Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Standards

Premium Amortization on Purchased Callable Debt Securities

– In

March 2017,

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

No.

2017

-

08,

Receivables – Nonrefundable Fees and Other Costs (Topic

310

-

20

): Premium Amortization on Purchased Callable Debt Securities

(“ASU

2017

-

08”

), that amends the amortization period for certain purchased callable debt securities held at a premium. Specifically, the amendments shorten the amortization period by requiring that the premium be amortized to the earliest call date. Under previous US GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. The amendments do

not

require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The effective date is for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. As permitted, we elected to early adopt the provisions of ASU

2017

-

08

during the

first

quarter

2017.

The adoption of this standard did

not

have a material effect on our results of operations, financial position or disclosures.

Employee Share-Based Payments

– In

March 2016,

the FASB issued ASU

No.

2016

-

09,

Compensation – Stock Compensation (Topic

718

): Improvements to Employee Share-Based Payment Accounting

(“ASU

2016

-

09”

), which requires all excess tax benefits and tax deficiencies related to share-based payment awards be recognized as income tax expense or benefit in the income statement during the period in which they occur. Previously, such amounts were recorded in the pool of excess tax benefits included in additional paid-in capital, if such pool was available. Due to excess tax benefits

no

longer recognized in additional paid-in capital, the assumed proceeds from applying the treasury stock method when computing earnings per share should exclude the amount of excess tax benefits that would have previously been recognized in additional paid-in capital. Additionally, excess tax benefits should be classified along with other income tax cash flows as an operating activity rather than a financing activity, as was previously the case. ASU 

2016

-

09

also provides that an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (current US GAAP) or account for forfeitures when they occur. ASU 

2016

-

09

changes the threshold to qualify for equity classification (rather than as a liability) to permit withholding up to the maximum statutory tax rates (rather than the minimum as was previously the case) in the applicable jurisdictions. ASU

2016

-

09

became effective for annual and interim periods beginning after

December 15, 2016.

The prospective adoption of this standard has

not

had a material effect on our results of operations, financial position or disclosures. The impact of the requirement to report those income tax effects in earnings reduced reported federal and state income tax expense by approximately

$22,000

and

$1.5

million for the

three

and

nine

month periods ended

September 30, 2017,

respectively.

Recently Issued Accounting Standards

Derivatives and Hedging: Targeted Improvements

– In

August 2017,

the FASB issued ASU

No.

2017

-

12,

Derivatives and Hedging (Topic

815

): Targeted Improvements to Accounting for Hedging

Activities (“ASU

2017

-

12”

), that changes both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in order to better align a company’s risk management activities and financial reporting for hedging relationships. In summary, this amendment

1

) expands the types of transactions eligible for hedge accounting;

2

) eliminates the separate measurement and presentation of hedge ineffectiveness;

3

) simplifies the requirements around the assessment of hedge effectiveness;

4

) provides companies more time to finalize hedge documentation; and

5

) enhances presentation and disclosure requirements. The effective date is for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years, with early adoption permitted. All transition requirements and elections should be applied to existing hedging relationships on the date of adoption and the effects should be reflected as of the beginning of the fiscal year of adoption. We are currently evaluating the impact this standard will have on our results of operations, financial position or disclosures, but it is

not

expected to have a material impact.

Stock Compensation: Scope of Modification Accounting

– In

May 2017,

the FASB issued ASU

No.

2017

-

09,

Compensation – Stock Compensation (Topic

718

): Scope of Modification Accounting

(“ASU

2017

-

09”

), that provides clarity and reduces both (

1

) diversity in practice and (

2

) cost and complexity when applying the guidance in Topic

718,

to a change to the terms or conditions of a share-based payment award. An entity

may

change the terms or conditions of a share-based payment award for many different reasons, and the nature and effect of the change can vary significantly. The guidance clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ASU

2017

-

09

is effective for interim and annual reporting periods beginning after

December 15, 2017,

with early adoption permitted. ASU

2017

-

09

is

not

expected to have a material impact on the Company’s results of operations, financial position or disclosures.

Goodwill Impairment

– In

January 2017,

the FASB issued ASU

No.

2017

-

04,

Intangibles – Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment

(“ASU

2017

-

04”

), that eliminates Step

2

from the goodwill impairment test which required entities to compare the implied fair value of goodwill to its carrying amount. Under the amendments, the goodwill impairment will be measured as the excess of the reporting unit’s carrying amount over its fair value. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should

not

exceed the total amount of goodwill allocated to that reporting unit. The effective date is for fiscal years beginning after

December 15, 2019,

with early adoption permitted for interim or annual impairment tests beginning in

2017.

ASU

2017

-

04

is

not

expected to have a material effect on our results of operations, financial position or disclosures.

Statement of Cash Flows

– In

August 2016,

the FASB issued ASU

No.

2016

-

15,

Statement of Cash Flows (Topic

230

): Classification of Certain Cash Receipts and Cash Payments

(“ASU

2016

-

15”

), designed to address the diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of certain debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The amendments also provide guidance on when an entity should separate or aggregate cash flows based on the predominance principle. The effective date is for fiscal years beginning after

December 15, 2017,

including interim periods within those fiscal years. The new standard is required to be applied retrospectively, but

may

be applied prospectively if retrospective application would be impracticable. Since the amendment applies to the classification of cash flows,

no

impact is anticipated on our financial position or results of operations. Additionally, although we do

not

expect it to have a material impact, we are currently evaluating the impact of this amendment on our financial statement disclosures.

Credit Losses on Financial Instruments

– In

June 2016,

the FASB issued ASU

No.

2016

-

13,

Financial Instruments – Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments

(“ASU

2016

-

13”

), which requires earlier measurement of credit losses, expands the range of information considered in determining expected credit losses and enhances disclosures. The main objective of ASU

2016

-

13

is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments replace the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The effective date for these amendments is for fiscal years beginning after

December 15, 2019,

including interim periods within those fiscal years. We have formed a cross functional team that is assessing our data and system needs and evaluating the impact of adopting the new guidance. We expect to recognize a

one

-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the

first

reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such

one

-time adjustment or the overall impact on our results of operations, financial position or disclosures.

Leases

– In

February 2016,

the FASB issued ASU

No.

2016

-

02,

Leases (Topic

842

)

(“ASU

2016

-

02”

), that establish the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. The new guidance results in a more consistent representation of the rights and obligations arising from leases by requiring lessees to recognize the lease asset and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. The effective date is for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. Based upon leases that were outstanding as of

September 30, 2017,

we do

not

expect the new standard to have a material impact on our results of operations, but anticipate increases in our assets and liabilities. Decisions to repurchase, modify or renew leases prior to the implementation date will impact the level of materiality.

Financial Assets and Financial Liabilities

– In

January 2016,

the FASB issued ASU

No.

2016

-

01,

Financial Instruments – Overall (Subtopic

825

-

10

): Recognition and Measurement of Financial Assets and Financial Liabilities

(“ASU

2016

-

01”

), that makes changes primarily affecting the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The effective date is for fiscal periods beginning after

December 15, 2017,

including interim periods within those fiscal years. ASU

2016

-

01

is

not

expected to have a material impact on the Company’s results of operations or financial position. Additionally, although we do

not

expect a material impact, we are continuing to evaluate the impact of this ASU on our fair value disclosures in the notes to the consolidated financial statements.

Revenue Recognition

– In

May 2014,

the FASB issued ASU

No.

2014

-

09,

Revenue from Contracts with Customers (Topic

606

)

(“ASU

2014

-

09”

), that outlines a single comprehensive revenue recognition model for entities to follow in accounting for revenue from contracts with customers. The core principle of this revenue model is that an entity should recognize revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive for those goods or services. In

July 2015,

the FASB issued ASU

No.

2015

-

14,

deferring the effective date to annual and interim periods beginning after

December 15, 2017.

The adoption of this standard is

not

expected to have a material effect on our results of operations, financial position or disclosures. The guidance does

not

apply to revenue associated with financial instruments, including loans and securities that are accounted for under other US GAAP, which comprises a significant portion of our revenue stream. We believe that for most revenue streams within the scope of ASU

2015

-

14,

the amendments will

not

change the timing of when the revenue is recognized. We will continue to evaluate the impact focusing on noninterest income sources within the scope of the new guidance; however, we do

not

expect adoption to have a material impact on our results of operations or financial position. Additionally, although we do

not

expect a material impact, we are continuing to evaluate the impact of the additional disclosures in our notes to the consolidated financial statements required by this guidance.

There have been

no

other significant changes to the Company’s accounting policies from the

2016

Form

10

-K.  Presently, the Company is

not

aware of any other changes to the Accounting Standards Codification that will have a material impact on the Company’s present or future financial position or results of operations.

Business Combinations Policy [Policy Text Block]

Acquisition Accounting, Loans Acquired

The Company accounts for its acquisitions under ASC Topic

805,

Business Combinations

, which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value.

No

allowance for loan losses related to the loans acquired is recorded on the acquisition date as the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic

820.

The fair value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.

The Company evaluates loans acquired, other than purchased impaired loans, in accordance with the provisions of ASC Topic

310

-

20,

Nonrefundable Fees and Other Costs

. The fair value discount on these loans is accreted into interest income over the weighted average life of the loans using a constant yield method. The Company evaluates purchased impaired loans in accordance with the provisions of ASC Topic

310

-

30,

Loans and Debt Securities Acquired with Deteriorated Credit Quality

. Purchased loans are considered impaired if there is evidence of credit deterioration since origination and if it is probable that

not

all contractually required payments will be collected.

For impaired loans accounted for under ASC Topic

310

-

30,

the Company continues to estimate cash flows expected to be collected on these loans. The Company evaluates at each balance sheet date whether the present value of the loans determined using the effective interest rates has decreased significantly and, if so, recognizes a provision for loan loss in the consolidated statement of income. For any significant increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield recognized on a prospective basis over the remaining life of the loan.

For further discussion of our acquisition and loan accounting, see Note

2,

Acquisitions, and Note

6,

Loans Acquired.

Earnings Per Share, Policy [Policy Text Block]

Earnings Per Common Share (“EPS”)

Basic EPS is computed by dividing reported net income available to common shareholders by weighted average number of common shares outstanding during each period.  Diluted EPS is computed by dividing reported net income available to common shareholders by the weighted average common shares and all potential dilutive common shares outstanding during the period.

Following is the computation of EPS for the

three

and

nine

months ended

September 30, 2017

and 

2016:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share data)	2017		2016		2017		2016
Net income available to common shareholders	$	28,852	$	23,429	$	74,037	$	69,819
Average common shares outstanding		32,214		30,621		31,797		30,434
Average potential dilutive common shares		210		223		210		223
Average diluted common shares		32,424		30,844		32,007		30,657
Basic earnings per share	$	0.90	$	0.77	$	2.33	$	2.29
Diluted earnings per share (1)	$	0.89	$	0.76	$	2.31	$	2.28

________________________________

( 1 ) Stock options to purchase 3,305 and 61,395 shares for the three and nine months ended September 30, 2016 were not included in the diluted EPS calculation because the exercise price of those options exceeded the average market price for each period. There were no stock options excluded from the earnings per share calculation due to the related exercise price exceeding the average market price for the three and nine months ended September 30, 2017.