Business Combinations, Intangible Assets and Goodwill (Notes)

3 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

Business Combinations, Intangible Assets and Goodwill

Business Combinations, Intangible Assets and Goodwill

Business Combinations

In October 2016, National Investors Holdings, LLC ("NIH"), a subsidiary of the Company, acquired all of the outstanding shares of University Title Company (“University”), a title insurance agency doing business in Texas. NIH paid $10 million plus a $918,000 adjustment for University’s net cash position at closing to the shareholders of University. The acquisition was partially financed with loan proceeds from a Business/Commercial Loan Agreement and related Promissory Note (collectively, the “Loan Agreement”) with a bank, pursuant to which the bank loaned the Company the principal amount of $6 million. The Company paid off all amounts due under the Loan Agreement in December 2016, and therefore has no liabilities related to the Loan Agreement at December 31, 2016.

In April 2012, ITIC purchased a 70% ownership interest in United Title Agency Co., LLC (“United”) for a purchase price of $1,041,250. In May 2014, ITIC purchased the remaining 30% interest in United for an additional $515,275, making United a wholly owned subsidiary of ITIC. United is a title insurance agency doing business in Michigan.

Intangible Assets

The Company recognized the required identifiable intangible assets of University and United.  The fair values of intangible assets, all Level 3 inputs, are principally based on values obtained from a third party valuation service. In accordance with ASC 350, Intangibles – Goodwill and Other, management determined that no events or changes in circumstances occurred that would indicate the carrying amounts may not be recoverable, and therefore determined that no identifiable intangible assets were impaired at March 31, 2017.

Identifiable intangible assets consist of the following as of March 31, 2017 and December 31, 2016:

Year Ended:	2017			2016
Referral relationships	$	6,416,215		$	6,416,215
Non-complete agreements	1,405,685			1,405,685
Tradename	560,000			560,000
Total	8,381,900			8,381,900
Accumulated amortization	(708,698		)	(475,110		)
Identifiable intangible assets, net	$	7,673,202		$	7,906,790

The following table provides the estimated aggregate amortization expense for each of the five succeeding fiscal years:

Year Ended:
2017	$	665,763
2018	642,253
2019	568,920
2020	568,920
2021	561,587
Thereafter	4,665,759
Total	$	7,673,202

Goodwill and Title Plant

The Company recognized $4,349,851 in goodwill and $690,000 in a title plant as the result of the University acquisition.  The title plant is included with prepaid expenses and other assets in the Consolidated Balance Sheets. The fair values of goodwill and the title plant, both Level 3 inputs, are principally based on values obtained from a third party valuation service. In accordance with ASC 350, Intangibles – Goodwill and Other, management determined that no events or changes in circumstances occurred that would indicate the carrying amounts may not be recoverable, and therefore determined that goodwill and the title plant were not impaired at March 31, 2017.