Goodwill and Core Deposit Intangible

6 Months Ended

Jun. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Core Deposit Intangible

Note 10 – Goodwill and Core Deposit Intangible

On May 17, 2019, the Bank acquired five branches which were accounted for under FASB ASC 805, Business Combinations.

In accordance with ASC 805, the Bank recorded $8.9 million of goodwill along with $4.2 million of core deposit intangible assets. The intangible assets are related to core deposits and are being amortized over 10 years, using the sum of the year’s digits. For tax purposes, goodwill totaling $8.9 million is tax deductible and will be amortized over 15 years straight line. Except as set forth below, GAAP requires that goodwill be tested for impairment annually (with the annual evaluation occurring on May 31 of each year) or more frequently if impairment indicators arise. The reporting unit was determined to be our community banking operations, which is our only operating segment.

ASC Topic 350-20 requires an at least annual review of the fair value of a Reporting Unit that has goodwill in order to determine if it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a Reporting Unit is less than its carrying amount, including goodwill. A qualitative factor test can be performed to determine whether it is necessary to perform a quantitative goodwill impairment test. If this qualitative test determines it is not likely that (less than 50% probability) the fair value of the Reporting Unit is less than Carrying Value, then the Company does not have to perform a quantitative test and goodwill can be considered not impaired. After performing the qualitative factor test, the result was the Company determined that a quantitative test would be performed at May 31, 2023, primarily due to the Company’s common stock trading at 68.0% of book value and a reduction in return on assets for the first five months of 2023 compared to the same period of 2022. Based on the results of the quantitative impairment test the Company’s goodwill was not impaired as of May 31, 2023.

The changes in the carrying amount of goodwill and core deposit intangible assets are summarized as follows:

			Core Deposit
	Goodwill		Intangible
	(In thousands)
Balance at December 31, 2022	$	8,853	$	1,825
Acquisition of Noah Bank		—		99
Amortization expense		—		(262	)
Balance at March 31, 2023	$	8,853	$	1,662

As of June 30, 2023, the remaining current fiscal year and future fiscal periods amortization for the core deposit intangible is (in thousands):

2023	$	243
2024		432
2025		353
2026		274
2027		195
Thereafter		165
Total	$	1,662