Note 8 - Other Assets

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Other Assets Disclosure [Text Block]

(8) Other Assets

A summary of major components of other assets follows:

December 31, (in thousands)	2020		2019
Cash surrender value of life insurance other than BOLI	$	18,426	$	16,145
Net deferred tax asset		22,320		14,466
Investments in tax credit related ventures		9,552		6,248
Swap assets		8,374		2,696
Prepaid assets		2,935		2,812
Trust fee receivable		2,192		2,171
Mortgage servicing rights		2,710		1,372
Other real estate owned		281		493
Other		4,575		4,568
Total other assets	$	71,365	$	50,971

Bancorp maintains life insurance policies other than BOLI in conjunction with its non-qualified defined benefit retirement and non-qualified compensation plans.

Bancorp enters into interest rate swap transactions with borrowers who desire to hedge exposure to rising interest rates, while at the same time entering into an offsetting interest rate swap, with substantially matching terms, with another approved independent counterparty. These are undesignated derivative instruments and are recognized on the balance sheet at fair value. For additional information, see the footnote titled “Derivative Financial Instruments.”

MSRs, a component of other assets, are initially recognized at fair value when mortgage loans are sold with servicing retained. The MSRs are amortized in proportion to and over the period of estimated net servicing income, considering appropriate prepayment assumptions. MSRs are evaluated quarterly for impairment by comparing carrying value to fair value. Fair value is based on a valuation model that calculates the PV of estimated net servicing income. The model incorporates assumptions that market participants would use in estimating future net servicing income.

The estimated fair value of MSRs at December 31, 2020 and December 31, 2019 were $3.1 million and $2.9 million, respectively.

Changes in the net carrying amount of MSRs follows:

Years ended December 31, (in thousands)	2020			2019			2018
Balance at beginning of period	$	1,372		$	1,022		$	875
Additions for mortgage loans sold		1,785			506			302
Amortization		(447	)		(156	)		(155	)
Impairment		—			—			—
Balance at end of period	$	2,710		$	1,372		$	1,022

Total outstanding principal balances of loans serviced by Bancorp were $428 million and $327 million at December 31, 2020 and December 31, 2019, respectively.