XML 24 R13.htm IDEA: XBRL DOCUMENT

Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

4. Goodwill and Other Intangible Assets

The Company tests goodwill for impairment annually or more frequently if circumstances warrant. The Company’s annual step one impairment test as of December 31, 2017 concluded that its goodwill was not impaired. The Company concluded there were no triggering events during the first six months of 2018 that required an interim goodwill impairment test.

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. Mortgage servicing rights are amortized over the estimated life of the mortgage loan serviced for others. A summary of the other intangible assets that continue to be subject to amortization is as follows:

(Dollars in thousands)	As of June 30, 2018
	Gross carrying amount		Accumulated amortization			Net carrying amount
Core deposit intangible assets	$	2,067	$	(1,487	)	$	580
Lease intangible asset		350		(211	)		139
Mortgage servicing rights		6,410		(3,771	)		2,639
Total other intangible assets	$	8,827	$	(5,469	)	$	3,358

(Dollars in thousands)	As of December 31, 2017
	Gross carrying amount		Accumulated amortization			Net carrying amount
Core deposit intangible assets	$	2,067	$	(1,381	)	$	686
Lease intangible asset		350		(188	)		162
Mortgage servicing rights		6,285		(3,474	)		2,811
Total other intangible assets	$	8,702	$	(5,043	)	$	3,659

The following sets forth estimated amortization expense for core deposit and lease intangible assets for the remainder of 2018 and in successive years ending December 31:

(Dollars in thousands)	Amortization
	expense
Remainder of 2018	$	123
2019		214
2020		177
2021		121
2022		58
Thereafter		26
Total	$	719

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)	June 30,		December 31,
	2018		2017
FHLMC	$	520,587	$	517,863
FHLB		9,324		9,782
Total	$	529,911	$	527,645

Custodial escrow balances maintained in connection with serviced loans were $5.0 million and $4.4 million at June 30, 2018 and December 31, 2017, respectively. Gross service fee income related to such loans was $337,000 and $320,000 for the three months ended June 30, 2018 and 2017, respectively, and is included in fees and service charges in the consolidated statements of earnings. Gross service fee income related to such loans was $673,000 and $639,000 for the six months ended June 30, 2018 and 2017, respectively.

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

(Dollars in thousands)	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Mortgage servicing rights:
Balance at beginning of period	$	2,722		$	2,787		$	2,811		$	2,849
Additions		137			281			259			442
Amortization		(220	)		(255	)		(431	)		(478	)
Balance at end of period	$	2,639		$	2,813		$	2,639		$	2,813

The fair value of mortgage servicing rights was $6.1 million and $5.6 million at June 30, 2018 and December 31, 2017, respectively. Fair value at June 30, 2018 was determined using discount rates ranging from 9.00% to 11.00%; prepayment speeds ranging from 6.00% to 23.83%, depending on the stratification of the specific mortgage servicing right; and a weighted average default rate of 1.35%. Fair value at December 31, 2017 was determined using discount rates ranging from 9.50% to 9.59%, prepayment speeds ranging from 5.23% to 33.39%, depending on the stratification of the specific mortgage servicing right, and a weighted average default rate of 2.26%.

The Company had a mortgage repurchase reserve of $235,000 at both June 30, 2018 and December 31, 2017, 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 did not incur any losses charged against the reserve or make any provisions to the reserve during the first six months of 2018 and 2017. As of June 30, 2018, the Company did not have any outstanding mortgage repurchase requests.