10. GOODWILL AND INTANGIBLE ASSETS

In accordance with ASC 805 and ASC 350, all assets acquired and liabilities assumed in purchase acquisitions, including goodwill, indefinite-lived intangibles and other intangibles are recorded at fair value.

The fair value of acquired assets and liabilities assumed, including the resulting goodwill, was based either on quoted market prices or provided by other third-party sources, when available. When third-party information was not available we made good-faith estimates primarily through the use of internal cash flow modeling techniques. The assumptions used in the cash flow modeling are subjective and susceptible to significant changes.

Goodwill and other intangible assets with indefinite useful lives are tested for impairment at least annually and charged to results of operations in periods in which the recorded value is more than the estimated fair value. Intangible assets that have finite useful lives will continue to be amortized over their useful lives and are periodically evaluated for impairment. Goodwill totaled $166.0 million at both December 31, 2018 and 2017. The majority of this goodwill, $145.8 million, is in the WSFS Bank segment and is the result of a branch acquisition in 2008 and the purchases of Christiana Bank and Trust (CB&T) in 2010, Array (currently known as WSFS Mortgage) and Arrow in 2013, FNBW in 2014, Alliance in 2015 and Penn Liberty in 2016. The Wealth Management segment also recorded goodwill as a result of the acquisitions of CB&T in 2010 as well as Powdermill and West Capital in 2016.

ASC 350 states that an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. Therefore the entity may first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of goodwill is less than carrying value. The qualitative assessment includes adverse events or circumstances identified that could negatively affect the reporting units’ fair value as well as positive and mitigating events. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, performing the quantitative assessment is not required. The entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to a quantitative assessment. The entity can resume performing the qualitative assessment in any subsequent period.

When required, the quantitative assessment is done by comparing the reporting unit’s aggregate fair value to its carrying value. The quantitative goodwill impairment test is used to identify both the existence of impairment and the amount of impairment loss. Absent other indicators of impairment, if the aggregate fair value exceeds the carrying value, goodwill is not considered impaired and no additional analysis is necessary. If the carrying value of the reporting unit exceeds the aggregate fair value, an impairment loss shall be recognized in an amount equal to that excess.

Fair value may be determined using market prices, comparison to similar assets, market multiples, discounted cash flow analysis and other variables. Estimated cash flows extend five years into the future and, by their nature, are difficult to estimate over such an extended period of time. Factors that may significantly affect estimates include, but are not limited to, balance sheet growth assumptions, credit losses in our investment and loan portfolios, competitive pressures in our market area, changes in customer base and customer product preferences, changes in revenue growth trends, cost structure, changes in discount rates, conditions in the banking sector, and general economic variables.

During the fourth quarter of 2018, we completed a quantitative assessment and determined the fair value of any of our reporting units exceeded their respective carrying amounts. No impairment losses related to our goodwill were recorded in 2018 or 2017, however, there can be no assurances that impairments to our goodwill will not occur in the future periods.

As of December 31, 2018, we had three operating segments: WSFS Bank, Cash Connect®, and Wealth Management. Our operating segments may contain one or more reporting units depending on economic characteristics, products and customers. When we acquire a business, we assign it to a reporting unit and allocate its goodwill to that reporting unit based on its relative fair value. Should we have a significant business reorganization, we may reallocate the goodwill. See Note 21 for additional information on management reporting.

The following table shows the allocation of goodwill to our reportable operating segments for purposes of goodwill impairment testing:



(Dollars in thousands)	WSFS Bank			Wealth Management		Consolidated Company
December 31, 2016	$	147,396		$	20,143	$	167,539
Goodwill adjustments⁽¹⁾	(1,588		)	56		(1,532		)
December 31, 2017	145,808			20,199		166,007
Goodwill adjustments	—			—		—
December 31, 2018	$	145,808		$	20,199	$	166,007


(1)	The goodwill adjustments for WSFS Bank represent remeasurement adjustments related to our acquisition of Penn Liberty in 2016. The goodwill adjustments for Wealth Management represent remeasurement adjustments related to our acquisition of West Capital in 2016.

ASC 350 also requires that an acquired intangible asset be separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the asset can be sold, transferred, licensed, rented or exchanged, regardless of the acquirer’s intent to do so.

The following table summarizes our intangible assets:



(Dollars in thousands)	Gross Intangible Assets		Accumulated Amortization			Net Intangible Assets		Amortization Period
December 31, 2018
Core deposits	$	10,658	$	(5,285	)	$	5,373	10 years
Customer relationships	17,561		(5,815		)	11,746		7-15 years
Non-compete agreements	221		(101		)	120		5 years
Loan servicing rights	2,652		(1,301		)	1,351		10-30 years
Favorable lease asset	1,932		(506		)	1,426		10 months-18 years
Total other intangible assets	$	33,024	$	(13,008	)	$	20,016
December 31, 2017
Core deposits	$	10,658	$	(4,263	)	$	6,395	10 years
Customer relationships	17,561		(4,214		)	13,347		7-15 years
Non-compete agreements	221		(57		)	164		5 years
Loan servicing rights	2,132		(1,191		)	941		10-30 years
Favorable lease asset	1,932		(342		)	1,590		10 months-18 years
Total other intangible assets	$	32,504	$	(10,067	)	$	22,437

We recognized amortization expense on other intangible assets of $2.9 million, and $3.0 million and $2.4 million for the years ended December 31, 2018, 2017 and 2016, respectively.

The following presents the estimated amortization expense of intangibles:



(Dollars in thousands)	Amortization of Intangibles
2019	$	2,873
2020	2,677
2021	2,352
2022	2,289
2023	2,257
Thereafter	7,568
Total	$	20,016

There was no impairment of other intangible assets as of December 31, 2018 or 2017. Changing economic conditions that may adversely affect our performance and stock price could result in impairment, which could adversely affect earnings in the future.