Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

The Corporation has customer-related intangibles and mortgage servicing rights, which are not deemed to have an indefinite life and therefore will continue to be amortized over their useful life using the present value of projected cash flows. The amortization of intangible assets for the years ended December 31, 2014, 2013 and 2012 was $3.3 million, $2.3 million and $2.4 million, respectively. In 2014, 2013 and 2012, impairment on customer-related intangibles was recognized in other noninterest expense in the amount of $31 thousand, $83 thousand and $31 thousand, respectively. The Corporation also has goodwill with a net carrying amount of $67.7 million at December 31, 2014, which is deemed to be an indefinite intangible asset and is not amortized. The Corporation recorded goodwill of $6.8 million and customer related intangibles of $4.3 million related to the Girard Partners acquisition on January 27, 2014. The Corporation recorded goodwill of $3.4 million and customer related intangibles of $1.6 million related to the Sterner Insurance Associates acquisition on July 1, 2014.

The Corporation completed an annual impairment test for goodwill and other intangibles during the fourth quarter of 2014. There was no goodwill impairment or material impairment of identifiable intangibles recorded during the period 2012 through 2014. There can be no assurance that future impairment assessments or tests will not result in a charge to earnings.

Changes in the carrying amount of the Corporation's goodwill by business segment for the years ended December 31, 2014 and 2013 were as follows:



(Dollars in thousands)	Banking		Wealth Management		Insurance		Consolidated
Balance at December 31, 2012	$	35,058	$	8,625	$	12,555	$	56,238
Addition to goodwill from acquisitions	—		—		1,279		1,279
Balance at December 31, 2013	35,058		8,625		13,834		57,517
Addition to goodwill from acquisitions	—		6,809		3,391		10,200
Balance at December 31, 2014	$	35,058	$	15,434	$	17,225	$	67,717

The following table reflects the components of intangible assets at the dates indicated:



	At December 31, 2014						At December 31, 2013
(Dollars in thousands)	Gross Carrying Amount		Accumulated Amortization and Fair Value Adjustments		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization and Fair Value Adjustments		Net Carrying Amount
Amortized intangible assets:
Customer related intangibles	$	13,397	$	6,726	$	6,671	$	7,513	$	4,854	$	2,659
Mortgage servicing rights	10,559		5,050		5,509		10,965		5,446		5,519
Total amortized intangible assets	$	23,956	$	11,776	$	12,180	$	18,478	$	10,300	$	8,178

The estimated aggregate amortization expense for customer related intangibles for each of the five succeeding fiscal years follows:



Year	(Dollars in thousands)	Amount
2015		$	1,730
2016		1,411
2017		1,162
2018		868
2019		622
Thereafter		878

The Corporation has originated mortgage servicing rights which are included in other intangible assets on the consolidated balance sheet. Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing income on a basis similar to the interest method and an accelerated amortization method for loan payoffs. Mortgage servicing rights are subject to impairment testing on a quarterly basis. The aggregate fair value of these rights was $6.9 million and $7.2 million at December 31, 2014 and 2013, respectively. The fair value of mortgage servicing rights was determined using a discount rate of 10.0% at December 31, 2014, and discount rates ranging from 5.0% to 10.0% at December 31, 2013.

Changes in the mortgage servicing rights balance are summarized as follows:



	For the Years Ended December 31,
(Dollars in thousands)	2014			2013			2012
Beginning of period	$	5,519		$	4,152		$	2,739
Servicing rights capitalized	1,118			2,485			2,727
Amortization of servicing rights	(1,378		)	(1,365		)	(1,610		)
Changes in valuation allowance	250			247			296
End of period	$	5,509		$	5,519		$	4,152
Mortgage loans serviced for others	$	796,835		$	751,891		$	604,801

Activity in the valuation allowance for mortgage servicing rights was as follows:



	For the Years Ended December 31,
(Dollars in thousands)	2014			2013			2012
Valuation allowance, beginning of period	$	(250	)	$	(497	)	$	(793	)
Additions	—			—			—
Reductions	250			247			296
Direct write-downs	—			—			—
Valuation allowance, end of period	$	—		$	(250	)	$	(497	)

The estimated amortization expense of mortgage servicing rights for each of the five succeeding fiscal years is as follows:



Year	(Dollars in thousands)	Amount
2015		$	923
2016		787
2017		662
2018		556
2019		466
Thereafter		2,115

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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