RBB Bancorp Goodwill & Intangibles Disclosure

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, 2025 and 2024, and is the only intangible asset with an indefinite life on the balance sheet.

 

We performed a quantitative goodwill impairment analysis as of October 1, 2025, with the assistance of a third-party valuation specialist. The evaluation used two methods to estimate the value of the Company: the market approach and the income approach. The market approach uses pricing information available on publicly traded companies that are similar to the subject company to determine the value of the subject company. Estimates used in the market approach included selecting a representative peer group of institutions, determining an appropriate 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 is based on the discounted free cash flows of the subject company using projections of future results, and incorporating economic forecasts and management's plans. Estimates used in the income approach include management's projections of the Company's free cash flows in future periods and an appropriate rate of return that would be required by a market participant. Based on this quantitative analysis, the fair value of the Company was determined to exceed its carrying amount by 5.7% at October 1, 2025. As a result, management concluded that goodwill was not impaired as of October 1, 2025. No goodwill impairment charges were recognized during the years ended December 31, 2025 and 2024.

 

Other intangible assets consist of core deposit intangible (“CDI”) (included in “Accrued interest and other assets” in the consolidated balance sheets) 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. 

 

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

 

		Year ended December 31,
		2025				2024				2023
Core deposit intangibles		(dollars in thousands)
Balance, beginning of year		$	10,459			$	10,459			$	10,459
Balance, end of year		$	10,459			$	10,459			$	10,459
Accumulated amortization:
Balance, beginning of year		$	8,448			$	7,664			$	6,741
Amortization			673				784				923
Balance, end of year		$	9,121			$	8,448			$	7,664
Core deposit intangibles, net		$	1,338			$	2,011			$	2,795

 

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

 

			CDI Amortization Expense
Year ending December 31:			(dollars in thousands)
2026		$	501
2027			417
2028			297
2029			64
2030			33
Thereafter			26
Total		$	1,338