9. Intangible Assets

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Goodwill and certain other intangible assets with indefinite useful lives are not amortized into net income over an estimated life, but rather are tested at least annually for impairment.  Intangible assets determined to have definite useful lives are amortized over their estimated useful lives and also are subject to impairment testing.

 In accordance with ASU 2011-08, Intangibles - Goodwill and Other (Topic 350) - Testing Goodwill for Impairment, which amends Topic 350, Intangibles – Goodwill and Other, entities are permitted to first assess qualitative factors (Step 0) to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350.  The more-than-likely-than-not threshold is defined as having a likelihood of more than 50 percent.  If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.  However, if the entity concludes otherwise, then it is required to perform the first step (Step 1) of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit.  A fair value is determined based on at least one of three various market valuation methodologies.  If the fair value equals or exceeds the book value, no write-down of recorded goodwill is necessary.  If the fair value is less than the book value, an expense may be required on our books to write down the goodwill to the proper carrying value.  The second step (Step 2) of impairment testing is necessary only if the reporting unit does not pass Step 1.  Step 2 compares the implied fair value of the reporting unit goodwill with the carrying amount of the goodwill for the reporting unit.  The implied fair value of goodwill is determined in the same manner as goodwill that is recognized in a business combination.

During the third quarter, we completed Step 1 of the required annual impairment test for our insurance services reporting unit for 2013 and determined that no impairment write-offs were necessary.  We performed the Step 0 qualitative assessment of the goodwill relative to our community banking reporting unit, and determined that it was not more likely than not that the fair value was less than its carrying value and noted no indicators of impairment.

In addition, at December 31, 2013 and December 31, 2012, we had $50,000 and $202,000, respectively, in unamortized acquired intangible assets consisting entirely of unidentifiable intangible assets recorded in accordance with ASC Topic 805, Business Combinations, and $1.70 million and $1.90 million in unamortized identifiable customer intangible assets at December 31, 2013 and 2012, respectively.

	Goodwill Activity
	Community		Insurance
Dollars in thousands	Banking		Services		Total
Balance, January 1, 2013	$	1,488	$	4,710	$	6,198
Acquired goodwill, net		-		-		-
Balance, December 31, 2013	$	1,488	$	4,710	$	6,198

	Other Intangible Assets
	December 31, 2013						December 31, 2012
	Community		Insurance				Community		Insurance
Dollars in thousands	Banking		Services		Total		Banking		Services		Total
Unidentifiable intangible assets
Gross carrying amount	$	2,267	$	-	$	2,267	$	2,267	$	-	$	2,267
Less:  accumulated amortization		2,216		-		2,216		2,065		-		2,065
Net carrying amount	$	51	$	-	$	51	$	202	$	-	$	202
Identifiable intangible assets
Gross carrying amount	$	-	$	3,000	$	3,000	$	-	$	3,000	$	3,000
Less:  accumulated amortization		-		1,300		1,300		-		1,100		1,100
Net carrying amount	$	-	$	1,700	$	1,700	$	-	$	1,900	$	1,900

We recorded amortization expense of $351,000 for the year ended December 31, 2013 relative to our other intangible assets.  Annual amortization is expected to be approximately $251,000 in 2014, and $200,000 for each of the years ending 2015 through 2018.  The remaining amortization period is 9.5 years.