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Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

(7) Goodwill and Intangible Assets

The Company performed its annual step one impairment test as of December 31, 2019. 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, 2019 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:

(Dollars in thousands)	As of December 31, 2019
		Gross carrying amount		Accumulated amortization			Net carrying amount
Core deposit intangible assets	$	2,018	$	(1,707	)	$	311
Lease intangible asset		350		(278	)		72
Mortgage servicing rights		6,910		(4,464	)		2,446
Total other intangible assets	$	9,278	$	(6,449	)	$	2,829

	As of December 31, 2018
		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

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
2020		178
2021		121
2022		58
2023		26
Total	$	383

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,
	2019		2018
FHLMC	$	509,101	$	521,489
FHLB		40,462		10,603

Custodial escrow balances maintained in connection with serviced loans were $4.7 million and $4.5 million at December 31, 2019 and 2018, respectively. Gross service fee income related to such loans was $1.4 million, $1.4 million and $1.3 million for the years ended December 31, 2019, 2018 and 2017, 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,
	2019			2018
Mortgage servicing rights:
Balance at beginning of year	$	2,495		$	2,811
Additions		943			543
Amortization		(992	)		(859	)
Balance at end of year	$	2,446		$	2,495

At December 31, 2019 and 2018, there was no valuation allowance related to mortgage servicing rights.

The fair value of mortgage servicing rights was $5.2 million and $6.2 million at December 31, 2019 and 2018, respectively. Fair value at December 31, 2019 was determined using discount rates ranging from 9.00% to 11.00%, prepayment speeds ranging from 6.00% to 23.21%, depending on the stratification of the specific mortgage servicing right, and a weighted average default rate of 1.40%. 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%.

The Company had a mortgage repurchase reserve of $235,000 at December 31, 2019 and December 31, 2018, 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, 2019, the Company had one outstanding mortgage repurchase request which was settled in January 2020 without incurring a loss.