Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2012

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

Note 7. Goodwill and Other Intangible Assets

The Corporation has 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, 2012, 2011 and 2010 was $2.4 million, $1.6 million and $1.5 million, respectively. In 2012 and 2011, impairment on customer-related intangibles was recognized in other noninterest expense in the amount of $31 thousand and $11 thousand, respectively; there was no impairment in 2010. The Corporation also has goodwill with a net carrying amount of $56.2 million at December 31, 2012, which is deemed to be an indefinite intangible asset and is not amortized. The Corporation recorded additional goodwill of $3.1 million (inclusive of contingent consideration) and customer related intangibles of $989 thousand related to the Javers Group acquisition on May 31, 2012. The Corporation recorded additional goodwill of $1.8 million at December 31, 2011 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 related to the Trollinger Consulting Group.

The Corporation completed an annual impairment test for goodwill and other intangibles during the fourth quarter of 2012. There was no goodwill impairment and no material impairment to identifiable intangibles recorded during 2010 through 2012. 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, 2012 and 2011 were as follows:

(Dollars in thousands)
Balance at December 31, 2010	$	51,320
Additions:
Trollinger Consulting Group		1,849
Balance at December 31, 2011	$	53,169
Additions:
Javers Group		3,069
Balance at December 31, 2012	$	56,238

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

	At December 31, 2012						At December 31, 2011
(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	$	—	$	—	$	—	$	320	$	320	$	—
Branch acquisitions		—		—		—		2,951		2,951		—
Core deposit intangibles		2,201		2,201		—		2,201		2,148		53
Customer related intangibles		6,250		3,946		2,304		5,291		3,213		2,078
Mortgage servicing rights		8,480		4,328		4,152		5,753		3,014		2,739
Total amortized intangible assets	$	16,931	$	10,475	$	6,456	$	16,516	$	11,646	$	4,870

The estimated aggregate amortization expense for customer related intangibles for each of the five succeeding fiscal years follows:

Year	(Dollars in thousands)	Amount
2013		$	683
2014			543
2015			404
2016			265
2017			196
Thereafter			213

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 $4.2 million and $2.8 million at December 31, 2012 and 2011, respectively. The fair value of mortgage servicing rights was determined using discount rates ranging from 5.0% to 10.0% at December 31, 2012 and 2011.

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

	For the Years Ended December 31,
(Dollars in thousands)	2012			2011			2010
Beginning balance	$	2,739		$	2,441		$	1,437
Servicing rights capitalized		2,727			1,555			1,380
Amortization of servicing rights		(1,610	)		(665	)		(425	)
Changes in valuation allowance		296			(592	)		49
Ending balance	$	4,152		$	2,739		$	2,441
Mortgage loans serviced for others	$	604,801		$	418,224		$	306,403

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

	For the Years Ended December 31,
(Dollars in thousands)	2012			2011			2010
Beginning balance	$	(793	)	$	(201	)	$	(250	)
Additions		—			(592	)		—
Reductions		296			—			49
Direct write-downs		—			—			—
Ending balance	$	(497	)	$	(793	)	$	(201	)

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

Year	(Dollars in thousands)	Amount
2013		$	896
2014			716
2015			555
2016			440
2017			340
Thereafter			1,205