Goodwill and Intangible Assets
At December 31, 2020, the Company had goodwill in the amount of $4,488,000 in connection with various business combinations and purchases. This amount was unchanged from the balance of $4,488,000 at December 31, 2019. While goodwill is not amortized, the Company does conduct periodic impairment analysis on goodwill at least annually or more often as conditions require. The Company performed interim analyses of goodwill impairment throughout 2020 due to a triggering event of the current stock price falling below the Company's calculated book value. Additionally, the Company determined that the COVID-19 pandemic was a triggering event based on adverse impact on our business and results of operations.
Historically the goodwill analysis had been performed for the specific goodwill assessed to each of the Company's two reporting units, Legacy and Taft, with no impairment recommended to date. As the COVID-19 pandemic took over 2020, the Company had to dramatically evolve its understanding of the economies affecting the business as a whole, and the branches individually. The pandemic also forced the Company to prioritize strategic goals related to technology and branch banking. With this in mind, the Board approved increasing the Company's ITM fleet and modifying the structure of certain branch locations to ITM exclusive locations. The Board’s focus on ITMs represents a change in the Company’s business structure. As a result these factors we consolidated the Taft and Legacy reporting units into a single consolidated Company-level reporting unit. Goodwill as assessed at December 31, 2019 remained unchanged.
At December 31, 2020, the Company performed a quantitative assessment of goodwill, utilizing a third party valuation specialist, and concluded that it is more likely than not that the fair value of the reporting units exceeds the carrying value and no impairment was recommended. However, it is reasonably possible if adverse economic conditions worsen, or recent stock price fluctuation and market capitalization as a result of the COVID-19 pandemic were to be deemed sustained rather than temporary, it may impact the fair value of the Company's goodwill and result in impairment.
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.