Goodwill and Other Amortizing Intangible Assets

12 Months Ended

Dec. 31, 2021

Goodwill Disclosure [Abstract]

Goodwill and Other Amortizing Intangible Assets

Goodwill and Other Intangible AssetsFASB ASC Topic 350-20, “Intangibles—Goodwill and Other" ("Topic 350"), requires an annual valuation of the fair value of a reporting unit that has goodwill and a comparison of the fair value to the book value of equity to determine whether the

goodwill has been impaired. Goodwill is also required to be tested on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. When circumstances indicate that it is more likely than not that fair value is less than carrying value, a triggering event has occurred and a quantitative impairment test would be performed.

We consider First Commonwealth to be one reporting unit. The carrying amount of goodwill as of December 31, 2021 and 2020 was $303.3 million. No impairment charges on goodwill or other intangible assets were incurred in 2021, 2020 or 2019.

We test goodwill for impairment as of November 30th each year and again at any quarter-end if any material events occur during a quarter that may affect goodwill.

As of December 31, 2021, goodwill was not considered impaired; however, changing economic conditions that may adversely affect our performance, the fair value of our assets and liabilities, or our stock price could result in impairment, which could adversely affect earnings in future periods. Management will continue to monitor events that could impact this conclusion in the future.

Topic 350 also requires that an acquired intangible asset be separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the asset can be sold, transferred, licensed, rented or exchanged, regardless of the acquirer’s intent to do so.

The following table summarizes other intangible assets:

	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
	(dollars in thousands)
December 31, 2021
Customer deposit intangibles	$	22,573	$	(14,407)	$	8,166
Customer list intangible	2,283		(1,762)		521
Total other intangible assets	$	24,856	$	(16,169)	$	8,687
December 31, 2020
Customer deposit intangibles	$	22,573	$	(11,653)	$	10,920
Customer list intangible	2,283		(1,570)		713
Total other intangible assets	$	24,856	$	(13,223)	$	11,633

Core deposits are amortized over their expected lives using the present value of the benefit of the core deposits and straight-line methods of amortization. The core deposits have a remaining amortization period of 7.7 years and a weighted average amortization period of approximately 6.2 years. The customer list intangible represents the estimated value of the customer base for an insurance agency acquired in 2014 and the wealth management business acquired as part of the DCB acquisition in 2017. These amounts are amortized over their expected lives using expected cash flows based on retention of the customer base. The customer list intangible has a remaining amortization period of 7.7 years and a weighted average amortization period of 5.9 years. First Commonwealth recognized amortization expense on other intangible assets of $2.9 million, $3.4 million, and $3.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

In addition to customer deposit intangibles and customer list intangibles, First Commonwealth has servicing rights on mortgage loans as well as certain commercial loans totaling $2.5 million and $1.9 million as of December 31, 2021 and 2020, respectively. These servicing rights relate to loans sold to third parties on which the Company retains servicing responsibilities. The Company recognized amortization expense on these servicing assets of $0.6 million and $0.3 million for the years ended December 31, 2021 and 2020, respectively.

The following presents the estimated amortization expense of core deposit and customer list intangibles:

	Core Deposit Intangibles		Customer List Intangible		Total
	(dollars in thousands)
2022	$	2,343	$	159	$	2,502
2023	1,932		128		2,060
2024	1,522		97		1,619
2025	1,112		69		1,181
2026	702		42		744
Thereafter	555		26		581
Total	$	8,166	$	521	$	8,687