Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill represents the excess of the amounts paid to acquire subsidiaries over the fair value of their net assets at the date of acquisition. The majority of the recorded goodwill is related to acquisitions of other banks, which were subsequently merged into Isabella Bank. If it is determined that the goodwill is impaired, a write-down of goodwill by the amount of the impairment would be required. The carrying amount of goodwill was $48,282 at December 31, 2020 and 2019.

The decline in economic conditions, as a result of the COVID-19 pandemic and other factors, led to a significant decline in the stock market causing the value of investments, including our stock, to decline. Our stock price was negatively impacted in March 2020, which continued during most of 2020. Since the price of our stock increased but had not fully recovered through the fourth quarter, we decided to engage a third-party valuation firm to perform a quantitative analysis of goodwill as of December 31, 2020. In determining the fair value of the Bank and Isabella Bank Corporation, the third-party firm assessed general economic conditions, industry and market considerations, the impact of recent events to financial performance, the market price of our common stock, and other relevant events. Based on the valuation prepared, it was determined that our estimated fair values of the Bank and Isabella Bank Corporation at December 31, 2020 were greater than our recorded book value and no impairment of goodwill was identified.

Furthermore, management noted that despite the decline of the market capitalization as a result of the COVID-19 pandemic, our financial performance remained positive. This is evidenced by our financial results, strong credit quality indicators, increased liquidity position, as well as the strong capital position. Finally, by the end of the fourth quarter, our stock price had increased to levels consistent with prices prior to the second quarter of 2020. Based on these factors and the results of the independent quantitative analysis of goodwill, management concluded that it was more likely than not that there was no goodwill impairment as of December 31, 2020.

Identifiable intangible assets were as follows as of December 31:


	2020
	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Core deposit premium resulting from acquisitions	$	5,579	$	5,530	$	49


	2019
	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Core deposit premium resulting from acquisitions	$	5,579	$	5,482	$	97

Amortization expense associated with identifiable intangible assets was $48, $72, and $96 in 2020, 2019, and 2018, respectively.

Estimated amortization expense associated with identifiable intangibles for each of the next five years succeeding December 31, 2020, and thereafter is as follows:


	Estimated Amortization Expense
2021	$	29
2022	15
2023	2
2024	2
2025	1
Total	$	49