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Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

(7) Goodwill and Intangible Assets

The Company performed its annual step one impairment test as of December 31, 2018. 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, 2018 step one impairment test, the Company concluded its goodwill was not impaired.

A summary of the other intangible assets that continue to be subject to amortization is as follows:

	As of December 31, 2018
(Dollars in thousands)	Gross carrying amount		Accumulated amortization			Net carrying amount
Core deposit intangible assets	$	2,067	$	(1,588	)	$	479
Lease intangible asset		350		(233	)		117
Mortgage servicing rights		6,545		(4,050	)		2,495
Total other intangible assets	$	8,962	$	(5,871	)	$	3,091

	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 years ending December 31:

	Amortization
(Dollars in thousands)	expense
2019		214
2020		177
2021		121
2022		58
2023		26
Total	$	596

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:

	As of December 31,
(Dollars in thousands)	2018		2017
FHLMC	$	521,489	$	517,863
FHLB		10,603		9,782

Custodial escrow balances maintained in connection with serviced loans were $4.5 million and $4.4 million at December 31, 2018 and 2017, respectively. Gross service fee income related to such loans was $1.4 million, $1.3 million and $1.2 million for the years ended December 31, 2018, 2017 and 2016, 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:

	As of December 31,
(Dollars in thousands)	2018			2017
Mortgage servicing rights:
Balance at beginning of year	$	2,811		$	2,849
Additions		543			931
Amortization		(859	)		(969	)
Balance at end of year	$	2,495		$	2,811

At December 31, 2018 and 2017, there was no valuation allowance related to mortgage servicing rights.

The fair value of mortgage servicing rights was $6.2 million and $5.6 million at December 31, 2018 and 2017, respectively. Fair value at December 31, 2018 was determined using discount rates ranging from 9.00% to 11.00%, prepayment speeds ranging from 6.00% to 22.40%, depending on the stratification of the specific mortgage servicing right, and a weighted average default rate of 1.37%. 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 December 31, 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. As of December 31, 2018, the Company did not have any outstanding mortgage repurchase requests.