Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Note 7 -- Goodwill and Intangible Assets

The Company has goodwill from business combinations, intangible assets from branch acquisitions, identifiable intangible assets assigned to core deposit relationships and customer lists of business lines acquired. The following table presents gross carrying amount and accumulated amortization by major intangible asset class as of December 31, 2022 and 2021 (in thousands):


	2022				2021
	Gross Carrying		Accumulated		Gross Carrying		Accumulated
	Value		Amortization		Value		Amortization
Goodwill	$	144,172	$	3,760	$	115,613	$	3,760
Intangibles from branch acquisition		3,015		3,015		3,015		3,015
Core deposit intangibles		45,355		28,432		39,435		24,085
Customer list intangibles		20,782		8,551		20,561		6,808
	$	213,324	$	43,758	$	178,624	$	37,668

Goodwill of $28.6 million was recorded for the acquisition and merger of Delta Bancshares Company during the first quarter of 2022. All this goodwill was assigned to the banking unit of the Company.

During the second quarter of 2021, goodwill of $1.4 million was recorded for the acquisition of certain assets used by BBM & Associates Inc., in connection with its trucking insurance business. All this goodwill was assigned to First Mid Insurance.

Goodwill of $8.9 million was provisionally recorded for the acquisition and merger of LINCO Bancshares, Inc. (“LINCO”) during the first quarter of 2021. All this goodwill was assigned to the banking segment of the Company. This goodwill was subsequently adjusted to $5.4 million to reflect adjustments made to finalize the purchase accounting.

The following table provides a reconciliation of the purchase price paid for the acquisition of Delta and the amount of goodwill recorded (in thousands):


Unallocated purchase price			$	29,791
Less purchase accounting adjustments:
Fair value of securities	(2,836	)
Fair value of loans, net	(3,399	)
Fair value of premises and equipment	3,508
Fair value of time deposits	(1,759	)
Fair value of FHLB advances	(75	)
Core deposit intangible	5,920
Other assets	(570	)
Other liabilities	444
				1,233
Resulting goodwill from acquisition			$	28,558

The unpaid principal balance of mortgage loans serviced for others was $73.6 million and $90.2 million at December 31, 2022 and 2021, respectively. The following table summarizes the activity pertaining to the mortgage servicing rights included in intangible assets as of December 31, 2022 and 2021 (in thousands):


	December 31, 2022			December 31, 2021
Beginning balance	$	420		$	516
Valuation recovery		108			544
Mortgage servicing rights amortized		(200	)		(629	)
I/O strip		3			(11	)
Ending balance	$	331		$	420

Total amortization expense for the years ended December 31, 2022, 2021, and 2020 was as follows (in thousands):


	2022		2021		2020
Core deposit intangibles	$	4,347	$	3,176	$	3,164
Customer list intangibles		1,743		1,586		1,305
Mortgage servicing rights		200		629		593
	$	6,290	$	5,391	$	5,062

Estimated amortization expense for each of the five succeeding years is shown in the table below (in thousands):


For year ended 12/31/23	$	5,878
For year ended 12/31/24		5,371
For year ended 12/31/25		4,736
For year ended 12/31/26		3,835
For year ended 12/31/27		3,254

In accordance with the provisions of SFAS 142 ”Goodwill and Other Intangible Assets,” codified in ASC 350, the Company performed testing of goodwill for impairment as of September 30, 2022 and 2021, and determined, as of each of these dates, that goodwill was not impaired. Management also concluded that the remaining amounts and amortization periods were appropriate for all intangible assets. The weighted average amortization period for core deposit, customer lists and total intangibles was 3.23, 4.12 and 3.60 respectively, at December 31, 2022.