CORE DEPOSIT PREMIUM AND MORTGAGE SERVICING RIGHTS

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

CORE DEPOSIT PREMIUM AND MORTGAGE SERVICING RIGHTS

8. CORE DEPOSIT PREMIUM AND MORTGAGE SERVICING RIGHTS

The following table presents changes in our core deposit premium and mortgage servicing rights for the periods presented:



	Core Deposit Premium			Mortgage Servicing Rights			Total
	(Dollars in thousands)
Balance as of December 31, 2016	$	4,680		$	15,779		$	20,459
Additions	—			2,352			2,352
Amortization	(2,674		)	(2,288		)	(4,962		)
Balance as of December 31, 2017	$	2,006		$	15,843		$	17,849
Additions	—			1,612			1,612
Amortization	(2,006		)	(1,859		)	(3,865		)
Balance as of December 31, 2018	$	—		$	15,596		$	15,596
Additions	—			1,582			1,582
Amortization	—			(2,460		)	(2,460		)
Balance as of December 31, 2019	$	—		$	14,718		$	14,718

The gross carrying value, accumulated amortization, and net carrying value related to our core deposit premium and mortgage servicing rights as of December 31, 2019 and 2018 are presented below:



	December 31, 2019							December 31, 2018
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Gross Carrying Value		Accumulated Amortization			Net Carrying Value
	(Dollars in thousands)
Core deposit premium	$	44,642	$	(44,642	)	$	—	$	44,642	$	(44,642	)	$	—
Mortgage servicing rights	67,595		(52,877		)	14,718		66,013		(50,417		)	15,596
Total	$	112,237	$	(97,519	)	$	14,718	$	110,655	$	(95,059	)	$	15,596

Our core deposit premium was fully amortized as of December 31, 2018. Based on our mortgage servicing rights held as of December 31, 2019, estimated amortization expense for the next five succeeding fiscal years and all years thereafter are as follows (dollars in thousands):



Year Ending December 31:
2020	$	2,407
2021	1,964
2022	1,635
2023	1,382
2024	1,154
Thereafter	6,176
Total	$	14,718

We utilize the amortization method to measure our mortgage servicing rights. Under the amortization method, we amortize our mortgage servicing rights in proportion to and over the period of net servicing income. Income generated as the result of new mortgage servicing rights is reported as a component of mortgage banking income and totaled $1.6 million, $1.6 million, and $2.4 million in 2019, 2018 and 2017, respectively. Amortization of the servicing rights is reported as a component of mortgage banking income in our consolidated statements of income. Ancillary income is recorded in other income. Mortgage servicing rights are recorded when loans are sold to third-parties with servicing of those loans retained and we classify and pool our mortgage servicing rights into buckets of homogeneous characteristics.

Initial fair value of the servicing right is calculated by a discounted cash flow model prepared by a third-party service provider based on market value assumptions at the time of origination and we assess the servicing right for impairment using current market value assumptions at each reporting period. Critical assumptions used in the discounted cash flow model include mortgage prepayment speeds, discount rates, costs to service and ancillary income. Variations in our assumptions could materially affect the estimated fair values. Changes to our assumptions are made when current trends and market data indicate that new trends have developed. Current market value assumptions based on loan product types (fixed-rate, adjustable-rate and balloon loans) include average discount rates, servicing costs and ancillary income. Many of these assumptions are subjective and require a high level of management judgment. Our mortgage servicing rights portfolio and valuation assumptions are periodically reviewed by management.

Prepayment speeds may be affected by economic factors such as home price appreciation, market interest rates, the availability of other credit products to our borrowers and customer payment patterns. Prepayment speeds include the impact of all borrower prepayments, including full payoffs, additional principal payments and the impact of loans paid off due to foreclosure liquidations. As market interest rates decline, prepayment speeds will generally increase as customers refinance existing mortgages under more favorable interest rate terms. As prepayment speeds increase, anticipated cash flows will generally decline resulting in a potential reduction, or impairment, to the fair value of the capitalized mortgage servicing rights. Alternatively, an increase in market interest rates may cause a decrease in prepayment speeds and therefore an increase in fair value of mortgage servicing rights.

The following table presents the fair market value and key assumptions used in determining the fair market value of our mortgage servicing rights:



	Year Ended December 31,
	2019			2018
	(Dollars in thousands)
Fair market value, beginning of period	$	17,696		$	17,161
Fair market value, end of period	15,820			17,696
Weighted average discount rate	9.5		%	9.5		%
Weighted average prepayment speed assumption	14.2		%	14.5		%

Loans serviced for others as of December 31, 2019 and 2018 totaled $1.89 billion and $2.01 billion, respectively. Loans serviced for others are not reported as assets on the Company's consolidated balance sheets.