Finward Bancorp Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Note 7 - Intangibles and Acquisition Related Accounting

Note 7 - Intangibles and Acquisition Related Accounting

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Note

–

Intangible

and Acquisition Related Accounting

The Bancorp established a goodwill balance totaling

$11.1

million with the acquisitions of AJSB, First Personal, First Federal, and Liberty Savings. Goodwill of

$2.9

million,

$5.4

million,

$2.0

million, and

$804

thousand were established with the acquisition of AJSB, First Personal, First Federal, and Liberty Savings, respectively. 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. Goodwill totaled

$11.1

million and

$8.2

million as of

September 30, 2019

and

December 31, 2018,

respectively.

In addition to goodwill, a core deposit intangible of

$93

thousand for the acquisition of First Federal was established and is being amortized over an initial period of

7.9

years on a straight line basis. A core deposit intangible of

$471

thousand for the acquisition of Liberty Savings was established and is being amortized over an initial period of

8.2

years on a straight line basis. A core deposit intangible of

$3.0

million for the acquisition of First Personal was established and is being amortized over an initial period of

6.4

years on a straight line basis. A core deposit intangible of

$2.9

million for the acquisition of AJSB was established and is being amortized over an initial period of

6.5

years on a straight line basis. The table below summarizes the annual amortization:

Amortization recorded for the

nine

months ended

September 30,

is as follows:

(dollars in thousands)		First Federal				Liberty Savings				First Personal				AJ Smith				Total
Current period		$	9			$	44			$	356			$	299			$	708

Amortization to be recorded in future periods, is as follows:

(dollars in thousands)	First Federal		Liberty Savings		First Personal		AJ Smith		Total
Remainder 2019		3		14		119		112		248
2020		12		58		475		449		994
2021		12		58		475		449		994
2022		1		58		475		449		983
2023		-		38		475		449		962
2024		-		-		470		449		919
2025		-		-		-		261		261
Total	$	28	$	226	$	2,489	$	2,618	$	5,361

For the First Personal acquisition, as part of the fair value of certificates of deposit, a fair value premium was established of

$133

thousand that is being amortized over

months on a straight line basis. Approximately

$53

thousand of amortization was taken as income during the

nine

months ended

September 30, 2019.

The premium has been fully amortized as of

September 30, 2019.

For the AJSB acquisition, as part of the fair value of certificates of deposit, a fair value premium was established of

$174

thousand that is being amortized over

months on a straight line basis. Approximately

$102

thousand of amortization was taken as income during the

nine

months ended

September 30, 2019.

It is estimated that an additional

$38

thousand of amortization will occur during

2019

and an additional

$34

thousand of amortization will occur during

2020.