Note 6 – Intangibles and Acquisition Related Accounting

The Bancorp established a goodwill balance totaling $11.7 million with the acquisition of Royal, and also maintains goodwill balances totaling $11.1 million from prior acquisitions. 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 $22.8 million and $11.1 million as of March 31, 2022 and December 31, 2021, respectively.

In addition to goodwill, a core deposit intangible was established with the acquisition of Royal and from previous acquisitons. The Bancorp had core deposit intangible balances of $6.0 million and $3.1 million as of March 31, 2022, and December 31, 2021, respectively. The table below summarizes the annual amortization:

The amortization recorded for the three months ended March 31, is as follows:

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

For the Royal acquisition, as part of the fair value of certificates of deposit, a fair value premium was established of $1.0 million. Approximately $129 thousand of amortization was taken as income during the three months ended March 31, 2022. It is estimated amortization to be recorded in future periods is as follows, an additional $412 thousand in 2022, $217 thousand in 2023, $124 thousand in 2024, $72 thousand in 2025, and $55 thousand thereafter.