Goodwill, Other Intangible Assets, and Acquisition Related Accounting |
9 Months Ended | |
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Sep. 30, 2016 | ||
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Goodwill and Intangible Assets Disclosure [Text Block] |
Note 6 Goodwill, Other Intangible Assets, and Acquisition Related Accounting
The Bancorp established a goodwill balance totaling $2.8 million with the acquisition of First Federal and Liberty Savings. Goodwill of $2.0 million was established with the acquisition of First Federal and goodwill of $803 thousand was established with the acquisition of Liberty Savings. Goodwill is tested annually for impairment. Goodwill arising from business combinations represents the value attributable to unidentifiable intangible assets in the business acquired. The Bancorp’s goodwill relates to the value inherent in the banking industry and that value is dependent upon the ability of the Bancorp to provide quality, cost effective banking services in a competitive marketplace. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value. There has not been any impairment of goodwill identified or recorded. During the first quarter of 2015, estimates of fair values related to a pool of loans with a single borrower were determined to be lower than originally estimated. This change, net of related estimated adjustments, led to the addition of $377 thousand to goodwill and $423 thousand to purchased credit impaired loan balances during the period ended March 31, 2015. During the second quarter of 2016, original estimates related to Liberty goodwill components were adjusted. Estimates of fair values related to a pool of purchased loans were determined to be lower than originally estimated, which led to the addition of $178 thousand to goodwill. Fixed asset valuations were also determined to be higher than originally estimated, which led to a reduction of $109 thousand to goodwill. Also, the valuation of the accrued withdrawal liability for the defined benefit plan was determined to be higher than originally estimated leading to the addition of $161 thousand to goodwill. Goodwill totaled $2.8 million at September 30, 2016 compared to $2.6 million at December 31, 2015.
In addition to goodwill, a core deposit intangible of $93 thousand for the acquisition of First Federal was established and is being amortized over 7.9 years on a straight line basis. Approximately $9 thousand of amortization was taken during the nine months ended September 30, 2016 and 2015. It is estimated that $3 thousand of additional amortization will occur during 2016 and the remaining amount of $60 thousand will be equally amortized through to the first quarter of 2022. A core deposit intangible of $471 thousand for the acquisition of Liberty Savings was established and is being amortized over 8.2 years on a straight line basis. Approximately $43 thousand of amortization was taken during the nine months ended September 30, 2016, with $14 thousand of amortization occurring during the nine months ended September 30, 2015. It is estimated that $14 thousand of additional amortization will occur during 2016 and the remaining amount of $385 thousand will be equally amortized through to the third quarter of 2023.
For the First Federal acquisition, as part of the fair value of loans receivable, a net fair value discount was established for residential real estate, including home equity lines of credit, of $1.1 million that is being accreted over 55 months on a straight line basis. Approximately $146 thousand of accretion was taken into income for the nine months ended September 30, 2016, compared to $168 thousand for the nine months ended September 30, 2015. It is estimated that $45 thousand of additional accretion will occur in 2016, with estimated accretion of $182 thousand occurring in 2017, and $152 thousand occurring in 2018. Similarly, for the Liberty Savings acquisition, as part of the fair value of loans receivable, a net fair value discount was established for residential real estate, including home equity lines of credit, of $1.2 million that is being accreted over 44 months on a straight line basis. Approximately $274 thousand of accretion was taken into income for the nine months ended September 30, 2016, compared to $79 thousand for the nine months ended September 30, 2015. It is estimated an additional $76 thousand of accretion will occur during 2016, $302 thousand of accretion will occur annually through to 2018, and accretion of $50 thousand will occur during 2019.
For the First Federal acquisition, as part of the fair value of certificates of deposit, a fair value premium was established of $276 thousand that is being amortized over 17 months on a straight line basis. No amortization was taken as expense during the nine months ended September 30, 2016, compared to $127 thousand of amortization expense during the nine months ended September 30, 2015, as the amortization period ended during 2015. For the Liberty Savings acquisition, as part of the fair value of certificates of deposit, a fair value premium was established of $124 thousand that is being amortized over 17 months on a straight line basis. Approximately $66 thousand of amortization was taken as expense during the nine months ended September 30, 2016 compared to $22 thousand during the nine months ended September 30, 2015. It is estimated that an additional $15 thousand of amortization will occur during 2016.
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