Note 2 - New Authoritative Accounting Guidance	3 Months Ended
Mar. 31, 2019
Notes to Financial Statements
New Accounting Pronouncements and Changes in Accounting Principles [Text Block]	Note 2. New Authoritative Accounting Guidance Accounting Standards Update ("ASU") 2016 - 02, Leases (Topic 842 ): “Leases” requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by the lessee will primarily depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new ASU requires both finance and operating leases to be recognized on the balance sheet. ASU 2016 - 02 also requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. The new disclosures include both qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. ASU 2016 - 02 is effective with fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 for public business entities. An entity may adopt the new guidance either by restating prior periods and recording a cumulative effect adjustment at the beginning of the earliest comparative period presented or by recording a cumulative effect adjustment at the beginning of the period of adoption. FNCB adopted this guidance on January 1, 2019 and applied the standard by recording a cumulative effect adjustment at that date. Management performed a comprehensive evaluation of the effect this guidance may have on its operating results or financial position, including working with various business units within the organization and reviewing contractual arrangements for embedded leases in an effort to identify FNCB’s full lease population. Based on management's evaluation, the adoption of ASU 2016 - 02 resulted in FNCB recording an aggregate lease liability and right of use ("ROU") asset of $ 3.6 million for its operating lease commitments. ASU 2017 - 08 , Receivables – Nonrefundable Fees and Other Costs (Topic 310 ): “Premium Amortization on Purchased Callable Debt Securities” requires that the amortization period for certain callable debt securities be shortened to the earliest call date. The amortization of callable securities held at a discount is not affected. ASU 2017 - 08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 for public business entities. The adoption of this guidance on January 1, 2019 did not have a material effect on the operating results or financial position of FNCB. Accounting Guidance to be Adopted in Future Periods ASU 2016 - 13, Financial Instruments – Credit Losses (Topic 326 ): “Measurement of Credit Losses on Financial Instruments,” replaces the current loss impairment methodology under GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to form credit loss estimates in an effort to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit. Specifically, the amendments in this ASU will require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The amendments in this update affect entities holding financial assets and net investment in leases that are not accounted for at fair value through net income, including such financial assets as loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. On June 17, 2016, the four, federal financial institution regulatory agencies (the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Office of the Comptroller of the Currency), issued a joint statement to provide information about ASU 2016 - 13 and the initial supervisory views regarding the implementation of the new standard. The joint statement applies to all banks, savings associations, credit unions and financial institution holding companies, regardless of asset size. The statement details the key elements of, and the steps necessary for, the successful transition to the new accounting standard. In addition, the statement notifies financial institutions that because the appropriate allowance levels are institution-specific amounts, the agencies will not establish benchmark targets or ranges for the change in institutions’ allowance levels upon adoption of the ASU, or for allowance levels going forward. Due to the importance of ASU 2016 - 13, the agencies encourage financial institutions to begin planning and preparing for the transition and state that senior management, under the oversight of the board of directors, should work closely with staff in their accounting, lending, credit risk management, internal audit, and information technology functions during the transition period leading up to, and well after, adoption. ASU 2016 - 13 is effective for public business entities that are U.S. Securities and Exchange Commission (“SEC”) filers for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All entities may adopt the amendments in this ASU earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Accordingly, FNCB will adopt this guidance on January 1, 2020. FNCB has created a Current Expected Credit Loss (“CECL”) task group comprised of members of its finance, credit administration, lending, internal audit, loan operations and information systems units. The CECL task group has become familiar with the provisions of ASU 2016 - 13 and is in the process of implementing the new guidance, which includes, but is not limited to: ( 1 ) identifying segments and sub-segments within the loan portfolio that have similar risk characteristics; ( 2 ) determining the appropriate methodology for each segment; ( 3 ) implementing changes that are necessary to its core operating system and interfaces to be able to capture appropriate data requirements; and ( 4 ) evaluating qualitative factors and economic to develop appropriate forecasts for integration into the model. FNCB plans to begin running parallel computations using the current GAAP incurred loss model in the second quarter of 2019. FNCB is currently evaluating the effect this guidance may have on its operating results and/or financial position, including assessing any potential impact on its capital. Refer to Note 2 to FNCB’s consolidated financial statements included in the 2018 Annual Report on Form 10 -K for a discussion of additional accounting guidance applicable to FNCB that will be adopted in future periods.

Note

New Authoritative Accounting Guidance

Accounting Standards Update ("ASU")

2016

02,

Leases (Topic

842

): “Leases” requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with lease terms of more than

months. Consistent with current GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by the lessee will primarily depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new ASU requires both finance and operating leases to be recognized on the balance sheet. ASU

2016

also requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. The new disclosures include both qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. ASU

2016

is effective with fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018

for public business entities. An entity

may

adopt the new guidance either by restating prior periods and recording a cumulative effect adjustment at the beginning of the earliest comparative period presented or by recording a cumulative effect adjustment at the beginning of the period of adoption. FNCB adopted this guidance on

January 1, 2019

and applied the standard by recording a cumulative effect adjustment at that date. Management performed a comprehensive evaluation of the effect this guidance

may

have on its operating results or financial position, including working with various business units within the organization and reviewing contractual arrangements for embedded leases in an effort to identify FNCB’s full lease population. Based on management's evaluation, the adoption of ASU

2016

resulted in FNCB recording an aggregate lease liability and right of use ("ROU") asset of

3.6

million for its operating lease commitments.

ASU

2017

Receivables – Nonrefundable Fees and Other Costs (Topic

310

): “Premium Amortization on Purchased Callable Debt Securities” requires that the amortization period for certain callable debt securities be shortened to the earliest call date. The amortization of callable securities held at a discount is

not

affected. ASU

2017

is effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018

for public business entities. The adoption of this guidance on

January 1, 2019

did

not

have a material effect on the operating results or financial position of FNCB.

Accounting Guidance to be Adopted in Future Periods

ASU

2016

13,

Financial Instruments – Credit Losses (Topic

326

): “Measurement of Credit Losses on Financial Instruments,” replaces the current loss impairment methodology under GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to form credit loss estimates in an effort to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit. Specifically, the amendments in this ASU will require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The amendments in this update affect entities holding financial assets and net investment in leases that are

not

accounted for at fair value through net income, including such financial assets as loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets

not

excluded from the scope that have the contractual right to receive cash. On

June 17, 2016,

the four, federal financial institution regulatory agencies (the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Office of the Comptroller of the Currency), issued a joint statement to provide information about ASU

2016

and the initial supervisory views regarding the implementation of the new standard. The joint statement applies to all banks, savings associations, credit unions and financial institution holding companies, regardless of asset size. The statement details the key elements of, and the steps necessary for, the successful transition to the new accounting standard. In addition, the statement notifies financial institutions that because the appropriate allowance levels are institution-specific amounts, the agencies will

not

establish benchmark targets or ranges for the change in institutions’ allowance levels upon adoption of the ASU, or for allowance levels going forward. Due to the importance of ASU

2016

13,

the agencies encourage financial institutions to begin planning and preparing for the transition and state that senior management, under the oversight of the board of directors, should work closely with staff in their accounting, lending, credit risk management, internal audit, and information technology functions during the transition period leading up to, and well after, adoption. ASU

2016

is effective for public business entities that are U.S. Securities and Exchange Commission (“SEC”) filers for fiscal years beginning after

December 15, 2019,

including interim periods within those fiscal years. All entities

may

adopt the amendments in this ASU earlier as of the fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. Accordingly, FNCB will adopt this guidance on

January 1, 2020.

FNCB has created a Current Expected Credit Loss (“CECL”) task group comprised of members of its finance, credit administration, lending, internal audit, loan operations and information systems units. The CECL task group has become familiar with the provisions of ASU

2016

and is in the process of implementing the new guidance, which includes, but is

not

limited to: (

) identifying segments and sub-segments within the loan portfolio that have similar risk characteristics; (

) determining the appropriate methodology for each segment; (

) implementing changes that are necessary to its core operating system and interfaces to be able to capture appropriate data requirements; and (

) evaluating qualitative factors and economic to develop appropriate forecasts for integration into the model. FNCB plans to begin running parallel computations using the current GAAP incurred loss model in the

second

quarter of

2019.

FNCB is currently evaluating the effect this guidance

may

have on its operating results and/or financial position, including assessing any potential impact on its capital.

Refer to Note

to FNCB’s consolidated financial statements included in the

2018

Annual Report on Form

-K for a discussion of additional accounting guidance applicable to FNCB that will be adopted in future periods.