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Goodwill and Other Intangible Assets
3 Months Ended
Mar. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets Goodwill and Other Intangible Assets
Goodwill
Goodwill is not amortized but is instead subject to impairment tests on at least an annual basis, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
The Corporation conducted its most recent annual impairment testing in May 2018, utilizing a qualitative assessment. Factors that management considered in this assessment included macroeconomic conditions, industry and market considerations, overall financial performance of the Corporation and each reporting unit (both current and projected), changes in management strategy, and changes in the composition or carrying amount of net assets. In addition, management considered the changes in both the Corporation’s common stock price and in the overall bank common stock index (based on the S&P 400 Regional Bank Sub-Industry Index), as well as the Corporation’s earnings per common share trend over the past year. Based on these assessments, management concluded that it is more likely than not that the estimated fair value exceeded the carrying value (including goodwill) for each reporting unit. Therefore, a step one quantitative analysis was not required. There have been no events since the May 2018 impairment testing that have changed the Corporation's impairment assessment conclusion. There were no impairment charges recorded in 2018 or the first three months of 2019.
At both March 31, 2019 and December 31, 2018, the Corporation had goodwill of $1.2 billion.
Other Intangible Assets
The Corporation has other intangible assets that are amortized, consisting of CDI, other intangibles (primarily related to customer relationships acquired in connection with the Corporation’s insurance agency acquisitions), and mortgage servicing rights. For CDI and other intangibles, changes in the gross carrying amount, accumulated amortization, and net book value were as follows:
 
Three Months Ended March 31, 2019
 
Year Ended December 31, 2018
 
($ in Thousands)
Core deposit intangibles
 
 
 
Gross carrying amount
$
58,100

 
$
58,100

Accumulated amortization
(6,778
)
 
(5,326
)
Net book value
$
51,322

 
$
52,774

Additions during the periods
$

 
$
58,100

Amortization during the year
$
1,453

 
$
5,326

Other intangibles
 
 
 
Gross carrying amount
$
44,887

 
$
44,931

Reductions due to sale

 
(43
)
Accumulated amortization
(22,599
)
 
(21,825
)
Net book value
$
22,288

 
$
23,062

Additions during the period
$

 
$
10,359

Amortization during the year
$
774

 
$
2,833


Mortgage Servicing Rights
The Corporation sells residential mortgage loans in the secondary market and typically retains the right to service the loans sold. MSR are amortized in proportion to and over the period of estimated net servicing income and assessed for impairment at each reporting date.
The Corporation evaluates its mortgage servicing rights asset for impairment at minimum on a quarterly basis. Impairment is assessed based on fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). As mortgage interest rates fall, prepayment speeds are usually faster and the value of the mortgage servicing rights asset generally decreases, requiring additional valuation reserve. Conversely, as mortgage interest rates rise, prepayment speeds are usually slower and the value of the mortgage servicing rights asset generally increases, requiring less valuation reserve. A valuation allowance is established, through a charge to earnings, to the extent the amortized cost of the mortgage servicing rights exceeds the estimated fair value by stratification. If it is later determined that all or a portion of the temporary impairment no longer exists for a stratification, the valuation is reduced through a recovery to earnings. An other-than-temporary impairment (i.e., recoverability is considered remote when considering interest rates and loan pay off activity) is recognized as a write-down of the mortgage servicing rights asset and the related valuation allowance (to the extent a valuation allowance is available) and then against earnings. A direct write-down permanently reduces the carrying value of the mortgage servicing rights asset and valuation allowance, precluding subsequent recoveries. See Note 12 for a discussion of the recourse provisions on sold residential mortgage loans. See Note 13 which further discusses fair value measurement relative to the mortgage servicing rights asset.
A summary of changes in the balance of the mortgage servicing rights asset and the mortgage servicing rights valuation allowance is as follows:
 
Three Months Ended March 31, 2019
 
Year Ended December 31, 2018
 
($ in Thousands)
Mortgage servicing rights
Mortgage servicing rights at beginning of period
$
68,433

 
$
59,168

Additions from acquisition

 
8,136

Additions
1,247

 
10,722

Amortization
(2,693
)
 
(9,594
)
Mortgage servicing rights at end of period
$
66,987

 
$
68,433

Valuation allowance at beginning of period
(239
)
 
(784
)
(Additions) recoveries, net
(121
)
 
545

Valuation allowance at end of period
(360
)
 
(239
)
Mortgage servicing rights, net
$
66,626

 
$
68,193

Fair value of mortgage servicing rights
$
73,858

 
$
81,012

Portfolio of residential mortgage loans serviced for others (“servicing portfolio”)
$
8,543,467

 
$
8,600,983

Mortgage servicing rights, net to servicing portfolio
0.78
%
 
0.79
%
Mortgage servicing rights expense(a)
$
2,814

 
$
9,049


(a) Includes the amortization of mortgage servicing rights and additions / recoveries to the valuation allowance of mortgage servicing rights, and is a component of mortgage banking, net in the consolidated statements of income.

The projections of amortization expense are based on existing asset balances, the current interest rate environment, and prepayment speeds as of March 31, 2019. The actual amortization expense the Corporation recognizes in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, prepayment speeds, market conditions, regulatory requirements, and events or circumstances that indicate the carrying amount of an asset may not be recoverable. The following table shows the estimated future amortization expense for amortizing intangible assets:
Estimated Amortization Expense
Core Deposit Intangibles
 
Other Intangibles
 
Mortgage Servicing Rights
 
($ in Thousands)
Nine Months Ending December 31, 2019
$
4,358

 
$
2,050

 
$
7,983

2020
5,810

 
2,707

 
11,032

2021
5,810

 
2,682

 
9,334

2022
5,810

 
2,659

 
7,848

2023
5,810

 
2,640

 
6,579

2024
5,810

 
2,620

 
5,507

Beyond 2024
17,914

 
6,931

 
18,703

Total Estimated Amortization Expense
$
51,322

 
$
22,288

 
$
66,987