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Note 5 - Goodwill and Core Deposit Intangibles

9 Months Ended

Sep. 30, 2021

Goodwill and Intangible Assets Disclosure [Text Block]

(5)

Goodwill and Core Deposit Intangibles

As of September 30, 2021, goodwill represents $123 million related to the KB acquisition, $12 million related to the 2019 KSB acquisition and $682,000 related to the 1996 purchase of a bank in southern Indiana. The acquisition of TBOC in 2013 generated a bargain purchase gain. As permitted 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 related to the KB acquisition. During this measurement period, Bancorp may record subsequent 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 of each year or more often as situations dictate.

At September 30, 2021, Bancorp elected to perform a qualitative assessment to determine if it was more-likely-than-not that the fair value of the Commercial Banking 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.

Changes in the carrying value of goodwill follows:

	Three months ended					Nine months ended
	September 30,					September 30,
(in thousands)	2021			2020		2021			2020
Balance at beginning of period	$	136,529		$	12,513	$	12,513		$	12,513
Goodwill acquired		—			—		124,016			—
Recast adjustments		(699	)		—		(699	)		—
Impairment		—			—		—			—
Balance at end of period	$	135,830		$	12,513	$	135,830		$	12,513

Bancorp recorded CDI assets of $4.4 million, $1.5 million and $2.5 million in association with the acquisition of KB in 2021, KSB in 2019 and TBOC in 2013, respectively.

Changes in the net carrying amount of CDIs follows:

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands)	2021			2020			2021			2020
Balance at beginning of period	$	5,162		$	2,122		$	1,962		$	2,285
Core deposit intangible acquired		—			—			3,404			—
Recast adjustment		999			—			999			—
Amortization		(290	)		(80	)		(494	)		(243	)
Balance at end of period	$	5,871		$	2,042		$	5,871		$	2,042