GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2016

NOTE 4: GOODWILL AND INTANGIBLE ASSETS

The goodwill and intangible balances presented below resulted from the Company’s acquisition of NUVO. The acquisition of NUVO resulted in goodwill of $7.01 million and core deposit intangible (“CDI”) of $1.38 million. For further information regarding goodwill and other intangible assets recorded in connection with the acquisition of NUVO, including the effect of adjustments to goodwill, please refer to Note 3.

Goodwill

Goodwill is deemed to have an indefinite life and therefore is not amortized, but is instead subject to impairment tests. There was no impairment during 2016 or the period from the date of the acquisition through December 31, 2015. There was no goodwill recorded prior to 2015.

The change in goodwill during the year is as follows:


	December 31,		December 31,
(In thousands)	2016		2015
Beginning of period	$	6,967	$	—
Effect of adjustments		44		—
Goodwill recorded in acquisition		—		6,967
Impairment		—		—
End of period	$	7,011	$	6,967

Impairment exists when the carrying value of goodwill exceeds its fair value. NUVO was consolidated into Merchants Bank which is considered the reporting unit. At December 31, 2016, the Bank reporting unit had positive equity and the Company elected to perform a qualitative assessment to determine if it was more likely than not that the fair value of the Bank reporting unit exceeded its carrying value, including goodwill. The qualitative assessment indicated that it was more likely than not the fair value of the Bank reporting unit exceeded its carrying value, resulting in no impairment.

Other Intangible Assets

Acquired CDI were as follows:


		December 31,		December 31,
(In thousands)		2016		2015
Beginning of period	$	1,360	$	—
Additions		—		1,377
Amortization		204		17
End of period	$	1,156	$	1,360

Aggregate amortization expense for the CDI was $204 thousand for 2016 and $17 thousand for 2015.

Estimated amortization expense for each of the next five years:


(In thousands)		Amount
2017	$	173
2018		147
2019		126
2020		120
2021		120
Thereafter		470

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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