CoastalSouth Bancshares, Inc. Goodwill & Intangibles Disclosure
NOTE 6 — GOODWILL AND INTANGIBLE ASSETS
The Company’s carrying amount of goodwill at December 31, 2025, and 2024 and changes to the goodwill are summarized as follows:
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|
Years Ended December 31, |
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(In thousands of dollars) |
|
2025 |
|
|
2024 |
|
||
Beginning of year |
|
$ |
4,708 |
|
|
$ |
4,708 |
|
Acquired goodwill |
|
|
- |
|
|
|
- |
|
Impairment |
|
|
- |
|
|
|
- |
|
End of year |
|
$ |
4,708 |
|
|
$ |
4,708 |
|
Goodwill was recognized as a result of the Company’s acquisition of First Citizens Financial Corporation in 2018. As of October 1, 2025, the Company performed its annual goodwill impairment evaluation conducting a comprehensive business valuation analysis using a quantitative method for determining the fair value. The Company determined the fair value of our reporting unit exceeded its carrying amount and that goodwill was not impaired. There are no events that have occurred since the last annual goodwill impairment assessment that would necessitate an interim goodwill impairment. No goodwill was recognized in conjunction with the acquisition of Cornerstone Bank in 2021.
The Company also had other intangible assets at December 31, 2025 and 2024, as presented in the following table:
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December 31, 2025 |
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December 31, 2024 |
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(In thousands of dollars) |
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Gross Carrying |
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|
Accumulated |
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|
Net Carrying |
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|
Gross Carrying |
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|
Accumulated |
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|
Net Carrying |
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Definite-lived intangible assets: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Core deposit intangibles |
|
$ |
1,850 |
|
|
$ |
1,562 |
|
|
$ |
288 |
|
|
$ |
1,850 |
|
|
$ |
1,409 |
|
|
$ |
441 |
|
Commercial mortgage servicing rights |
|
|
3,857 |
|
|
|
2,591 |
|
|
|
1,266 |
|
|
|
3,445 |
|
|
|
2,208 |
|
|
|
1,237 |
|
Total |
|
$ |
5,707 |
|
|
$ |
4,153 |
|
|
$ |
1,554 |
|
|
$ |
5,295 |
|
|
$ |
3,617 |
|
|
$ |
1,678 |
|
Core deposit intangibles are amortized over their estimated useful lives, which the Company determined is ten years. Amortization expense of $153 thousand and $189 thousand at December 31, 2025 and 2024, respectively, was recognized in other noninterest expense.
CMSRs arise from the sale of participating interests in government guaranteed loans to third parties where servicing is retained by the Company. These assets are amortized over the expected remaining life of the related loan. Amortization expense of $383 thousand and $314 thousand at December 31, 2025 and 2024, respectively, was recognized in other noninterest income related to these intangible assets. There was no impairment for the CMSRs for the years ended December 31, 2025 or 2024.
The Company’s estimated future amortization of intangible assets at December 31, 2025 is presented in the following table:
2026 |
|
$ |
347 |
|
2027 |
|
|
285 |
|
2028 |
|
|
216 |
|
2029 |
|
|
168 |
|
2030 |
|
|
130 |
|
Thereafter |
|
|
408 |
|
Total expected amortization |
|
$ |
1,554 |
|
Contractually specified servicing fees related to commercial mortgage servicing rights of $1.1 million were recognized in during each of the years ended December 31, 2025, and 2024. The principal balance of loans serviced for third parties was $205.8 million and $201.0 million at December 31, 2025 and 2024, respectively.
A rollforward of each class of CMSRs is presented as follows:
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|
For the Years Ended December 31, |
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|
|
2025 |
|
|
2024 |
|
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(In thousands of dollars) |
|
SBA |
|
|
USDA |
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|
SBA |
|
|
USDA |
|
||||
Beginning carrying value, net |
|
$ |
590 |
|
|
$ |
647 |
|
|
$ |
697 |
|
|
$ |
428 |
|
Amortization |
|
|
(254 |
) |
|
|
(129 |
) |
|
|
(241 |
) |
|
|
(73 |
) |
Servicing rights originated |
|
|
369 |
|
|
|
43 |
|
|
|
134 |
|
|
|
292 |
|
Servicing rights purchased |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Servicing rights sold |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Impairment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Ending carrying value, net |
|
$ |
705 |
|
|
$ |
561 |
|
|
$ |
590 |
|
|
$ |
647 |
|
The estimated fair value of the CMSRs was $1.7 million and $1.6 million at December 31, 2025 and 2024, respectively.
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.