Note 11 - Indemnification Asset

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


	Three months ended June 30,					Six months ended June 30,
	2018		2017			2018		2017
Beginning balance		—	$	(895	)		—	$	(744	)
Effect of actual and estimated future covered losses and recoveries		—		(1	)		—		(224	)
Payments made to (received from) FDIC		—		184			—		256
Gain on termination of loss share agreement		—		712			—		712

Ending balance		—	$	—			—	$	—

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. The Company continually estimated, updated and recorded this “true up” amount, at its estimated present value, since the inception of the agreement in May 2010. 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.