Note 7 - Goodwill and Core Deposit Intangibles

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

(7) Goodwill and Core Deposit Intangibles

Goodwill, recorded on the acquisition date of an entity, represents $11.8 million related to the May 1, 2019 KSB acquisition and $682,000 related to the 1996 purchase of a bank in southern Indiana. As provided for under GAAP, management has up to 12 months following the date of acquisition to finalize the fair values of the acquired assets and assumed liabilities. During this measurement period, Bancorp may record subsequent recast adjustments to goodwill for provisional amounts recorded at the acquisition date.

GAAP requires that goodwill and intangible assets with indefinite useful lives not be amortized, but instead be tested for impairment at least annually. Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value. Bancorp’s annual goodwill impairment test is conducted as of September 30^th of each year or more often as situations dictate. The goodwill balance at December 31, 2019 and 2018 relates entirely to the Commercial Banking segment of Bancorp. At December 31, 2019, Bancorp’s Commercial Banking reporting unit had positive equity and Bancorp elected to perform a qualitative assessment to determine if it was more-likely-than-not that the fair value of the reporting unit exceeded its carrying value, including goodwill. The qualitative assessment indicated that it was not more-likely-than-not that the carrying value of the reporting unit exceeded its fair value. Therefore, Bancorp did not complete the two-step impairment test as of December 31, 2019.

Changes in the carrying value of goodwill follows:

December 31, (in thousands)	2019			2018
Balance at beginning of period	$	682		$	682
Goodwill acquired		12,144			—
Recast adjustments		(313	)		—
Impairment		—			—
Balance at end of period	$	12,513		$	682

Bancorp recorded CDI assets of $1.5 million and $2.5 million in association with its May 1, 2019 KSB and 2013 TBOC acquisitions. See the Footnote titled “Acquisition of KSB” for additional detail.

Changes in the net carrying amount of CDI assets follow:

Years ended December 31, (in thousands)	2019			2018			2017
Balance, beginning of period	$	1,057		$	1,225		$	1,405
Additions		1,519			—			—
Amortized to expense		(291	)		(168	)		(180	)
Balance, end of period	$	2,285		$	1,057		$	1,225

Future CDI amortization expense is estimated as follows:

(in thousands)
2020	$	323
2021		302
2022		295
2023		259
2024		241
Beyond 2024		865
Total future payments	$	2,285