Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

The Corporation has covenants not to compete agreements with certain individuals, core deposit and customer-related intangibles and 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 Corporation also has goodwill which is deemed to be an indefinite intangible asset and is not amortized.

Changes in the carrying amount of the Corporation's goodwill by business segment for the nine months ended September 30, 2017 were as follows:



(Dollars in thousands)	Banking		Wealth Management		Insurance		Consolidated
Balance at December 31, 2016	$	138,476	$	15,434	$	18,649	$	172,559
Addition to goodwill from acquisitions	—		—		—		—
Balance at September 30, 2017	$	138,476	$	15,434	$	18,649	$	172,559

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



	At September 30, 2017						At December 31, 2016
(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	$	495	$	215	$	710	$	205	$	505
Core deposit intangibles	6,788		1,864		4,924		6,788		1,004		5,784
Customer related intangibles	12,381		9,509		2,872		12,381		8,504		3,877
Servicing rights	15,474		8,918		6,556		14,369		7,884		6,485
Total amortized intangible assets	$	35,353	$	20,786	$	14,567	$	34,248	$	17,597	$	16,651

The estimated aggregate amortization expense for covenants not to compete and core deposit and customer related intangibles for the remainder of 2017 and the succeeding fiscal years is as follows:



Year	(Dollars in thousands)	Amount
Remainder of 2017		$	674
2018		2,115
2019		1,565
2020		1,200
2021		923
Thereafter		1,534

The Corporation has originated mortgage servicing rights, which are included in other intangible assets on the consolidated balance sheets. 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 at September 30, 2017 and December 31, 2016. The fair value of mortgage servicing rights was determined using a discount rate of 10.0% at September 30, 2017 and December 31, 2016. The Corporation also records servicing rights on small business administration (SBA) loans. The value of these servicing rights was $16 thousand and $0 thousand at September 30, 2017 and December 31, 2016, respectively.

Changes in the servicing rights balance are summarized as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2017			2016			2017			2016
Beginning of period	$	6,548		$	5,896		$	6,485		$	5,877
Servicing rights capitalized	376			652			1,106			1,429
Acquired servicing rights	—			87			—			87
Amortization of servicing rights	(368		)	(468		)	(1,035		)	(1,226		)
Changes in valuation allowance	—			—			—			—
End of period	$	6,556		$	6,167		$	6,556		$	6,167
Residential mortgage and SBA loans serviced for others	$	997,169		$	933,470		$	997,169		$	933,470

There was no activity in the valuation allowance for the three and nine months ended September 30, 2017 and September 30, 2016.

The estimated amortization expense of servicing rights for the remainder of 2017 and the succeeding fiscal years is as follows:



Year	(Dollars in thousands)	Amount
Remainder of 2017		$	989
2018		857
2019		737
2020		632
2021		542
Thereafter		2,799

- 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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