Intangible Assets

9 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

The Corporation has the following types of intangible assets: goodwill, core deposit intangible assets, non-compete intangible assets and mortgage servicing rights (MSRs). Goodwill, core deposit intangible assets, and non-compete intangible assets arose as a result of business combinations or other acquisitions. MSRs arose as a result of selling residential mortgage loans in the secondary market while retaining the right to service these loans and receive servicing income over the life of the loan and from acquisitions of other banks that had MSRs. The majority of the MSRs recorded at September 30, 2015 were acquired as a result of the Northwestern and Monarch acquisitions. Amortization is recorded on the core deposit intangible assets, non-compete intangible assets and MSRs. Goodwill recorded is primarily attributable to the synergies and economies of scale expected from combining the operations of the Corporation and other acquisitions.

During the second quarter of 2015, the Corporation acquired Lake Michigan and Monarch, which resulted in the recognition of $100.9 million and $5.3 million in goodwill, respectively. No amount of goodwill recorded in conjunction with these acquisitions is deductible for tax purposes. Goodwill is not amortized but is evaluated at least annually for impairment. The Corporation’s most recent annual goodwill impairment test performed as of October 31, 2014 did not indicate that an impairment of goodwill existed. The Corporation also determined that no triggering events have occurred that indicated impairment from the most recent valuation date through September 30, 2015 and that the Corporation's goodwill was not impaired at September 30, 2015.

The following table shows the net carrying value of the Corporation’s intangible assets:



	September 30, 2015		December 31, 2014		September 30, 2014
	(In thousands)
Goodwill	$	286,454	$	180,128	$	120,164
Other intangible assets:
Core deposit intangible assets	$	27,890	$	20,863	$	8,665
Non-compete intangible assets	434		—		—
Mortgage servicing rights	11,540		12,217		3,293
Total other intangible assets	$	39,864	$	33,080	$	11,958

The following table sets forth the carrying amount, accumulated amortization and amortization expense of core deposit intangible assets that are amortizable and arose from business combinations or other acquisitions:



	September 30, 2015		December 31, 2014		September 30, 2014
	(In thousands)
Gross original amount	$	40,055	$	31,550	$	18,659
Accumulated amortization	12,165		10,687		9,994
Carrying amount	$	27,890	$	20,863	$	8,665
Amortization expense for the three months ended September 30	$	1,163			$	445
Amortization expense for the nine months ended September 30	$	2,906			$	1,336

In conjunction with the acquisition of Lake Michigan on May 31, 2015 and Monarch on April 1, 2015, the Corporation recorded $8.0 million and $1.9 million, respectively, in core deposit intangible assets. These core deposit intangible assets are being amortized over a period of 10 years on an accelerated basis. There were no additions of core deposit intangible assets during the three and nine months ended September 30, 2014.

The estimated future amortization expense on core deposit intangible assets for periods ending after September 30, 2015 is as follows: 2015 — $1.2 million; 2016 — $4.4 million; 2017 — $3.8 million; 2018 — $3.6 million; 2019 — $3.4 million; 2020 and thereafter — $11.5 million.

In conjunction with the acquisition of Lake Michigan on May 31, 2015, the Corporation recorded $0.6 million in non-compete intangible assets with an amortization period of one year. There were no additions of non-compete intangible assets during the three and nine months ended September 30, 2014.

The following shows the net carrying value and fair value of MSRs and the total loans that the Corporation is servicing for others:



	September 30, 2015		December 31, 2014		September 30, 2014
	(In thousands)
Net carrying value of MSRs	$	11,540	$	12,217	$	3,293
Fair value of MSRs	$	15,326	$	14,979	$	6,618
Loans serviced for others that have servicing rights capitalized	$	2,129,492	$	2,093,140	$	875,720

The following table shows the activity for capitalized MSRs:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(In thousands)
Balance at beginning of period	$	12,307		$	3,344		$	12,217		$	3,423
Acquired in Monarch acquisition	—			—			1,284			—
Additions	303			324			1,118			745
Amortization	(1,070		)	(375		)	(3,279		)	(875		)
Change in valuation allowance	—			—			200			—
Balance at end of period	$	11,540		$	3,293		$	11,540		$	3,293

MSRs are stratified into servicing assets originated by the Corporation and those acquired in acquisitions of other institutions and further stratified into relatively homogeneous pools based on products with similar characteristics. There was a valuation allowance of $0.2 million as of December 31, 2014 related to impairment within certain pools attributable to the Corporation's servicing portfolio that was acquired in the Northwestern transaction. There was no impairment valuation allowance recorded on the Corporation's MSRs at September 30, 2015 and September 30, 2014.

- 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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