EFSC » Topics » Goodwill and Other Intangible Assets

This excerpt taken from the EFSC 10-Q filed May 11, 2009.
Goodwill and Other Intangible Assets, requires that goodwill be tested for impairment annually and more frequently if events or changes in circumstances indicate that the asset might be impaired. Historically the Banking reporting unit has been tested for goodwill impairment at December 31 and the Millennium reporting unit goodwill tested at September 30. The market price of the Company’s common stock has declined from an average closing price of $15.55 during the fourth quarter of 2008 to $11.03 during the first quarter of 2009, a 29% decrease. The closing market value of the Company’s common stock on March 31, 2009 was $9.76. As a result of the Company’s market capitalization being significantly less than total stockholders’ equity at March 31, 2009, an interim goodwill impairment valuation analysis was performed on the Banking reporting unit.

The evaluation identified impairment and as a result, the Company recorded an impairment charge of $45.4 million, which eliminated all goodwill at the Banking reporting unit. The Company also tested the Banking reporting unit core deposit intangible assets for impairment in conformity with FASB 144,

These excerpts taken from the EFSC 10-K filed Mar 16, 2009.
Goodwill and Other Intangible Assets
The Company accounts for goodwill and intangible assets according to SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”.) Intangible assets other than goodwill, such as core deposit intangibles, that are determined to have finite lives are amortized over their estimated remaining useful lives. The Company tests goodwill for impairment on an annual basis and intangible assets whenever events or changes in circumstances indicate that the Company may not be able to recover the respective asset’s carrying amount. Such tests involve the use of estimates and assumptions. Management believes that the assumptions utilized are reasonable. However, the Company may incur impairment charges related to goodwill or intangible assets in the future due to changes in business prospects or other matters that could affect our assumptions.

SFAS 142 requires that goodwill be tested for impairment at the reporting unit level. Reporting units are defined as the same level as, or one level below, an operating segment, as defined in SFAS 131, Disclosures about Segments of an Enterprise and Related Information. An operating segment is a component of a business for which separate financial information is available that management regularly evaluates in deciding how to allocate resources and assess performance. The Company’s reporting units are Millennium, Trust and the Banking operations of Enterprise. At December 31, 2008 and 2007, the Trust reporting unit had no goodwill.

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Historically, our goodwill impairment tests have been completed as of December 31 each year. Following the annual impairment test for 2006, the Company changed the goodwill impairment test date for the Millennium reporting unit to September 30 of each fiscal year. This change in the testing date was designed to provide sufficient time for independent experts to complete the Millennium reporting unit testing prior to year end reporting. The goodwill impairment test date for the Banking reporting unit did not change.

Under SFAS 142, businesses must identify potential impairments by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Goodwill impairment does not occur as long as the fair value of the unit is greater than its carrying value. The second step of the impairment test is only required if a goodwill impairment is identified in step one. The second step of the test compares the implied fair market value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair market value, an impairment loss is recognized. That loss is equal to the carrying amount of goodwill that is in excess of its implied fair market value.

SFAS 144 also requires long-lived assets, such as purchased intangibles subject to amortization, to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

There are three general approaches commonly used in business valuation: income approach, asset-based approach, and market approach. Within each of these approaches, there are various techniques for determining the value of a business using the definition of value appropriate for the appraisal assignment. Professional judgment is required to determine which valuation methods are the most appropriate. The valuation may utilize one or more of the approaches. Generally, the income approaches determine value by calculating the net present value of the benefit stream generated by the business (discounted cash flow); the asset-based approaches determine value by adding the sum of the parts of the business (net asset value); and the market approaches determine value by comparing the subject company to other companies in the same industry, of the same size, and/or within the same region.

Millennium reporting unit
An independent third party performed the valuation of the Millennium reporting unit. Step one of the impairment valuation utilized a combination of the income approach and the market approach. The income and market approaches were weighted at 33% and 67%, respectively. The weights reflect the relative importance of the methods used and serve as a means of simulating the thinking of hypothetical investors. Significant assumptions and estimates used to determine the step one impairment value included expected cash flows and annual growth rates, anticipated future earnings, operating margins and other indicators of value derived from market transactions of similar companies.

Step two of the impairment valuation contemplated a hypothetical acquisition of the assets and liabilities of Millennium. The intangible assets identified were trade name and customer lists. Significant assumptions and estimates used to determine the step two allocation include an expected discount rate, existing customer list and projected revenue from those customers.

In accordance with SFAS 142 and SFAS 144, we evaluated Millennium’s goodwill and intangible assets for impairment as of September 30, 2008. In connection with these tests, we determined that margin pressures reducing Millennium revenues continued to negatively affect operating performance, thereby reducing the fair value of our investment in Millennium. As a result, the Company recorded a $5.9 million, pre-tax goodwill impairment charge as of September 30, 2008. In the fourth quarter of 2008, due to continued pressures in the sales margin and resulting decreased earnings of Millennium, we identified and recorded an additional pre-tax goodwill impairment of $2.8 million and $500,000 of intangible asset impairment. Millennium’s goodwill and intangible assets were $3.1 million and $1.4 million, respectively, at December 31, 2008. It is possible that additional impairment charges could occur in 2009.

Banking reporting unit
An independent third party performed the valuation of the Banking reporting unit. Step one of the impairment valuation utilized a combination of the income approach and the market approach. The income and market approaches were weighted at 67% and 33%, respectively. The weights reflect the relative importance of the methods used and serve as a means of simulating the thinking of hypothetical investors. Significant assumptions and estimates used to determine the step one impairment value included expected cash flows and annual growth rates, anticipated future earnings, operating margins and other indicators of value derived from market transactions of similar companies.

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The 2008 annual impairment evaluation of the goodwill and intangible balances did not identify any impairment for the Banking reporting unit. At December 31, 2008, the Company’s common shareholders’ equity was $186.7 million. At March 2, 2009, the Company’s market capitalization was $116.0 million. A goodwill impairment test may be performed on the Banking reporting unit as of March 31, 2009. If current market conditions persist, it is possible that goodwill impairment could occur in the Banking reporting unit in 2009.

There was no goodwill or intangible impairment recorded in 2007 or 2006 for either the Millennium or Banking reporting units.

Goodwill and Other Intangible Assets
The Company accounts for goodwill and intangible assets according to SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”.) Intangible assets other than goodwill, such as core deposit intangibles, that are determined to have finite lives are amortized over their estimated remaining useful lives. The Company tests goodwill for impairment on an annual basis and intangible assets whenever events or changes in circumstances indicate that the Company may not be able to recover the respective asset’s carrying amount. Such tests involve the use of estimates and assumptions. Management believes that the assumptions utilized are reasonable. However, the Company may incur impairment charges related to goodwill or intangible assets in the future due to changes in business prospects or other matters that could affect our assumptions.

SFAS 142 requires that goodwill be tested for impairment at the reporting unit level. Reporting units are defined as the same level as, or one level below, an operating segment, as defined in SFAS 131, Disclosures about Segments of an Enterprise and Related Information. An operating segment is a component of a business for which separate financial information is available that management regularly evaluates in deciding how to allocate resources and assess performance. The Company’s reporting units are Millennium, Trust and the Banking operations of Enterprise. At December 31, 2008 and 2007, the Trust reporting unit had no goodwill.

43


Historically, our goodwill impairment tests have been completed as of December 31 each year. Following the annual impairment test for 2006, the Company changed the goodwill impairment test date for the Millennium reporting unit to September 30 of each fiscal year. This change in the testing date was designed to provide sufficient time for independent experts to complete the Millennium reporting unit testing prior to year end reporting. The goodwill impairment test date for the Banking reporting unit did not change.

Under SFAS 142, businesses must identify potential impairments by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Goodwill impairment does not occur as long as the fair value of the unit is greater than its carrying value. The second step of the impairment test is only required if a goodwill impairment is identified in step one. The second step of the test compares the implied fair market value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair market value, an impairment loss is recognized. That loss is equal to the carrying amount of goodwill that is in excess of its implied fair market value.

SFAS 144 also requires long-lived assets, such as purchased intangibles subject to amortization, to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

There are three general approaches commonly used in business valuation: income approach, asset-based approach, and market approach. Within each of these approaches, there are various techniques for determining the value of a business using the definition of value appropriate for the appraisal assignment. Professional judgment is required to determine which valuation methods are the most appropriate. The valuation may utilize one or more of the approaches. Generally, the income approaches determine value by calculating the net present value of the benefit stream generated by the business (discounted cash flow); the asset-based approaches determine value by adding the sum of the parts of the business (net asset value); and the market approaches determine value by comparing the subject company to other companies in the same industry, of the same size, and/or within the same region.

Millennium reporting unit
An independent third party performed the valuation of the Millennium reporting unit. Step one of the impairment valuation utilized a combination of the income approach and the market approach. The income and market approaches were weighted at 33% and 67%, respectively. The weights reflect the relative importance of the methods used and serve as a means of simulating the thinking of hypothetical investors. Significant assumptions and estimates used to determine the step one impairment value included expected cash flows and annual growth rates, anticipated future earnings, operating margins and other indicators of value derived from market transactions of similar companies.

Step two of the impairment valuation contemplated a hypothetical acquisition of the assets and liabilities of Millennium. The intangible assets identified were trade name and customer lists. Significant assumptions and estimates used to determine the step two allocation include an expected discount rate, existing customer list and projected revenue from those customers.

In accordance with SFAS 142 and SFAS 144, we evaluated Millennium’s goodwill and intangible assets for impairment as of September 30, 2008. In connection with these tests, we determined that margin pressures reducing Millennium revenues continued to negatively affect operating performance, thereby reducing the fair value of our investment in Millennium. As a result, the Company recorded a $5.9 million, pre-tax goodwill impairment charge as of September 30, 2008. In the fourth quarter of 2008, due to continued pressures in the sales margin and resulting decreased earnings of Millennium, we identified and recorded an additional pre-tax goodwill impairment of $2.8 million and $500,000 of intangible asset impairment. Millennium’s goodwill and intangible assets were $3.1 million and $1.4 million, respectively, at December 31, 2008. It is possible that additional impairment charges could occur in 2009.

Banking reporting unit
An independent third party performed the valuation of the Banking reporting unit. Step one of the impairment valuation utilized a combination of the income approach and the market approach. The income and market approaches were weighted at 67% and 33%, respectively. The weights reflect the relative importance of the methods used and serve as a means of simulating the thinking of hypothetical investors. Significant assumptions and estimates used to determine the step one impairment value included expected cash flows and annual growth rates, anticipated future earnings, operating margins and other indicators of value derived from market transactions of similar companies.

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The 2008 annual impairment evaluation of the goodwill and intangible balances did not identify any impairment for the Banking reporting unit. At December 31, 2008, the Company’s common shareholders’ equity was $186.7 million. At March 2, 2009, the Company’s market capitalization was $116.0 million. A goodwill impairment test may be performed on the Banking reporting unit as of March 31, 2009. If current market conditions persist, it is possible that goodwill impairment could occur in the Banking reporting unit in 2009.

There was no goodwill or intangible impairment recorded in 2007 or 2006 for either the Millennium or Banking reporting units.

Goodwill and Other Intangible Assets (“SFAS 142”.) Intangible assets other than goodwill, such as core deposit intangibles, that are determined to have finite lives are amortized over their estimated remaining useful lives. The Company tests goodwill for impairment on an annual basis and intangible assets whenever events or changes in circumstances indicate that the Company may not be able to recover the respective asset’s carrying amount. Such tests involve the use of estimates and assumptions. Management believes that the assumptions utilized are reasonable. However, the Company may incur impairment charges related to goodwill or intangible assets in the future due to changes in business prospects or other matters that could affect our assumptions.

SFAS 142 requires that goodwill be tested for impairment at the reporting unit level. Reporting units are defined as the same level as, or one level below, an operating segment, as defined in SFAS 131, Disclosures about Segments of an Enterprise and Related Information. An operating segment is a component of a business for which separate financial information is available that management regularly evaluates in deciding how to allocate resources and assess performance. The Company’s reporting units are Millennium, Trust and the Banking operations of Enterprise. At December 31, 2008 and 2007, the Trust reporting unit had no goodwill.

43


Historically, our goodwill impairment tests have been completed as of December 31 each year. Following the annual impairment test for 2006, the Company changed the goodwill impairment test date for the Millennium reporting unit to September 30 of each fiscal year. This change in the testing date was designed to provide sufficient time for independent experts to complete the Millennium reporting unit testing prior to year end reporting. The goodwill impairment test date for the Banking reporting unit did not change.

Under SFAS 142, businesses must identify potential impairments by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Goodwill impairment does not occur as long as the fair value of the unit is greater than its carrying value. The second step of the impairment test is only required if a goodwill impairment is identified in step one. The second step of the test compares the implied fair market value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair market value, an impairment loss is recognized. That loss is equal to the carrying amount of goodwill that is in excess of its implied fair market value.

SFAS 144 also requires long-lived assets, such as purchased intangibles subject to amortization, to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

There are three general approaches commonly used in business valuation: income approach, asset-based approach, and market approach. Within each of these approaches, there are various techniques for determining the value of a business using the definition of value appropriate for the appraisal assignment. Professional judgment is required to determine which valuation methods are the most appropriate. The valuation may utilize one or more of the approaches. Generally, the income approaches determine value by calculating the net present value of the benefit stream generated by the business (discounted cash flow); the asset-based approaches determine value by adding the sum of the parts of the business (net asset value); and the market approaches determine value by comparing the subject company to other companies in the same industry, of the same size, and/or within the same region.

Goodwill and Other Intangible Assets (“SFAS 142”.) Intangible assets other than goodwill, such as core deposit intangibles, that are determined to have finite lives are amortized over their estimated remaining useful lives. The Company tests goodwill for impairment on an annual basis and intangible assets whenever events or changes in circumstances indicate that the Company may not be able to recover the respective asset’s carrying amount. Such tests involve the use of estimates and assumptions. Management believes that the assumptions utilized are reasonable. However, the Company may incur impairment charges related to goodwill or intangible assets in the future due to changes in business prospects or other matters that could affect our assumptions.

SFAS 142 requires that goodwill be tested for impairment at the reporting unit level. Reporting units are defined as the same level as, or one level below, an operating segment, as defined in SFAS 131, Disclosures about Segments of an Enterprise and Related Information. An operating segment is a component of a business for which separate financial information is available that management regularly evaluates in deciding how to allocate resources and assess performance. The Company’s reporting units are Millennium, Trust and the Banking operations of Enterprise. At December 31, 2008 and 2007, the Trust reporting unit had no goodwill.

43


Historically, our goodwill impairment tests have been completed as of December 31 each year. Following the annual impairment test for 2006, the Company changed the goodwill impairment test date for the Millennium reporting unit to September 30 of each fiscal year. This change in the testing date was designed to provide sufficient time for independent experts to complete the Millennium reporting unit testing prior to year end reporting. The goodwill impairment test date for the Banking reporting unit did not change.

Under SFAS 142, businesses must identify potential impairments by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Goodwill impairment does not occur as long as the fair value of the unit is greater than its carrying value. The second step of the impairment test is only required if a goodwill impairment is identified in step one. The second step of the test compares the implied fair market value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair market value, an impairment loss is recognized. That loss is equal to the carrying amount of goodwill that is in excess of its implied fair market value.

SFAS 144 also requires long-lived assets, such as purchased intangibles subject to amortization, to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

There are three general approaches commonly used in business valuation: income approach, asset-based approach, and market approach. Within each of these approaches, there are various techniques for determining the value of a business using the definition of value appropriate for the appraisal assignment. Professional judgment is required to determine which valuation methods are the most appropriate. The valuation may utilize one or more of the approaches. Generally, the income approaches determine value by calculating the net present value of the benefit stream generated by the business (discounted cash flow); the asset-based approaches determine value by adding the sum of the parts of the business (net asset value); and the market approaches determine value by comparing the subject company to other companies in the same industry, of the same size, and/or within the same region.

Goodwill and Other Intangible
Assets

The Company accounts for goodwill
and intangible assets according to SFAS No. 142,
Goodwill and Other Intangible Assets
(“SFAS 142”.) Intangible assets other than goodwill, such as core deposit
intangibles, that are determined to have finite lives are amortized over their
estimated remaining useful lives. The Company tests goodwill for impairment on
an annual basis and intangible assets whenever events or changes in
circumstances indicate that the Company may not be able to recover the
respective asset’s carrying amount. Such tests involve the use of estimates and
assumptions. Management believes that the assumptions utilized are reasonable.
However, the Company may incur impairment charges related to goodwill or
intangible assets in the future due to changes in business prospects or other
matters that could affect our assumptions.


SFAS 142 requires that goodwill be
tested for impairment at the reporting unit level. Reporting units are defined
as the same level as, or one level below, an operating segment, as defined in
SFAS 131, Disclosures about Segments of an Enterprise and Related
Information
. An operating segment is a component of a business for which
separate financial information is available that management regularly evaluates
in deciding how to allocate resources and assess performance. The Company’s
reporting units are Millennium, Trust and the Banking operations of Enterprise.
At December 31, 2008 and 2007, the Trust reporting unit had no goodwill.


43





Historically, our goodwill impairment
tests have been completed as of December 31 each year. Following the annual
impairment test for 2006, the Company changed the goodwill impairment test date
for the Millennium reporting unit to September 30 of each fiscal year. This
change in the testing date was designed to provide sufficient time for
independent experts to complete the Millennium reporting unit testing prior to
year end reporting. The goodwill impairment test date for the Banking reporting
unit did not change.


Under SFAS 142, businesses must
identify potential impairments by comparing the fair value of a reporting unit
to its carrying amount, including goodwill. Goodwill impairment does not occur
as long as the fair value of the unit is greater than its carrying value. The
second step of the impairment test is only required if a goodwill impairment is
identified in step one. The second step of the test compares the implied fair
market value of goodwill to its carrying amount. If the carrying amount of
goodwill exceeds its implied fair market value, an impairment loss is
recognized. That loss is equal to the carrying amount of goodwill that is in
excess of its implied fair market value.


SFAS 144 also requires long-lived
assets, such as purchased intangibles subject to amortization, to be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated future cash
flows, an impairment charge is recognized by the amount by which the carrying
amount of the asset exceeds the fair value of the asset.


There are three general approaches
commonly used in business valuation: income approach, asset-based approach, and
market approach. Within each of these approaches, there are various techniques
for determining the value of a business using the definition of value
appropriate for the appraisal assignment. Professional judgment is required to
determine which valuation methods are the most appropriate. The valuation may
utilize one or more of the approaches. Generally, the income approaches
determine value by calculating the net present value of the benefit stream
generated by the business (discounted cash flow); the asset-based approaches
determine value by adding the sum of the parts of the business (net asset
value); and the market approaches determine value by comparing the subject
company to other companies in the same industry, of the same size, and/or within
the same region.


Millennium reporting
unit

An independent third party
performed the valuation of the Millennium reporting unit. Step one of the
impairment valuation utilized a combination of the income approach and the
market approach. The income and market approaches were weighted at 33% and 67%,
respectively. The weights reflect the relative importance of the methods used
and serve as a means of simulating the thinking of hypothetical investors.
Significant assumptions and estimates used to determine the step one impairment
value included expected cash flows and annual growth rates, anticipated future
earnings, operating margins and other indicators of value derived from market
transactions of similar companies.


Step two of the impairment valuation
contemplated a hypothetical acquisition of the assets and liabilities of
Millennium. The intangible assets identified were trade name and customer lists.
Significant assumptions and estimates used to determine the step two allocation
include an expected discount rate, existing customer list and projected revenue
from those customers.


In accordance with SFAS 142 and SFAS
144, we evaluated Millennium’s goodwill and intangible assets for impairment as
of September 30, 2008. In connection with these tests, we determined that margin
pressures reducing Millennium revenues continued to negatively affect operating
performance, thereby reducing the fair value of our investment in Millennium. As
a result, the Company recorded a $5.9 million, pre-tax goodwill impairment
charge as of September 30, 2008. In the fourth quarter of 2008, due to continued
pressures in the sales margin and resulting decreased earnings of Millennium, we
identified and recorded an additional pre-tax goodwill impairment of $2.8
million and $500,000 of intangible asset impairment. Millennium’s goodwill and
intangible assets were $3.1 million and $1.4 million, respectively, at December
31, 2008. It is possible that additional impairment charges could
occur in 2009.


Banking reporting
unit

An independent third party performed the valuation of the
Banking reporting unit. Step one of the impairment valuation utilized a
combination of the income approach and the market approach. The income and
market approaches were weighted at 67% and 33%, respectively. The weights
reflect the relative importance of the methods used and serve as a means of
simulating the thinking of hypothetical investors. Significant assumptions and
estimates used to determine the step one impairment value included expected cash
flows and annual growth rates, anticipated future earnings, operating margins
and other indicators of value derived from market transactions of similar
companies.


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The 2008 annual impairment evaluation
of the goodwill and intangible balances did not identify any impairment for the
Banking reporting unit. At December 31, 2008, the Company’s common shareholders’
equity was $186.7 million. At March 2, 2009, the Company’s market capitalization
was $116.0 million. A goodwill impairment test may be performed on the Banking
reporting unit as of March 31, 2009. If current market conditions persist, it is
possible that goodwill impairment could occur in the Banking
reporting unit in 2009.


There was no goodwill or intangible
impairment recorded in 2007 or 2006 for either the Millennium or Banking
reporting units.


Goodwill and Other Intangible
Assets

The Company accounts for goodwill
and intangible assets according to SFAS No. 142,
Goodwill and Other Intangible Assets
(“SFAS 142”.) Intangible assets other than goodwill, such as core deposit
intangibles, that are determined to have finite lives are amortized over their
estimated remaining useful lives. The Company tests goodwill for impairment on
an annual basis and intangible assets whenever events or changes in
circumstances indicate that the Company may not be able to recover the
respective asset’s carrying amount. Such tests involve the use of estimates and
assumptions. Management believes that the assumptions utilized are reasonable.
However, the Company may incur impairment charges related to goodwill or
intangible assets in the future due to changes in business prospects or other
matters that could affect our assumptions.


SFAS 142 requires that goodwill be
tested for impairment at the reporting unit level. Reporting units are defined
as the same level as, or one level below, an operating segment, as defined in
SFAS 131, Disclosures about Segments of an Enterprise and Related
Information
. An operating segment is a component of a business for which
separate financial information is available that management regularly evaluates
in deciding how to allocate resources and assess performance. The Company’s
reporting units are Millennium, Trust and the Banking operations of Enterprise.
At December 31, 2008 and 2007, the Trust reporting unit had no goodwill.


43





Historically, our goodwill impairment
tests have been completed as of December 31 each year. Following the annual
impairment test for 2006, the Company changed the goodwill impairment test date
for the Millennium reporting unit to September 30 of each fiscal year. This
change in the testing date was designed to provide sufficient time for
independent experts to complete the Millennium reporting unit testing prior to
year end reporting. The goodwill impairment test date for the Banking reporting
unit did not change.


Under SFAS 142, businesses must
identify potential impairments by comparing the fair value of a reporting unit
to its carrying amount, including goodwill. Goodwill impairment does not occur
as long as the fair value of the unit is greater than its carrying value. The
second step of the impairment test is only required if a goodwill impairment is
identified in step one. The second step of the test compares the implied fair
market value of goodwill to its carrying amount. If the carrying amount of
goodwill exceeds its implied fair market value, an impairment loss is
recognized. That loss is equal to the carrying amount of goodwill that is in
excess of its implied fair market value.


SFAS 144 also requires long-lived
assets, such as purchased intangibles subject to amortization, to be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated future cash
flows, an impairment charge is recognized by the amount by which the carrying
amount of the asset exceeds the fair value of the asset.


There are three general approaches
commonly used in business valuation: income approach, asset-based approach, and
market approach. Within each of these approaches, there are various techniques
for determining the value of a business using the definition of value
appropriate for the appraisal assignment. Professional judgment is required to
determine which valuation methods are the most appropriate. The valuation may
utilize one or more of the approaches. Generally, the income approaches
determine value by calculating the net present value of the benefit stream
generated by the business (discounted cash flow); the asset-based approaches
determine value by adding the sum of the parts of the business (net asset
value); and the market approaches determine value by comparing the subject
company to other companies in the same industry, of the same size, and/or within
the same region.


Millennium reporting
unit

An independent third party
performed the valuation of the Millennium reporting unit. Step one of the
impairment valuation utilized a combination of the income approach and the
market approach. The income and market approaches were weighted at 33% and 67%,
respectively. The weights reflect the relative importance of the methods used
and serve as a means of simulating the thinking of hypothetical investors.
Significant assumptions and estimates used to determine the step one impairment
value included expected cash flows and annual growth rates, anticipated future
earnings, operating margins and other indicators of value derived from market
transactions of similar companies.


Step two of the impairment valuation
contemplated a hypothetical acquisition of the assets and liabilities of
Millennium. The intangible assets identified were trade name and customer lists.
Significant assumptions and estimates used to determine the step two allocation
include an expected discount rate, existing customer list and projected revenue
from those customers.


In accordance with SFAS 142 and SFAS
144, we evaluated Millennium’s goodwill and intangible assets for impairment as
of September 30, 2008. In connection with these tests, we determined that margin
pressures reducing Millennium revenues continued to negatively affect operating
performance, thereby reducing the fair value of our investment in Millennium. As
a result, the Company recorded a $5.9 million, pre-tax goodwill impairment
charge as of September 30, 2008. In the fourth quarter of 2008, due to continued
pressures in the sales margin and resulting decreased earnings of Millennium, we
identified and recorded an additional pre-tax goodwill impairment of $2.8
million and $500,000 of intangible asset impairment. Millennium’s goodwill and
intangible assets were $3.1 million and $1.4 million, respectively, at December
31, 2008. It is possible that additional impairment charges could
occur in 2009.


Banking reporting
unit

An independent third party performed the valuation of the
Banking reporting unit. Step one of the impairment valuation utilized a
combination of the income approach and the market approach. The income and
market approaches were weighted at 67% and 33%, respectively. The weights
reflect the relative importance of the methods used and serve as a means of
simulating the thinking of hypothetical investors. Significant assumptions and
estimates used to determine the step one impairment value included expected cash
flows and annual growth rates, anticipated future earnings, operating margins
and other indicators of value derived from market transactions of similar
companies.


44





The 2008 annual impairment evaluation
of the goodwill and intangible balances did not identify any impairment for the
Banking reporting unit. At December 31, 2008, the Company’s common shareholders’
equity was $186.7 million. At March 2, 2009, the Company’s market capitalization
was $116.0 million. A goodwill impairment test may be performed on the Banking
reporting unit as of March 31, 2009. If current market conditions persist, it is
possible that goodwill impairment could occur in the Banking
reporting unit in 2009.


There was no goodwill or intangible
impairment recorded in 2007 or 2006 for either the Millennium or Banking
reporting units.


Goodwill and Other Intangible Assets
(“SFAS 142”.) Intangible assets other than goodwill, such as core deposit
intangibles, that are determined to have finite lives are amortized over their
estimated remaining useful lives. The Company tests goodwill for impairment on
an annual basis and intangible assets whenever events or changes in
circumstances indicate that the Company may not be able to recover the
respective asset’s carrying amount. Such tests involve the use of estimates and
assumptions. Management believes that the assumptions utilized are reasonable.
However, the Company may incur impairment charges related to goodwill or
intangible assets in the future due to changes in business prospects or other
matters that could affect our assumptions.


SFAS 142 requires that goodwill be
tested for impairment at the reporting unit level. Reporting units are defined
as the same level as, or one level below, an operating segment, as defined in
SFAS 131, Disclosures about Segments of an Enterprise and Related
Information
. An operating segment is a component of a business for which
separate financial information is available that management regularly evaluates
in deciding how to allocate resources and assess performance. The Company’s
reporting units are Millennium, Trust and the Banking operations of Enterprise.
At December 31, 2008 and 2007, the Trust reporting unit had no goodwill.


43





Historically, our goodwill impairment
tests have been completed as of December 31 each year. Following the annual
impairment test for 2006, the Company changed the goodwill impairment test date
for the Millennium reporting unit to September 30 of each fiscal year. This
change in the testing date was designed to provide sufficient time for
independent experts to complete the Millennium reporting unit testing prior to
year end reporting. The goodwill impairment test date for the Banking reporting
unit did not change.


Under SFAS 142, businesses must
identify potential impairments by comparing the fair value of a reporting unit
to its carrying amount, including goodwill. Goodwill impairment does not occur
as long as the fair value of the unit is greater than its carrying value. The
second step of the impairment test is only required if a goodwill impairment is
identified in step one. The second step of the test compares the implied fair
market value of goodwill to its carrying amount. If the carrying amount of
goodwill exceeds its implied fair market value, an impairment loss is
recognized. That loss is equal to the carrying amount of goodwill that is in
excess of its implied fair market value.


SFAS 144 also requires long-lived
assets, such as purchased intangibles subject to amortization, to be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated future cash
flows, an impairment charge is recognized by the amount by which the carrying
amount of the asset exceeds the fair value of the asset.


There are three general approaches
commonly used in business valuation: income approach, asset-based approach, and
market approach. Within each of these approaches, there are various techniques
for determining the value of a business using the definition of value
appropriate for the appraisal assignment. Professional judgment is required to
determine which valuation methods are the most appropriate. The valuation may
utilize one or more of the approaches. Generally, the income approaches
determine value by calculating the net present value of the benefit stream
generated by the business (discounted cash flow); the asset-based approaches
determine value by adding the sum of the parts of the business (net asset
value); and the market approaches determine value by comparing the subject
company to other companies in the same industry, of the same size, and/or within
the same region.


Goodwill and Other Intangible Assets
(“SFAS 142”.) Intangible assets other than goodwill, such as core deposit
intangibles, that are determined to have finite lives are amortized over their
estimated remaining useful lives. The Company tests goodwill for impairment on
an annual basis and intangible assets whenever events or changes in
circumstances indicate that the Company may not be able to recover the
respective asset’s carrying amount. Such tests involve the use of estimates and
assumptions. Management believes that the assumptions utilized are reasonable.
However, the Company may incur impairment charges related to goodwill or
intangible assets in the future due to changes in business prospects or other
matters that could affect our assumptions.


SFAS 142 requires that goodwill be
tested for impairment at the reporting unit level. Reporting units are defined
as the same level as, or one level below, an operating segment, as defined in
SFAS 131, Disclosures about Segments of an Enterprise and Related
Information
. An operating segment is a component of a business for which
separate financial information is available that management regularly evaluates
in deciding how to allocate resources and assess performance. The Company’s
reporting units are Millennium, Trust and the Banking operations of Enterprise.
At December 31, 2008 and 2007, the Trust reporting unit had no goodwill.


43





Historically, our goodwill impairment
tests have been completed as of December 31 each year. Following the annual
impairment test for 2006, the Company changed the goodwill impairment test date
for the Millennium reporting unit to September 30 of each fiscal year. This
change in the testing date was designed to provide sufficient time for
independent experts to complete the Millennium reporting unit testing prior to
year end reporting. The goodwill impairment test date for the Banking reporting
unit did not change.


Under SFAS 142, businesses must
identify potential impairments by comparing the fair value of a reporting unit
to its carrying amount, including goodwill. Goodwill impairment does not occur
as long as the fair value of the unit is greater than its carrying value. The
second step of the impairment test is only required if a goodwill impairment is
identified in step one. The second step of the test compares the implied fair
market value of goodwill to its carrying amount. If the carrying amount of
goodwill exceeds its implied fair market value, an impairment loss is
recognized. That loss is equal to the carrying amount of goodwill that is in
excess of its implied fair market value.


SFAS 144 also requires long-lived
assets, such as purchased intangibles subject to amortization, to be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated future cash
flows, an impairment charge is recognized by the amount by which the carrying
amount of the asset exceeds the fair value of the asset.


There are three general approaches
commonly used in business valuation: income approach, asset-based approach, and
market approach. Within each of these approaches, there are various techniques
for determining the value of a business using the definition of value
appropriate for the appraisal assignment. Professional judgment is required to
determine which valuation methods are the most appropriate. The valuation may
utilize one or more of the approaches. Generally, the income approaches
determine value by calculating the net present value of the benefit stream
generated by the business (discounted cash flow); the asset-based approaches
determine value by adding the sum of the parts of the business (net asset
value); and the market approaches determine value by comparing the subject
company to other companies in the same industry, of the same size, and/or within
the same region.


Goodwill and Other Intangible Assets
The Company accounts for goodwill and intangible assets according to SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). The Company tests goodwill for impairment on an annual basis. Such tests involve the use of estimates and assumptions. Intangibles, consisting of customer lists are amortized using the straight-line method over the estimated useful life of 5 years and trade names are amortized using the straight-line method over the estimated useful lives of approximately 20 years. Core deposit intangibles are amortized using an accelerated method over an estimated useful life of approximately 10 years.

Historically, our goodwill impairment tests have been completed as of December 31 each year. Following the annual impairment test for 2006, the Company changed the goodwill and intangible asset impairment test date for the Millennium reporting unit to September 30 of each fiscal year. This change in the testing date was designed to provide sufficient time for independent experts to complete the Millennium reporting unit testing prior to year end reporting. The goodwill and other intangible impairment test date for the Banking segment did not change.

57


Under SFAS 142, businesses must identify potential goodwill impairments by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Goodwill impairment is not indicated as long as the fair value of the reporting unit is greater than its carrying value. The second step of the impairment test is only required if a goodwill impairment is identified in step one. The second step of the test compares the implied fair value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized. That loss is equal to the carrying amount of goodwill that is in excess of its implied fair market value.

Goodwill and Other Intangible Assets
The Company accounts for goodwill and intangible assets according to SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). The Company tests goodwill for impairment on an annual basis. Such tests involve the use of estimates and assumptions. Intangibles, consisting of customer lists are amortized using the straight-line method over the estimated useful life of 5 years and trade names are amortized using the straight-line method over the estimated useful lives of approximately 20 years. Core deposit intangibles are amortized using an accelerated method over an estimated useful life of approximately 10 years.

Historically, our goodwill impairment tests have been completed as of December 31 each year. Following the annual impairment test for 2006, the Company changed the goodwill and intangible asset impairment test date for the Millennium reporting unit to September 30 of each fiscal year. This change in the testing date was designed to provide sufficient time for independent experts to complete the Millennium reporting unit testing prior to year end reporting. The goodwill and other intangible impairment test date for the Banking segment did not change.

57


Under SFAS 142, businesses must identify potential goodwill impairments by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Goodwill impairment is not indicated as long as the fair value of the reporting unit is greater than its carrying value. The second step of the impairment test is only required if a goodwill impairment is identified in step one. The second step of the test compares the implied fair value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized. That loss is equal to the carrying amount of goodwill that is in excess of its implied fair market value.

Goodwill and Other Intangible Assets (“SFAS 142”). The Company tests goodwill for impairment on an annual basis. Such tests involve the use of estimates and assumptions. Intangibles, consisting of customer lists are amortized using the straight-line method over the estimated useful life of 5 years and trade names are amortized using the straight-line method over the estimated useful lives of approximately 20 years. Core deposit intangibles are amortized using an accelerated method over an estimated useful life of approximately 10 years.

Historically, our goodwill impairment tests have been completed as of December 31 each year. Following the annual impairment test for 2006, the Company changed the goodwill and intangible asset impairment test date for the Millennium reporting unit to September 30 of each fiscal year. This change in the testing date was designed to provide sufficient time for independent experts to complete the Millennium reporting unit testing prior to year end reporting. The goodwill and other intangible impairment test date for the Banking segment did not change.

57


Under SFAS 142, businesses must identify potential goodwill impairments by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Goodwill impairment is not indicated as long as the fair value of the reporting unit is greater than its carrying value. The second step of the impairment test is only required if a goodwill impairment is identified in step one. The second step of the test compares the implied fair value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized. That loss is equal to the carrying amount of goodwill that is in excess of its implied fair market value.

Goodwill and Other Intangible Assets (“SFAS 142”). The Company tests goodwill for impairment on an annual basis. Such tests involve the use of estimates and assumptions. Intangibles, consisting of customer lists are amortized using the straight-line method over the estimated useful life of 5 years and trade names are amortized using the straight-line method over the estimated useful lives of approximately 20 years. Core deposit intangibles are amortized using an accelerated method over an estimated useful life of approximately 10 years.

Historically, our goodwill impairment tests have been completed as of December 31 each year. Following the annual impairment test for 2006, the Company changed the goodwill and intangible asset impairment test date for the Millennium reporting unit to September 30 of each fiscal year. This change in the testing date was designed to provide sufficient time for independent experts to complete the Millennium reporting unit testing prior to year end reporting. The goodwill and other intangible impairment test date for the Banking segment did not change.

57


Under SFAS 142, businesses must identify potential goodwill impairments by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Goodwill impairment is not indicated as long as the fair value of the reporting unit is greater than its carrying value. The second step of the impairment test is only required if a goodwill impairment is identified in step one. The second step of the test compares the implied fair value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized. That loss is equal to the carrying amount of goodwill that is in excess of its implied fair market value.

Goodwill and Other Intangible Assets

The Company accounts for goodwill and
intangible assets according to SFAS No. 142,
Goodwill and Other Intangible Assets
(“SFAS 142”). The Company tests goodwill for impairment on an annual basis. Such
tests involve the use of estimates and assumptions. Intangibles, consisting of
customer lists are amortized using the straight-line method over the estimated
useful life of 5 years and trade names are amortized using the straight-line
method over the estimated useful lives of approximately 20 years. Core deposit
intangibles are amortized using an accelerated method over an estimated useful
life of approximately 10 years.


Historically, our goodwill impairment
tests have been completed as of December 31 each year. Following the annual
impairment test for 2006, the Company changed the goodwill and intangible asset
impairment test date for the Millennium reporting unit to September 30 of each
fiscal year. This change in the testing date was designed to provide sufficient
time for independent experts to complete the Millennium reporting unit testing
prior to year end reporting. The goodwill and other intangible impairment test
date for the Banking segment did not change.


57





Under SFAS 142, businesses must
identify potential goodwill impairments by comparing the fair value of a
reporting unit to its carrying amount, including goodwill. Goodwill impairment
is not indicated as long as the fair value of the reporting unit is greater than
its carrying value. The second step of the impairment test is only required if a
goodwill impairment is identified in step one. The second step of the test
compares the implied fair value of goodwill to its carrying amount. If the
carrying amount of goodwill exceeds its implied fair value, an impairment loss
is recognized. That loss is equal to the carrying amount of goodwill that is in
excess of its implied fair market value.


Goodwill and Other Intangible Assets

The Company accounts for goodwill and
intangible assets according to SFAS No. 142,
Goodwill and Other Intangible Assets
(“SFAS 142”). The Company tests goodwill for impairment on an annual basis. Such
tests involve the use of estimates and assumptions. Intangibles, consisting of
customer lists are amortized using the straight-line method over the estimated
useful life of 5 years and trade names are amortized using the straight-line
method over the estimated useful lives of approximately 20 years. Core deposit
intangibles are amortized using an accelerated method over an estimated useful
life of approximately 10 years.


Historically, our goodwill impairment
tests have been completed as of December 31 each year. Following the annual
impairment test for 2006, the Company changed the goodwill and intangible asset
impairment test date for the Millennium reporting unit to September 30 of each
fiscal year. This change in the testing date was designed to provide sufficient
time for independent experts to complete the Millennium reporting unit testing
prior to year end reporting. The goodwill and other intangible impairment test
date for the Banking segment did not change.


57





Under SFAS 142, businesses must
identify potential goodwill impairments by comparing the fair value of a
reporting unit to its carrying amount, including goodwill. Goodwill impairment
is not indicated as long as the fair value of the reporting unit is greater than
its carrying value. The second step of the impairment test is only required if a
goodwill impairment is identified in step one. The second step of the test
compares the implied fair value of goodwill to its carrying amount. If the
carrying amount of goodwill exceeds its implied fair value, an impairment loss
is recognized. That loss is equal to the carrying amount of goodwill that is in
excess of its implied fair market value.


Goodwill and Other Intangible Assets
(“SFAS 142”). The Company tests goodwill for impairment on an annual basis. Such
tests involve the use of estimates and assumptions. Intangibles, consisting of
customer lists are amortized using the straight-line method over the estimated
useful life of 5 years and trade names are amortized using the straight-line
method over the estimated useful lives of approximately 20 years. Core deposit
intangibles are amortized using an accelerated method over an estimated useful
life of approximately 10 years.


Historically, our goodwill impairment
tests have been completed as of December 31 each year. Following the annual
impairment test for 2006, the Company changed the goodwill and intangible asset
impairment test date for the Millennium reporting unit to September 30 of each
fiscal year. This change in the testing date was designed to provide sufficient
time for independent experts to complete the Millennium reporting unit testing
prior to year end reporting. The goodwill and other intangible impairment test
date for the Banking segment did not change.


57





Under SFAS 142, businesses must
identify potential goodwill impairments by comparing the fair value of a
reporting unit to its carrying amount, including goodwill. Goodwill impairment
is not indicated as long as the fair value of the reporting unit is greater than
its carrying value. The second step of the impairment test is only required if a
goodwill impairment is identified in step one. The second step of the test
compares the implied fair value of goodwill to its carrying amount. If the
carrying amount of goodwill exceeds its implied fair value, an impairment loss
is recognized. That loss is equal to the carrying amount of goodwill that is in
excess of its implied fair market value.


Goodwill and Other Intangible Assets
(“SFAS 142”). The Company tests goodwill for impairment on an annual basis. Such
tests involve the use of estimates and assumptions. Intangibles, consisting of
customer lists are amortized using the straight-line method over the estimated
useful life of 5 years and trade names are amortized using the straight-line
method over the estimated useful lives of approximately 20 years. Core deposit
intangibles are amortized using an accelerated method over an estimated useful
life of approximately 10 years.


Historically, our goodwill impairment
tests have been completed as of December 31 each year. Following the annual
impairment test for 2006, the Company changed the goodwill and intangible asset
impairment test date for the Millennium reporting unit to September 30 of each
fiscal year. This change in the testing date was designed to provide sufficient
time for independent experts to complete the Millennium reporting unit testing
prior to year end reporting. The goodwill and other intangible impairment test
date for the Banking segment did not change.


57





Under SFAS 142, businesses must
identify potential goodwill impairments by comparing the fair value of a
reporting unit to its carrying amount, including goodwill. Goodwill impairment
is not indicated as long as the fair value of the reporting unit is greater than
its carrying value. The second step of the impairment test is only required if a
goodwill impairment is identified in step one. The second step of the test
compares the implied fair value of goodwill to its carrying amount. If the
carrying amount of goodwill exceeds its implied fair value, an impairment loss
is recognized. That loss is equal to the carrying amount of goodwill that is in
excess of its implied fair market value.


Goodwill and Other Intangible Assets. Due primarily to continued pressures in the sales margin and resulting earnings of Millennium, the Company’s wholesale insurance brokerage business, this analysis determined that the carrying value of the reporting unit was higher than the fair value of the reporting unit, which resulted in a non-cash goodwill impairment charge of $8,700,000 in 2008. The Millennium intangible assets are related to their customer lists and tradename. The Company also tested the Millennium intangible assets for impairment in conformity with SFAS 144,
Goodwill and Other Intangible Assets. Due primarily to continued pressures in the sales margin and resulting earnings of Millennium, the Company’s wholesale insurance brokerage business, this analysis determined that the carrying value of the reporting unit was higher than the fair value of the reporting unit, which resulted in a non-cash goodwill impairment charge of $8,700,000 in 2008. The Millennium intangible assets are related to their customer lists and tradename. The Company also tested the Millennium intangible assets for impairment in conformity with SFAS 144,
Goodwill and Other Intangible Assets.
Due primarily to continued pressures in the sales margin and resulting earnings
of Millennium, the Company’s wholesale insurance
brokerage business, this analysis determined that the carrying value of the
reporting unit was higher than the fair value of the reporting unit, which
resulted in a non-cash goodwill impairment charge of $8,700,000 in 2008. The
Millennium intangible assets are related to their customer lists and tradename.
The Company also tested the Millennium intangible assets for impairment in
conformity with SFAS 144,
Goodwill and Other Intangible Assets.
Due primarily to continued pressures in the sales margin and resulting earnings
of Millennium, the Company’s wholesale insurance
brokerage business, this analysis determined that the carrying value of the
reporting unit was higher than the fair value of the reporting unit, which
resulted in a non-cash goodwill impairment charge of $8,700,000 in 2008. The
Millennium intangible assets are related to their customer lists and tradename.
The Company also tested the Millennium intangible assets for impairment in
conformity with SFAS 144,
This excerpt taken from the EFSC 10-Q filed Nov 7, 2008.
Goodwill and Other Intangible Assets. This analysis determined that the carrying value of the reporting unit was higher than the fair value of the reporting unit, which resulted in a third quarter pre-tax, non-cash goodwill impairment charge of $5,900,000. This charge did not reduce the Company’s regulatory capital, cash flow or liquidity.

The Company evaluates the goodwill associated with our banking segment as of December 31 each year.

The tables below present an analysis of the goodwill and intangible activity for the periods presented.

(in thousands)       Goodwill
Balance at December 31, 2007 $ 57,177  
     Acquisition-related adjustments (1)   812  
     Goodwill write-off related to sale of Liberty branch   (97 )
     Goodwill write-off related to sale of DeSoto branch   (680 )
     Goodwill impairment related to Millennium Brokerage Group   (5,900 )
Balance at September 30, 2008 $           51,312  

(1)       Includes additional purchase accounting adjustments on the Millennium and Great American acquisitions necessary to reflect additional valuation data since the respective acquisition dates.

7



Customer and
Trade Name Core Deposit
(in thousands)       Intangibles       Intangible       Net Intangible
Balance at December 31, 2007 $ 2,724 $ 3,329 $ 6,053
       Intangible write-off related to sale of Liberty branch - (269 ) (269 )
       Intangible write-off related to sale of DeSoto branch - (336 ) (336 )
       Amortization expense (634 ) (468 )        (1,102 )
Balance at September 30, 2008 $        2,090 $        2,256 $ 4,346

The following table reflects the expected amortization schedule for the customer, trade name and core deposit intangibles (in thousands) at September 30, 2008.

Year       Amount
Remaining 2008 $ 342
2009 1,327
2010   1,265
2011 371
2012 309
After 2013 732
$ 4,346

These excerpts taken from the EFSC 10-K filed Mar 14, 2008.
Goodwill and Other Intangible Assets
Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment at least annually.

Intangibles, consisting of customer lists and trade names are amortized using the straight-line method over the estimated useful lives of approximately 5 years. Core deposit intangibles are amortized using an accelerated method over an estimated useful life of approximately 10 years.

Goodwill and Other Intangible
Assets
Goodwill represents the excess of
costs over fair value of assets of businesses acquired. Goodwill and intangible
assets acquired in a purchase business combination and determined to have an
indefinite useful life are not amortized, but instead tested for impairment at
least annually. Intangible assets with estimable useful lives are amortized over
their respective estimated useful lives to their estimated residual values, and
reviewed for impairment at least annually.


Intangibles, consisting of customer
lists and trade names are amortized using the straight-line method over the
estimated useful lives of approximately 5 years. Core deposit intangibles are
amortized using an accelerated method over an estimated useful life of
approximately 10 years.


This excerpt taken from the EFSC 10-K filed Mar 15, 2007.

Goodwill and Other Intangible Assets

Goodwill represents the excess of costs over fair value of assets of businesses acquired.  Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment.

Intangibles, consisting of customer lists and agreements not to compete, are amortized using the straight-line method over the estimated useful lives of approximately 5 years.  Core deposit intangibles are amortized using an accelerated method over an estimated useful life of approximately 10 years.  

This excerpt taken from the EFSC 10-K filed Mar 14, 2005.

Goodwill and Other Intangible Assets

Goodwill represents the excess of costs over fair value of assets of businesses acquired.  The Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets, as of January 1, 2002. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142.  SFAS No.142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and review for impairment in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

In connection with SFAS No. 142’s transitional goodwill impairment evaluation, the Statement required the Company to perform an assessment of whether there was an indication that goodwill is impaired as of the date of adoption.  To accomplish this, the Company was required to identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets to those reporting units as of January 1, 2002.  Goodwill was assigned to the Banking segment.  The Company was required to determine the fair value of the reporting unit and compare it to the carrying amount of the reporting unit within six months of January 1, 2002.  Given the size of the goodwill amount and the increasing profitability and growth of the Company, we determined the fair value of the Banking segment by applying appropriate multiples to the segments’ net book value.  To the extent the carrying amount of a reporting unit exceeded the fair value of the reporting unit, the Company would be required to perform the second step of the transitional impairment test, as this is an indication that the reporting unit goodwill may be impaired.  The second step was not required because the fair value exceeded the carrying amount for the reporting units. 

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