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Goodwill and Other Intangible Assets
 6 Months Ended
Jun. 30, 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 2021, 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 changes 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 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 have been no events since the May 2021 impairment testing that have changed the Corporation's impairment assessment conclusion. There were no impairment charges recorded in 2020 or the first six months of 2021.
At both June 30, 2021 and December 31, 2020, the Corporation had goodwill of $1.1 billion. During the first quarter of 2021, there was a reduction of $4 million of goodwill related to the sale of Whitnell.
Other Intangible Assets
The Corporation has other intangible assets that are amortized, consisting of CDIs and MSRs. For CDIs and other intangibles, changes in the gross carrying amount, accumulated amortization, and net book value were as follows:
($ in Thousands)Six Months Ended June 30, 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(25,611)(21,205)
Net book value$62,498 $66,904 
Amortization during the year$4,405 $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)Six Months Ended June 30, 2021Year Ended December 31, 2020
Mortgage servicing rights
Mortgage servicing rights at beginning of period$59,967 $67,607 
Additions from acquisition— 1,357 
Additions7,488 13,667 
Amortization(11,352)(22,664)
Mortgage servicing rights at end of period$56,103 $59,967 
Valuation allowance at beginning of period$(18,006)$(302)
(Additions) recoveries, net10,239 (17,704)
Valuation allowance at end of period$(7,768)$(18,006)
Mortgage servicing rights, net$48,335 $41,961 
Fair value of mortgage servicing rights$48,378 $41,990 
Portfolio of residential mortgage loans serviced for others (“servicing portfolio”)$7,149,619 $7,743,956 
Mortgage servicing rights, net to servicing portfolio0.68 %0.54 %
Mortgage servicing rights expense(a)
$1,113 $40,369 
(a) Includes the amortization of mortgage servicing rights and additions / recoveries to the valuation allowance of mortgage servicing rights, and is a component of mortgage banking, net on the consolidated statements of income.
The projections of amortization expense are based on existing asset balances, the current interest rate environment, and prepayment speeds as of June 30, 2021. The actual amortization expense the Corporation recognizes in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, prepayment speeds, market conditions, regulatory requirements, and events or circumstances that indicate the carrying amount of an asset may not be recoverable. The following table shows the estimated future amortization expense for amortizing intangible assets:
($ in Thousands)Core Deposit IntangiblesMortgage Servicing Rights
Six Months Ending December 31, 2021$4,405 $5,834 
20228,811 11,451 
20238,811 8,823 
20248,811 6,926 
20258,811 5,512 
20268,811 4,440 
Beyond 202614,038 13,118 
Total Estimated Amortization Expense$62,498 $56,103