Goodwill, Core Deposit Premium and Other Intangible Assets

6 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill, Core Deposit Premium and Other Intangible Assets

GOODWILL, CORE DEPOSIT PREMIUM AND OTHER INTANGIBLE ASSETS

Heartland had goodwill of $30.6 million at both June 30, 2013, and December 31, 2012.

Other intangible assets consist of core deposit intangibles, mortgage servicing rights and customer relationship intangible. The gross carrying amount of other intangible assets and the associated accumulated amortization at June 30, 2013, and December 31, 2012, are presented in the table below, in thousands:



	June 30, 2013						December 31, 2012
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets:
Core deposit intangibles	$	11,668	$	9,702	$	1,966	$	11,668	$	9,327	$	2,341
Mortgage servicing rights	27,709		8,088		19,621		22,892		7,239		15,653
Customer relationship intangible	1,177		708		469		1,177		685		492
Total	$	40,554	$	18,498	$	22,056	$	35,737	$	17,251	$	18,486

The following table shows the estimated future amortization expense for amortizable intangible assets, in thousands:



	Core Deposit Intangibles		Mortgage Servicing Rights		Customer Relationship Intangible		Total

Six months ending December 31, 2013	$	366	$	3,951	$	22	$	4,339
Year ending December 31,
2014	468		5,223		43		5,734
2015	267		4,179		42		4,488
2016	238		3,134		41		3,413
2017	212		2,089		40		2,341
2018	187		1,045		39		1,271
Thereafter	228		—		242		470

Projections of amortization expense for mortgage servicing rights are based on existing asset balances and the existing interest rate environment as of June 30, 2013. Heartland's actual experience may be significantly different depending upon changes in mortgage interest rates and market conditions. Mortgage loans serviced for others were $2.70 billion and $2.20 billion as of June 30, 2013, and December 31, 2012, respectively. The fair value of Heartland's mortgage servicing rights was estimated at $24.6 million and $16.0 million at June 30, 2013, and December 31, 2012, respectively. Valuation allowances of $0 and $496,000, were required as of June 30, 2013, and December 31, 2012, respectively.

The majority of Heartland's mortgage servicing rights portfolio is comprised of loans serviced for the Federal National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"), which are separated into 15- and 30-year tranches. At June 30, 2013, the 30-year tranche had a fair value of $18.8 million in comparison with the book value of $15.3 million. At December 31, 2012, the 30-year tranche had a fair value of $12.6 million in comparison with the book value of $12.6 million, which was net of the related valuation allowance of $496,000. At June 30, 2013, the 15-year tranche had a fair value of $4.2 million in comparison with the book value of $3.2 million. At December 31, 2012, the 15-year tranche had a fair value of $3.3 million in comparison with the book value of $3.0 million.

In addition to servicing FNMA and FHLMC loans, Heartland became an authorized servicer of Government National Mortgage Association ("GNMA") mortgages in late 2012. At June 30, 2013, the GNMA tranche had a fair value of $1.6 million and a book value of $1.1 million.

The following table summarizes, in thousands, the changes in capitalized mortgage servicing rights:



	2013			2012
Balance at January 1	$	15,653		$	11,276
Originations	7,209			4,600
Amortization	(3,737		)	(2,831		)
Valuation adjustment	496			(181		)
Balance at June 30	$	19,621		$	12,864

- 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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