GOODWILL, OTHER INTANGIBLE ASSETS AND MORTGAGE SERVICING RIGHTS

3 Months Ended

Mar. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL, OTHER INTANGIBLE ASSETS AND MORTGAGE SERVICING RIGHTS

Goodwill and Other Intangible Assets: At March 31, 2022, 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, 2021 and concluded that no further analysis was required as it is more likely than not that the fair value of Banner

Bank, the reporting unit, exceeds the carrying value.

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 three months ended March 31, 2022 and the year ended December 31, 2021 (in thousands):


	Goodwill		CDI		Total
Balance, December 31, 2020	$	373,121	$	21,426	$	394,547

Amortization	—		(6,571)		(6,571)


Balance, December 31, 2021	373,121		14,855		387,976

Amortization	—		(1,424)		(1,424)


Balance, March 31, 2022	$	373,121	$	13,431	$	386,552

The following table presents the estimated amortization expense with respect to CDI as of March 31, 2022 for the periods indicated (in thousands):


	Estimated Amortization
Remainder of 2022	$	3,892
2023	3,814
2024	2,659
2025	1,575
2026	904
Thereafter	587
	$	13,431

Mortgage Servicing Rights: Mortgage and SBA servicing rights are reported in other assets. SBA servicing rights are initially recorded and carried at fair value. 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. During the three months ended March 31, 2022 and 2021, the Company did not record any impairment charges or recoveries against mortgage servicing rights. The unpaid principal balance of loans for which mortgage and SBA servicing rights have been recognized totaled $2.84 billion and $2.77 billion at March 31, 2022 and December 31, 2021, respectively. Custodial accounts maintained in connection with this servicing totaled $3.5 million and $3.2 million at March 31, 2022 and December 31, 2021, respectively.

An analysis of the mortgage and SBA servicing rights for the three months ended March 31, 2022 and 2021 is presented below (in thousands):


	Three Months Ended March 31,
	2022		2021
Balance, beginning of the period	$	17,206	$	15,223
Additions—amounts capitalized	1,953		2,010
Additions—through purchase	62		27
Amortization (1)	(1,231)		(1,853)
Fair value adjustments	18		—

Balance, end of the period (2)	$	18,008	$	15,407

(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 on mortgage servicing rights as of both March 31, 2022 and 2021.