Goodwill and Other Intangible Assets

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in an acquisition. The Company assesses goodwill for impairment at the reporting unit level (at the same level as the Company’s business segment) on an annual basis as of December 31^stof each year, or more frequently if events or circumstances, such as adverse changes in the economic or business environment, indicate there may be impairment. The Company organizes its operation into three reporting segments: (1) Consumer and Business Banking (referred to as “Retail Banking” in the Company’s prior quarterly Form 10-Q and annual Form 10-K filings); (2) Commercial Banking; and (3) Other. For information on how the reporting units are identified and components are aggregated, see Note 20 — Business Segments to the Consolidated Financial Statements.

There was no changes in the carrying amount of goodwill during the years ended December 31, 2017 and 2016. The following table presents changes in the carrying amount of goodwill by reporting unit during year ended December 31, 2018:




($ in thousands)	Consumer and Business Banking			Commercial Banking		Total
Beginning Balance, January 1, 2018	$	357,207		$	112,226	$	469,433
Disposition of the DCB branches	(3,886		)	—		(3,886		)
Ending Balance, December 31, 2018	$	353,321		$	112,226	$	465,547

Accounting guidance permits an entity to first perform a qualitative assessment to determine whether it is necessary to perform the two-step goodwill impairment test. The Company did not elect to perform this qualitative assessment in the 2018 annual goodwill impairment testing. For the two-step goodwill impairment test, the first step is to identify potential impairment by determining the fair value of each reporting unit and comparing such fair value to its corresponding carrying amount. If the fair value of a reporting unit exceeds its carrying amount, then goodwill of the reporting unit is considered not impaired and step two is unnecessary. If the fair value of a reporting unit is less than its carrying amount, the second step is performed to measure the amount of impairment loss, if any, by comparing the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined as if the reporting unit were being acquired in a business combination. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess. The loss recognized cannot exceed the carrying amount of goodwill.

The Company completed the quantitative step one analysis of goodwill impairment test as of December 31, 2018 using a combined income and market approach to determine the fair value of the reporting units. Under the income approach, the Company prepared a net income projection for the next three years plus a terminal growth rate that was used to calculate the discounted cash flows and the present value of the reporting units. Under the market approach, the fair value was calculated using the current fair values of comparable peer banks of similar size and focus. The market capitalizations and multiples of these peer banks were used to calculate the market price of the Company and each reporting unit. A control premium adjustment, which represents the cost savings that a purchaser of the reporting units could be achieved by eliminating duplicative costs, was applied to determine the fair value. Under the combined income and market approach, the fair value from each approach was weighed based on management’s judgment to determine the fair value. As a result of this analysis, the Company determined that there was no goodwill impairment as of December 31, 2018 as the fair value of all reporting units exceeded the carrying amount of their respective reporting unit.

Core Deposit Intangibles

Core deposit intangibles represent the intangible value of depositor relationships resulting from deposit liabilities assumed in various acquisitions and are included in Other assets on the Consolidated Balance Sheet. These intangibles are tested for impairment on an annual basis, or more frequently as events occur or current circumstances and conditions warrant. Core deposit intangibles associated with the sale of the Bank’s DCB branches with a net carrying amount of $1.0 million were written off in the first quarter of 2018. There were no impairment write-downs on the remaining core deposit intangibles for the years ended December 31, 2018, 2017 and 2016.

The following table presents the gross carrying amount of core deposit intangible assets and accumulated amortization as of December 31, 2018 and 2017:




($ in thousands)	December 31,
($ in thousands)	2018			2017
Gross balance ⁽¹⁾	$	86,099		$	100,166
Accumulated amortization ⁽¹⁾	(71,570		)	(79,112		)
Net carrying balance ⁽¹⁾	$	14,529		$	21,054


(1)	Excludes fully amortized core deposit intangible assets.

Amortization Expense

The Company amortizes the core deposit intangibles based on the projected useful lives of the related deposits. The amortization expense related to the core deposit intangible assets was $5.5 million, $6.9 million and $8.1 million for the years ended December 31, 2018, 2017 and 2016, respectively.

The following table presents the estimated future amortization expense of core deposit intangibles for the five years succeeding December 31, 2018 and thereafter:




	Amount
Years Ending December 31,	($ in thousands)
2019	$	4,518
2020	3,634
2021	2,749
2022	1,865
2023	1,199
Thereafter	564
Total	$	14,529