Annual report pursuant to Section 13 and 15(d)

Goodwill and Intangibles

v3.20.4
Goodwill and Intangibles
12 Months Ended
Dec. 31, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Intangibles

NOTE 8. GOODWILL AND INTANGIBLES

Goodwill and other intangible assets, which consist of core deposit intangibles, are summarized as follows:

 

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(Dollars in thousands)

 

Beginning goodwill

 

$

68,503

 

 

$

18,253

 

Measurement period adjustments

 

$

(2,278

)

 

 

 

 

Arising from business combinations

 

 

11,456

 

 

 

50,250

 

Ending goodwill

 

$

77,681

 

 

$

68,503

 

 

 

 

 

 

 

 

 

 

Core deposit intangible

 

$

19,722

 

 

$

19,712

 

Less: Accumulated amortization

 

 

(11,904

)

 

 

(8,240

)

Core deposit intangible, net

 

$

7,818

 

 

$

11,472

 

Amortization expense for core deposit intangibles for the years ended December 31, 2020, 2019 and 2018 totalled $3.7 million, $3.6 million and $917 thousand, respectively.

The estimated amount of amortization expense for core deposit intangible assets to be recognized over the next five fiscal years is as follows:

 

Type of intangibles

 

2021

 

 

2022

 

 

2023

 

 

2024

 

 

2025

 

 

 

(Dollars in thousands)

 

Core deposit intangible

 

$

3,028

 

 

$

2,212

 

 

$

1,500

 

 

$

744

 

 

 

200

 

 

Due to triggering events associated with the COVID-19 pandemic, the Company evaluated Goodwill for impairment quarterly during 2020 in addition to completing the annual Goodwill impairment test as of December 31, 2020. The result of each quarterly assessment and the annual impairment test was that the fair value of the one

reporting unit, the Bank, exceeded the carrying value and no impairment charge was deemed necessary. The Company utilized discounted cash flow and market valuation approaches in each assessment and in the annual impairment test.

 

The discounted cash flow approach utilizes the Company’s five year forecasted income statement which was updated for expected losses related to the pandemic, lower loan growth, and an extended period of low interest rates.  The resulting cash flows for each year was discounted using a rate determined through a build-up approach which includes, a risk free rate, an equity risk premium, size premium, and company specific premium.

 

The market approach utilizes observed merger activity during the year and calculates deal multiples of last twelve months net income, book value, and tangible book value.  An additional market approach was utilized for the annual impairment test which utilized the same multiples calculated based upon market capitalization applied to a group of representative peers.