Note 11 – Indemnification Asset

A summary of the activity in the balance of indemnification asset (liability) included in other assets is follows (in thousands):


	Year ended December 31,
	2017			2016			2015
Beginning balance	$	(744	)	$	(521	)	$	(349	)
Effect of actual covered losses (recoveries) and increase (decrease) in estimated future covered losses		(192	)		(412	)		(93	)
Change in estimated “true up” liability		(32	)		(86	)		(71	)
Reimbursable expenses, net		—			2			4
Payments made (received)		256			273			(12	)
Gain on termination of loss share agreement		712			—			—

Ending balance		—		$	(744	)	$	(521	)

Amount of indemnification asset (liability) recorded in other assets		—		$	(60	)	$	77
Amount of indemnification liability recorded in other liabilities		—			(684	)		(598	)

Ending balance		—		$	(744	)	$	(521	)

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 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 in May 2010 was set to expire in May 2018. The agreement specified 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 specified 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 did not meet a certain threshold, the Company would have been 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. On May 9, 2017, the Company and the FDIC terminated their loss sharing agreements. As part of the termination agreement, the Company paid the FDIC $184,000, and recorded a $712,000 gain representing the difference between the Company’s payment to the FDIC and the recorded payable balance on May 9, 2017.