Summary of Significant Accounting Policies (Policy)

6 Months Ended

Jun. 30, 2022

Summary of Significant Accounting Policies [Abstract]

Basis of Consolidated Financial Statement Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to

Form 10-Q and do not include all the information and footnotes required by U.S. generally accepted accounting principles

(“U.S. GAAP”) for complete financial statements. All adjustments consisting of normally recurring accruals that, in the

opinion of management, are necessary for a fair presentation of the financial position and results of operations for the

periods presented have been included. These unaudited consolidated financial statements should be read in conjunction

with the Company’s consolidated financial statements and related notes appearing in the Company’s Annual Report on

Form 10-K for the year ended December 31, 2021.

Principles of Consolidation

Principles of Consolidation

The Company consolidates entities in which it has a controlling financial interest. Intercompany transactions and

balances are eliminated in consolidation.

Use of Estimates

Use of Estimates

To prepare financial statements in conformity with U.S. GAAP, management makes estimates and assumptions based

on available information. These estimates and assumptions affect the amounts reported in the financial statements. The

most significant estimates impacting the Company’s consolidated financial statements are the allowance for credit losses

and income taxes.

Reclassifications

Reclassifications

Certain amounts in the Consolidated Financial Statements have been reclassified to conform to the current

presentation. Reclassifications had no impact on the net income or stockholders’ equity of the Company.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

Issued and Not Yet Adopted

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326); Measurement of Credit

Losses on Financial Instruments. This accounting standard update (“ASU” or “Update”) on accounting for current expected

credit losses on financial instruments (“CECL”) will replace the current probable incurred loss impairment methodology

under U.S. GAAP with a methodology that reflects the expected credit losses. The Update is intended to provide financial

statement users with more decision-useful information about expected credit losses. This Update is applicable to the

Company on a modified retrospective basis for interim and annual periods in fiscal years beginning after December 15,

2022. Early adoption is permitted for fiscal years beginning after December 15, 2019, including interim periods within those

fiscal years. The Company expects to adopt this ASU on January 1, 2023. The impact of adoption on the Company’s

financial statements will depend on the composition of the loan and investment securities portfolio as of January 1, 2023,

general economic conditions, and other factors that are not known at this time. Although management is in the process of

evaluating the impact of adoption of this ASU on its consolidated financial statements, management does believe that this

ASU will lead to significant changes in accounting policies and disclosures related to, and the methods used in estimating,

the ACL. The Company has developed a detailed implementation plan through the date of adoption that includes the

implementation of a software solution to assist with the CECL implementation process and is developing measurements in

parallel with the current methodology. To date, the Company has initiated policy discussion with key stakeholders,

completed a data gap analysis and retained the services of a third-party consulting firm to perform an independent model

validation prior to adoption.

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of

Reference Rate Reform on Financial Reporting. In January 2021, the FASB clarified the scope of this guidance with ASU

2021-01 which provides optional guidance for a limited period of time to ease the burden in accounting for (or recognizing

the effects of) reference rate reform on financial reporting. This ASU is effective from March 12, 2020 through December 31,

2022. The Company is evaluating the impact of this ASU and has not yet determined whether LIBOR transition and this

ASU will have a material effect on our business operations and consolidated financial statements.

Trouble Debt Restructuring

In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt

Restructurings and Vintage Disclosures. This ASU eliminates the recognition and measurement guidance on troubled debt

restructurings for creditors and aligns it with existing guidance to determine whether a loan modification results in a new

loan or a continuation of an existing loan. The new guidance also requires enhanced disclosures about certain loan

modifications by creditors when a borrower is experiencing financial difficulty. This ASU is effective in periods beginning

after December 15, 2022, using either a prospective or modified retrospective transition approach. Early adoption is

permitted for entities that have already adopted CECL. The Company is in the process of reviewing this ASU, as part of its

CECL implementation efforts, to determine whether it would have a material impact on the Company’s consolidated financial

statements when adopted.