GOODWILL AND OTHER INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill. Assets and liabilities acquired in a business combination are recorded at their estimated fair values as of the acquisition date. The excess of the purchase price of the acquisition over the fair value of net assets acquired is recorded as goodwill.

Changes in the carrying amount of goodwill for the three and six months ended June 30, 2023 and June 30, 2022 were as follows:


	Three months ended				Six months ended
	June 30,				June 30,
(Dollars in thousands)	2023		2022		2023		2022
Balance at beginning of period	$	1,005,738	$	999,959	$	1,001,507	$	1,000,749
Goodwill resulting from business combinations	90		0		4,321		(790)
Balance at end of period	$	1,005,828	$	999,959	$	1,005,828	$	999,959

In the first quarter of 2023, First Financial recorded $4.2 million of goodwill related to the acquisition of the assets of Brady Ware Capital. Brady Ware Capital specializes in buy-side and sell-side consulting services for mid-sized businesses. This acquisition is consistent with First Financial's approach of adding niche financial services to core banking capabilities and further expands its broad service offerings. In May 2023, First Financial also acquired Brady Ware Corporate Finance, a broker-dealer and member of FINRA. First Financial recorded $0.1 million of goodwill in connection with the acquisition of Brady Ware Corporate Finance. The fair value measurements of Brady Ware assets and liabilities are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values become available, and the measurement period ends in January 2024 for Brady Ware Capital. The measurement period for recording adjustments to the fair value of assets and liabilities ends in May 2024 for Brady Ware Corporate Finance.

In the first quarter of 2022, First Financial recorded adjustments of $0.8 million to goodwill resulting from the acquisition of Summit Funding Group, Inc. First Financial recorded its final adjustments to goodwill related to the Summit acquisition in the fourth quarter of 2022.

Goodwill is evaluated for impairment on an annual basis as of October 1 of each year, or whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value. First Financial performed its most recent annual impairment test as of October 1, 2022 and no impairment was indicated. As of June 30, 2023, no events or changes in circumstances indicated that the fair value of the reporting unit was below its carrying value.

Other intangible assets. Other intangible assets consist primarily of core deposit, customer lists, mortgage servicing rights and other miscellaneous intangibles, such as purchase commissions, non-compete agreements and trade name intangibles.

Core deposit intangibles represent the estimated fair value of acquired customer deposit relationships on the date of acquisition and are amortized on an accelerated basis over their estimated useful lives. First Financial's core deposit intangibles have an estimated weighted average remaining life of 4.8 years.

First Financial recorded a customer list intangible asset in conjunction with the Summit acquisition to account for the obligation or advantage on the part of either the Company or the customer to continue the pre-existing relationship subsequent to the merger. The customer list intangible asset is being amortized on a straight-line basis over its estimated useful life of 12 years and was $26.4 million and $27.6 million at June 30, 2023 and December 31, 2022, respectively. Additionally, First Financial recorded a customer list intangible asset in conjunction with the Bannockburn acquisition which is being amortized on a straight-line basis over its estimated useful life of 11 years and was $25.7 million and $27.5 million at June 30, 2023 and December 31, 2022, respectively.

Mortgage servicing rights represent the value of servicing fees First Financial expects to receive from the servicing responsibilities it retained when selling fixed and adjustable-rate residential mortgage loans. In those sales, First Financial retained servicing responsibilities and provided certain standard representations and warranties; however, the investors have no recourse to the Company’s other assets for failure of debtors to pay when due. First Financial receives servicing fees based on a percentage of the outstanding balance. When First Financial sells mortgage loans with servicing rights retained, these servicing rights are initially recorded at fair value. First Financial has selected the “amortization method” as permissible within U.S. GAAP, whereby the servicing rights capitalized are amortized in proportion to and over the period of estimated future servicing income with respect to the underlying loan. At the end of each reporting period, the carrying value of MSRs is assessed for impairment with a comparison to fair value. MSRs are carried at the lower of their amortized cost or fair value. The amortization of MSRs is included within other noninterest income in the Consolidated Statements of Income.

Amortization expense recognized on other intangible assets for the three months ended June 30, 2023 and June 30, 2022 was $3.4 million and $3.7 million, respectively, which includes MSR amortization expense of $0.8 million for each period. Amortization expense recognized on other intangible assets for the six months ended June 30, 2023 and June 30, 2022 was $6.7 million and $7.5 million, which includes MSR amortization of $1.5 million and $1.6 million, respectively. MSR amortization is included in other noninterest income on the Consolidated Statements of Income.

The gross carrying amount and accumulated amortization of other intangible assets at June 30, 2023 and December 31, 2022 were as follows:


(Dollars in thousands)	June 30, 2023				December 31, 2022
	Gross carrying amount		Accumulated amortization		Gross carrying amount		Accumulated amortization
Core deposit intangibles	$	41,750	$	(27,941)	$	41,750	$	(26,488)
Customer list	69,563		(17,506)		69,563		(14,457)
Other	10,960		(4,668)		14,079		(7,064)
Mortgage servicing rights	22,230		(5,726)		21,347		(4,811)
Total	$	144,503	$	(55,841)	$	146,739	$	(52,820)