INTANGIBLE ASSETS AND MORTGAGE SERVICING RIGHTS

Intangible Assets: At December 31, 2014, intangible assets consisted primarily of core deposit intangibles (CDI), which are amounts recorded in business combinations or deposit purchase transactions related to the value of transaction-related deposits and the value of the customer relationships associated with the deposits.

The Company amortizes CDI over its estimated useful life and reviews it at least annually for events or circumstances that could impair its value. The CDI assets shown in the table below represent the value ascribed to the long-term deposit relationships acquired in three separate bank acquisitions during 2007, a single branch acquisition in 2013, and the Branch Acquisition in 2014. These intangible assets are being amortized using an accelerated method over estimated useful lives of three to eight years. The CDI assets are not estimated to have a significant residual value. Other intangible assets are amortized over their estimated useful lives and are also reviewed for impairment.

The following table summarizes the changes in the Company’s CDI and other intangibles for the years ended December 31, 2012, 2013 and 2014 (in thousands):



	CDI			Other			Total
Balance, December 31, 2011	$	6,322		$	9		$	6,331
Amortization	(2,092		)	(9		)	(2,101		)
Balance, December 31, 2012	4,230			—			4,230
Additions through acquisition	160			—			160
Amortization	(1,941		)	—			(1,941		)
Balance, December 31, 2013	2,449			—			2,449
Additions through acquisition	2,372			—			2,372
Amortization	(1,990		)	—			(1,990		)
Balance, December 31, 2014	$	2,831		$	—		$	2,831

Estimated amortization expense in future years with respect to existing intangibles as of December 31, 2014 (in thousands):



Year Ended:	CDI
December 31, 2015	$	1,007
December 31, 2016	353
December 31, 2017	321
December 31, 2018	296
Thereafter	854
Net carrying amount	$	2,831

Mortgage servicing rights are reported in other assets. Mortgage servicing rights are initially reported at fair value and are amortized in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Mortgage servicing rights are subsequently evaluated for impairment based upon the fair value of the rights compared to the amortized cost (remaining unamortized initial fair value). If the fair value is less than the amortized cost, a valuation allowance is created through an impairment charge to servicing fee income. However, if the fair value is greater than the amortized cost, the amount above the amortized cost is not recognized in the carrying value. In 2014, the Company did not record any impairment charges or recoveries against mortgage servicing rights. In 2013, the Company recorded a recovery of $1.3 million in previously recognized impairment charges against mortgage servicing rights. In 2012, the Company recorded $400,000 in impairment charges against mortgage servicing rights. Loans serviced for others totaled $1.391 billion and $1.216 billion at December 31, 2014 and 2013, respectively. Custodial accounts maintained in connection with this servicing totaled $6.7 million and $5.7 million at December 31, 2014 and 2013, respectively.

An analysis of the mortgage servicing rights for the years ended December 31, 2014, 2013 and 2012 is presented below (in thousands):



	Years Ended December 31
	2014			2013			2012
Balance, beginning of the year	$	8,086		$	6,244		$	5,584
Amounts capitalized	3,023			2,913			3,662
Amortization ⁽¹⁾	(2,079		)	(2,371		)	(2,602		)
Valuation adjustments in the period	—			1,300			(400		)
Balance, end of the year ⁽²⁾	$	9,030		$	8,086		$	6,244


⁽¹⁾	Amortization of mortgage servicing rights is recorded as a reduction of loan servicing income and any unamortized balance is fully written off if the loan repays in full.


⁽²⁾	Balances as of December 31, 2014 and 2013 are net of no valuation allowances, and as of December 31, 2012 are net of a $1.3 million valuation allowance.