XML 31 R15.htm IDEA: XBRL DOCUMENT

Other Assets

12 Months Ended

Dec. 31, 2022

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, 2022 and 2021 were as shown below. The Treasury and Other segment is not assigned goodwill.


	Retail		Commercial
(in thousands)	Banking		Banking		Total
December 31, 2022	$	687,492	$	308,000	$	995,492
December 31, 2021		687,492		308,000		995,492

There was no impairment of the Company’s goodwill for the years ended December 31, 2022, 2021 and 2020.

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 $1.4 billion and $1.7 billion as of December 31, 2022 and 2021, respectively. Servicing fees include contractually specified fees, late charges and ancillary fees and were $3.8 million, $4.8 million and $5.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Amortization of MSRs was $1.9 million, $3.7 million and $6.3 million for the years ended December 31, 2022, 2021 and 2020, 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:
2023	$	949
2024		843
2025		747
2026		660
2027		583

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


	Year Ended December 31,
(dollars in thousands)	2022		2021
Gross carrying amount	$	69,273	$	69,103
Less: accumulated amortization		62,711		60,801
Net carrying value	$	6,562	$	8,302

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


	Year Ended December 31,
(dollars in thousands)	2022		2021
Balance at beginning of year	$	8,302	$	10,731
Originations		170		1,247
Amortization		(1,910)		(3,676)
Balance at end of year	$	6,562	$	8,302
Fair value of amortized MSRs at beginning of year	$	12,243	$	14,029
Fair value of amortized MSRs at end of year	$	15,193	$	12,243
Balance of loans serviced for others	$	1,441,202	$	1,673,158

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, 2022, 2021 and 2020.

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


	December 31, 2022							December 31, 2021
						Weighted							Weighted
	Range					Average		Range					Average
Conditional prepayment rate	7.02	%	-	13.58	%	7.11	%	13.77	%	-	25.19	%	14.61	%
Life in years (of the MSR)	3.35		-	7.37		7.20		1.99		-	5.31		5.03
Weighted-average coupon rate	3.55	%	-	6.24	%	3.68	%	3.58	%	-	6.56	%	3.71	%
Discount rate	10.41	%	-	10.54	%	10.51	%	10.00	%	-	10.01	%	10.00	%

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

Other

The Company had $167.4 million and $184.3 million in affordable housing and other tax credit investment partnership interest as of December 31, 2022 and 2021, 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 $24.4 million, $21.7 million and $10.5 million during the years ended December 31, 2022, 2021 and 2020, respectively. The affordable housing tax credits and other benefits recognized during the years ended December 31, 2022, 2021 and 2020 were $26.9 million, $22.7 million and $15.8 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 $10.1 million as of both December 31, 2022 and 2021.

Capitalized internal-use software was included as a component of other assets on the consolidated balance sheets. As of December 31, 2022, total capitalized internal-use software was $54.9 million with an accumulated amortization of $39.8 million for a net book value of $15.1 million. As of December 31, 2021, total capitalized internal-use software was $56.9 million with an accumulated amortization of $43.6 million for a net book value of $13.3 million. Total amortization expense for all capitalized internal-use software was recorded in other noninterest expense on the consolidated statements of income and was $5.4 million, $8.6 million and $6.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Capitalized implementation costs associated with hosting arrangements that are service contracts were included as a component of other assets on the consolidated balance sheets. As of December 31, 2022, total capitalized implementation costs amounted to $118.2 million with an accumulated amortization of $7.7 million for a net book value of $110.5 million. As of December 31, 2021, total capitalized implementation costs amounted to $78.3 million with an accumulated amortization of $0.6 million for a net book value of $77.7 million. Total amortization expense for all capitalized implementation costs of hosting arrangements that are service contracts was recorded in equipment expense on the consolidated statements of income and was $7.2 million, $0.5 million and $0.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.