valuation allowance provision expense of $222 thousand, no provision expense, and a $4 thousand provision reversal in the years ended December 31, 2019, 2018 and 2017, respectively. Valuation of mortgage servicing rights is performed using a pooling methodology. Similar loans are pooled together and evaluated on a discounted earnings basis to determine the present value of future earnings. Key economic assumptions used to value mortgage servicing rights as of December 31, 2019 and 2018, were as follows:
| 2019 |  | 2018
Discount rate - conventional fixed loans | 8.92 | % |  | 9.69 | %
Discount rate - all loans excluding conventional fixed loans | 9.92 | % |  | 10.69 | %
Weighted average constant prepayment rate | 13.72 | % |  | 9.26 | %
Weighted average cost to service a loan | $ | 87.09 |  |  | $ | 87.52 |
The discount rate is based on the 10-year U.S. Treasury rate plus 700 basis points for conventional fixed loans and 800 basis points for all other loans. The 700 and 800 basis points are used as a risk premium when calculating the discount rate. The prepayment rate is derived from the Public Securities Association Standard Prepayment model, which compared to actual prepayment rates annually for reasonableness. The average cost to service a loan is based on the number of loans serviced and the total costs to service the loans. Core Deposit Intangibles Core deposit intangibles represent the estimated fair value of core deposits and other customer relationships acquired. They are being amortized on an accelerated basis over their estimated useful lives. The weighted average useful life of core deposit intangibles acquired in 2019 is 10.2 years. The following information relates to core deposit intangible assets, which are being amortized over their estimated useful lives:
(Dollars in thousands) | 2019 |  | 2018
Balance at January 1 | $ | 48,232 |  |  | $ | 51,151 |
Acquired in Biscayne Bancshares transaction | 4,745 |  |  | — |
Acquired in First South Bancorp transaction | 2,268 |  |  | — |
Acquired in Entegra transaction | 4,487 |  |  | — |
Acquired in the HomeBancorp transaction | — |  |  | 9,860 |
Acquired in the Capital Commerce transaction | — |  |  | 2,680 |
Acquired in the Palmetto Heritage transaction | — |  |  | 1,706 |
Amortization | (16,346 | ) |  | (17,165 | )
Balance at December 31 | $ | 43,386 |  |  | $ | 48,232 |
The gross amount of core deposit intangible assets and accumulated amortization as of December 31, 2019 and 2018, are:
(Dollars in thousands) | 2019 |  | 2018
Gross balance | $ | 154,507 |  |  | $ | 143,007 |
Accumulated amortization | (111,121 | ) |  | (94,775 | )
Carrying value | $ | 43,386 |  |  | $ | 48,232 |
Based on current estimated useful lives and carrying values, BancShares anticipates amortization expense for core deposit intangibles in subsequent periods will be:
(Dollars in thousands) |
2020 | $ | 14,165 |
2021 | 10,850 |
2022 | 7,658 |
2023 | 5,056 |
2024 and subsequent | 5,657 |
| $ | 43,386 |
Miscellaneous Intangibles Other servicing rights were acquired as part of a business combination and relate to the sale of the guaranteed portion of government guaranteed loans with servicing retained. The amount of the other servicing rights were $1.9 million and $2.7 million at December 31, 2019, and 2018, respectively. The amortization related to other servicing rights is recorded in other noninterest income.

X
- References No definition available. + Details
Name: | us-gaap_GoodwillAndIntangibleAssetsDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -URI http://asc.fasb.org/topic&trid=2144416 + Details
Name: | us-gaap_GoodwillAndIntangibleAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration