FIRST CAPITAL INC Goodwill & Intangibles Disclosure
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(7) |
GOODWILL AND OTHER INTANGIBLES |
The Company acquired goodwill of $1.1 million in the acquisition of Peoples Bancorp, Inc. of Bullitt County and Peoples during 2015 in addition to acquiring goodwill of $5.4 million in the acquisition of Hometown Bancshares, Inc. (“Hometown”) during 2003. Goodwill is evaluated for impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the carrying amount is greater than its fair value. impairment of goodwill was recognized during 2024, 2023 or 2022.
The Company acquired a core deposit intangible of $1.4 million in the acquisition of Peoples. All of the Company’s previously acquired core deposit intangibles had been fully amortized prior to 2015. Core deposit intangible amortization expense totaled $147,000 each year for 2024, 2023, and 2022.
Core deposit intangibles subject to amortization as of December 31, 2024 and 2023 consisted of the following:
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(In thousands) |
2024 |
2023 |
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Core deposit intangible acquired in Peoples acquisition |
$ | 1,418 | $ | 1,418 | ||||
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Less accumulated amortization |
1,332 | 1,186 | ||||||
| $ | 86 | $ | 232 | |||||
The remaining $86,000 of core deposit intangible associated with the Peoples acquisition is expected to amortize in 2025.
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About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.