Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

At December 31, 2020, the Company had goodwill of $898.6 million. In June 2020, the Company acquired Opus, which resulted in the recognition of approximately $90.2 million in goodwill assets including post-acquisition measurement period purchase accounting adjustments of $2.6 million to the fair value of assets acquired and liabilities assumed. In 2019, adjustments to goodwill in the amount of $404,000 were related to fair value adjustments associated with the acquisition of Grandpoint Capital, Inc. (“Grandpoint”) and were recorded during the 12-month measurement period subsequent to the acquisition date. In 2018, additions to goodwill included $313.0 million due to the acquisition of Grandpoint and adjustments to goodwill in the amount of $1.8 million for Plaza Bancorp (“PLZZ”) and $600,000 for Heritage Oaks Bank (“HEOP”), both of which were recorded during the 12-month measurement period subsequent to the acquisition date. The following table presents changes in the carrying value of goodwill for the periods indicated:


	2020		2019		2018
	(Dollars in thousands)
Balance, beginning of year	$	808,322	$	808,726	$	493,329
Goodwill acquired during the year	92,844		—		313,043
Purchase accounting adjustments	(2,597)		(404)		2,354

Balance, end of year	$	898,569	$	808,322	$	808,726
Accumulated impairment losses at end of year	$	—	$	—	$	—

The amount of goodwill is subject to change, as the Company’s fair value estimates for assets acquired and liabilities assumed in the Opus acquisition are considered preliminary, and are subject to refinement for a period of one year after the closing date of the acquisition as additional information related to those fair value estimates becomes available or such information is considered final.

The Company’s policy is to assess goodwill for impairment on an annual basis during the fourth quarter of each year, and more frequently if events or circumstances lead management to believe the value of goodwill may be impaired. Given the volatility observed in economic conditions and in the equity markets during 2020, triggered by the outbreak of the COVID-19 pandemic, the Company performed a qualitative assessment of goodwill each quarter commencing with the quarter ended March 31, 2020. No impairment of goodwill was determined to exist as a result of the quarterly analyses in 2020.

In accordance with ASC 350-20, Intangibles - Goodwill and Other - Goodwill, the Company made an unconditional election to forego a qualitative assessment of goodwill and proceed directly to the quantitative assessment of goodwill during the fourth quarter of 2020. The Company’s quantitative assessment of goodwill in the fourth quarter of 2020 consisted of a market approach as well as a discounted cash flow approach, both of which were given equal weighting in the analysis. The results of this analysis indicated the estimated fair value of the Company exceeded its carrying value and that the value of goodwill assets could be supported and there was no goodwill impairment as of December 31, 2020.

The market approach utilized in the Company’s goodwill assessment utilized observed valuation multiples, such as price-to-tangible book values, of the Company’s peers, as well as premiums paid in bank mergers completed over the last four years. In addition, the market approach component of the Company’s quantitative assessment incorporated estimates for a control premium, which was based on market observations. The discounted cash flow approach utilized in the Company’s goodwill assessment relied upon internal projections of future operating results, as well as estimates for an appropriate discount rate, representative of the estimated cost of equity.

At December 31, 2020, the Company had other intangible assets of $85.5 million, consisting of $82.5 million in core deposit intangibles and $3.0 million in customer relationship intangibles. The Company had $19.3 million of additions to other intangible assets during 2020, consisting of $16.1 million of core deposit intangible assets and $3.2 million of customer relationship intangibles, both the result of the Opus acquisition. The following table summarizes the change in the balance of core deposit intangibles and customer relationship intangible assets, and the related accumulated amortization for the periods indicated below:


	2020		2019		2018
	(Dollars in thousands)
Gross balance of intangible assets:
Balance, beginning of year	$	125,945	$	125,945	$	54,809
Additions due to acquisitions	19,267		—		71,136
Balance, end of year	145,212		125,945		125,945
Accumulated amortization:
Balance, beginning of year	(42,633)		(25,389)		(11,795)
Amortization	(17,072)		(17,244)		(13,594)
Balance, end of year	(59,705)		(42,633)		(25,389)
Net intangible assets, end of year	$	85,507	$	83,312	$	100,556

The Company amortizes the core deposit intangibles and customer relationship intangibles based on the projected useful lives of the related deposits in the case of core deposit intangibles, and over the projected useful lives of the related client relationships in the case of customer relationship intangibles, typically ranging from six to eleven years. The estimated aggregate amortization expense related to our core deposit intangible assets and customer relationship intangible assets for each of the next five years succeeding December 31, 2020, in order from the present, is $15.9 million, $14.0 million, $12.3 million, $11.1 million, and $10.0 million. The Company’s core deposit intangibles and customer relationship intangibles are evaluated annually for impairment or sooner if events and circumstances indicate possible impairment. Factors that may attribute to impairment include customer attrition and run-off. Management is unaware of any events and/or circumstances that would indicate a possible impairment to the core deposit intangible assets or customer relationship intangible assets as of December 31, 2020.