Note 7 - Goodwill and Other Intangibles

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

NOTE

7

.

GOODWILL AND OTHER INTANGIBLES

In

February

of

2019,

as part of our Merchants acquisition, we recorded a core deposit intangible of

$4.4

million and goodwill of

$11.0

million. 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 and goodwill are

not

being amortized.

In

December

of

2018,

we purchased a domain name for

$32

thousand. The purchase of the domain name created an intangible asset with an indefinite life that is

not

being amortized for book purposes. For tax purposes the domain name is being amortized over

15

years.

In

March

of

2016,

as part of our branch acquisition, we recorded a core deposit intangible of

$1.8

million and goodwill of

$665

thousand. 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 and goodwill are being amortized over

15

years.

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.

No

impairment of goodwill was deemed necessary based on the

2019

and

2018

annual reviews.

The acquired core deposits provide value as a source of below market rate funds and the realization of interest 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 intangibles were recorded at fair value which was derived by using the income approach and represent the present value of the cost savings over the projected term of our new deposit base.

Goodwill and Other Intangibles, net consisted of the following at

December 31, 2019

and

2018.

(Amounts in thousands)
Goodwill and Other Intangibles	2019			2018
Goodwill	$	11,671		$	665
Core deposit intangibles		6,125			1,772
Domain name		32			32
Accumulated amortization		(1,348	)		(628	)
Goodwill and other intangibles, net	$	16,480		$	1,841

The following table sets forth, as of

December 31, 2019,

the total estimated future amortization of intangible assets:

(Amounts in thousands)
For the year ended December 31,	Amount
2020	$	766
2021		766
2022		766
2023		766
2024		580
2025 and thereafter		1,133
Total	$	4,777