New Accounting Pronouncements

12 Months Ended

Dec. 31, 2023

Accounting Changes and Error Corrections [Abstract]

New Accounting Pronouncements

New Accounting Pronouncements

Adoption of New Accounting Standards: On January 1, 2023, the Company adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as loans, such as loan commitments, standby letters of credit and certain lines of credit. In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believes that it is more likely than not they will be required to sell.

The Company adopted ASC 326 using the modified retrospective method for all financial assets, measured at amortized cost, and off-balance-sheet credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. On adoption, the Company recognized an increase in the ACL on held to maturity securities of $438,000, an increase to the ACL on loans of $6,210,000, and an increase to the reserve for off-balance sheet commitments of $1,297,000. The net, after-tax impact of the increases of the allowances for credit losses and reserve for off-balance sheet commitments was a net decrease to retained earnings of $6,277,000 shown in the Consolidated Statements of Changes in Stockholders Equity. Additional details can be found in Notes 3, 5 and 6.

The following table illustrates the impact of adopting ASC 326 at January 1, 2023:

	As Reported Under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
Assets:
Allowance for credit losses on debt securities
Held-to-maturity
State and political subdivisions	$	229,000	$	—	$	229,000
Corporate securities	209,000		—		209,000
Loans
Commercial
Real estate owner occupied	256,623,000				256,623,000
Real estate non-owner occupied	363,660,000				363,660,000
Real estate			699,340,000		(699,340,000)
Construction	93,907,000		93,907,000		—
C&I	319,359,000		319,359,000		—
Multifamily	79,057,000		—		79,057,000
Municipal	40,619,000		40,619,000		—
Residential
Term	597,404,000		613,919,000		(16,515,000)
Construction	49,907,000		49,907,000		—
Home Equity
Revolving and term	93,075,000		76,560,000		16,515,000
Consumer	21,063,000		21,063,000		—
Allowance for credit losses on loans	22,933,000		16,723,000		6,210,000
Liabilities:
Allowance for credit losses on off-balance sheet credit exposures	$	1,397,000	$	100,000	$	1,297,000

In March 2023, the FASB issued ASU No. 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. This ASU expands the use of proportional amortization method of accounting — currently allowed only for investments in low-income housing tax credit (LIHTC) structures — to equity investments in other tax credit structures that meet certain criteria. The proportional amortization method results in (1) the tax credit investment being amortized in proportion to the allocation of tax credits and other tax benefits in each period and (2) net presentation within the income tax line item. The ASU is effective beginning in 2024 for calendar year-end public business entities. Adoption is not expected to have a material impact on the Company's consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires public business entities, such as the Company, to provide enhanced disclosures on the amount of income taxes paid disaggregated by type and jurisdiction. Adoption is required for annual periods beginning after December 15, 2024 and is not expected to have a material impact on the Company's consolidated financial statements.