Recent Accounting Standards

9 Months Ended

Sep. 30, 2019

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Standards

NOTE 2 – RECENT ACCOUNTING STANDARDS

The Bank recently adopted the following Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”):

ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This amendment supersedes and replaces nearly all existing revenue recognition guidance. Under the amended guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Management adopted this new accounting standard beginning with the interim period ended March 31, 2019, with no material impact on the Bank’s financial statements.

ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities. This ASU applies to all entities that hold financial assets or owe financial liabilities, and is intended to provide more useful information on the recognition, measurement, presentation and disclosure of financial instruments. Among other things, this ASU 1) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; 2) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3) eliminates the requirement to disclose the fair values of financial instruments measured at amortized cost for entities that are not public business entities; 4) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair values required to be disclosed for financial instruments measured at amortized cost; 5) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; 6) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and 7) clarifies that an entity should evaluate the need for a valuation allowance on deferred tax assets related to available-for-sale securities in combination with the entity’s other deferred tax assets. Management adopted this new accounting standard beginning with the interim period ended March 31, 2019, with no material impact on the Bank’s financial statements.

The following ASUs have been issued by the FASB and may impact the Bank’s financial statements in future reporting periods:

ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). ASU 2016-13 requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. In addition, at their October 16, 2019 meeting, the FASB affirmed its decision on the amendment of the effective date of this standard as initially outlined in the ASU proposed at their July 17, 2019 meeting. Upon approval of the final ASU, it is expected that the effective date for this standard will be delayed by one year, and will be effective for reporting periods beginning after December 15, 2022. Management is currently evaluating the impact of adopting ASU 2016-13 on the Bank’s financial statements, as well as the impact of the FASB’s proposed ASU.

ASU 2016-02, Leases (Topic 842). This ASU affects any entity that enters into a lease, and is intended to increase the transparency and comparability of financial reporting. The ASU requires, among other changes, a lessee to recognize on its balance sheet a lease asset and a lease liability for those leases previously classified as operating leases. The lease asset will represent the right to use the underlying asset for the lease term, and the lease liability will represent the discounted value of the required lease payments to the lessor. The ASU will also require entities to disclose key information about leasing arrangements. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted. In addition, at their October 16, 2019 meeting, the FASB affirmed its decision on the amendment of the effective date of this standard as initially outlined in the ASU proposed at their July 17, 2019 meeting. Upon approval of the final ASU, it is expected that the effective date for this standard will be delayed by one year, and will be effective for reporting periods beginning after December 15, 2020. Management is currently evaluating the impact of adopting ASU 2016-02 on the Bank’s financial statements, as well as the impact of the FASB’s proposed ASU.