Note 7 - Intangibles

3 Months Ended

Mar. 31, 2016

Disclosure Text Block [Abstract]

Intangible Assets Disclosure [Text Block]

NOTE 7. INTANGIBLES

In March of 2016, as part of our branch acquisition, we recorded a core deposit intangible of $1.8 million and goodwill of $717 thousand. The new core deposit base provides value as a source of below market rate funds and the realization of cost savings is a fundamental rationale for assuming these deposit liabilities. The cost savings is defined as the difference between the cost of funds on our new deposits (i.e., interest and net maintenance costs) and the cost of an equal amount of funds from an alternative source having a similar term as the new deposit base. Our core deposit intangible is recorded at fair value which was derived by using the income approach and represents the present value of the cost savings over the projected term of our new deposit base.

The core deposit intangible is being amortized on a straight-line basis over the estimated useful life of the deposits, which is eight years, with no expected residual value. For tax purposes, the core deposit intangible is expected to be treated as a taxable asset, resulting in amortizable tax basis of $1.8 million. 

As of March 31, 2016, we have recorded the following amounts related to the core deposit intangible.

(Amounts in thousands)	March 31,
Intangibles	2016
Gross carrying amount	$	1,772
Accumulated amortization		(20	)
Core deposit intangibles, net	$	1,752

The following table sets forth, as of March 31, 2016, the total estimated amortization of intangible assets:

(Amounts in thousands)
For the year ended December 31,	Amount
2016	$	166
2017		221
2018		221
2019		221
2020		221
2021		221
2022 and thereafter		481
Total	$	1,752

Goodwill is calculated as the amount of cash paid in excess of the fair value of the net assets acquired in the transaction. Goodwill is not amortized, but is annually reviewed for impairment. See Note 17 Branch Acquisition in the Notes to Consolidated Financial Statements in this document for further detail on the branch acquisition.