Goodwill and Other Intangibles and Mortgage Servicing Rights

Management periodically reviews the carrying value of its intangible assets to determine if any impairment has occurred, in which case an impairment charge would be recorded as an expense in the period of impairment, or whether changes in circumstances have occurred that would require a revision to the remaining useful life which would impact expense prospectively. In making such determination, management evaluates whether there are any adverse qualitative factors indicating that an impairment may exist, as well as the performance, on an undiscounted basis, of the underlying operations or assets which give rise to the intangible. In the first quarter, management considered the potential impacts of the COVID-19 pandemic on the valuation of our franchise value, stability of deposits, and of the wealth client base, underlying our goodwill, core deposit intangible, and customer list intangibles, and determined no impairments were indicated. However, the impacts of the COVID-19 pandemic, which began in March 2020, are still evolving. The Company’s assessment in 2019 resulted in an $0.8 million full impairment charge on non-bank goodwill. A summary of goodwill and other intangibles was as follows.



	Three Months Ended		Year Ended
(in thousands)	March 31, 2020		December 31, 2019
Goodwill	$	151,198	$	151,198
Core deposit intangibles	10,031		10,897
Customer list intangibles	3,745		3,872
Other intangibles	13,776		14,769
Goodwill and other intangibles, net	$	164,974	$	165,967

Goodwill: A summary of goodwill was as follows. During 2019, goodwill increased due to the Choice acquisition. See Note 2 for additional information on the Company's acquisitions.



	Three Months Ended		Year Ended
(in thousands)	March 31, 2020		December 31, 2019
Goodwill:
Goodwill at beginning of year	$	151,198	$	107,366
Acquisition	—		44,594
Impairment	—		(762		)
Goodwill at end of period	$	151,198	$	151,198

Other intangible assets: Other intangible assets, consisting of core deposit intangibles and customer list intangibles, are amortized over their estimated finite lives. During 2019, core deposit intangibles increased due to the Choice acquisition. See Note 2 for additional information on the Company's acquisitions.



	Three Months Ended			Year Ended
(in thousands)	March 31, 2020			December 31, 2019
Core deposit intangibles:
Gross carrying amount	$	30,715		$	30,715
Accumulated amortization	(20,684		)	(19,818		)
Net book value	$	10,031		$	10,897
Additions during the period	$	—		$	1,700
Amortization during the period	$	866		$	3,365
Customer list intangibles:
Gross carrying amount	$	5,523		$	5,523
Accumulated amortization	(1,778		)	(1,651		)
Net book value	$	3,745		$	3,872
Additions during the period	$	—		$	—
Amortization during the period	$	127		$	507

Mortgage servicing rights: Mortgage servicing rights are amortized in proportion to and over the period of estimated net servicing income, and assessed for impairment at each reporting date, with the amortization recorded in mortgage income, net, in the consolidated statements of income. Mortgage servicing rights are carried at the lower of the initial capitalized amount, net of accumulated amortization, or estimated fair value, and are included in other assets in the consolidated balance sheets. A summary of the changes in the mortgage servicing rights asset was as follows.



	Three Months Ended			Year Ended
(in thousands)	March 31, 2020			December 31, 2019
Mortgage servicing rights ("MSR") asset:
MSR asset at beginning of year	$	5,919		$	3,749
Capitalized MSR	559			2,876
MSR asset acquired	—			160
Amortization during the period	(284		)	(866		)
MSR asset at end of period	$	6,194		$	5,919
Valuation allowance at beginning of year	$	—		$	—
Additions	(175		)	—
Valuation allowance at end of period	$	(175	)	$	—
MSR asset, net	$	6,019		$	5,919
Fair value of MSR asset at end of period	$	8,807		$	8,420
Residential mortgage loans serviced for others	$	890,162		$	847,756
Net book value of MSR asset to loans serviced for others	0.68		%	0.70		%

The Company periodically evaluates its mortgage servicing rights asset for impairment. At each reporting date, impairment is assessed based on estimated fair value using estimated prepayment speeds of the underlying mortgage loans serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). A valuation allowance of $0.2 million was recorded for the three months ended March 31, 2020, while no valuation allowance was recorded for the year ended December 31, 2019. See Note 9 for additional information on the fair value of the MSR asset.

The following table shows the estimated future amortization expense for amortizing intangible assets and the MSR asset. The projections are based on existing asset balances, the current interest rate environment and prepayment speeds as of March 31, 2020. The actual amortization expense the Company recognizes in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, prepayment speeds, market conditions, regulatory requirements and events or circumstances that indicate the carrying amount of an asset may not be recoverable.



(in thousands)	Core deposit intangibles		Customer list intangibles		MSR asset
Year ending December 31,
2020 (remaining nine months)	$	2,127	$	380	$	829
2021	2,453		507		937
2022	1,987		507		930
2023	1,490		483		962
2024	1,010		449		541
2025	573		449		541
Thereafter	391		970		1,454
Total	$	10,031	$	3,745	$	6,194