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Goodwill and Other Intangible Assets
 3 Months Ended
Mar. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets Goodwill and Other Intangible Assets
Goodwill
Goodwill is not amortized but is instead 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.
The Corporation conducted its most recent annual impairment testing in May 2020, utilizing a quantitative assessment of goodwill impairment which included determining the estimated fair value of each reporting unit, utilizing an equally weighted combination of discounted cash flow and market-based approaches, and comparing that fair value to each reporting unit’s carrying amount (including goodwill). An impairment loss is recognized if the carrying amount of a reporting unit exceeds its fair value. Based on the quantitative assessment, management concluded that the estimated fair value exceeded the carrying value (including goodwill) for each reporting unit. Therefore, based on the step one quantitative analysis, no impairment was required. There have been no events since the May 2020 impairment testing that have changed the Corporation's impairment assessment conclusion. There were no impairment charges recorded in 2020 or the first three months of 2021.
Each of the valuation techniques employed by the Corporation requires significant assumptions. Depending upon the specific approach, assumptions are made regarding the economic environment including forecasted cash flow projections, expected net interest margins, long-term growth rates, discount rates for cash flows, control premiums, and price-to-forward earnings multiples. Changes to any one of these assumptions could result in significantly different results. A sustained decline in the Corporation’s expected future cash flows or estimated growth rates, or a prolonged decline in the price of the Corporation’s common stock due to deterioration in the economic environment, may necessitate additional interim testing, which could result in an impairment charge to goodwill in future reporting periods.
At both March 31, 2021 and December 31, 2020, the Corporation had goodwill of $1.1 billion. During the first quarter of 2021, there was a reduction of $4 million related to the sale of Whitnell.
Other Intangible Assets
The Corporation has other intangible assets that are amortized, consisting of CDIs and MSRs. For CDIs and other intangibles, changes in the gross carrying amount, accumulated amortization, and net book value were as follows:
($ in Thousands)Three Months Ended March 31, 2021Year Ended December 31, 2020
Core deposit intangibles
Gross carrying amount at the beginning of the year$88,109 $80,730 
Additions during the period— 7,379 
Accumulated amortization(23,408)(21,205)
Net book value$64,701 $66,904 
Amortization during the year$2,203 $8,749 
Other intangibles
Gross carrying amount at the beginning of the year $2,000 $38,970 
Additions during the period— 200 
Reductions due to sale(1,317)(17,435)
Accumulated amortization(683)(20,385)
Net book value $— $1,350 
Amortization during the year$33 $1,443 
Mortgage Servicing Rights
The Corporation sells residential mortgage loans in the secondary market and typically retains the right to service the loans sold. MSRs are amortized in proportion to and over the period of estimated net servicing income and assessed for impairment at each reporting date.
The Corporation evaluates its MSRs asset for impairment at minimum on a quarterly basis. Impairment is assessed based on fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). As mortgage interest rates fall, prepayment speeds are usually faster and the value of the MSRs asset generally decreases, requiring additional valuation reserve. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the MSRs asset generally increases, requiring less valuation reserve. A valuation allowance is established, through a charge to earnings, to the extent the amortized cost of the MSRs exceeds the estimated fair value by stratification. An other-than-temporary impairment (i.e., recoverability is considered remote when considering interest rates and loan pay off activity) is recognized as a write-down of the MSRs asset and the related valuation allowance (to the extent a valuation allowance is available) and then against earnings. A direct write-down permanently reduces the carrying value of the MSRs asset and valuation allowance, precluding subsequent recoveries. See Note 12 for a discussion of the recourse provisions on sold residential mortgage loans. See Note 13 which further discusses fair value measurement relative to the MSRs asset.
A summary of changes in the balance of the MSRs asset and the MSRs valuation allowance is as follows:
($ in Thousands)Three Months Ended March 31, 2021Year Ended December 31, 2020
Mortgage servicing rights
Mortgage servicing rights at beginning of period$59,967 $67,607 
Additions from acquisition— 1,357 
Additions3,348 13,667 
Amortization(6,388)(22,664)
Mortgage servicing rights at end of period$56,927 $59,967 
Valuation allowance at beginning of period$(18,006)$(302)
(Additions) recoveries, net10,578 (17,704)
Valuation allowance at end of period$(7,428)$(18,006)
Mortgage servicing rights, net$49,500 $41,961 
Fair value of mortgage servicing rights$49,541 $41,990 
Portfolio of residential mortgage loans serviced for others (“servicing portfolio”)$7,313,308 $7,743,956 
Mortgage servicing rights, net to servicing portfolio0.68 %0.54 %
Mortgage servicing rights expense(a)
$(4,190)$40,369 
(a) Includes the amortization of mortgage servicing rights and additions / recoveries to the valuation allowance of mortgage servicing rights, and is a component of mortgage banking, net on the consolidated statements of income.
The projections of amortization expense are based on existing asset balances, the current interest rate environment, and prepayment speeds as of March 31, 2021. The actual amortization expense the Corporation recognizes in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, prepayment speeds, market conditions, regulatory requirements, and events or circumstances that indicate the carrying amount of an asset may not be recoverable. The following table shows the estimated future amortization expense for amortizing intangible assets:
($ in Thousands)Core Deposit IntangiblesMortgage Servicing Rights
Nine Months Ending December 31, 2021$6,608 $8,345 
20228,811 11,550 
20238,811 8,909 
20248,811 6,983 
20258,811 5,547 
20268,811 4,466 
Beyond 202614,038 11,125 
Total Estimated Amortization Expense$64,701 $56,927