ASC 805 Reporting — CDI, CDs and Loans

MountainView can help you comply with ASC 805, which mandates that the core deposit intangible (CDI) associated with any acquired core deposits be quantified for acquisition accounting compliance. We can also provide you with the typically required CD and loan premium estimates, plus other economic value information, to arrive at a transaction goodwill value.

Benefits of MountainView's ASC 805 Compliant Valuation

MountainView’s CDI valuation and report provide acquisition accounting entries required for compliance with ASC 805. With this service, your institution is empowered to:

  • Determine the core deposit intangible and useful economic life values required to complete the accounting entries for ASC 805 compliance
  • Establish the values of your acquired CDs and loans to correctly set up purchase accounting treatments for these elements of transaction value
  • Present you with a multi-faceted entity valuation where this input is necessary
  • Test your prior core deposit intangible and useful economic life values for impairment when required

Valuation Methodology

MountainView produces custom estimates of the CDI and useful economic life associated with acquired core deposits using peer decay data and transaction-specific value inputs. We can also determine value estimates for acquired CDs and loans. Our CDI valuation process matches specific characteristics of the acquired core deposit base to the fair value calculations with custom inputs for value drivers such as non-interest expense and immediate balance outflows. Runoff balances (decay) populate the present value model, define useful economic lives, and set an amortization method (e.g. straight line or accelerated). Peers are uniquely assigned, selected by geographic location, asset size, and other characteristics.

We derive peer runoff balances data from our core deposit forecasts, which are produced by statistical analyses of client-specific data. Our CDI runoff inputs are based on aggregated information representing billions of dollars of deposits and the individual decisions of millions of depositors, as reflected in specific monthly records.

Where a purchase price is not established in the transaction, such as a credit union merger, we can produce an entity valuation. The primary value methodology applied is a transaction-specific discounted cash flow (DCF) fair value analysis. The calculated DCF entity value is placed in perspective with recent comparable M&A value ratio metrics and examination of ongoing balance sheet composition and performance trends. The valuation is based on the expected future path of net earnings, derived from an existing business plan or other input sources. A capital contribution set aside is applied to growth balances.