GOODWILL, OTHER INTANGIBLE ASSETS AND MORTGAGE SERVICING RIGHTS

9 Months Ended

Sep. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL, OTHER INTANGIBLE ASSETS AND MORTGAGE SERVICING RIGHTS

Goodwill and Other Intangible Assets: At September 30, 2021, intangible assets are comprised of goodwill and CDI acquired in business combinations. Goodwill represents the excess of the purchase consideration paid over the fair value of the assets acquired, net of the fair values of liabilities assumed in a business combination, and is not amortized but is reviewed at least annually for impairment. Banner has identified one reporting unit for purposes of evaluating goodwill for impairment. The Company completed an assessment of qualitative factors as of December 31, 2020 and as a result of the economic impact of the COVID-19 pandemic concluded further analysis was required. The Company completed a quantitative goodwill impairment test and concluded the fair value of Banner Bank, the reporting unit, exceeded the carrying value of the reporting unit including goodwill and therefore no impairment existed as of December 31, 2020.

CDI represents the value of transaction-related deposits and the value of the client relationships associated with the deposits. The Company amortizes CDI assets over their estimated useful lives and reviews them at least annually for events or circumstances that could impair their value.

The following table summarizes the changes in the Company’s goodwill and other intangibles for the nine months ended September 30, 2021 and the year ended December 31, 2020 (in thousands):


	Goodwill		CDI		Total
Balance, December 31, 2019	$	373,121	$	29,158	$	402,279

Amortization	—		(7,732)		(7,732)


Balance, December 31, 2020	373,121		21,426		394,547

Amortization	—		(4,997)		(4,997)


Balance, September 30, 2021	$	373,121	$	16,429	$	389,550

The following table presents the estimated amortization expense with respect to CDI as of September 30, 2021 for the periods indicated (in thousands):


	Estimated Amortization
Remainder of 2021	$	1,574
2022	5,317
2023	3,814
2024	2,659
2025	1,575
Thereafter	1,490
	$	16,429

Mortgage Servicing Rights: Mortgage servicing rights are reported in other assets. Mortgage servicing rights are initially recorded 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, which is recognized in servicing fee income within mortgage banking operations on the Consolidated Statement of Operations. However, if the fair value is greater than the amortized cost, the amount above the amortized cost is not recognized in the carrying value. During the three and nine months ended September 30, 2021 and 2020, the Company did not record any impairment charges or recoveries against mortgage servicing rights. The unpaid principal balance for loans which mortgage servicing rights have been recorded totaled $2.68 billion and $2.64 billion at September 30, 2021 and December 31, 2020, respectively. Custodial accounts maintained in connection with this servicing totaled $3.1 million and $3.8 million at September 30, 2021 and December 31, 2020, respectively.

An analysis of our mortgage servicing rights for the three and nine months ended September 30, 2021 and 2020 is presented below (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Balance, beginning of the period	$	15,612	$	14,424	$	15,223	$	14,148
Additions—amounts capitalized	1,621		2,426		5,418		6,030
Additions—through purchase	53		40		121		141
Amortization (1)	(1,533)		(2,075)		(5,009)		(5,504)

Balance, end of the period (2)	$	15,753	$	14,815	$	15,753	$	14,815

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

(2) There was no valuation allowance as of both September 30, 2021 and 2020.