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Business Combinations, Goodwill and Intangible Assets | 12 Months Ended
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Dec. 31, 2021
Business Combinations, Goodwill and Intangible Assets [Abstract] |
Business Combinations, Goodwill and Intangible Assets | Business Combinations, Goodwill and Intangible Assets Business Combinations Citizens First Acquisition Effective July 1, 2019, the Company acquired Citizens First Corporation (“Citizens First”) and its subsidiary, Citizens First Bank, Inc., pursuant to an Agreement and Plan of Reorganization dated February 22, 2019. The acquisition was accomplished by the merger of Citizens First with and into the Company, immediately followed by the merger of Citizens First Bank with and into the Company’s subsidiary bank, German American Bank. Citizens First Bank operated 8 banking offices in Barren, Hart, Simpson and Warren Counties in Kentucky. Citizens First’s consolidated assets and equity (unaudited) as of July 1, 2019 totaled $456.0 million and $49.8 million, respectively. The Company accounted for the transaction under the acquisition method of accounting which means that the acquired assets and liabilities were recorded at fair value at the date of acquisition. In accordance with ASC 805, the Company expensed approximately $3.3 million of direct acquisition costs and recorded $17.7 million of goodwill and $4.5 million of intangible assets. The intangible assets are related to core deposits and are being amortized over 8 years. For tax purposes, goodwill totaling $17.7 million is non-deductible but will be evaluated annually for impairment. The following table summarizes the fair value of the total consideration transferred as a part of the Citizens First acquisition as well as the fair value of identifiable assets acquired and liabilities assumed as of the effective date of the transaction.
Consideration |  |
Cash for Options and Fractional Shares |  | $ | 216 |
Cash Consideration |  | 15,294 |
Equity Instruments |  | 50,118 |
Fair Value of Total Consideration Transferred |  | $ | 65,628 |
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed: |  |
Cash |  | $ | 21,055 |
Interest-bearing Time Deposits with Banks |  | 2,231 |
Securities |  | 43,839 |
Loans |  | 356,970 |
Stock in FHLB of Indianapolis and Other Restricted Stock, at Cost |  | 2,065 |
Premises, Furniture & Equipment |  | 10,772 |
Other Real Estate |  | — |
Intangible Assets |  | 4,547 |
Company Owned Life Insurance |  | 8,796 |
Accrued Interest Receivable and Other Assets |  | 3,863 |
Deposits - Non-interest Bearing |  | (52,521) |
Deposits - Interest Bearing |  | (318,966) |
FHLB Advances and Other Borrowings |  | (31,068) |
Accrued Interest Payable and Other Liabilities |  | (3,694) |
Total Identifiable Net Assets |  | $ | 47,889 |
Goodwill |  | $ | 17,739 |
Under the terms of the merger agreement, each Citizens First common shareholder of record at the effective time of the merger (other than those holding shares in the Citizens First Bank 401(k) Profit Sharing Plan (the “CFB 401(k) Plan”)) became entitled to receive a cash payment of $5.80 and a 0.6629 share of common stock of the Company for each of their former shares of Citizens First common stock. In addition, as record holder of shares of Citizens First common stock held in the CFB 401(k) Plan, the plan administrator was entitled to receive a cash payment of $25.77 for each share held by the CFB 401(k) Plan, which amount is equal to (i) the exchange ratio multiplied by the closing trading price of the Company’s common stock on June 28, 2019, plus (ii) $5.80. As a result, in connection with the closing of the merger on July 1, 2019, the Company issued approximately 1,664,000 shares of its common stock to the former shareholders of Citizens First and paid cash consideration in the aggregate amount of $15.5 million. This acquisition is consistent with the Company’s strategy to build a regional presence in central and western Kentucky. The acquisition offers the Company the opportunity to increase profitability by introducing existing products and services to the acquired customer base as well as add new customers in the expanded region. The fair value of net assets acquired includes fair value adjustments to certain receivables that were not considered impaired as of the acquisition date. The fair value adjustments were determined using discounted cash flows. However, the Company believes that all contractual cash flows related to these financial instruments will be collected. As such, these receivables were not considered impaired at the acquisition date and were not subject to the guidance relating to purchased credit impaired loans, which are loans that have shown evidence of credit deterioration since origination. Receivables acquired that were not subject to these requirements include non-impaired loans and customer receivables with a fair value of $349.9 million and unpaid principal of $353.3 million on the date of acquisition. Goodwill The changes in the carrying amount of goodwill for the periods ended December 31, 2021, 2020, and 2019, were classified as follows:
|  | 2021 |  | 2020 |  | 2019
Beginning of Year |  | $ | 121,956 |  |  | $ | 121,306 |  |  | $ | 103,681 |
Acquired Goodwill |  | — |  |  | 650 |  |  | 17,625 |
Adjustments |  | (195) |  |  | — |  |  | — |
End of Year |  | $ | 121,761 |  |  | $ | 121,956 |  |  | $ | 121,306 |
Of the $121,761 carrying amount of goodwill, $120,429 is allocated to the core banking segment, and $1,332 is allocated to the insurance segment for the period ended December 31, 2021. The decrease of $195 in 2021 is attributable to the sale of two branches located in Lexington, Kentucky. Of the $121,956 carrying amount of goodwill, $120,624 is allocated to the core banking segment, and $1,332 is allocated to the insurance segment for the period ended December 31, 2020. During 2020, the Company finalized valuation estimates for the Citizens First acquisition and recorded $650 of additional goodwill. Of the $121,306 carrying amount of goodwill, $119,974 is allocated to the core banking segment, and $1,332 is allocated to the insurance segment for the period ended December 31, 2019. Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value. At December 31, 2021, the Company’s reporting units had positive equity, and the Company elected to perform a qualitative assessment to determine if it was more likely than not that the fair value of the reporting units exceeded its carrying value, including goodwill. The qualitative assessment indicated that it was more likely than not that the fair value of the reporting unit exceeded its carrying value, resulting in no impairment. Acquired Intangible Assets Acquired intangible assets were as follows as of year end:
|  | 2021
|  | Gross Amount |  | Accumulated Amortization
Core Banking |  |  |  |
Core Deposit Intangible |  | $ | 25,675 |  |  | $ | (21,320) |
Branch Acquisition Intangible |  | 257 |  |  | (257) |
Insurance |  |  |  |
Customer List |  | 5,408 |  |  | (5,348) |
Total |  | $ | 31,340 |  |  | $ | (26,925) |
|  | 2020
|  | Gross Amount |  | Accumulated Amortization
Core Banking |  |  |  |
Core Deposit Intangible |  | $ | 25,780 |  |  | $ | (18,619) |
Branch Acquisition Intangible |  | 257 |  |  | (257) |
Insurance |  |  |  |
Customer List |  | 5,408 |  |  | (5,318) |
Total |  | $ | 31,445 |  |  | $ | (24,194) |
Amortization Expense was $2,731, $3,539 and $3,721, for 2021, 2020 and 2019. Estimated amortization expense for each of the next five years is as follows:
2022 |  | $ | 1,947 |
2023 |  | 1,310 |
2024 |  | 736 |
2025 |  | 332 |
2026 |  | 89 |

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