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Intangible Assets
3 Months Ended
Mar. 31, 2013
Intangible Assets [Abstract]  
Intangible Assets
(5) Intangible Assets

Core Deposit Intangible Asset

A summary of amortizable intangible assets at March 31, 2013 and December 31, 2012 is as follows:

 

                                                 

(in thousands)

  March 31, 2013     December 31, 2012  
    Gross
Carrying
Amount
    Accumulated
Amortization
    Net
Amount
    Gross
Carrying
Amount
    Accumulated
Amortization
    Net
Amount
 

Core deposit intangible

  $ 4,795     $ (4,761   $ 34     $ 4,795     $ (4,660   $ 135  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The Company’s core deposit intangible asset will be fully amortized in April 2013.

Changes in the net carrying amount of core deposit intangible assets for the three months ended March 31, 2013 and 2012 were as follows:

 

                 
    Three Months Ended March 31,  

(in thousands)

          2013                     2012          

Balance at beginning of year

  $ 135     $ 543  
   

 

 

   

 

 

 

Additions

    0       0  

Amortization

    (101     (104
   

 

 

   

 

 

 

Balance at end of year

  $ 34     $ 439  
   

 

 

   

 

 

 

Mortgage Servicing Rights

On January 1, 2012, the Company opted to measure mortgage servicing rights at fair value as permitted by Accounting Standards Codification (ASC) Topic 860-50, Accounting for Servicing Financial Assets. The election of this option resulted in the recognition of a cumulative effect of change in accounting principle of $459,890, which was recorded as an increase to beginning retained earnings. As such, effective January 1, 2012, changes in the fair value of mortgage servicing rights have been recognized in earnings in noninterest income in the period in which the change occurred.

At March 31, 2013 and December 31, 2012, respectively, the Company serviced mortgage loans for others totaling $318,894,000 and $310,587,000, respectively. Mortgage loan servicing fees, reported as other noninterest income, earned on loans sold were $217,000 and $207,000 for the three months ended March 31, 2013 and 2012, respectively.

The table below presents changes in mortgage servicing rights (MSRs) for the three months ended March 31, 2013 and 2012 as follows:

 

                 
    Three Months Ended March 31,  

(in thousands)

          2013                     2012          

Balance at beginning of period

  $ 2,549     $ 2,308  
   

 

 

   

 

 

 

Re-measurement to fair value upon election to measure servicing rights at fair value

    0       742  

Originated mortgage servicing rights

    197       182  

Changes in fair value:

               

Due to change in model inputs and assumptions(1)

    194       170  

Other changes in fair value(2)

    (251     (655
   

 

 

   

 

 

 

Balance at end of period

  $ 2,689     $ 2,747  
   

 

 

   

 

 

 

 

(1) The change in fair value resulting from changes in valuation inputs or assumptions used in the valuation model reflects the change in discount rates and prepayment speed assumptions primarily due to changes in interest rates.
(2) Other changes in fair value reflect changes due to customer payments and passage of time. This also includes a one time adjustment of a $538,000 correction of an immaterial prior period error in 2012 due to changing from the straight-line amortization method to an accelerated amortization method of accounting for amortizing MSRs in prior years. If the aforementioned was corrected as of December 31, 2011, the balance at the beginning of the three month period ending March 31, 2012 would have been $1,770,000.

The following key data and assumptions were used in estimating the fair value of the Company’s mortgage servicing rights for the three months ended March 31, 2013 and 2012:

 

                 
    Three Months Ended March 31,  
            2013                     2012          

Weighted-Average Constant Prepayment Rate

    17.63     17.78

Weighted-Average Note Rate

    4.12     4.55

Weighted-Average Discount Rate

    8.03     8.01

Weighted-Average Contractual Life (in years)

    20.00       20.00