GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The following tables detail the changes in carrying value of goodwill by segment during the years ended December 31, 2017 and 2016. There were no changes in the carrying value of goodwill during 2015.



	As of December 31, 2015		Impairment			As of December 31, 2016
	(In thousands)
Goodwill
Private Banking	$	—	$	—		$	—
Wealth Management and Trust	44,305		(9,528		)	34,777
Investment Management	66,955		—			66,955
Wealth Advisory	40,822		—			40,822
Total goodwill	$	152,082	$	(9,528	)	$	142,554



	As of December 31, 2016		Impairment			Adjustments or Reclasses			As of December 31, 2017
	(In thousands)
Goodwill
Private Banking	$	—	$	—		$	—		$	—
Wealth Management and Trust	34,777		—			—			34,777
Investment Management (1)	66,955		(24,901		)	(42,054		)	—
Wealth Advisory (2)	40,822		—			(1		)	40,821
Total goodwill	$	142,554	$	(24,901	)	$	(42,055	)	$	75,598

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(1)	Remaining goodwill of Anchor is classified as held for sale as of December 31, 2017.


(2)	Adjusted for rounding.

The following tables detail total goodwill and the cumulative impairment charges thereon as of December 31, 2017 and 2016:



	Goodwill prior to impairment		Cumulative goodwill impairment			Goodwill
	(In thousands)
Private Banking	$	34,281	$	(34,281	)	$	—
Wealth Management and Trust	44,305		(9,528		)	34,777
Investment Management (1)	75,162		(75,162		)	—
Wealth Advisory (2)	40,821		—			40,821
Total goodwill at December 31, 2017	$	194,569	$	(118,971	)	$	75,598

Private Banking	$	34,281	$	(34,281	)	$	—
Wealth Management and Trust	44,305		(9,528		)	34,777
Investment Management	117,216		(50,261		)	66,955
Wealth Advisory	40,822		—			40,822
Total goodwill at December 31, 2016	$	236,624	$	(94,070	)	$	142,554

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(1)	Remaining goodwill of Anchor is classified as held for sale as of December 31, 2017.


(2)	Adjusted for rounding.

In 2017 and 2016, the Company recognized no additional goodwill.

Goodwill and indefinite lived intangible assets such as trade names are subject to annual impairment tests, or more frequently, if there is an indication of impairment, based on the guidance in ASC 350, Intangibles-Goodwill and Other (“ASC 350”). Long-lived intangible assets such as advisory contracts are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable in accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”).

Management performed its annual goodwill and indefinite-lived intangible asset impairment testing during the fourth quarter of 2017 for applicable reporting units. There was no additional testing required for long-lived intangible assets in 2017.

2017 Impairment testing and results

Management performed its annual goodwill and indefinite-lived intangible asset impairment testing during the fourth quarters of 2017 for applicable reporting units. For the 2017 testing, Step 0 was performed for BOS and KLS. A Step 1 test was performed for Boston Private Wealth and Anchor. The results of the Step 1 test for Boston Private Wealth indicated that the fair value exceeded their carrying value therefore no goodwill impairment was evident. Neither Boston Private Bank nor DGHM have any goodwill.

In December 2017, while the Company was performing the Step 1 test for Anchor, the Company entered into an agreement to sell its entire ownership interest in Anchor in a transaction that will result in Anchor being majority owned by members of its management team. The Company will receive approximately $32 million of cash at closing and future revenue share payments that, at signing, had a net present value of approximately $15 million, subject to purchase price adjustments. The Company’s annual goodwill impairment test for Anchor resulted in a fourth quarter of 2017 goodwill impairment charge of $24.9 million. The decline in fair value and the related goodwill impairment was related to the fair market value impacts of the Anchor sale transaction. Due to the limited interest and terms of the transaction that were required for a mutual agreement, the fair value obtained was substantially below the carrying value. The fair value was based on the terms of the sale transaction. The transaction is expected to close in the first quarter of 2018. This transaction has been approved by the Company’s board of directors and is subject to obtaining client consents, Anchor raising debt financing, and customary closing conditions. The rationale for the sale is to focus the Company’s resources in businesses where we can offer holistic financial advice, along with integrated wealth management, trust, and private banking capabilities. This transaction will also generate additional capital for us to reinvest in a more focused Company.

2016 Impairment testing and results

In the 2016 goodwill impairment testing, a Step 0 test was performed for BOS and KLS and a Step 1 test was performed for Anchor and Boston Private Wealth. Neither Boston Private Bank nor DGHM have any goodwill. Based on the qualitative factors assessed in the Step 0 tests for BOS and KLS, no additional testing was required. Anchor passed its Step 1 test although with a lower fair value than the previous year. Boston Private Wealth failed its Step 1 test and the Company performed a Step 2 test to determine the amount of goodwill impairment, if any.

The estimated fair value of Boston Private Wealth was $68.0 million as compared to a carrying value of $76.9 million, resulting in a deficit of $8.9 million, or 11.6%.

Because the estimated fair value of Boston Private Wealth was lower than its carrying value, the Company was required to perform a Step 2 valuation. The results of the Step 2 valuation indicated an implied fair value of goodwill of $34.8 million as compared to the book value of $44.3 million, or a deficiency of $9.5 million. The resulting deficiency was recorded as a goodwill impairment charge within operating expenses in the fourth quarter of 2016. As a result of the goodwill impairment, the carrying value of goodwill at Boston Private Wealth was reduced to $34.8 million.

See Part II. Item 8. “Financial Statements and Supplementary Data - Note 1: “Basis of Presentation and Summary of Significant Accounting Policies” for changes to the rules in goodwill impairment testing as discussed in the Recent Accounting Pronouncements section.

Intangible assets

The following table shows the gross and net carrying amounts of identifiable intangible assets at December 31, 2017 and 2016:



	2017						2016
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
	(In thousands)
Advisory contracts (1)	$	37,313	$	21,370	$	15,943	$	71,513	$	46,828	$	24,685
Trade names (1)	140		—		140		2,040		—		2,040
Total	$	37,453	$	21,370	$	16,083	$	73,553	$	46,828	$	26,725

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(1)	Intangible assets of Anchor are classified as held for sale as of December 31, 2017.

The Company recognized no additional identifiable intangible assets in 2017 or 2016.

Consolidated expense related to intangible assets subject to amortization was $5.6 million, $6.3 million, and $6.7 million for 2017, 2016, and 2015, respectively.

Management reviews, and adjusts if necessary, intangible asset amortization schedules to ensure that the remaining life on the amortization schedule accurately reflects the useful life of the intangible asset. The weighted average amortization period of these intangible assets is 6.68 years.

The estimated annual amortization expense for these identifiable intangibles over the next five years is:



	Estimated intangible amortization expense
	(In thousands)
2018	$	2,970
2019	2,848
2020	2,588
2021	2,110
2022	2,056