Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Note 13. Goodwill and Intangible Assets

The Company accounts for goodwill and other intangible assets in accordance with ASC Topic 350, Intangibles—Goodwill and Other (“ASC 350”). The Company records goodwill when the purchase price of an acquired entity is greater than the fair value of the identifiable tangible and intangible assets acquired minus the liabilities assumed. The Company amortizes acquired intangible assets with definite useful economic lives over their useful economic lives. On a periodic basis, management assesses whether events or changes in circumstances indicate that the carrying amount of the intangible assets may be impaired. The Company does not amortize goodwill or any acquired intangible assets with an indefinite useful economic life, but reviews them for impairment on an annual basis, or when events or changes in circumstances indicate that the carrying amounts may be impaired. The Company has performed the required goodwill impairment test and has determined that goodwill was not impaired as of September 30, 2022 or December 31, 2021.

Goodwill: The Company acquired goodwill in the purchases of Liberty, which was effective in 2018, and Partners, which was effective in 2019. There were no changes to goodwill during the three and nine month periods ended September 30, 2022 and the year ended December 31, 2021.

Core Deposit Intangible: The Company acquired core deposit intangibles in the acquisitions of Liberty and Partners. For the core deposit intangible related to Liberty, the Company utilizes the double declining balance method of amortization, in which the straight line amortization rate is doubled and applied to the remaining unamortized portion of the intangible asset. The amortization method changes to the straight line method of amortization when the straight line amortization amount exceeds the amount that would be calculated under the double declining balance method. This core deposit intangible will be amortized over seven years. For the core deposit intangible related to Partners, the Company utilizes the sum of months method and an estimated average life of 120 months.

The following table provides changes for the nine months ended September 30, 2022, and the year ended December 31, 2021:

	September 30,		December 31,
Dollars in Thousands	2022		2021
Balance at the beginning of the period	$	2,060	$	2,660
Amortization		(394)		(600)
Balance at the end of the period	$	1,666	$	2,060

The following table provides the remaining amortization expense for the core deposit intangible over the years indicated below:

	September 30,
Dollars in Thousands	2022
2022	$	125
2023		467
2024		415
2025		246
2026		182
Thereafter		231
	$	1,666

Net Deposits Purchased Premium and Discount: The Company paid a deposit premium in the acquisition of Liberty and received a deposit discount in the acquisition of Partners, which are included in the balances of time deposits on the consolidated balance sheets. The deposit premium is amortized as a reduction in interest expense over the life of the acquired time deposits and the deposit discount is accreted as an increase in interest expense over the life of the acquired time deposits. The premium and discount on acquired time deposits will both be amortized and accreted over approximately five years.

The following table provides changes in the net deposit discount for the nine months ended September 30, 2022 and the year ended December 31, 2021:

	September 30,		December 31,
Dollars in Thousands	2022		2021
Balance at the beginning of the period	$	(9)	$	(23)
Accretion, net		6		14
Balance at the end of the period	$	(3)	$	(9)

The following table provides the remaining accretion for the net deposit discount over the years indicated below:

	September 30,
Dollars in Thousands	2022
2022	$	1
2023		2
	$	3

The net effect of the amortization of premiums and accretion of discounts associated with the Company’s acquisition accounting adjustments to assets acquired and liabilities assumed had the following impact on the consolidated statement of income for the periods indicated below:

	September 30,		September 30,
	2022		2021
Nine Months Ended	Dollars in Thousands
Adjustments to net income
Loans (1)	$	566	$	1,149
Time deposits (2)		(6)		(11)
Core deposit intangible (3)		(394)		(455)
Note Payable (4)		(3)		(4)
Net impact to income before taxes	$	163	$	679

(1) Loan discount accretion is included in the "Loans, including fees" section of "Interest Income" in the Consolidated Statements of Income.

(2) Time deposit discount accretion is included in the "Deposits" section of "Interest Expense" in the Consolidated Statements of Income.

(3) Core deposit intangible premium amortization is included in the "Other Expenses" section of "Non-interest Expense" in the Consolidated Statements of Income.

(4) Note payable discount accretion is included in the "Borrowings" section of "Interest Expense" in the Consolidated Statements of Income.