GOODWILL AND OTHER INTANGIBLES

9 Months Ended

Sep. 30, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLES

NOTE 14 – GOODWILL AND OTHER INTANGIBLES

Goodwill as of September 30, 2020 and December 31, 2019 amounted to $34.4 million and $28.1 million, respectively. The $6.3 million increase in goodwill as of September 30, 2020 is related to the acquisition of BSPR. This transaction was accounted for as a business combination under the acquisition method of accounting in which the Corporation preliminarily allocated the total cash consideration paid of $1.3 billion over the estimated fair value of BSPR’s assets acquired and liabilities assumed. The excess of the acquisition price over the estimated fair value of the net assets acquired resulted in the recognition of goodwill of $6.3 million. This acquisition also resulted in the recognition of $39.2 million of identifiable intangible assets as further discussed below. The amount of goodwill is subject to change, as the Corporation’s fair value estimates associated with the BSPR acquisition are considered preliminary estimates and are subject to refinement for a period of up to one year after the closing date of the acquisition. As potential additional information related to those fair value estimates becomes available and such information is considered final.

The Corporation’s policy is to assess goodwill and other intangibles for impairment on an annual basis during the fourth quarter of each year, and more frequently if events or circumstances lead management to believe the values of goodwill or other intangibles may be impaired. The analysis performed in the fourth quarter of 2019 indicated that it was more likely than not that the fair value of the United States operations reporting unit was greater than its carrying value based on a qualitative assessment of events and circumstances that could impact the latest quantitative estimate of fair value of the reporting unit performed in the fourth quarter of 2018. During 2020, the COVID-19 pandemic has broadly impacted the operating environment, since March, causing a sharp contraction in global economic activity and increased market volatility affecting both equity and credit markets. During the first, second and third quarters of 2020, the Corporation performed qualitative assessments to determine whether the continued effects of the COVID-19 pandemic constituted a triggering event that would indicate that it was more likely than not that the fair value of the reporting unit was impaired. Although the market volatility resulting from uncertainties around the COVID-19 pandemic had a broad negative effect on macroeconomic and equity market indicators, the duration and extent of the effects of the COVID-19 pandemic are still highly uncertain at this time and its ultimate effect could be affected by measures implemented by central banks and governments intended to mitigate the contraction in economic activity and market concerns. There were no other events specific to the performance of the United States operations reporting unit that would have had a significant negative impact on the valuation of the reporting unit. Ultimately, the Corporation concluded that the COVID-19 event was not a triggering event that required the performance of a quantitative test. As a result, no impairment charges for goodwill were recorded during the first nine months of 2020.

The Corporation had other intangible assets of $43.9 million as of September 30, 2020, consisting of $37.7 million in core deposit intangibles, $5.8 million in purchased credit card relationship intangible, and $0.4 million in insurance customer relationship intangible. The acquisition of BSPR increased core deposit intangibles by $35.4 million and purchased credit card relationship intangibles by $3.8 million as of September 30, 2020.

The following table shows the gross amount and accumulated amortization of the Corporation’s intangible assets as of the indicated dates:

	Quarter Ended September 30, 2020								Quarter Ended September 30, 2019
	Core deposit intangible		Purchased credit relationship intangible		Insurance customer relationship intangible		Total		Core deposit intangible		Purchased credit relationship intangible		Insurance customer relationship intangible		Total
(Dollars in thousands)
Gross amount of intangible assets:
Beginning balance	$	51,664	$	24,465	$	1,067	$	77,196	$	51,664	$	24,465	$	1,067	$	77,196
Additions due to acquisitions		35,432		3,800		-		39,232		-		-		-		-
Ending Balance		87,096		28,265		1,067		116,428		51,664		24,465		1,067		77,196
Accumulated amortization:
Beginning balance		(48,578)		(21,797)		(673)		(71,048)		(47,762)		(19,806)		(521)		(68,089)
Amortization		(769)		(679)		(39)		(1,487)		(207)		(522)		(38)		(767)
Ending balance		(49,347)		(22,476)		(712)		(72,535)		(47,969)		(20,328)		(559)		(68,856)
Net intangible assets	$	37,749	$	5,789	$	355	$	43,893	$	3,695	$	4,137	$	508	$	8,340
	Nine-Month Period Ended September 30, 2020								Nine-Month Period Ended September 30, 2019
	Core deposit intangible		Purchased credit relationship intangible		Insurance customer relationship intangible		Total		Core deposit intangible		Purchased credit relationship intangible		Insurance customer relationship intangible		Total

(Dollars in thousands)
Gross amount of intangible assets:
Beginning balance	$	51,664	$	24,465	$	1,067	$	77,196	$	51,664	$	24,465	$	1,067	$	77,196
Additions due to acquisitions		35,432		3,800		-		39,232		-		-		-		-
Ending Balance		87,096		28,265		1,067		116,428		51,664		24,465		1,067		77,196
Accumulated amortization:
Beginning balance		(48,176)		(20,850)		(597)		(69,623)		(47,329)		(18,763)		(445)		(66,537)
Amortization		(1,171)		(1,626)		(115)		(2,912)		(640)		(1,565)		(114)		(2,319)
Ending balance		(49,347)		(22,476)		(712)		(72,535)		(47,969)		(20,328)		(559)		(68,856)
Net intangible assets	$	37,749	$	5,789	$	355	$	43,893	$	3,695	$	4,137	$	508	$	8,340

The Corporation amortizes core deposit intangibles and customer relationship intangibles based on the projected useful lives of the related deposits in the case of core deposit intangibles, and over the projected useful lives of the related client relationships in the case of customer relationship intangibles. The weighted average remaining amortization periods typically range from one to six years. As mentioned above, the Corporation analyzes core deposit intangibles and customer relationship intangibles annually for impairment, or sooner if events and circumstances indicate possible impairment. Factors that may suggest impairment include customer attrition and run-off. Management is unaware of any events and/or circumstances that would indicate a possible impairment to the core deposit intangibles or customer relationship intangibles as of September 30, 2020.

The estimated aggregate annual amortization expense related to the intangible assets for future periods was as follows as of September 30, 2020:
			Amount
			(In thousands)
	2020	$	3,001
	2021		11,293
	2022		8,731
	2023		7,651
	2024		6,418
	2025 and after		6,799