2006 ANNUAL REPORT - Far East National Bank

6. GOODWILL INTANGIBLE ASSETSOn August 15, 1997, the Bank was acquired by SinoPac Bancorp, which is a wholly owned subsidiaryof Bank SinoPac of Taiwan. The acquisition was accounted for using the purchase method of accountingwith the purchase price “pushed down” to the Bank. In conjunction with this acquisition, the Bankrecorded approximately $37,606,000 of goodwill and $6,958,000 of core deposit intangible. Both thegoodwill and the core deposit intangible were to be amortized, on a straight-line basis, over a period of15 years. In January 2002 the Bank adopted SFAS No. 142, Goodwill and Other Intangible Assets, and,as a result, no longer amortizes goodwill but tests it at least annually for impairment. The Bank willcontinue to amortize the core deposit intangible over an estimated useful life of 15 years.Following is a summary of the Bank’s goodwill and intangible assets as of December 31:2006 2005Gross Carrying Accumulated Gross Carrying AccumulatedAmount Amortization Amount AmortizationGoodwill $ 37,605,540 $ (11,855,659) $ 37,605,540 $ (11,855,659)Core deposit intangibles 6,958,000 (4,348,750) 6,958,000 (3,884,884)Total $ 44,563,540 $ (16,204,409) $ 44,563,540 $ (15,740,543)For the years ended December 31, 2006 and 2005, the Bank recorded amortization expense ofapproximately $464,000 for both years, related to the core deposit intangibles. The estimatedamortization of the December 31, 2006 balance for the succeeding five fiscal years will beapproximately $464,000 per year.There were no changes in the carrying value of goodwill during the year ended December 31, 2006. TheBank tested goodwill for impairment in January 2006 and 2007 and determined that there was noimpairment.7. OTHER ASSETSThe Bank purchased $30 million of bank owned life insurance policies on its executives. The policiesare established for the benefit of the Bank as the Bank paid the single-premium life insurance andreceives non-interest income to offset the cost of employee benefit expenses. The cash surrender valuewas approximately $32,950,000 and $31,560,000 as of December 31, 2006 and 2005, respectively.In 2005, the Bank carried a single premium life insurance policy on a former key officer of the Bank asthe beneficiary. The insurance policy was purchased with a single premium of $1,000,000, which wasredeemed in 2005 due to the death of the individual and the Bank recognized an additional benefit of$463,000.28