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Other Assets

12 Months Ended

Dec. 31, 2020

7. Other Assets

Goodwill

Goodwill originated from the acquisition of BancWest by BNPP in December 2001. Goodwill generated in that acquisition was recorded on the Company’s consolidated balance sheets as a result of push-down accounting treatment.

The carrying amount of goodwill reported in two of the Company’s reporting segments as of December 31, 2020 and 2019 were as shown below. The Treasury and Other segment is not assigned goodwill.


	Retail		Commercial
(in thousands)	Banking		Banking		Total
December 31, 2020	$	687,492	$	308,000	$	995,492
December 31, 2019		687,492		308,000		995,492

There was no impairment of the Company’s goodwill for the years ended December 31, 2020, 2019 and 2018.

Mortgage Servicing Rights (“MSRs”)

Mortgage servicing activities include collecting principal, interest, tax and insurance payments from borrowers while accounting for and remitting payments to investors, taxing authorities and insurance companies. The Company also monitors delinquencies and administers foreclosure proceedings.

Mortgage loan servicing income is recorded in noninterest income as a part of other service charges and fees and amortization of the servicing assets is recorded in noninterest income as part of other income. The unpaid principal amount of residential real estate loans serviced for others was $2.2 billion and $2.3 billion as of December 31, 2020 and 2019, respectively. Servicing fees include contractually specified fees, late charges and ancillary fees and were $5.7 million, $6.3 million and $7.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Amortization of MSRs was $6.3 million, $3.6 million and $3.8 million for the years ended December 31, 2020, 2019 and 2018, respectively. The estimated future amortization expenses for MSRs over the next five years are as follows:


	Estimated
(dollars in thousands)	Amortization
Year ending December 31:
2021	$	2,462
2022		1,879
2023		1,477
2024		1,188
2025		971

The details of the Company’s MSRs are presented below:


	December 31,
(dollars in thousands)	2020		2019
Gross carrying amount	$	67,856	$	63,480
Less: accumulated amortization		57,125		50,812
Net carrying value	$	10,731	$	12,668

The following table presents changes in amortized MSRs for the years indicated:


	Year Ended December 31,
(dollars in thousands)	2020		2019
Balance at beginning of year	$	12,668	$	16,155
Originations		4,376		138
Amortization		(6,313)		(3,625)
Balance at end of year	$	10,731	$	12,668
Fair value of amortized MSRs at beginning of year	$	20,329	$	27,662
Fair value of amortized MSRs at end of year	$	14,029	$	20,329
Balance of loans serviced for others	$	2,189,027	$	2,344,899

MSRs are evaluated for impairment if events and circumstances indicate a possible impairment. No impairment of MSRs was recorded for the years ended December 31, 2020, 2019 and 2018.

The quantitative assumptions used in determining the lower of cost or fair value of the Company’s MSRs were as follows:


	December 31, 2020							December 31, 2019
						Weighted							Weighted
	Range					Average		Range					Average
Conditional prepayment rate	11.86	%	-	26.52	%	16.90	%	10.74	%	-	23.39	%	11.10	%
Life in years (of the MSR)	1.83		-	6.68		4.45		2.04		-	6.33		5.99
Weighted-average coupon rate	3.24	%	-	6.98	%	3.84	%	3.96	%	-	7.26	%	4.01	%
Discount rate	10.00	%	-	10.00	%	10.00	%	10.00	%	-	10.01	%	10.00	%

The sensitivities surrounding MSRs are expected to have an immaterial impact on fair value.

Other

The Company had $170.2 million and $145.6 million in affordable housing and other tax credit investment partnership interest as of December 31, 2020 and 2019, respectively, included in other assets on the consolidated balance sheets. The amount of amortization of such investments reported in the provision for income taxes was $10.5 million, $11.3 million and $5.2 million during the years ended December 31, 2020, 2019 and 2018, respectively. The affordable housing tax credits and other benefits recognized during the years ended December 31, 2020, 2019 and 2018 were $15.8 million, $10.6 million and $6.3 million, respectively.

Nonmarketable equity securities include FHLB stock, which the Company holds to meet regulatory requirements. As a member of the FHLB system, the Company is required to maintain a minimum level of investment in FHLB non-publicly traded stock based on specific percentages of the Company’s total assets and outstanding advances in accordance with the FHLB’s capital plan which may be amended or revised periodically. Amounts in excess of the required minimum may be transferred at par to another member institution subject to prior approval of the FHLB. Excess stock may also be sold to the FHLB subject to a five-year redemption notice period and at the sole discretion of the FHLB. These securities are accounted for under the cost method. These investments are considered long-term investments by management and accordingly, the ultimate recoverability of its par value is considered rather than considering temporary declines in value. The investment in FHLB stock was included in other assets on the consolidated balance sheets and was $18.1 million and $34.1 million as of December 31, 2020 and 2019, respectively.