ISBC 2017 Form 10-K & 2018 Proxy Statement

FORM 10-K INVESTORS BANCORP, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements Depreciation and amortization expense for the years ended December 31, 2017, 2016 and 2015 was $17.4 million, $16.2 million and $13.9 million, respectively. 6. Goodwill and Other Intangible Assets The following table summarizes net intangible assets and goodwill at December 31, 2017 and 2016: December 31, 2017 December 31, 2016 (In thousands) Mortgage servicing rights $13,228 14,889 Core deposit premiums 6,024 8,451 Other 842 928 Total other intangible assets 20,094 24,268 Goodwill 77,571 77,571 Goodwill and intangible assets $97,665 101,839 The following table summarizes other intangible assets as of December 31, 2017 and December 31, 2016: Gross Intangible Asset Accumulated Amortization Valuation Allowance Net Intangible Assets (In thousands) December 31, 2017 Mortgage Servicing Rights $20,236 (6,886) (122) 13,228 Core Deposit Premiums 25,058 (19,034) — 6,024 Other 1,150 (308) — 842 Total other intangible assets $46,444 (26,228) (122) 20,094 December 31, 2016 Mortgage Servicing Rights $24,340 (9,286) (165) 14,889 Core Deposit Premiums 25,058 (16,607) — 8,451 Other 1,150 (222) — 928 Total other intangible assets $50,548 (26,115) (165) 24,268 Mortgage servicing rights are accounted for using the amortization method. Under this method, the Company amortizes the loan servicing asset in proportion to, and over the period of, estimated net servicing revenues. The Company sells loans on a servicing-retained basis. Loans that were sold on this basis had an unpaid principal balance of $1.77 billion and $1.98 billion at December 31, 2017 and 2016, respectively, all of which relate to residential mortgage loans. At December 31, 2017 and 2016, the servicing asset, included in intangible assets, had an estimated fair value of $15.0 million and $16.2 million, respectively. For the year ended December 31, 2017, fair value was based on expected future cash flows considering a weighted average discount rate of 13.20%, a weighted average constant prepayment rate on mortgages of 9.60% and a weighted average life of 6.9 years. Core deposit premiums are amortized using an accelerated method and having a weighted average amortization period of 10 years. 108