Quarterly report pursuant to Section 13 or 15(d)

Note 6 - Intangibles and Acquisition Related Accounting

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Note 6 - Intangibles and Acquisition Related Accounting
9 Months Ended
Sep. 30, 2021
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]

Note 6 Intangibles and Acquisition Related Accounting

The Bancorp established a goodwill balance totaling $11.1 million from past 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. Additionally, as part of the Bancorp’s annual impairment test of goodwill as of December 31, 2020, the Bancorp enlisted a third party expert to assist with the evaluation of goodwill for impairment. The evaluation involved the comparison of the fair value of the Bancorp to its carrying value. The Bancorp determined its fair value using a blend of the income approach (discounted cash flow model) and market approach (guideline public company method and guideline transaction method). The determination of the fair value using the discounted cash flow model required the Bancorp to make significant estimates and assumptions related to forecasts of future income, provision for credit losses, and discount rates. The determination of the fair value using the guideline public company method required management to make significant assumptions related to price to tangible book value multiples and price to earnings multiples, as well as significant assumptions related to control premiums. The determination of the fair value using the guideline transaction method required management to review the value of the business based on pricing multiples derived from the sale of companies that are similar to the Bancorp. The Bancorp’s estimation of fair value for the quantitative goodwill impairment testing exceeded its carrying value as of December 31, 2020 and therefore, no impairment was recognized. There has not been any impairment of goodwill identified or recorded. Goodwill totaled $11.1 million as of September 30, 2021 and December 31, 2020.

 

In addition to goodwill, core deposit intangibles were established from past acquisitions and are subject to amortization. As of September 30, 2021, the Bancorp had core deposit intangible balances of $3.6 million. The table below summarizes the annual amortization:

 

Amortization recorded for the nine months ended September 30, 2021 is as follows:

 

(dollars in thousands)

 

Total

 

Current period

  $ 745  

 

Amortization recorded for the three months ended September 30, 2021 is as follows:

 

         

(dollars in thousands)

 

Total

 

Current period

  $ 248  

 

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

 

         

(dollars in thousands)

 

Total

 

Remainder 2021

    249  

2022

    983  

2023

    962  

2024

    919  

2025

    261  

Total

  $ 3,374