Intangible Assets

9 Months Ended

Sep. 30, 2013

(5) Intangible Assets

Core Deposit Intangible Asset

A summary of amortizable intangible assets at September 30, 2013 and December 31, 2012 is as follows:

(in thousands)	September 30, 2013							December 31, 2012
	Gross							Gross
	Carrying		Accumulated			Net		Carrying		Accumulated			Net
	Amount		Amortization			Amount		Amount		Amortization			Amount
Core deposit intangible	$	4,795	$	(4,795	)	$	0	$	4,795	$	(4,660	)	$	135

Changes in the net carrying amount of core deposit intangible assets for the three and nine months ended September 30, 2013 and 2012 were as follows:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(in thousands)	2013		2012			2013			2012
Balance at beginning of period	$	0	$	337		$	135		$	543
Additions	0		0			0			0
Amortization	0		(101		)	(135		)	(307		)
Balance at end of period	$	0	$	236		$	0		$	236

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 non-interest income in the period in which the change occurred.

At September 30, 2013 and December 31, 2012, respectively, the Company serviced mortgage loans for others totaling $323.0 million and $310.6 million, respectively. Mortgage loan servicing fees, reported as non-interest income, earned on loans sold were $214,000 and $674,000, and $211,000 and $637,000, for the three and nine months ended September 30, 2013 and 2012, respectively.

The table below presents changes in mortgage servicing rights (MSRs) for the three and nine months ended September 30, 2013 and 2012 as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2013			2012			2013			2012
Balance at beginning of period	$	2,873		$	2,666		$	2,549		$	2,308
Re-measurement to fair value upon election to measure servicing rights at fair value	0			0			0			742
Originated mortgage servicing rights	83			231			444			559
Changes in fair value:
Due to change in model inputs and assumptions (1)	296			96			677			372
Other changes in fair value (2)	(173		)	(369		)	(591		)	(1,357		)
Balance at end of period	$	3,079		$	2,624		$	3,079		$	2,624

(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 nine month period ending September 30, 2012 would have been $1.8 million.

The following key data and assumptions were used in estimating the fair value of the Company’s mortgage servicing rights for the nine months ended September 30, 2013 and 2012:

	Nine Months Ended
	September 30,
	2013		2012
Weighted-Average Constant Prepayment Rate	10.94	%	16.32	%
Weighted-Average Note Rate	4.02	%	4.38	%
Weighted-Average Discount Rate	8.56	%	8.01	%
Weighted-Average Expected Life (in years)	5.70		3.90

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References+ Details