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Goodwill and Other Intangible Assets
 6 Months Ended
Jun. 30, 2022
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 2022, 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 2022 impairment test that have changed the Corporation's impairment assessment conclusion. There were no impairment charges recorded in 2021 or the first six months of 2022.
The Corporation had goodwill of $1.1 billion at both June 30, 2022 and December 31, 2021.
Other Intangible Assets
The Corporation has CDIs and historically had other intangible assets, both of which are amortized. For CDIs and other intangibles, changes in the gross carrying amount, accumulated amortization, and net book value were as follows:
($ in Thousands)Six Months Ended June 30, 2022Year Ended Dec 31, 2021
Core deposit intangibles
Gross carrying amount at the beginning of period$88,109 $88,109 
Accumulated amortization(34,422)(30,016)
Net book value$53,687 $58,093 
Amortization during the period$4,405 $8,811 
Other intangibles
Gross carrying amount at the beginning of period$— $2,000 
Reductions due to sale— (1,317)
Accumulated amortization— (683)
Net book value $— $— 
Amortization during the period$— $33 
Mortgage Servicing Rights
The Corporation sells residential mortgage loans in the secondary market and typically retains the right to service the loans sold. On January 1, 2022, the Corporation made the irrevocable election to account for its MSRs under the fair value measurement method, with any change in fair value being recognized through earnings in mortgage banking, net on the consolidated statements of income. MSRs are not traded in active markets. As a result, a cash flow model is used to determine fair value. Key assumptions and estimates, projected prepayment speeds, assumed servicing costs, ancillary income, costs to service delinquent loans, costs of foreclosure, and discount rates with option-adjusted spreads, are used in measuring the fair value of the MSRs asset. These assumptions are considered significant unobservable inputs. See Note 12 for a discussion of the recourse provisions on sold residential mortgage loans. See Note 13 which further discusses fair value measurement relative to the MSRs asset.
A summary of changes in the balance of the MSRs asset under the fair value measurement method for the six months ended June 30, 2022 is as follows:
($ in Thousands)Six Months Ended June 30, 2022
Mortgage servicing rights
Mortgage servicing rights at beginning of period$54,862 
Cumulative effect of accounting methodology change2,296 
Balance at beginning of period, adjusted$57,158 
Additions5,231 
Paydowns(5,220)
Valuation:
Change in fair value model assumptions6,034 
Changes in fair value of asset13,366 
Mortgage servicing rights at end of period$76,570 
Portfolio of residential mortgage loans serviced for others (“servicing portfolio”)$6,910,382 
Mortgage servicing rights to servicing portfolio1.11 %
Prior to January 1, 2022, the Corporation accounted for its MSRs under the amortization methodology. Under this methodology the Corporation evaluated its MSRs asset for impairment at minimum on a quarterly basis. Impairment was assessed based on fair value at each reporting date using estimated prepayment speeds of the underlying mortgage loans serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). As mortgage interest rates fell, prepayment speeds were usually faster and the value of the MSRs asset generally decreased, requiring additional valuation reserve. Conversely, as mortgage interest rates rose, prepayment speeds were usually slower and the value of the MSRs asset generally increased, requiring less valuation reserve. A valuation allowance was established, through a charge to earnings, to the extent the amortized cost of the MSRs exceeded the estimated fair value by stratification. An other-than-temporary impairment (i.e., recoverability was considered remote when considering interest rates and loan pay off activity) was recognized as a write-down of the MSRs asset and the related valuation allowance (to the extent a valuation allowance was available) and then against earnings. A direct write-down permanently reduced the carrying value of the MSRs asset and valuation allowance, precluding subsequent recoveries.
A summary of changes in the balance of the MSRs asset and the MSRs valuation allowance under the amortization method for the year ended December 31, 2021 is as follows:
($ in Thousands)Year Ended Dec 31, 2021
Mortgage servicing rights
Mortgage servicing rights at beginning of period$59,967 
Additions16,151 
Amortization(19,436)
Mortgage servicing rights at end of period$56,682 
Valuation allowance at beginning of period$(18,006)
Recoveries, net16,186 
Valuation allowance at end of period$(1,820)
Mortgage servicing rights, net$54,862 
Fair value of mortgage servicing rights$57,259 
Portfolio of residential mortgage loans serviced for others (“servicing portfolio”)$6,994,834 
Mortgage servicing rights, net to servicing portfolio0.78 %
Mortgage servicing rights expense(a)
$3,250 
(a) Includes the amortization of mortgage servicing rights and additions / recoveries to the valuation allowance of mortgage servicing rights, and is a component of mortgage banking, net on the consolidated statements of income.
The projections of amortization expense for CDIs and decay for MSRs are based on existing asset balances, the current interest rate environment, and prepayment speeds as of June 30, 2022. The actual expense the Corporation recognizes in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, prepayment speeds, market conditions, regulatory requirements, and events or circumstances that indicate the carrying amount of an asset may not be recoverable. The following table shows the estimated future amortization expense for amortizing intangible assets:
($ in Thousands)Core Deposit IntangiblesMortgage Servicing Rights
Six months ended December 31, 2022$4,405 $6,511 
20238,811 12,413 
20248,811 10,884 
20258,811 9,535 
20268,811 8,275 
20278,811 7,198 
Beyond 20275,227 21,752 
Total Estimated Amortization Expense$53,687 $76,570