Note 11 – Indemnification Asset/Liability

A summary of the activity in the balance of indemnification asset (liability) follows (in thousands):


	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Beginning (payable) receivable balance	$	(466	)	$	(37	)	$	(349	)	$	206
Effect of actual covered losses and change in estimated future covered losses		(15	)		(5	)		(59	)		(513	)
Change in estimated true up liability		(13	)		(9	)		(57	)		(66	)
Reimbursable expenses (revenue), net		3			8			—			81
Payments made (received)		(1	)		30			(27	)		279

Ending (payable) receivable balance	$	(492	)	$	(13	)	$	(492	)	$	(13	)


Amount of indemnification asset (liability) recorded in other assets							$	92		$	(13	)
Amount of indemnification liability recorded in other liabilities								(584	)		—

Ending balance							$	(492	)	$	(13	)

During May 2015, the indemnification portion of the Company’s agreement with the FDIC related to the Company’s acquisition of certain nonresidential real estate loans of Granite Community Bank in May 2010 expired. The indemnification portion of the Company’s agreement with the FDIC related to the Company’s acquisition of certain residential real estate loans of Granite Community Bank in May 2010 will expire in May 2018. The agreement specifies that recoveries of losses that are claimed by the Company and indemnified by the FDIC under the agreement that are recovered by the Company through May 2020 are to be shared with the FDIC in the same proportion as they were indemnified by the FDIC. In addition, the agreement specifies that at the end of the agreement in May 2020, to the extent that total claimed losses plus servicing expenses, net of recoveries, claimed under the agreement over the entire ten year period of the agreement do not meet a certain threshold, the Company will be required to pay to the FDIC a “true up” amount equal to fifty percent of the difference of the threshold and actual claimed losses plus servicing expenses, net of recoveries. The Company has continually been estimating, updating and recording this “true up” amount, at its estimated present value, since the inception of the agreement in May 2010. As of September 30, 2015, the present value of this “true up” amount is estimated to be $584,000, and is recorded in other liabilities.