Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

The Corporation has covenants not to compete, core deposit and customer-related intangibles and mortgage servicing rights, which are not deemed to have an indefinite life and therefore will continue to be amortized over their useful life using the present value of projected cash flows. The amortization of intangible assets for the years ended December 31, 2016, 2015 and 2014 was $4.1 million, $3.6 million and $3.3 million, respectively. In 2016, 2015 and 2014, impairment on customer-related intangibles was recognized in other noninterest expense in the amount of $0 thousand, $0 thousand and $31 thousand, respectively. The Corporation also has goodwill with a net carrying amount of $172.6 million at December 31, 2016, which is deemed to be an indefinite intangible asset and is not amortized. The Corporation recorded goodwill of $59.9 million and core deposit intangibles of $5.3 million related to the Fox Chase Bank acquisition on July 1, 2016.

In accordance with ASC Topic 350, the Corporation performed a qualitative assessment of goodwill during the fourth quarter of 2016 and determined it was more likely than not that the fair value of the Corporation, including each of the identified reporting units, was more than its carrying amount; therefore, the Corporation did not need to perform the two-step impairment test for the Corporation or the reporting units. The Corporation completed the most recent impairment test for goodwill during the fourth quarter of 2014.

The Corporation also completed an impairment test for other intangible assets during the fourth quarter of 2016. There was no goodwill impairment or material impairment of identifiable intangibles recorded during 2014 through 2016.

Changes in the carrying amount of the Corporation's goodwill by business segment for the years ended December 31, 2016 and 2015 were as follows:



(Dollars in thousands)	Banking		Wealth Management		Insurance		Consolidated
Balance at December 31, 2014	$	35,058	$	15,434	$	17,225	$	67,717
Addition to goodwill from acquisitions	43,516		—		1,424		44,940
Balance at December 31, 2015	78,574		15,434		18,649		112,657
Addition to goodwill from acquisitions	59,902		—		—		59,902
Balance at December 31, 2016	$	138,476	$	15,434	$	18,649	$	172,559

The following table reflects the components of intangible assets at the dates indicated:



	At December 31, 2016						At December 31, 2015
(Dollars in thousands)	Gross Carrying Amount		Accumulated Amortization and Fair Value Adjustments		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization and Fair Value Adjustments		Net Carrying Amount
Amortized intangible assets:
Covenants not to compete	$	710	$	205	$	505	$	—	$	—	$	—
Core deposit intangibles	6,788		1,004		5,784		1,520		276		1,244
Customer related intangibles	12,381		8,504		3,877		14,227		8,728		5,499
Mortgage servicing rights	14,369		7,884		6,485		12,233		6,356		5,877
Total amortized intangible assets	$	34,248	$	17,597	$	16,651	$	27,980	$	15,360	$	12,620

The estimated aggregate amortization expense for covenants not to compete and core deposit and customer related intangibles for each of the five succeeding fiscal years and thereafter follows:



Year	(Dollars in thousands)	Amount
2017		$	2,829
2018		2,114
2019		1,565
2020		1,200
2021		923
Thereafter		1,535

The Corporation has originated mortgage servicing rights which are included in other intangible assets on the consolidated balance sheet. Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing income on a basis similar to the interest method and an accelerated amortization method for loan payoffs. Mortgage servicing rights are subject to impairment testing on a quarterly basis. The aggregate fair value of these rights was $9.5 million and $8.0 million at December 31, 2016 and 2015, respectively. The fair value of mortgage servicing rights was determined using a discount rate of 10.0% at December 31, 2016 and 2015.

Changes in the mortgage servicing rights balance are summarized as follows:



	For the Years Ended December 31,
(Dollars in thousands)	2016			2015			2014
Beginning of period	$	5,877		$	5,509		$	5,519
Servicing rights capitalized	2,049			1,674			1,118
Acquired servicing rights	87			—			—
Amortization of servicing rights	(1,528		)	(1,306		)	(1,378		)
Changes in valuation allowance	—			—			250
End of period	$	6,485		$	5,877		$	5,509
Mortgage loans serviced for others	$	965,729		$	863,947		$	796,835

Activity in the valuation allowance for mortgage servicing rights was as follows:



	For the Years Ended December 31,
(Dollars in thousands)	2016		2015		2014
Valuation allowance, beginning of period	$	—	$	—	$	(250	)
Additions	—		—		—
Reductions	—		—		250
Direct write-downs	—		—		—
Valuation allowance, end of period	$	—	$	—	$	—

The estimated amortization expense of mortgage servicing rights for each of the five succeeding fiscal years and thereafter is as follows:



Year	(Dollars in thousands)	Amount
2017		$	941
2018		825
2019		716
2020		619
2021		533
Thereafter		2,851

- 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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