OTHER INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2012

OTHER INTANGIBLE ASSETS

OTHER INTANGIBLE ASSETS

8.   OTHER INTANGIBLE ASSETS

Other intangible assets include a core deposit premium, mortgage servicing rights, customer relationships and non-compete agreements. The following table presents changes in other intangible assets for the six months ended June 30, 2012:

	Core			Mortgage
	Deposit			Servicing			Customer			Non-Compete
	Premium			Rights			Relationships			Agreements			Total
	(Dollars in thousands)
Balance, beginning of period	$	18,053		$	22,933		$	910		$	90		$	41,986
Additions	—			2,506			—			—			2,506
Amortization	(1,338		)	(2,454		)	(58		)	(25		)	(3,875		)
Impairment charges	—			—			(852		)	(65		)	(917		)
Balance, end of period	$	16,715		$	22,985		$	—		$	—		$	39,700

During the second quarter of 2012, we evaluated the recoverability of the intangible assets related to our customer relationships and non-compete agreements, both of which related to the 2008 asset acquisition of Pacific Islands Financial Management. Upon completion of this review, we determined that the intangible assets related to our customer relationships and non-compete agreements were both fully impaired, and thus, we recorded impairment charges to other operating expense of $852,000 and $65,000, respectively.

Income generated as the result of new mortgage servicing rights is reported as gains on sales of loans and totaled $1.3 million and $2.5 million for the three and six months ended June 30, 2012, respectively, compared to $0.7 million and $2.1 million for the three and six months ended June 30, 2011. Amortization of mortgage servicing rights was $1.4 million and $2.5 million for the three and six months ended June 30, 2012, respectively, compared to $0.9 million and $1.7 million for the three and six months ended June 30, 2011, respectively.

The following table presents the fair market value and key assumptions used in determining the fair market value of our mortgage servicing rights:

	Six Months Ended June 30,
	2012			2011
	(Dollars in thousands)
Fair market value, beginning of period	$	23,149		$	23,709
Fair market value, end of period	23,359			23,190
Weighted average discount rate	8.0		%	8.5		%
Weighted average prepayment speed assumption	14.2			14.5

The gross carrying value and accumulated amortization related to our intangible assets are presented below:

	June 30, 2012							December 31, 2011
	Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated
	Value		Amortization			Net		Value		Amortization			Net
	(Dollars in thousands)
Core deposit premium	$	44,642	$	(27,927	)	$	16,715	$	44,642	$	(26,589	)	$	18,053
Mortgage servicing rights	48,553		(25,568		)	22,985		46,047		(23,114		)	22,933
Customer relationships	1,400		(1,400		)	—		1,400		(490		)	910
Non-compete agreements	300		(300		)	—		300		(210		)	90
	$	94,895	$	(55,195	)	$	39,700	$	92,389	$	(50,403	)	$	41,986

Based on the core deposit premium and mortgage servicing rights held as of June 30 2012, estimated amortization expense for the remainder of fiscal 2012, the next five succeeding fiscal years and all years thereafter are as follows:

	Estimated Amortization Expense
			Mortgage
	Core Deposit		Servicing
	Premium		Rights		Total
	(Dollars in thousands)
2012 (remainder)	$	1,337	$	1,955	$	3,292
2013	2,674		3,062		5,736
2014	2,674		2,690		5,364
2015	2,674		2,332		5,006
2016	2,674		2,002		4,676
2017	2,674		1,739		4,413
Thereafter	2,008		9,205		11,213
	$	16,715	$	22,985	$	39,700

We perform an impairment assessment of our other intangible assets whenever events or changes in circumstance indicate that the carrying value of those assets may not be recoverable.  Our impairment assessments involve, among other valuation methods, the estimation of future cash flows and other methods of determining fair value. Estimating future cash flows and determining fair values is subject to judgment and often involves the use of significant estimates and assumptions. The variability of the factors we use to perform our impairment tests depend on a number of conditions, including the uncertainty about future events and cash flows. All such factors are interdependent and, therefore, do not change in isolation. Accordingly, our accounting estimates may materially change from period to period due to changing market factors.