Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2013

Goodwill And Intangible Assets Disclosure [Abstract]

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, 2013, 2012 and 2011 was $2.3 million, $2.4 million and $1.6 million, respectively. In 2013, 2012 and 2011, impairment on customer-related intangibles was recognized in other noninterest expense in the amount of $83 thousand, $31 thousand and $11 thousand, respectively. The Corporation also has goodwill with a net carrying amount of $57.5 million at December 31, 2013, which is deemed to be an indefinite intangible asset and is not amortized. The Corporation recorded additional goodwill of $1.3 million and customer related intangibles of $1.3 million related to the John T. Fretz Insurance Agency, Inc. acquisition on May 1, 2013. The Corporation recorded additional goodwill of $3.1 million and customer related intangibles of $989 thousand related to the Javers Group acquisition on May 31, 2012.

The Corporation completed an annual impairment test for goodwill and other intangibles during the fourth quarter of 2013. There was no goodwill impairment and no material impairment of identifiable intangibles recorded during 2011 through 2013. 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, 2013 and 2012 were as follows:


(Dollars in thousands)
Balance at December 31, 2011	$	53,169
Additions:
Javers Group		3,069

Balance at December 31, 2012		56,238
Additions:
John T. Fretz Insurance, Inc.		1,279

Balance at December 31, 2013	$	57,517

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


	At December 31, 2013						At December 31, 2012
(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:
Core deposit intangibles	$	—	$	—	$	—	$	2,201	$	2,201	$	—
Customer related intangibles		7,513		4,854		2,659		6,250		3,946		2,304
Mortgage servicing rights		10,965		5,446		5,519		8,480		4,328		4,152

Total amortized intangible assets	$	18,478	$	10,300	$	8,178	$	16,931	$	10,475	$	6,456

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


Year	(Dollars in thousands)	Amount

2014		$	848
2015			660
2016			473
2017			356
2018			223
Thereafter			99

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 $7.2 million and $4.2 million at December 31, 2013 and 2012, respectively. The fair value of mortgage servicing rights was determined using discount rates ranging from 5.0% to 10.0% at December 31, 2013 and 2012.

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


	For the Years Ended December 31,
(Dollars in thousands)	2013			2012			2011
Beginning balance	$	4,152		$	2,739		$	2,441
Servicing rights capitalized		2,485			2,727			1,555
Amortization of servicing rights		(1,365	)		(1,610	)		(665	)
Changes in valuation allowance		247			296			(592	)

Ending balance	$	5,519		$	4,152		$	2,739

Mortgage loans serviced for others	$	751,891		$	604,801		$	418,224

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


	For the Years Ended December 31,
(Dollars in thousands)	2013			2012			2011
Beginning balance	$	(497	)	$	(793	)	$	(201	)
Additions		—			—			(592	)
Reductions		247			296			—
Direct write-downs		—			—			—

Ending balance	$	(250	)	$	(497	)	$	(793	)

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


Year	(Dollars in thousands)	Amount
2014		$	837
2015			734
2016			632
2017			541
2018			456
Thereafter			2,319

- 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.

+ References+ Details