Goodwill and Other Amortizing Intangible Assets

12 Months Ended

Dec. 31, 2023

Goodwill and Other Amortizing Intangible Assets

Goodwill and Other Intangible Assets

FASB ASC Topic 350-20, “Intangibles—Goodwill and Other" ("Topic 350"), requires an annual valuation of the fair value of a reporting unit that has goodwill and a comparison of the fair value to the book value of equity to determine whether the goodwill has been impaired. Goodwill is also required to be tested on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. When circumstances indicate that it is more likely than not that fair value is less than carrying value, a triggering event has occurred and a quantitative impairment test would be performed.

We consider First Commonwealth to be one reporting unit. The carrying amount of goodwill as of December 31, 2023 and 2022 was $363.7 million and $303.3 million, respectively. The $60.4 million increase in goodwill during the year ended December 31, 2023 is the result of the Centric acquisition. No impairment charges on goodwill or other intangible assets were incurred in 2023, 2022 or 2021.

We test goodwill for impairment as of November 30th each year and again at any quarter-end if any material events occur during a quarter that may affect goodwill. At November 30, 2023, the Company completed its annual goodwill impairment analysis and determined that it was more likely than not that the fair value of the Company was in excess of its carrying value, therefore goodwill was not considered impaired.

As of December 31, 2023, no indicators of impairment were identified; however, changing economic conditions that may adversely affect our performance, the fair value of our assets and liabilities, or our stock price could result in impairment, which could adversely affect earnings in future periods. Management will continue to monitor events that could impact this conclusion in the future.

Topic 350 also requires that an acquired intangible asset be separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the asset can be sold, transferred, licensed, rented or exchanged, regardless of the acquirer’s intent to do so.

The following table summarizes other intangible assets:


	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
	(dollars in thousands)
December 31, 2023
Customer deposit intangibles	$	39,244	$	(20,747)	$	18,497
Customer list intangible	2,283		(2,049)		234
Total other intangible assets	$	41,527	$	(22,796)	$	18,731

December 31, 2022
Customer deposit intangibles	$	22,573	$	(16,750)	$	5,823
Customer list intangible	2,283		(1,921)		362
Total other intangible assets	$	24,856	$	(18,671)	$	6,185

Core deposits are amortized over their expected lives using the present value of the benefit of the core deposits and straight-line methods of amortization. The $12.7 million increase in core deposit intangibles for the year ended December 31, 2023 is a result of the Centric acquisition. The core deposits have a remaining amortization period of 6.5 years and a weighted average amortization period of approximately 6.1 years. The customer list intangible represents the estimated value of the customer base for an insurance agency acquired in 2014 and the wealth management business acquired as part of the DCB acquisition in 2017. These amounts are amortized over their expected lives using expected cash flows based on retention of the customer base. The customer list intangible has a remaining amortization period of 5.7 years and a weighted average amortization period of 4.0 years. First Commonwealth recognized amortization expense on other intangible assets of $4.1 million, $2.5 million, and $2.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.

In addition to customer deposit intangibles and customer list intangibles, First Commonwealth has servicing rights on mortgage loans as well as certain commercial loans totaling $4.1 million and $3.0 million as of December 31, 2023 and 2022, respectively. These servicing rights relate to loans sold to third parties on which the Company retains servicing responsibilities. The Company recognized amortization expense on these servicing assets of $0.9 million, $0.7 million and $0.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The following presents the estimated amortization expense of core deposit and customer list intangibles:



	Core Deposit Intangibles		Customer List Intangible		Total
	(dollars in thousands)
2024	$	3,775	$	97	$	3,872
2025	3,364		69		3,433
2026	2,955		42		2,997
2027	2,565		15		2,580
2028	2,428		7		2,435
Thereafter	3,410		4		3,414
Total	$	18,497	$	234	$	18,731