GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2012

GOODWILL AND OTHER INTANGIBLE ASSETS (Note 8)

The changes in the carrying amount of goodwill as allocated to our business segments, or reporting units thereof, for goodwill impairment analysis were:


	Business Segment / Reporting Unit*
	Wealth Management		Consumer Lending		Commercial Lending		Investment Management		Total
	(in thousands)
Balance at December 31, 2010	$	20,446	$	98,999	$	117,689	$	80,757	$	317,891
Goodwill from business combinations		71		—		—		—		71

Balance at December 31, 2011		20,517		98,999		117,689		80,757		317,962
Goodwill from business combinations		—		29,452		57,074		23,746		110,272

Balance at December 31, 2012	$	20,517	$	128,451	$	174,763	$	104,503	$	428,234

*	Valley’s Wealth Management Division is comprised of trust, asset management, and insurance services. This reporting unit is included in the Consumer Lending segment for financial reporting purposes.

During 2012, goodwill from business combinations primarily related to the acquisition of State Bancorp (see Note 2 for further details). During 2011, Valley recorded $71 thousand in goodwill from a final earn-out payment related to an acquisition by Valley in 2006. This earn-out payment was based upon predetermined profitability targets in accordance with the merger agreement. There was no impairment of goodwill during the years ended December 31, 2012, 2011, and 2010.

The following tables summarize other intangible assets as of December 31, 2012 and 2011:


	Gross								Net
	Intangible		Accumulated			Valuation			Intangible
	Assets		Amortization			Allowance			Assets
	(in thousands)
December 31, 2012
Loan servicing rights	$	63,377	$	(43,393	)	$	(3,046	)	$	16,938
Core deposits		35,194		(24,160	)		—			11,034
Other		5,878		(2,727	)		—			3,151

Total other intangible assets	$	104,449	$	(70,280	)	$	(3,046	)	$	31,123

December 31, 2011
Loan servicing rights	$	52,046	$	(39,146	)	$	(2,670	)	$	10,230
Core deposits		27,144		(20,363	)		—			6,781
Other		6,121		(2,314	)		—			3,807

Total other intangible assets	$	85,311	$	(61,823	)	$	(2,670	)	$	20,818

The Bank is a servicer of residential mortgage and SBA loan portfolios, and it is compensated for loan administrative services performed for mortgage servicing rights purchased in the secondary market and loans originated and sold by the Bank. The aggregate principal balances of residential mortgage loans serviced by the Bank for others approximated $1.8 billion at December 31, 2012 and $1.3 billion at both December 31, 2011 and 2010. The SBA loans serviced by the Bank for third-party investors totaled $30.4 million, $33.1 million, and $38.4 million, at December 31, 2012, 2011 and 2010, respectively. The outstanding balance of all loans serviced for others is not included in the consolidated statements of financial condition.

The following table summarizes the change in loan servicing rights during the years ended December 31, 2012, 2011 and 2010:


	2012			2011			2010
	(in thousands)
Loan servicing rights
Balance at beginning of year	$	12,900		$	12,491		$	11,722
Origination of loan servicing rights		12,039			4,483			4,182
Amortization expense		(4,955	)		(4,074	)		(3,413	)

Balance at end of year	$	19,984		$	12,900		$	12,491

Valuation allowance
Balance at beginning of year	$	(2,670	)	$	(1,163	)	$	(612	)
Impairment adjustment		(376	)		(1,507	)		(551	)

Balance at end of year	$	(3,046	)	$	(2,670	)	$	(1,163	)

Balance at end of year net of valuation allowance	$	16,938		$	10,230		$	11,328

Loan servicing rights are accounted for using the amortization method (see Note 1 for more details).

Core deposits are amortized using an accelerated method and have a weighted average amortization period of 10 years. The line item labeled “Other” included in the table above primarily consists of customer lists and covenants not to compete, which are amortized over their expected lives generally using a straight-line method and have a weighted average amortization period of 17 years. During the first quarter of 2012, Valley recorded $8.1 million in core deposits intangibles resulting from the State Bancorp acquisition. Valley evaluates core deposits and other intangibles for impairment when an indication of impairment exists. No impairment was recognized during the years ended December 31, 2012, 2011, and 2010.

Valley recognized amortization expense on other intangible assets, including net impairment charges on loan servicing rights (reflected in the table above), of $9.8 million, $9.3 million, and $7.7 million for the years ended December 31, 2012, 2011 and 2010, respectively.

The following presents the estimated amortization expense of other intangible assets over the next five-year period:


	Loan
	Servicing		Core
	Rights		Deposits		Other
	(in thousands)
2013	$	4,511	$	3,078	$	541
2014		3,640		2,359		466
2015		2,658		1,758		434
2016		1,941		1,195		233
2017		1,433		815		220

- 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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