Finward Bancorp Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Note 7 - Goodwill and Other Intangible Assets

Note 7 - Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Note

– Goodwill and Other Intangible Assets

The Bancorp established a goodwill balance totaling

$11.1

million from past acquisitions. 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

December 31, 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:

The annual amortization for the

twelve

months ended

December 31,

is as follows:

(dollars in thousands)	First Federal		Liberty Savings		First Personal		AJ Smith		Total
2018	$	12	$	58	$	198	$	-	$	268
2019		12		58		475		411		956

The expected future annual amortization for the

twelve

months ended

December 31,

as follows:

(dollars in thousands)	First Federal		Liberty Savings		First Personal		AJ Smith		Total
2020	$	12	$	58	$	475	$	449	$	994
2021		12		58		475		449		994
2022		1		58		475		449		983
2023		-		38		475		449		962
2024		-		-		471		449		920
2025		-		-		-		261		261
Total	$	25	$	212	$	2,371	$	2,506	$	5,114

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. Amortization taken into income was approximately

$53

thousand and

$80

thousand during

2019

and

2018,

respectively. The premium has been fully amortized as of

December 31, 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

$140

thousand of amortization was taken as income during the year ended

December 31, 2019.

It is estimated that an additional

$34

thousand of amortization will occur during

2020.