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Note 2 - Accounting Policies | 9 Months Ended
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Sep. 30, 2019
Notes to Financial Statements |
New Accounting Pronouncements and Changes in Accounting Principles [Text Block] | Note 2: Accounting Policies New Accounting Policy Please refer to the summary of Significant Accounting Policies included in the Company’s 2018 Annual Report on Form 10 -K for a list of all policies in effect as of December 31, 2018. The below summary is intended to provide updates or new policies required as a result of a new accounting standard or a change to the Company’s operations or assets that require a new or amended policy. Transfers of Financial Assets Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when ( 1 ) the assets have been isolated from the Company, ( 2 ) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and ( 3 ) the Company does not maintain effective control over the transferred assets through either (a) an agreement that both entitles and obligates the transferor to repurchase or redeem the assets before maturity or (b) the ability to unilaterally cause the holder to return specific assets, other than through a cleanup call. Loans Held for Sale Loans held for sale represent the guaranteed portion of Small Business Administration (“SBA”) loans and are reflected at the lower of aggregate cost or market value. The Company originates loans to customers under a SBA program that historically has provided for SBA guarantees of 75 percent of the principal balance of each loan. The Company generally sells the guaranteed portion of its SBA loans to a third party and retains the servicing, holding the unguaranteed portion in its portfolio. The amount of loan origination fees is included in the carrying value of loans sold and in the calculation of the gain or loss on the sale. When sales of SBA loans do occur, the premium received on the sale and the present value of future cash flows of the servicing assets, less the discount of the retained portion of the loan are recognized in income. All criteria for sale accounting must be met in order for the loan sales to occur; see details under the “Transfers of Financial Assets” heading above. There were $4.1 million of loans held for sale at September 30, 2019, consisting of $2.9 million commercial and industrial loans and $1.2 million commercial real estate, which represent the guaranteed portion of the SBA loans originated and held for sale. Servicing assets represent the estimated fair value of retained servicing rights, net of servicing costs, at the time loans are sold. Servicing assets are amortized in proportion to, and over the period of, estimated net servicing revenues. Impairment will be evaluated based on stratifying the underlying financial assets by date of origination and term. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Any impairment, if temporary, would be reported as a valuation allowance. Serviced loans sold to others are not included in the accompanying Consolidated Balance Sheets. The total amount of such loans serviced, but owned by third party, amounted to approximately $13.1 million at September 30, 2019. The servicing asset has a carrying value of $196,000 and fair value of $276,000 at September 30, 2019. Income and fees collected for loan servicing are credited to noninterest income when earned, net of amortization on the related servicing assets. The following table presents an analysis of the activity in the SBA servicing assets for the three and nine months ended September 30, 2019:
(In thousands) |  | Three Months Ended September 30, 2019 |  |  | Nine Months Ended September 30, 2019 |
Beginning balance |  | $ | 156 |  |  | $ | 37 |
Servicing rights capitalized |  |  | 44 |  |  |  | 169 |
Servicing rights amortized |  |  | (4 | ) |  |  | (10 | )
Ending balance |  | $ | 196 |  |  | $ | 196 |
New Accounting Standards Accounting Standards Adopted During 201 9 Effective January 1, 2019, the following new Accounting Standards Updates (ASU) were adopted by the Company: ASU 2016 - 02 In February 2016, the FASB issued ASU No. 2016 - 02, Leases. This ASU was issued to improve the financial reporting of leasing activities and provide a faithful representation of leasing transactions and improve understanding and comparability of a lessee's financial statements. The amendments in this ASU require lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by leases. Accounting by lessors will remain largely unchanged. In July 2018, the FASB issued a subsequent update which introduced a new transition method, under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The guidance was effective for the Company on January 1, 2019, with early adoption permitted. Management elected the transition practical expedient option. The cumulative-effect adjustment was an increase to the opening balance of accumulated deficit at the time of adoption on January 1, 2019. The Company recognized $3.4 million of right-of-use (“ROU”) assets and $3.4 million of lease liabilities for operating leases on its Consolidated Balance Sheets. ASU 2016 - 12 did not have an impact on its Consolidated Statements of Operations. ASU 2017 - 08 In March 2017, the FASB issued ASU 2017 - 08, Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Earlier application is permitted for all entities, including adoption in an interim period. If an entity early adopts the ASU in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. The adoption of ASU 2017 - 08 did not have any impact on its Consolidated Financial Statements. ASU 2017 - 12 "Derivatives and Hedging (Topic 815 ): Targeted Improvements to Accounting for Hedging Activities." ASU 2017 - 12 was issued to ease the burden associated with assessing hedge effectiveness and to promote better financial statement alignment of the recognition and presentation of the effects of the hedging instrument and the hedged item. This guidance requires entities to present the earnings effect of the hedging instrument in the same income statement line item with the earnings effect on the hedged item. In October 2018, FASB issued ASU 2018 - 16, "Derivatives and Hedging (Topic 815 ): Inclusion of the Secured Overnight Financial Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes." ASU 2018 - 16 was issued to expand the list of benchmark interest rates for hedge accounting. The effective date for the amendment is the same as the effective date for ASU 2017 - 12. For public business entities, ASU 2017 - 12 was effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. ASU 2017 - 12 and ASU 2018 - 16 did not have any impact on the Consolidated Financial Statements. ASU 2017 - 04 In January 2017, the FASB issued ASU 2017 - 04, Intangibles-Goodwill and Other (Topic 350 ): Simplifying the Test for Goodwill Impairment: The objective of this guidance is to simplify an entity’s required test for impairment of goodwill by eliminating Step 2 from the goodwill impairment test by permitting the entity to complete a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Under this Update, an entity should perform its annual or quarterly goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount and record an impairment charge for the excess of the carrying amount over the reporting unit’s fair value. The loss recognized should not exceed the total amount of goodwill allocated to the reporting unit and the entity must consider the income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. This guidance is effective for a public business entity that is an SEC filer for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and early adoption is permitted. The Company early adopted ASU 2017 - 04 as of June 30, 2019 and completed a qualitative assessment to support its conclusion that goodwill was not impaired at the reporting date. Accounting Standards Issued But Not Yet Adopted ASU 2016 - 13 In June 2016, the FASB issued ASU 2016 - 13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments. The ASU changes the methodology for measuring credit losses on financial instruments measured at amortized cost to a current expected loss (“CECL”) model. Under the CECL model, entities will estimate credit losses over the entire contractual term of a financial instrument from the date of initial recognition of the instrument. The ASU also changes the existing impairment model for available-for-sale debt securities. In cases where there is neither the intent nor a more-likely-than- not requirement to sell the debt security, an entity will record credit losses as an allowance rather than a direct write-down of the amortized cost basis. Additionally, ASU 2016 - 13 notes that credit losses related to available-for-sale debt securities and purchased credit impaired loans should be recorded through an allowance for credit losses. ASU 2016 - 13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted for fiscal years beginning after December 15, 2018. In October 2019, the FASB voted to approve amendments to the effective date of ASC 326 for smaller reporting companies, as defined by the SEC, and other non-SEC reporting entities. The amendment is expected to delay the effective date to fiscal years beginning after December 31, 2022, including interim periods within those fiscal periods. As the Company is a small reporting company, the delay will be applicable to the Company. The final ASU is expected to be issued in November 2019. Management is currently evaluating the impact that the standard will have on its Consolidated Financial Statements. ASU 2018 - 13 In August 2018, the FASB issued ASU No. 2018 - 13, Fair Value Measurement (Topic 820 ) - Changes to the Disclosure Requirements for Fair Value Measurement , to modify the disclosure requirements on fair value measurements. This ASU removes requirements to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. ASU 2018 - 13 clarifies that disclosure regarding measurement uncertainty is intended to communicate information about the uncertainty in measurement as of the reporting date. ASU 2018 - 13 adds certain disclosure requirements, including disclosure of changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2019. The amendments related to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively, while all other amendments should be applied retrospectively for all periods presented upon their effective date. Management is currently evaluating the impact of adopting the new guidance on the Consolidated Financial Statements, but it is not expected to have a material impact.

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- Definition The entire disclosure of changes in accounting principles, including adoption of new accounting pronouncements, that describes the new methods, amount and effects on financial statement line items. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 + Details
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