Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

(8) Goodwill and Intangible Assets

The Company performed its annual step one impairment test as of December 31, 2015. The fair value of the Company’s single reporting unit was compared to the carrying value of the single reporting unit at the measurement date to determine if any impairment existed. Based on the results of the December 31, 2015 step one impairment test, the Company concluded its goodwill was not impaired.

Core deposit intangibles with a gross carrying amount of $367,000 as of December 31, 2015 were the result of acquisitions prior to 2013. On November 1, 2013, the Company’s subsidiary, Landmark National Bank, assumed approximately $181.9 million in deposits in connection with the acquisition of Citizens Bank. The Company recorded a $1.7 million core deposit intangible asset in connection with the acquisition. The Company also recorded a lease intangible asset of $350,000 relating to the leased portion of an acquired branch. Lease intangible assets are amortized over the life of the lease. Core deposit intangible assets are amortized over the estimated useful life of ten years on an accelerated basis. A summary of the other intangible assets that continue to be subject to amortization is as follows:

(Dollars in thousands)	As of December 31, 2015
	Gross carrying amount		Accumulated amortization		Net carrying amount
Core deposit intangible assets	$	2,067	$	(855)	$	1,212
Lease intangible asset		350		(98)		252
Mortgage servicing rights		5,322		(2,482)		2,840
Total other intangible assets	$	7,739	$	(3,435)	$	4,304

	As of December 31, 2014
	Gross carrying amount		Accumulated amortization		Net carrying amount
Core deposit intangible assets	$	6,078	$	(4,483)	$	1,595
Lease intangible asset		350		(52)		298
Mortgage servicing rights		4,458		(1,981)		2,477
Total other intangible assets	$	10,886	$	(6,516)	$	4,370

The following sets forth estimated amortization expense for core deposit and lease intangible assets for the years ending December 31:

(Dollars in thousands)	Amortization
	expense
2016	$	327
2017		289
2018		252
2018		214
2020		177
Thereafter		205
Total	$	1,464

Mortgage loans serviced for others are not reported as assets. The following table provides information on the principal balances of mortgage loans serviced for others:

(Dollars in thousands)	As of December 31,
	2015		2014
FHLMC	$	444,714	$	361,353
FHLB		14,039		18,572

Custodial escrow balances maintained in connection with serviced loans were $3.5 million and $3.2 million at December 31, 2015 and 2014, respectively. Gross service fee income related to such loans was $1.1 million, $939,000 and $682,000 for the years ended December 31, 2015, 2014 and 2013, respectively, and is included in fees and service charges in the consolidated statements of earnings.

Activity for mortgage servicing rights and the related valuation allowance follows:

(Dollars in thousands)	As of December 31,
	2015		2014
Mortgage servicing rights:
Balance at beginning of year	$	2,477	$	2,377
Additions		1,289		846
Amortization		(926)		(746)
Balance at end of year	$	2,840	$	2,477

At December 31, 2015 and 2014, there was no valuation allowance related to mortgage servicing rights.

The fair value of mortgage servicing rights was $4.6 million and $3.6 million at December 31, 2015 and 2014, respectively. Fair value at December 31, 2015 was determined using discount rates ranging from 9.50% to 10.00%, prepayment speeds ranging from 5.15% to 33.78%, depending on the stratification of the specific mortgage servicing right, and a weighted average default rate of 2.23%. Fair value at December 31, 2014 was determined using discount rates ranging from 9.50% to 9.52%, prepayment speeds ranging from 5.05% to 12.04%, depending on the stratification of the specific mortgage servicing right, and a weighted average default rate of 2.25%.

The Company had a mortgage repurchase reserve of $351,000 and $427,000 at December 31, 2015 and December 31, 2014, respectively, which represents the Company’s best estimate of probable losses that the Company will incur related to the repurchase of one-to-four family residential real estate loans previously sold or to reimburse investors for credit losses incurred on loans previously sold where a breach of the contractual representations and warranties occurred. The Company charged $76,000 of losses against the mortgage repurchase reserve during 2015. The Company charged $46,000 of losses against the mortgage repurchase reserve and recorded a $5,000 provision to the reserve during 2014. As of December 31, 2015, the Company did not have any outstanding mortgage repurchase requests.

- 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.

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