Goodwill and Intangible Assets (Notes)

9 Months Ended

Sep. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

Goodwill and Intangible Assets

The Company has goodwill from business combinations, intangible assets from branch acquisitions, and identifiable intangible assets assigned to core deposit relationships and customer lists of the Insurance agency.

The following table presents gross carrying value and accumulated amortization by major intangible asset class as of September 30, 2016 and December 31, 2015 (in thousands):



	September 30, 2016				December 31, 2015
	Gross Carrying Value		Accumulated Amortization		Gross Carrying Value		Accumulated Amortization
Goodwill not subject to amortization (effective 1/1/02)	$	61,551	$	3,760	$	44,767	$	3,760
Intangibles from branch acquisition	3,015		3,015		3,015		3,015
Core deposit intangibles	19,862		9,180		15,202		8,017
Other intangibles	3,731		2,055		3,731		1,919
Mortgage Service Rights	$	1,060	$	—	$	—	$	—
	$	89,219	$	18,010	$	66,715	$	16,711

During the third quarter of 2016, goodwill of$16.8 million was recorded for the acquisition of First Clover Leaf. All of the goodwill was assigned to the banking segment of the Company. The Company expects this goodwill will not be deductible for tax purposes.

The following table provides a reconciliation of the purchase price paid for First Clover Leaf and the amount of goodwill recorded (in thousands):



Purchase price (in excess of net book value)			$	8,741
Less purchase accounting adjustments:
Fair value of securities	737
Fair value of loans, net	3,475
Fair value of OREO	754
Fair value of premises and equipment	(1,963	)
Fair value of time deposits	1,994
Fair value of FHLB advances	113
Fair value of subordinated debentures	(731	)
Core deposit intangible	(4,660	)
Other assets	8,325
			8,044
Resulting goodwill from acquisition			$	16,785

Goodwill of $14 million was recorded for the acquisition of twelve Old National Bank Branches during the third quarter of 2015. The goodwill consists largely of the synergies and economies of scale expected from combining the operations of the Company and the ONB Branches. All of the goodwill was assigned to the banking segment of the Company. The Company expects this goodwill to be fully deductible for tax purposes. The following table provides a reconciliation of the purchase price paid for the ONB Branches and the amount of goodwill recorded (in thousands):



Purchase price (in excess of net book value)				$	15,892
Less purchase accounting adjustments:
Fair value of loans	$	3,377
Fair value of premises and equipment	125
Fair value of time deposits	837
Core deposit intangible	(6,216		)
Other assets	259
				(1,618		)
Resulting goodwill from acquisition				$	14,274

During the fourth quarter of 2015, goodwill of $980,000 was also recorded for the acquisition of certain assets used by Illiana Insurance Agency, Ltd., in connection with its health plan and life insurance and annuity's business. The following table provides a reconciliation of the purchase price paid for Illiana and the amount of goodwill recorded (in thousands):



Purchase price (in excess of net book value)	$	2,807
Less purchase accounting adjustments:
Insurance company intangibles	(1,827		)
Resulting goodwill from acquisition	$	980

Total amortization expense for the nine months ended September 30, 2016 and 2015 was as follows (in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
Core deposit intangibles	395		155		1,161		466
Other Intangibles	46		—		137		—
Mortgage Service Rights	14		—		14		—
	$	455	$	155	$	1,312	$	466

Aggregate amortization expense for the current year and estimated amortization expense for each of the five succeeding years is shown in the table below (in thousands):



Aggregate amortization expense:
For period 01/01/16-09/30/16	$	1,312
Estimated amortization expense:
For period 10/01/16-12/31/16	557
For year ended 12/31/17	1,502
For year ended 12/31/18	1,373
For year ended 12/31/19	1,259
For year ended 12/31/20	1,113
For year ended 12/31/21	890

In accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” codified within ASC 350, the Company performed testing of goodwill for impairment as of September 30, 2016 and determined that, as of that date, goodwill was not impaired. Management also concluded that the remaining amounts and amortization periods were appropriate for all intangible assets.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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