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Recent Accounting Pronouncements | 3 Months Ended
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Mar. 31, 2023
Recent Accounting Pronouncements [Abstract] |
Recent Accounting Pronouncements | Note 2. Recent Accounting Pronouncements
Recently adopted accounting standards |  |  |  |  |  |  |  |  |  |
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
Description |  | This standard requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss (CECL) model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications) from the date of initial recognition of that instrument. The ASU replaces the current accounting model for purchased credit impaired loans and debt securities. The allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”), should be determined in a similar manner to other financial assets measured on an amortized cost basis. However, upon initial recognition, the allowance for credit losses is added to the purchase price to determine the initial amortized cost basis. The subsequent accounting for PCD financial assets is the same expected loss model described above.
|  | In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities. Management does not intend to sell or believes that it is more likely than not they will be required to sell.
|  | The Corporation adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet (OBS) credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.
Effective Date |  | January 1, 2023
Effect on the Consolidated Financial Statements |  | The Corporation adopted the ASU as of January 1, 2023 and recorded a decrease to the allowance for credit loss (ACL) for loans of $536 thousand, an increase of $412 thousand to the ACL for unfunded commitments, an increase of $98 thousand to retained earnings, and a deferred tax liability of $26 thousand.
|  | The following table illustrates the impact of ASC 326:
|  |  |  |  |  |  | As Reported |  |  | Pre-ASC |  |  | Impact of |
|  |  |  |  |  |  | Under |  |  | 326 |  |  | ASC 326 |
|  |  |  |  |  |  | ASC 326 |  |  | Adoption |  |  | Adoption |
|  | (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
|  | Assets: |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Loans |  |  |  |  |  |  |  |  |  |  |
|  |  |  | First liens |  | $ | 1,555 |  | $ | 459 |  | $ | 1,096 |
|  |  |  | Junior liens & lines of credit |  |  | 727 |  |  | 234 |  |  | 493 |
|  |  |  | Construction |  |  | 248 |  |  | 343 |  |  | (95) |
|  |  |  | Commercial real estate |  |  | 8,077 |  |  | 7,493 |  |  | 584 |
|  |  |  | Commercial |  |  | 2,939 |  |  | 4,846 |  |  | (1,907) |
|  |  |  | Consumer |  |  | 93 |  |  | 133 |  |  | (40) |
|  |  |  | Unallocated |  |  | — |  |  | 667 |  |  | (667) |
|  |  | Allowance for credit losses on loans |  | $ | 13,639 |  | $ | 14,175 |  | $ | (536) |
|  | Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Allowance for credit losses on OBS credit exposures |  | $ | 1,887 |  | $ | 1,475 |  | $ | 412 |
ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief
Description |  | This ASU allows entities to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that (1) were previously recorded at amortized cost and (2) are within the scope of ASC 326-20 if the instruments are eligible for the fair value option under ASC 825-10. The fair value option election does not apply to held-to-maturity debt securities. Entities are required to make this election on an instrument-by-instrument basis. ASU 2019-05 has the same effective date as ASU 2016-13. On October 16, 2019, FASB approved its August 2019 proposal to grant certain small public companies a delay in the effective date of ASU 2016-13. For the Corporation, the delay makes the ASU effective January 2023. Since the Corporation currently meets the SEC definition of a small reporting company, the delay will be applied to the Corporation. Early adoption is permitted.
Effective Date |  | January 1, 2023
Effect on the Consolidated Financial Statements |  | The Corporation adopted the ASU on January 1, 2023 and did not elect the fair value option on any financial instruments.
ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructuring and Vintage Disclosures
Description |  | ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings in Accounting Standards Codification ("ASC") 310-40, "Receivables - Troubled Debt Restructurings by Creditors" for entities that have adopted the current expected credit loss model introduced by ASU 2016-13, "Financial Instrucments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments." ASU 2022-02 also required that public business entities disclosure current-period gross charge-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, "Financial Instruments - Credit Losses - Measured at Amortized Cost."
Effective Date |  | January 1, 2023
Effect on the Consolidated Financial Statements |  | The Corporation adopted the standard on January 1, 2023 and it decreased the balance of loans individually evaluated by $3.0 million, and decreased the balance of performing TDR loans by the same amount.
Recently issued but not yet effective accounting standards |  |  |  |  |  |  |  |  |  |
ASU 2023-01, Leases (Topic 842): Common Control Arrangements
Description |  | This ASU requires entities to determine whether a related party arrangement between entities under common control is a lease. If the arrangement is determined to be a lease, an entity must classify and account for the lease on the same basis as an arrangement with a related party (on the basis of legally enforceable terms and conditions).
Effective Date |  | January 1, 2024
Effect on the Consolidated Financial Statements |  | The ASU is not expected to have an impact on the Corporation's financial statements.
ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proporational Amortization Method
Description |  | This ASU permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.
Effective Date |  | January 1, 2024
Effect on the Consolidated Financial Statements |  | The ASU is not expected to have an impact on the Corporation's financial statements.

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