LCNB CORP Goodwill & Intangibles Disclosure
NOTE 9 - GOODWILL AND OTHER INTANGIBLE ASSETS
Changes in goodwill during 2024 and 2023 were as follows (in thousands):
| 2024 | 2023 | |||||||
| Balance, beginning of year | $ | 79,509 | 59,221 | |||||
| Additions from acquisition of CNNB | 524 | 20,288 | ||||||
| Additions from acquisition of EFBI | 10,277 | — | ||||||
| Balance, end of year | $ | 90,310 | 79,509 | |||||
Core deposit and other intangible assets in the Consolidated Balance Sheets at December 31 were as follows (in thousands):
| 2024 | 2023 | |||||||||||||||||||||||
| Gross | Net | Gross | Net | |||||||||||||||||||||
| Intangible | Accumulated | Intangible | Intangible | Accumulated | Intangible | |||||||||||||||||||
| Assets | Amortization | Assets | Assets | Amortization | Assets | |||||||||||||||||||
| Core deposit intangibles | $ | 17,268 | 9,263 | 8,005 | 13,508 | 8,120 | 5,388 | |||||||||||||||||
| Mortgage servicing rights | 5,575 | 2,476 | 3,099 | 5,881 | 1,775 | 4,106 | ||||||||||||||||||
| Total | $ | 22,843 | 11,739 | 11,104 | 19,389 | 9,895 | 9,494 | |||||||||||||||||
The estimated aggregate future amortization expense for each of the next five years for core deposit intangible assets as of December 31, 2024 is as follows (in thousands):
| 2025 | $ | 1,075 | ||
| 2026 | 914 | |||
| 2027 | 913 | |||
| 2028 | 916 | |||
| 2029 | 913 |
Amortization of mortgage servicing rights is an adjustment to loan servicing income, which is included with other operating income in the Consolidated Statements of Income. Activity in mortgage servicing rights included in other assets in the Consolidated Balance Sheets during the years ended December 31 was as follows (in thousands):
| 2024 | 2023 | 2022 | ||||||||||
| Balance, beginning of year | $ | 4,106 | 871 | 1,039 | ||||||||
| Amount obtained through merger with CNNB | — | 3,427 | — | |||||||||
| Amount capitalized to mortgage servicing rights | — | 48 | 100 | |||||||||
| Amortization of mortgage servicing rights | (1,007 | ) | (240 | ) | (268 | ) | ||||||
| Balance, end of year | $ | 3,099 | 4,106 | 871 | ||||||||
At December 31, 2024, the fair value of servicing rights was $4,498,000, which was determined using a discount rate of 10.50% and an average prepayment rate of 6.63%. At December 31, 2023, the fair value of servicing rights was $5,023,000, which was determined using discount rate of 11.00% and an average prepayment rate of 6.86%. As estimated fair values were greater than the carrying value of LCNB's mortgage servicing rights, management determined that a valuation allowance was not necessary.
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.