Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2011

Goodwill and Other Intangible Assets [Abstract]

Note 6. Goodwill and Other Intangible Assets

The Corporation has covenants not to compete, intangible assets due to branch acquisitions, core deposit intangibles, 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 these intangible assets for the years ended December 31, 2011, 2010 and 2009 was $1.6 million, $1.5 million and $1.5 million respectively. In 2011, impairment on customer-related intangibles was recognized in other noninterest expense in the amount of $11 thousand; there was no impairment in 2010. The Corporation also has goodwill with a net carrying amount of $53.2 million at December 31, 2011, which is deemed to be an indefinite intangible asset and is not amortized. The Corporation recorded additional goodwill of $1.8 million and $925 thousand at December 31, 2011 and December 31, 2010, respectively for earn-out payments related to its 2008 acquisition of Trollinger Consulting Group for achieving specified operating income targets. The Corporation has no remaining contingent earn-out payments.

The Corporation completed an impairment test for goodwill as of October 31, 2010. The Corporation elected to early adopt, during the fourth quarter of 2011, new accounting guidance which allows entities the option to perform a qualitative assessment of goodwill. In accordance with the new guidance, the Corporation determined, based on the assessment of qualitative factors and events and circumstances that may impact the drivers of fair value, it was not more likely than not, that the fair value of the Corporation, and each of its reporting units, was less than its carrying amount; therefore, it was not necessary to perform the two-step impairment test for the Corporation or the reporting units. There was no impairment recorded during 2011 or 2010. There can be no assurance that future impairment assessments or tests will not result in a charge to earnings.

Changes in the carrying amount of the Corporation’s goodwill for the years ended December 31, 2011 and 2010 were as follows:


(Dollars in thousands)

Balance as of December 31, 2009	$	50,393
Additions:
Trollinger Consulting Group		927

Balance as of December 31, 2010	$	51,320
Additions:
Trollinger Consulting Group		1,849

Balance as of December 31, 2011	$	53,169

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


	December 31, 2011						December 31, 2010
			Accumulated						Accumulated
			Amortization						Amortization
	Gross		and		Net		Gross		and		Net
	Carrying		Fair Value		Carrying		Carrying		Fair Value		Carrying
(Dollars in thousands)	Amount		Adjustments		Amount		Amount		Adjustments		Amount

Amortized intangible assets:
Covenants not to compete	$	320	$	320	$	—	$	320	$	308	$	12
Branch acquisitions		2,951		2,951		—		2,951		2,951		—
Core deposit intangibles		2,201		2,148		53		2,201		2,007		194
Customer related intangibles		5,291		3,213		2,078		5,302		2,472		2,830
Mortgage servicing rights, net		5,753		3,014		2,739		4,198		1,757		2,441

Total amortized intangible assets	$	16,516	$	11,646	$	4,870	$	14,972	$	9,495	$	5,477

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


Year	(Dollars in thousands)	Amount
2012		$	670
2013			498
2014			380
2015			263
2016			146
Thereafter			174

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 using an accelerated amortization method and are subject to periodic impairment testing. The aggregate fair value of these rights was $2.8 million and $2.9 million at December 31, 2011 and 2010, respectively. The fair value of mortgage servicing rights was determined using discount rates ranging from 3.5% to 7.3% for 2011.

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


	For the Years Ended December 31,
(Dollars in thousands)	2011			2010			2009

Beginning balance	$	2,441		$	1,437		$	418
Servicing rights capitalized		1,555			1,380			1,280
Amortization of servicing rights		(665	)		(425	)		(178	)
Changes in valuation		(592	)		49			(83	)

Ending balance	$	2,739		$	2,441		$	1,437

Mortgage loans serviced for others	$	418,224		$	306,403		$	174,066

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


	For the Years Ended December 31,
(Dollars in thousands)	2011			2010			2009

Beginning balance	$	(201	)	$	(250	)	$	(167	)
Additions		(592	)		—			(83	)
Reductions		—			49			—
Direct write-downs		—			—			—

Ending balance	$	(793	)	$	(201	)	$	(250	)

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


Year	(Dollars in thousands)	Amount
2012		$	632
2013			499
2014			379
2015			289
2016			217
Thereafter			723

- 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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