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Note 7 - Goodwill and Intangibles

12 Months Ended

Dec. 31, 2024

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 7 - GOODWILL AND INTANGIBLES

Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill resulting from whole bank and branch acquisitions is not amortized, but tested for impairment at least annually. We have selected October 1 as the date to perform the annual impairment test. Goodwill amounted to $71.5 million as of December 31, 2024 and 2023, and is the only intangible asset with an indefinite life on the balance sheet. No impairment was recognized on goodwill during 2024 and 2023.

In 2023, after evaluating the prolonged decrease in our stock price, management performed a quantitative goodwill impairment analysis as of September 30, 2023. Management engaged a third-party valuation specialist to assist with the quantitative analysis. The evaluation used two methods to estimate our value: the market approach and the income approach. The market approach used pricing information available on publicly traded companies that are similar to the company to determine the value of the company. Estimates used in the market approach included selecting a representative peer group of institutions, determining the price to tangible book value based on the results of the peer group institutions, and estimating a control premium based on the whole-bank acquisition prices for representative transactions. The income approach was based on the discounted free cash flows of the company using projections of future results, and considering future economic forecasts and management’s plans. Estimates used in the income approach included management’s projections of our income in future periods and an appropriate rate of return that would be required by a market participant. Based on this quantitative analysis performed at September 30, 2023, our fair value exceeded our carrying amount with a passing amount of 9.6%. Also, at December 31, 2023, due to changes in our projections of income in future periods during the fourth quarter of 2023 resulting from the economic environment, management performed certain calculations and sensitivity analyses related to the quantitative goodwill impairment analysis performed at September 30, 2023 and the current information and concluded that goodwill was also not impaired at December 31, 2023. In the fourth quarter of 2024, we performed a qualitative analysis and concluded that it is more likely than not that our fair value exceeds our carrying value and goodwill was not impaired at December 31, 2024.

Other intangible assets consist of core deposit intangible (“CDI”) assets arising from acquisitions. CDI assets are amortized on an accelerated method over their estimated useful life of 8 to 10 years. CDI was recognized in the 2013 acquisition of Los Angeles National Bank, in the 2016 acquisition of TFC Holding Company, in the 2018 acquisition of FAIC and in the 2020 acquisition of PGB Holdings, Inc. (“PGBH”). In January 2022, $729,000 of CDI was recognized in conjunction with the Hawaii Branch purchase from BOTO.

The following table presents changes in the carrying amount of CDI for the periods indicated:

	*Year ended December 31,*
	*2024*		*2023*		*2022*
Core deposit intangibles	*(dollars in thousands)*
Balance, beginning of year	$	10,459	$	10,459	$	9,730
Acquired from acquisitions		—		—		729
Balance, end of year	$	10,459	$	10,459	$	10,459
Accumulated amortization:
Balance, beginning of year	$	7,664	$	6,741	$	5,655
Amortization		784		923		1,086
Balance, end of year	$	8,448	$	7,664	$	6,741
Core deposit intangibles, net	$	2,011	$	2,795	$	3,718

Estimated CDI amortization expense for the next 5 years is as follows:

		*CDI Amortization Expense*
Year ending December 31:		*(dollars in thousands)*
2025	$	672
2026		501
2027		417
2028		297
2029		64
Thereafter		60
Total	$	2,011