Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS (Note 8)

The changes in the carrying amount of goodwill as allocated to our business segments, or reporting units thereof, for goodwill impairment analysis were:



	Business Segment / Reporting Unit*
	Wealth Management		Consumer Lending		Commercial Lending		Investment Management		Total
	(in thousands)
Balance at December 31, 2014	$	20,517	$	168,922	$	252,900	$	133,553	$	575,892
Goodwill from business combinations	—		30,197		61,360		18,890		110,447
Balance at December 31, 2015	$	20,517	$	199,119	$	314,260	$	152,443	$	686,339
Goodwill from business combinations	701		984		1,998		615		4,298
Balance at December 31, 2016	$	21,218	$	200,103	$	316,258	$	153,058	$	690,637


*	Valley’s Wealth Management Division is comprised of trust, asset management and insurance services. This reporting unit is included in the Consumer Lending segment for financial reporting purposes.

Certain estimates for acquired assets and assumed liabilities are subject to change for up to one year after the acquisition date. During 2016, goodwill from business combinations primarily related to the effect of the combined adjustments to the estimated fair values of the acquired assets and liabilities as of the acquisition date of CNL, as well as $701 thousand of goodwill from the acquisition of certain assets from an independent insurance agency during the first quarter of 2016. The adjustments mostly related to the fair value of certain PCI loans, core deposit intangibles and time deposits which, resulted in an increase in goodwill totaling $3.6 million. There was no impairment of goodwill during the years ended December 31, 2016, 2015 and 2014.

The following tables summarize other intangible assets as of December 31, 2016 and 2015:



	Gross Intangible Assets		Accumulated Amortization			Valuation Allowance			Net Intangible Assets
	(in thousands)
December 31, 2016
Loan servicing rights	$	73,002	$	(52,634	)	$	(900	)	$	19,468
Core deposits	61,504		(37,562		)	—			23,942
Other	4,087		(2,013		)	—			2,074
Total other intangible assets	$	138,593	$	(92,209	)	$	(900	)	$	45,484
December 31, 2015
Loan servicing rights	$	75,932	$	(59,251	)	$	(289	)	$	16,392
Core deposits	62,714		(31,934		)	—			30,780
Other	4,374		(2,664		)	—			1,710
Total other intangible assets	$	143,020	$	(93,849	)	$	(289	)	$	48,882

Core deposits are amortized using an accelerated method and have a weighted average amortization period of 11 years. The line item labeled “Other” included in the table above primarily consists of customer lists and covenants not to compete, which are amortized over their expected lives generally using a straight-line method and have a weighted average amortization period of 20 years. In 2016, Valley recorded $660 thousand in other intangibles, consisting of customer lists acquired from an independent insurance agency. In 2015, Valley recorded $19.3 million in core deposit intangibles resulting from the CNL acquisition. Valley evaluates core deposits and other intangibles for impairment when an indication of impairment exists. No impairment was recognized during the years ended December 31, 2016, 2015 and 2014.

The following table summarizes the change in loan servicing rights during the years ended December 31, 2016, 2015 and 2014:



	2016			2015			2014
	(in thousands)
Loan servicing rights
Balance at beginning of year	$	16,681		$	20,446		$	26,068
Origination of loan servicing rights	8,479			1,696			1,065
Amortization expense	(4,792		)	(5,461		)	(6,687		)
Balance at end of year	$	20,368		$	16,681		$	20,446
Valuation allowance
Balance at beginning of year	$	(289	)	$	(592	)	$	(504	)
Impairment adjustment	(611		)	303			(88		)
Balance at end of year	$	(900	)	$	(289	)	$	(592	)
Balance at end of year, net of valuation allowance	$	19,468		$	16,392		$	19,854

Loan servicing rights are accounted for using the amortization method (see Note 1 for more details).

The Bank is a servicer of residential mortgage and SBA loan portfolios, and it is compensated for loan administrative services performed for mortgage servicing rights of loans originated and sold by the Bank, and to a lesser extent, purchased mortgage servicing rights. The aggregate principal balances of residential mortgage loans serviced by the Bank for others approximated $2.5 billion, $2.1 billion and $2.3 billion at December 31, 2016, 2015 and 2014, respectively. The SBA loans serviced by the Bank for third-party investors totaled $23.8 million, $32.3 million and $26.9 million at December 31, 2016, 2015 and 2014, respectively. The outstanding balance of all loans serviced for others is not included in the consolidated statements of financial condition.

Valley recognized amortization expense on other intangible assets, including recoveries and net impairment charges on loan servicing rights (reflected in the table above), of $11.3 million, $9.2 million and $9.9 million for the years ended December 31, 2016, 2015 and 2014, respectively.

The following table presents the estimated amortization expense of other intangible assets over the next five-year period:



Year	Loan Servicing Rights		Core Deposits		Other
	(in thousands)
2017	$	4,888	$	4,842	$	280
2018	3,989		4,215		249
2019	3,101		3,671		235
2020	2,417		3,127		220
2021	1,771		2,582		206

- 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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