Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Transfers and Servicing of Financial Assets, Policy [Policy Text Block]

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 (

) the assets have been isolated from the Company, (

) 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 (

) 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.

Financing Receivable, Held-for-sale [Policy Text Block]

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 an SBA program that historically has provided for SBA guarantees of

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 nonguaranteed portion in its portfolio. The net amount of loan origination fees on loans sold is included in the carrying value and in 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

$4.3

million of loans held for sale at

June 30, 2019,

consisting of

$3.4

million commercial real estate and

$920,000

commercial and industrial loans, 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

$11.0

million at

June 30, 2019.

The servicing assets has carrying value, which approximates fair value, of

$156,000

June 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

six

months ended

June 30, 2019:

(In thousands)	For the three Months Ended June 30, 2019			For the Six Months Ended June 30, 2019
Beginning balance	$	99			37
Servicing rights capitalized		60			125
Servicing rights amortized		(3	)		(6	)
Ending balance	$	156			156

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Standards

Accounting Standards Adopted During

201

Effective

January 1, 2019,

the following new Accounting Standards Update (ASU) was adopted by the Company:

ASU

2016

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

did

not

have an impact on its Consolidated Statements of Operations.

ASU

2017

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

did

not

have any impact on its Consolidated Financial Statements.

ASU

2017

"Derivatives and Hedging (Topic

815

): Targeted Improvements to Accounting for Hedging Activities." ASU

2017

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

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

is effective for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. ASU

2017

and ASU

2018

did

not

have any impact on the Consolidated Financial Statements.

ASU

2017

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

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 adopted ASU

2017

as of

June 30, 2019.

Accounting Standards Issued But

Not

Yet Adopted

ASU

2016

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

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

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.

July 17, 2019,

the FASB proposed deferring the effective date of ASC

326

for smaller reporting companies as defined by the SEC. Subject to any additional guidance or clarification from the FASB or the SEC, management believes the Company will qualify for this proposed deferral. The FASB has proposed a

three

year deferral for smaller reporting companies, with an effective date of

January 1, 2023.

The Company will continue to monitor the progress of this proposal. Management is currently evaluating the impact that the standard will have on its Consolidated Financial Statements.

ASU

2018

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

and Level

of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level

fair value measurements. ASU

2018

clarifies that disclosure regarding measurement uncertainty is intended to communicate information about the uncertainty in measurement as of the reporting date. ASU

2018

adds certain disclosure requirements, including disclosure of changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level

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

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 on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level

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.

- Definition

Disclosure of accounting policy for transfers and servicing financial assets, including securitization transactions as well as repurchase and resale agreements. This disclosure may include how the entity (1) determines whether a transaction is accounted for as a sale; (2) accounts for a sale transaction, including the initial and subsequent accounting for any interests that the entity obtains or continues to hold in the transaction, how such interests are valued, and the significant assumptions used in the valuation; (3) accounts for a transaction that does not qualify for sale treatment (that is, a financing); and (4) accounts for its servicing assets and liabilities ("servicing"), including how such servicing is measured initially and subsequently, and the methodology and significant assumptions used to value such servicing.

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