Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2011

Goodwill, Core Deposit Premium and Other Intangible Assets [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

GOODWILL AND INTANGIBLE ASSETS

The following table summarizes the changes in Heartland’s goodwill for 2011 and 2010:



(Dollars in thousands)

Goodwill balance at December 31, 2009	$	27,548
Impairment charges in 2010	(1,639		)
Goodwill balance at December 31, 2010	25,909
Impairment charge in 2011	—
Goodwill balance at December 31, 2011	$	25,909

Correction of Prior Period Error

In the third quarter of 2010, Heartland identified a $1.6 million error in the independent third party valuation utilized by Heartland for the calculation of goodwill impairment recorded at Rocky Mountain Bank in the fourth quarter of 2009. After consideration of both quantitative and qualitative factors, management determined the amount was not material to the financial statements and thus recorded such amount in the third quarter of 2010, when it was discovered, as a reduction of "goodwill" in the assets section of the balance sheet by $1.6 million, with a corresponding $1.6 million recorded as a goodwill impairment charge in the statement of income. The correction of this error does not impact the statement of cash flows contained in this Form 10-K and this correction was not considered material to the prior period financial statements.

Goodwill impairment charges were recorded at Rocky Mountain Bank and Arizona Bank & Trust in 2009 of $7.5 million and $5.2 million, respectively.

The gross carrying amount of intangible assets and the associated accumulated amortization at December 31, 2011 and 2010, are presented in the tables below:



	December 31, 2011				December 31, 2010
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizing intangible assets:
Core deposit intangibles	$	9,957	$	8,815	$	9,957	$	8,345
Mortgage servicing rights	16,779		5,503		15,297		4,087
Customer relationship intangible	1,177		635		1,177		533
Total	$	27,913	$	14,953	$	26,431	$	12,965
Unamortized intangible assets			$	12,960			$	13,466

The following table shows the estimated future amortization expense related to intangible assets:



(Dollars in thousands)
	Core Deposit Intangibles		Mortgage Servicing Rights		Customer Relationship Intangible		Total
Year ending:
2012	$	441	$	3,759	$	55	$	4,255
2013	423		3,007		45		3,475
2014	184		2,255		43		2,482
2015	15		1,503		42		1,560
2016	14		752		41		807
Thereafter	65		—		316		381

Projections of amortization expense for mortgage servicing rights are based on existing asset balances and the existing interest rate environment as of December 31, 2011. Heartland's actual experience may be significantly different depending upon changes in mortgage interest rates and market conditions.

The following table summarizes the changes in capitalized mortgage servicing rights:



(Dollars in thousands)
	2011			2010
Balance, beginning of year	$	11,210		$	9,533
Originations	3,723			5,778
Amortization	(3,638		)	(4,101		)
Valuation adjustment	(19		)	—
Balance, end of year	$	11,276		$	11,210

Mortgage loans serviced for others were $1.54 billion and $1.40 billion as of December 31, 2011 and 2010, respectively. Custodial escrow balances maintained in connection with the mortgage loan servicing portfolio were approximately $7.0 million and $6.2 million as of December 31, 2011 and 2010, respectively. The fair value of Heartland's mortgage servicing rights was estimated at $11.5 million and $12.3 million at December 31, 2011, and December 31, 2010, respectively. Heartland's mortgage servicing rights are separated into 15- and 30-year tranches. The 15-year tranche had a fair value of $2.41 million in comparison with the book value of $2.43 million. Accordingly, a valuation allowance of $19,000 was required as of December 31, 2011 and there was no valuation allowance on mortgage servicing rights at December 31, 2010.

- 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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