Goodwill, Other Intangible Assets, and Acquisition Related Accounting |
3 Months Ended | |
|---|---|---|
Mar. 31, 2017 | ||
| 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 acquisitions of First Federal and Liberty. Goodwill of $2.0 million was established with the acquisition of First Federal and goodwill of $804 thousand was established with the acquisition of Liberty. 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 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 $162 thousand to goodwill. Goodwill totaled $2.8 million at March 31, 2017 compared to $2.8 million at December 31, 2016. 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 $3 thousand of amortization was taken during the three months ended March 31, 2017 and March 31, 2016. It is estimated that an additional $9 thousand of additional amortization will occur during 2017 and the remaining amount of $48 thousand will be amortized through to the first quarter of 2022. A core deposit intangible of $471 thousand for the acquisition of Liberty was established and is being amortized over 8.2 years on a straight line basis. Approximately $14 thousand of amortization was taken during the three months ended March 31, 2017 compared to $14 thousand during the three months ended March 31, 2016. It is estimated that $43 thousand of additional amortization will occur during 2017 and the remaining amount of $327 thousand will be 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 $37 thousand of accretion was taken into income for the three months ended March 31, 2017, compared to $47 thousand for the three months ended March 31, 2016. It is estimated that $129 thousand of additional accretion will occur in 2017, and accretion of $143 thousand will occur during 2018. Similarly, for the Liberty 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 $81 thousand of accretion was taken into income for the three months ended March 31, 2017, compared to $76 thousand for the three months ended March 31, 2016. It is estimated that $209 thousand of additional accretion will occur in 2017, accretion of $279 thousand will occur in 2018, and accretion of $46 thousand will occur during 2019. For the Liberty acquisition, as part of the fair value of certificates of deposit, a fair value premium was established of $124 thousand that was amortized over 17 months on a straight line basis. No amortization expense was taken during the three months ended March 31, 2017, compared to $22 thousand of amortization taken as expense during the three months ended March 31, 2016. No additional amortization expense will occur during 2017. |