GOODWILL, OTHER INTANGIBLE ASSETS AND MORTGAGE SERVICING RIGHTS

Goodwill and Other Intangible Assets: At December 31, 2016, intangible assets are comprised of goodwill, CDI, and LHI acquired in business combinations. Goodwill represents the excess of the total purchase price paid over the fair value of the assets acquired, net of the fair values of liabilities assumed, and is not amortized but is reviewed annually for impairment. Banner has identified one reporting unit for purposes of evaluating goodwill for impairment. At December 31, 2016, the Company completed a qualitative assessment of goodwill and concluded that it is more likely than not that the fair value of Banner, the reporting unit, exceeds the carrying value. Additions to goodwill during the year ended December 31, 2015 relate to the Starbuck and Siuslaw acquisitions. The adjustments to goodwill in 2016 related to changes in the preliminary goodwill recorded for the Starbuck acquisition including adjustments to loan discount, deferred taxes and REO valuations. See Note 3, Business Combinations, for additional information on the acquisition and purchase price allocation.

CDI represents the value of transaction-related deposits and the value of the customer relationships associated with the deposits. LHI represents the value ascribed to leases assumed in an acquisition in which the lease terms are favorable compared to a market lease at the date of acquisition. The Company amortizes CDI and LHI over their estimated useful lives and reviews them at least annually for events or circumstances that could impair their value. The CDI assets shown in the table below represent the value ascribed to the long-term deposit relationships acquired in various bank acquisitions. The additions in the table below relate to the acquisition of Siuslaw and Starbuck in 2015. These intangible assets are being amortized using an accelerated method over estimated useful lives of three to ten years. The CDI and LHI assets are not estimated to have a significant residual value.

The following table summarizes the changes in the Company’s goodwill, CDI and LHI for the years ended December 31, 2014, 2015 and 2016 (in thousands):



	Goodwill			CDI			LHI			Total
Balance, December 31, 2013	$	—		$	2,449		$	—		$	2,449
Additions through acquisition	—			2,372			—			2,372
Amortization	—			(1,990		)	—			(1,990		)
Balance, December 31, 2014	—			2,831			—			2,831
Additions through acquisition	247,738			37,395			776			285,909
Amortization	—			(3,164		)	(66		)	(3,230		)
Other Changes ⁽¹⁾	—			(300		)	—			(300		)
Balance, December 31, 2015	247,738			36,762			710			285,210
Amortization	—			(7,061		)	(249		)	(7,310		)
Adjustments to goodwill	(3,155		)	—			—			(3,155		)
Balance, December 31, 2016	$	244,583		$	29,701		$	461		$	274,745


⁽¹⁾	Acquired CDI from Starbuck was adjusted for a branch that was subsequently sold.

Estimated amortization expense in future years with respect to CDI as of December 31, 2016 (in thousands):



Year ended:	Estimated Amortization
2017	$	6,332
2018	5,609
2019	4,889
2020	4,169
Thereafter	8,702
Net carrying amount	$	29,701

Mortgage servicing rights are reported in other assets. Mortgage servicing rights are initially recognized at fair value and are amortized in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Mortgage servicing rights are subsequently evaluated for impairment based upon the fair value of the rights compared to the amortized cost (remaining unamortized initial fair value). If the fair value is less than the amortized cost, a valuation allowance is created through an impairment charge to servicing fee income. However, if the fair value is greater than the amortized cost, the amount above the amortized cost is not recognized in the carrying value. In 2016 and 2015, the Company did not record any impairment charges or recoveries against mortgage servicing rights. Unpaid principal balance of loans for which mortgage servicing rights have been recognized totaled $2.05 billion and $1.86 billion at December 31, 2016 and 2015, respectively. Custodial accounts maintained in connection with this servicing totaled $10.3 million and $8.7 million at December 31, 2016 and 2015, respectively.

An analysis of the mortgage servicing rights for the years ended December 31, 2016, 2015 and 2014 is presented below (in thousands):



	Years Ended December 31
	2016			2015			2014
Balance, beginning of the year	$	13,295		$	9,030		$	8,086
Amounts capitalized	5,965			5,313			3,023
Additions through acquisition	—			2,172			—
Amortization ⁽¹⁾	(4,011		)	(3,220		)	(2,079		)
Balance, end of the year ⁽²⁾	$	15,249		$	13,295		$	9,030


⁽¹⁾	Amortization of mortgage servicing rights is recorded as a reduction of loan servicing income and any unamortized balance is fully written off if the loan repays in full.


⁽²⁾	There was no valuation allowance as of December 31, 2016, 2015 and 2014.