Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2021

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

6) Goodwill and Other Intangible Assets

Goodwill

At September 30, 2021, the carrying value of goodwill was $167,631,000, which included $13,044,000 of goodwill related to its acquisition of Bay View Funding, $32,619,000 from its acquisition of Focus Business Bank, $13,819,000 from its acquisition of Tri-Valley Bank, $24,271,000 from its acquisition of United American Bank and $83,878,000 from its acquisition of Presidio Bank.

Goodwill impairment exists when a reporting unit’s carrying value exceeds its fair value, which is determined through a qualitative assessment whether it is more likely than not that the fair value of equity of the reporting unit exceeds the carrying value (“Step Zero”). If the qualitative assessment indicates it is more likely than not that the fair value of equity of a reporting unit is less than book value, then a quantitative two-step impairment test is required. Step 1 includes the determination of the carrying value of the Company’s reporting units, including the existing goodwill and intangible assets, and estimating the fair value of each reporting unit.

The Company completed its annual goodwill impairment analysis as of November 30, 2020 with the assistance of an independent valuation firm. The goodwill related to the acquisition of Bay View Funding was tested separately for impairment under this analysis. No events or circumstances since the November 30, 2020 annual impairment test were noted that would indicate it was more likely than not that a goodwill impairment exists, for either the Company’s banking or factoring reporting units.

The following table summarizes the carrying amount of goodwill by segment for the periods indicated:

	September 30,		December 31,
	2021		2020
	(Dollars in thousands)
Banking	$	154,587	$	154,587
Factoring		13,044		13,044
Total Goodwill	$	167,631	$	167,631

Other Intangible Assets

The Company’s intangible assets are summarized as follows for the periods indicated:

	September 30, 2021
	Gross
	Carrying		Accumulated
	Amount		Amortization		Total
	(Dollars in thousands)
Core deposit intangibles	$	25,023	$	(11,274)	$	13,749
Customer relationship and brokered relationship intangibles		1,900		(1,313)		587
Below market leases		770		(683)		87
Total	$	27,693	$	(13,270)	$	14,423

	December 31, 2020
	Gross
	Carrying		Accumulated
	Amount		Amortization		Total
	(Dollars in thousands)
Core deposit intangibles	$	25,023	$	(9,153)	$	15,870
Customer relationship and brokered relationship intangibles		1,900		(1,171)		729
Below market leases		770		(705)		65
Total	$	27,693	$	(11,029)	$	16,664

As of September 30, 2021, the estimated amortization expense for future periods is as follows:

				Customer &	Below/
	Core			Brokered	(Above)		Total
	Deposit			Relationship	Market		Amortization
Year	Intangible			Intangible	Lease		Expense
		(Dollars in thousands)
2021 remaining	$	708	$	48	$	(1)	$	755
2022		2,447		190		(2)		2,635
2023		2,217		190		(2)		2,405
2024		2,023		159		5		2,187
2025		1,795		—		18		1,813
Thereafter		4,559		—		69		4,628
	$	13,749	$	587	$	87	$	14,423

Impairment testing of the intangible assets is performed at the individual asset level. Impairment exists if the carrying amount of the asset is not recoverable and exceeds its fair value at the date of the impairment test. For intangible assets, estimates of expected future cash flows (cash inflows less cash outflows) that are directly associated with an intangible asset are used to determine the fair value of that asset. Management makes certain estimates and assumptions in determining the expected future cash flows from core deposit and customer relationship intangibles including account attrition, expected lives, discount rates, interest rates, servicing costs and other factors. Significant changes in these estimates and assumptions could adversely impact the valuation of these intangible assets. If an impairment loss exists, the carrying amount of the intangible asset is adjusted to a new cost basis. The new cost basis is then amortized over the remaining useful life of the asset. Based on its assessment, management concluded that there was no impairment of intangible assets at September 30, 2021 and December 31, 2020.