Note

10:

New Accounting Pronouncements

May 2014,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2014

09,

(Topic

606

Revenue from Contracts with Customers

(“ASU

2014

09”

). The scope of the guidance applies to revenue arising from contracts with customers, except for the following: lease contracts, insurance contracts, contractual rights and obligations within the scope of other guidance and nonmonetary exchanges between entities in the same line of business to facilitate sales to customers. The core principle of the new guidance was that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration that the entity receives or expects to receive. ASU

2014

did

not

significantly impact the timing or approach to revenue recognition for financial institutions. Initially, the amendments were effective for public entities for annual reporting periods beginning after

December 15, 2016,

however, the FASB issued ASU

2015

Revenue from Contracts with Customers (Topic

606

) – Deferral of the Effective Date

” which deferred the effective date of ASU

2014

one

year to annual and interim periods beginning after

December 15, 2017.

The guidance does

not

apply to revenue associated with financial instruments, including loans and securities that are accounted for under GAAP, which comprises a significant portion of our revenue stream. The Company adopted ASU

2014

during the

first

quarter of

2018

and completed an evaluation of the impact of the revenue streams which are included in the scope of these updates, such as deposit fees and revenue from the sale of other real estate owned. The Company analyzed each revenue stream under Topic

606

and determined that there were

material changes to existing recognition practices. The Company concluded that the adoption of this update did

not

change significantly from our current practice of recognizing the in-scope non-interest income. In addition, we did

not

retroactively revise prior period amount or record a cumulative adjustment to retained earnings upon adoption.

Descriptions of our significant revenue-generating transactions that are within the scope of the new revenue recognition standards, which are presented in the consolidated statements of comprehensive income as components of non-interest income, are as follows:

●

Service Charges on Deposit Accounts –

Services charges on deposit accounts include general service fees for monthly account maintenance, account analysis fees, non-sufficient funds fees, wire transfer fees and other deposit account related fees. Revenue is recognized when the performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for service charges on deposit accounts is received immediately or in the following month through a direct charge to customers’ accounts.

●

Gains/Losses on Sales of OREO

–

Gains/Losses on sales of OREO are recorded from the sale when control of the property transfers to the buyer, which generally occurs at the time of an executed deed.

January 2016,

the FASB issued ASU

2016

01,

Financial Instruments- Overall (Subtopic

825

Recognition and Measurement of Financial Assets and Financial Liabilities

(“ASU

2016

01”

). ASU

2016

simplifies the impairment assessment of equity investments, clarifies reporting disclosure requirements for financial instruments measured at amortized cost, and requires the exit price notion be disclosed when measuring fair value of financial instruments. ASU

2016

details the required separate presentation in other comprehensive income for the change in fair value of a liability related to change in instrument specific credit risk and details the required separate presentation of financial assets and liabilities by measurement category and clarifies the guidance for a valuation allowance on deferred tax assets related to available-for-sale securities. ASU

2016

was effective for annual and interim reporting periods beginning after

December 15, 2017.

ASU

2016

was effective for the Company on

January 1, 2018

and did

not

have a material impact on our consolidated financial statements. See Note

- Disclosures about Fair Value of Assets and Liabilities for further information regarding the valuation method for loans.

February 2016,

the FASB issued ASU

2016

02,

Leases

(“ASU

2016

02”

). ASU

2016

establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than

months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU

2016

is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact and have determined that the provisions of ASU

2016

will result in an increase in assets to recognize the present value of the lease obligations with a corresponding increase in liabilities; however, we do

not

expect this to have a material impact to the Company’s results of operations or cash flows.

June 2016,

the FASB issued ASU

2016

13,

Financial Instruments-Credit Losses (Topic

326

Measurement of Credit Losses on Financial Instruments

. Among other things, the amendments in this ASU require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For SEC filers, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2019,

with later effective dates for non-SEC registrant public companies and other organizations. Early adoption will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018.

The Company has formed a committee that is assessing our data and evaluating the impact of adopting ASU

2016

13.

The Company has also selected a

third

party vendor to assist in generating loan level cash flows and disclosures.

August 2016,

the FASB issued ASU

2016

15,

Statement of Cash Flows (Topic

230

Classification of Certain Cash Receipts and Cash Payments.

The update was intended to reduce the diversity in practice around how certain transactions are classified within the statement of cash flows with respect to

eight

types of cash flows. This new accounting guidance was effective for interim and annual reporting periods beginning after

December 15, 2017.

Adoption of ASU

2016

did

not

significantly impact the Company’s consolidated financial statements.

May 2017,

the FASB issued ASU

2017

09,

Compensation-Stock Compensation (Subtopic

718

Scope of Modification Accounting.

ASU

2017

clarifies when changes to terms or conditions of a share-based payment award must be accounted for as a modification. Under the new guidance, an entity does

not

apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: (i) the fair value of the award, (ii) the vesting conditions of the award, and (iii) the classification of the award as either an equity or liability instrument. ASU

2017

was effective for the fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2017.

The guidance requires companies to apply the requirements prospectively to awards modified on or after the adoption date. ASU

2017

was effective for the Company on

January 1, 2018

and did

not

have a material impact on our consolidated financial statements.

July 2017,

the FASB issued ASU

2017

11,

Earnings Per Share (Topic

260

); Distinguishing Liabilities from Equity (Topic

480

); Derivatives and Hedging (Topic

815

(Part

) Accounting for certain financial

instruments with down round features and (Part II), Replacement of the indefinite deferral for mandatory redeemable financial instruments of certain nonpublic entities and certain mandatory redeemable non-controlling interests with a scope exception

. Part I of the update addresses the complexity of accounting for certain financial instruments with down round features such as warrants or convertible instruments and will be effective for interim and annual reporting periods beginning after

December 15, 2019.

The Company is currently evaluating the impact of our pending adoption of the new standard on our consolidated financial statements, but at this time do

not

believe the standard will have a significant impact on the financial statements.

August 2017,

the FASB issued ASU

2017

12,

Derivatives and Hedging (Topic

815

Targeted Improvements to Accounting for Hedging Activities.

The purpose of this updated guidance is to better align financial reporting for hedging activities with the economic objectives of those activities. The amendments in this update are effective for fiscal years beginning after

December 15, 2018,

with early adoption, including adoption in an interim period, permitted. The standard requires the modified retrospective transition approach as of the date of adoption. The Company is currently evaluating the adoption of this standard on its Consolidated Financial Statements, but at this time do

not

believe the standard will have a significant impact on the financial statements.

February 2018,

the FASB issued ASU

2018

02,

Income Statement-Reporting Comprehensive Income (Topic

220

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

. This ASU provides financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) are recorded. This standard is effective for all organizations for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. Early adoption is permitted. Organizations should apply the proposed amendments either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company elected to early adopt ASU

2018

and, as a result, reclassified

$31,818

from accumulated other comprehensive income to retained earnings as of

December 31, 2017.

The reclassification impacted the Consolidated Balance Sheet and the Consolidated Statement of Stockholder’s Equity as of and for the year ended

December 31, 2017.