Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Goodwill: Goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. See Note 1 for the Corporation’s accounting policy for goodwill and other intangible assets.

The Corporation conducted its most recent annual impairment testing in May 2017, utilizing a qualitative assessment. Factors that management considered in this assessment included macroeconomic conditions, industry and market considerations, overall financial performance of the Corporation and each reporting unit (both current and projected), changes in management strategy, and changes in the composition or carrying amount of net assets. In addition, management considered the increases in both the Corporation’s common stock price and in the overall bank common stock index (based on the S&P 400 Regional Bank Sub-Industry Index), as well as the Corporation’s earnings per common share trend over the past year. Based on these assessments, management concluded that the 2017 annual qualitative impairment assessment indicated that it is more likely than not that the estimated fair value exceeded the carrying value (including goodwill) for each reporting unit. Therefore, a step one quantitative analysis was not required. There were no events since the May 2017 impairment testing that have changed the Corporation's impairment assessment conclusion. There were no impairment charges recorded in 2017, 2016, or 2015.

At December 31, 2017, the Corporation had goodwill of $976 million, compared to $972 million at December 31, 2016 including goodwill of $428 million assigned to the Corporate and Commercial Specialty segment and the remaining assigned to the Community, Consumer and Business segment. There was an addition to the carrying amount of goodwill of approximately $55,000 as a result of a small insurance acquisition during the first quarter of 2017, along with an addition of approximately $4 million in fourth quarter 2017 from the Whitnell acquisition. See Note 2 for additional information on the Corporation's acquisitions.

Other Intangible Assets: The Corporation has other intangible assets that are amortized, consisting of core deposit intangibles, other intangibles (primarily related to customer relationships acquired in connection with the Corporation’s insurance agency acquisitions), and mortgage servicing rights. During the first and fourth quarter of 2017, the Corporation added approximately$162,000 and $2 million of other intangibles, respectively, relating to customer relationships associated with one small insurance acquisition in first quarter 2017, and the Whitnell acquisition in fourth quarter 2017. See Note 2 for additional information on the Corporation's acquisitions. For core deposit intangibles and other intangibles, changes in the gross carrying amount, accumulated amortization, and net book value were as follows.



	2017			2016			2015
	($ in Thousands)
Core deposit intangibles
Gross carrying amount	$	4,385		$	4,385		$	19,545
Accumulated amortization	(4,385		)	(4,273		)	(19,152		)
Net book value	$	—		$	112		$	393
Amortization during the year	$	112		$	281		$	1,404
Other intangibles
Gross carrying amount	$	34,572		$	32,410		$	31,398
Accumulated amortization	(18,992		)	(17,145		)	(15,333		)
Net book value	$	15,580		$	15,265		$	16,065
Additions during the period	$	2,162		$	1,012		$	12,115
Amortization during the year	$	1,847		$	1,812		$	1,690

Mortgage Servicing Rights: The Corporation sells residential mortgage loans in the secondary market and typically retains the right to service the loans sold. 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. See Note 1 for the Corporation’s accounting policy for mortgage servicing rights. See Note 16 for a discussion of the recourse provisions on sold residential mortgage loans. See Note 18 which further discusses fair value measurement relative to the mortgage servicing rights asset.

A summary of changes in the balance of the mortgage servicing rights asset and the mortgage servicing rights valuation allowance was as follows.



	2017			2016			2015
	($ in Thousands)
Mortgage servicing rights
Mortgage servicing rights at beginning of year	$	62,085		$	62,150		$	61,379
Additions	7,167			12,262			12,372
Amortization	(10,084		)	(12,327		)	(11,601		)
Mortgage servicing rights at end of year	$	59,168		$	62,085		$	62,150
Valuation allowance at beginning of year	(609		)	(809		)	(1,234		)
(Additions) recoveries, net	(175		)	200			425
Valuation allowance at end of year	(784		)	(609		)	(809		)
Mortgage servicing rights, net	$	58,384		$	61,476		$	61,341
Fair value of mortgage servicing rights	$	64,387		$	73,149		$	70,686
Portfolio of residential mortgage loans serviced for others (“servicing portfolio”)	$	7,646,846		$	7,974,742		$	7,915,224
Mortgage servicing rights, net to servicing portfolio	0.76		%	0.77		%	0.77		%
Mortgage servicing rights expense ^(a)	$	10,259		$	12,127		$	11,176


(a)	Includes the amortization of mortgage servicing rights and additions / recoveries to the valuation allowance of mortgage servicing rights, and is a component of mortgage banking, net in the consolidated statements of income.

The following table shows the estimated future amortization expense for amortizing intangible assets. The projections of amortization expense are based on existing asset balances, the current interest rate environment, and prepayment speeds as of December 31, 2017. The actual amortization expense the Corporation 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.



Estimated Amortization Expense	Other Intangibles		Mortgage Servicing Rights
	($ in Thousands)
Year ending December 31,
2018	$	1,971	$	9,590
2019	1,672		8,051
2020	1,555		6,747
2021	1,531		5,670
2022	1,508		4,783
Beyond 2022	7,343		24,327
Total Estimated Amortization Expense	$	15,580	$	59,168

- 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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