Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill was $150.6 million at December 31, 2017 and 2016, with no impairment recorded during 2017, 2016 and 2015. The following table presents the changes in the carrying amount of goodwill for the years ended December 31, 2017 and 2016:



(Dollars in thousands)	2017		2016
Balance at January 1	$	150,601	$	139,773
Acquired in the Cordia merger	—		10,828
Balance at December 31	$	150,601	$	150,601

Mortgage Servicing Rights

Our portfolio of residential mortgage loans serviced for third parties was $2.81 billion, $2.49 billion and $2.15 billion as of December 31, 2017, 2016 and 2015, respectively. These loans were originated by BancShares and sold to third parties on a non-recourse basis with servicing rights retained. These retained servicing rights are recorded as a servicing asset and reported in other intangible assets on the Consolidated Balance Sheets. The mortgage servicing rights are initially recorded at fair value and then carried at the lower of amortized cost or fair market value.

The activity of the servicing asset for the years ended December 31, 2017, 2016 and 2015 is presented in the following table:



(Dollars in thousands)	2017			2016			2015
Balance at January 1	$	20,415		$	19,351		$	16,688
Servicing rights originated	7,174			5,931			5,910
Amortization	(5,648		)	(4,958		)	(4,002		)
Valuation allowance reversal	4			91			755
Balance at December 31	$	21,945		$	20,415		$	19,351

The following table presents the activity in the servicing asset valuation allowance for the years ended December 31, 2017, 2016 and 2015:



(Dollars in thousands)	2017			2016			2015
Balance at January 1	$	4		$	95		$	850
Valuation allowance reversal	(4		)	(91		)	(755		)
Balance at December 31	$	—		$	4		$	95

Contractually specified mortgage servicing fees, late fees, and ancillary fees earned for the years ended December 31, 2017, 2016 and 2015 were $7.1 million, $5.8 million, and $5.4 million, respectively, and reported in mortgage income in the Consolidated Statements of Income.

Valuation of mortgage servicing rights is performed using a pooling methodology. Similar loans are pooled together and evaluated on a discounted earnings basis to determine the present value of future earnings. Key economic assumptions used to value mortgage servicing rights as of December 31, 2017 and 2016 were as follows:



	2017			2016
Discount rate - conventional fixed loans	9.41		%	9.45		%
Discount rate - all loans excluding conventional fixed loans	10.41		%	10.45		%
Weighted average constant prepayment rate	10.93		%	10.42		%
Weighted average cost to service a loan	$	64.03		$	62.75

Other Intangible Assets

Core deposit intangibles comprise the majority of the other intangible assets as of December 31, 2017 and 2016. Intangible assets generated by acquisitions, which represent the estimated fair value of core deposits and other customer relationships that were acquired, are being amortized on an accelerated basis over their estimated useful lives. The estimated useful remaining lives range from 1 year to less than 8 years.

The following information relates to other intangible assets, all customer-related, which are being amortized over their estimated useful lives:



(Dollars in thousands)	2017			2016
Balance at January 1	$	57,625		$	71,635
Acquired in the NMSB acquisition	—			240
Acquired in the FCSB acquisition	—			390
Acquired in the Cordia acquisition	—			2,210
Acquired in the HCB acquisition	850			—
Acquired in the Guaranty acquisition	9,870			—
Amortization	(17,194		)	(16,850		)
Balance at December 31	$	51,151		$	57,625

The gross amount of other intangible assets and accumulated amortization as of December 31, 2017 and 2016, are:



(Dollars in thousands)	2017			2016
Gross balance	$	128,761		$	118,041
Accumulated amortization	(77,610		)	(60,416		)
Carrying value	$	51,151		$	57,625

Based on current estimated useful lives and carrying values, BancShares anticipates amortization expense for intangible assets in subsequent periods will be:



(Dollars in thousands)
2018	$	15,394
2019	12,275
2020	9,431
2021	6,799
2022	4,288

- 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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