Note 21 - Recently Adopted Accounting Pronouncements

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

( 21 ) Recently Adopted Accounting Pronouncements

Accounting Standards Update (ASU)

2014

-

09,

Revenue – Revenue from Contracts with Customers

. Bancorp adopted ASU

2014

-

09

and all related amendments (ASC

606

), which creates a single framework for recognizing revenue from contracts with customers that fall within its scope and revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets, effective

January 1, 2018

using the full retrospective method. The great majority of Bancorp’s revenue consists of interest income generated by loans, leases, securities, and other investments, which is outside the scope of ASC

606.

Significant judgements related to the nature and timing of revenue recognition were

not

impacted by implementing ASU

2014

-

09.

Existing accrual practices for income earned but

not

collected proved consistent with the change in guidance to recognize revenue upon satisfying a performance obligation and as such

no

adjustment to retained earnings was needed. Services within the scope of ASC

606

include deposit service charges, WM&T revenue, investment product sales commissions and fees, interchange income, and the sale of other foreclosed assets. See note

20

for more revenue recognition details.

The only impact to financial statement presentation was reclassification from expense to contra income costs incurred to obtain and fulfill contracts associated with investment product sales. All periods presented in these financial statements have been adjusted to reflect the reclassification, the effect of which can be seen below.

	For the three months ended							For the three months ended
	September 30, 2018							September 30, 2017
(In thousands)	As reported		Under legacy GAAP		Impact of ASC 606			As reported		Under legacy GAAP		Impact of ASC 606
Non-interest income
Investment product sales commissions and fees	$	444	$	587	$	(143	)	$	404	$	552	$	(148	)
Non-interest expense
Compensation		11,607		11,608		(1	)		10,614		10,615		(1	)
Technology and communication		2,183		2,325		(142	)		1,905		2,052		(147	)
Net impact					$	-						$	-

	For the nine months ended							For the nine months ended
	September 30, 2018							September 30, 2017
(In thousands)	As reported		Under legacy GAAP		Impact of ASC 606			As reported		Under legacy GAAP		Impact of ASC 606
Non-interest income
Investment product sales commissions and fees	$	1,245	$	1,650	$	(405	)	$	1,147	$	1,585	$	(438	)
Non-interest expense
Compensation		34,280		34,282		(2	)		31,849		31,852		(3	)
Technology and communication		6,643		7,046		(403	)		5,873		6,308		(435	)
Net impact					$	-						$	-

ASU

2016

-

01,

Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities

.

Bancorp adopted ASU

2016

-

01

effective

January 1, 2018.

The most significant impact to Bancorp was a change in valuation methods for the loan portfolio for fair value reporting. GAAP

no

longer allows for valuing financial instruments for fair value purposes using an “entrance” pricing methodology. The use of an “exit” price methodology requires greater assumptions regarding life of loan losses and is a more complex calculation, the results of which are documented in note

16.

ASU

2018

-

02,

Income Statement Reporting Comprehensive Income (Topic

220

), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

. Bancorp adopted ASU

2018

-

02

in the

first

quarter of

2018.

Stranded items in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act enacted on

December 22, 2017

totaling

$506

thousand were reclassified into retained earnings.