Goodwill and Intangible Assets

The Company has goodwill from business combinations, intangible assets from branch acquisitions, identifiable intangible assets assigned to core deposit relationships and customer lists of First Mid Insurance. The following table presents gross carrying value and accumulated amortization by major intangible asset class as of September 30, 2018 and December 31, 2017 (in thousands):



	September 30, 2018				December 31, 2017
	Gross Carrying Value		Accumulated Amortization		Gross Carrying Value		Accumulated Amortization
Goodwill not subject to amortization (effective 1/1/02)	$	90,401	$	3,760	$	63,910	$	3,760
Intangibles from branch acquisition	3,015		3,015		3,015		3,015
Core deposit intangibles	25,086		13,153		19,862		11,473
Other intangibles	3,731		2,422		3,731		2,285
	$	122,233	$	22,350	$	90,518	$	20,533

Goodwill of $27.4 million was provisionally recorded for acquisition and merger of First Bank during the second quarter of 2018. Goodwill was subsequently adjusted to $26.5 million to reflect proper valuation of financial assets and liabilities. 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 the acquisition of First Bank and the amount of goodwill recorded (in thousands):



Purchase price (in excess of net book value)			$	26,946
Purchase accounting adjustments:
Fair value of securities	320
Fair value of loans, net	3,463
Fair value of OREO	12
Fair value of mortgage servicing rights	(1,097	)
Fair value of premises and equipment	689
Fair value of time deposits	1,301
Fair value of FHLB advances	(328	)
Fair value of subordinated debentures	(1,451	)
Core deposit intangible	(5,224	)
Other assets and other liabilities, net	1,860
			(455		)
Resulting goodwill from acquisition			$	26,491

As part of the First Bank acquisition, the Company acquired mortgage servicing rights valued at $1,522,000. The following table summarizes the activity pertaining to mortgage servicing rights included in intangible assets as of September 30, 2018, September 30, 2017 and December 31, 2017 (in thousands):



	September 30, 2018			September 30, 2017			December 31, 2017
Beginning Balance	$	844			$985		$	985
Mortgage servicing rights acquired during period	1,522			—			—
Mortgage servicing rights capitalized	7			—			—
Mortgage servicing rights amortized	(242		)	(105		)	(141		)
Ending Balance	$	2,131			$880		$	844

Total amortization expense for the three and nine months ended September 30, 2018 and 2017 was as follows (in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
Core deposit intangibles	669		466		$	1,680	$	1,409
Other intangibles	46		46		137		137
Mortgage servicing rights	123		33		242		105
	$	838	$	545	$	2,059	$	1,651

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 01/01/18-09/30/18	$	2,059
Estimated amortization expense:
For period 07/01/18-12/31/18	718
For year ended 12/31/19	2,903
For year ended 12/31/20	2,409
For year ended 12/31/21	1,943
For year ended 12/31/22	1,730
For year ended 12/31/23	1,547

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, 2018 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.