Smart Decisions. Lasting Value.™ Illustrative Financial Statements for 2019 Financial Institutions November 2019 Crowe LLP Financial Institutions Illustrative Financial Statements for 2019 November 2019 Table of Contents Consolidated Balance Sheets ............................................................................................................. 5 Consolidated Statements of Income .................................................................................................... 6 Consolidated Statements of Comprehensive Income, ......................................................................... 8 Consolidated Statements of Changes in Shareholders’ Equity ......................................................... 10 Consolidated Statements of Cash Flows........................................................................................... 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .................................................................. 13 Note 1 - Summary of Significant Accounting Policies ....................................................................... 13 Note 2 – Securities ............................................................................................................................ 30 Note 3 – Loans .................................................................................................................................. 35 Note 4 – Real Estate Owned ............................................................................................................. 50 Note 5 – Fair Value ............................................................................................................................ 51 Note 6 – Loan Servicing (use this when amortization method is used) ............................................ 64 Note 6A – Loan Servicing (use this when fair value method is used) ............................................... 65 Note 7 – Premises And Equipment ................................................................................................... 66 Note 8 – Leases ................................................................................................................................. 67 Note 9 – Goodwill And Intangible Assets .......................................................................................... 71 Note 9a – Goodwill And Intangible Assets ........................................................................................ 72 Note 10 – Deposits ............................................................................................................................ 74 Note 11 – Securities Sold Under Agreements To Repurchase ......................................................... 74 Note 12 – Federal Home Loan Bank Advances ................................................................................ 75 Note 13 – Long-Term Debt ................................................................................................................ 75 Note 14 – Subordinated Debentures ................................................................................................. 76 Note 15 – Pension And Other Postretirement Plans ......................................................................... 76 Note 16 – Other Benefit Plans ........................................................................................................... 83 Note 17 – ESOP Plan ........................................................................................................................ 84 Note 18 – Income Taxes.................................................................................................................... 84 Note 19 – Related-Party Transactions .............................................................................................. 87 Note 20 – Stock-Based Compensation ............................................................................................. 87 Note 21 – Regulatory Capital Matters ............................................................................................... 89 Note 22 – Derivatives ........................................................................................................................ 91 Note 23 – Loan Commitments And Other Related Activities............................................................. 99 Note 24 – Business Combination ...................................................................................................... 99 Note 25 – Parent Company Only Condensed Financial Information .............................................. 102 Note 26 – Earnings Per Share ......................................................................................................... 104 Note 27 – Accumulated Other Comprehensive Income (Loss) ....................................................... 106 Note 28 – Segment Information ....................................................................................................... 110 Note 29 – Quarterly Financial Data (Unaudited) ............................................................................. 112 Note 30 – Offsetting Assets And Liabilities ...................................................................................... 113 Note 31 – Qualified Affordable Housing Project Investments ......................................................... 114 Note 32 - Revenue From Contracts with Customers ....................................................................... 114 END NOTES ........................................................................................................................................ 117 The information in this document is not – and is not intended to be – audit, tax, accounting, advisory, risk, performance, consulting, business, financial, investment, legal, or other professional advice. Some firm services may not be available to attest clients. The information is general in nature, based on existing authorities, and is subject to change. The information is not a substitute for professional advice or services, and you should consult a qualified professional adviser before taking any action based on the information. Crowe is not responsible for any loss incurred by any person who relies on the information discussed in this document. Visit www.crowe.com/disclosure for more information about Crowe LLP, its subsidiaries, and Crowe Global. © 2019 Crowe LLP. © 2019 Crowe LLP www.crowe.com 2. Crowe LLP Financial Institutions Illustrative Financial Statements for 2019 November 2019 About These Illustrative Financial Statements These illustrative financial statements – which are examples for bank holding companies, including community banks, thrifts, and other financial institutions – contain common disclosures as required under U.S. GAAP, as well as rules and regulations of the U.S. Securities and Exchange Commission (SEC), including financial statement requirements in Article 9 of Regulation S-X. Of course, these statements do not address all possible scenarios. The form and content of financial statements remain the responsibility of management, and individual facts and circumstances, as well as the requirements of the applicable accounting standards or SEC rules and regulations, should be considered. Intended for general informational purposes only, the content in this document should not be used as a substitute for consultation with professional accounting, tax, legal, and other advisers. Recent Developments Certain Accounting Standards Updates (ASUs) issued over the past 12 months could have a significant near-term impact on the accounting and financial reporting of financial institutions. For a full recap of recently issued and effective standards from the Financial Accounting Standards Board (FASB) for both public and private entities, as well as accounting and financial reporting developments from the federal financial institution regulators, see “Year-End Accounting and Financial Reporting Issues for Financial Institutions” from Crowe LLP. Information related to other recent developments can be found in issues of the Financial Institutions Executive Briefing, published monthly at www.crowe.com/fieb. © 2019 Crowe LLP www.crowe.com 3. Crowe LLP Financial Institutions Illustrative Financial Statements for 2019 November 2019 Guide These illustrative financial statements reflect applicable guidance issued through September 2019. In addition, these financial statements illustrate many disclosures that are applicable only to public companies, as defined within each Accounting Standards Codification (ASC) topic and prior to the FASB defining a public business entity (PBE); disclosures applicable to public companies and public business entities are indicated by shaded text. Some of the differences between public business entities and nonpublic business entities include: • Quarterly information in an “unaudited” footnote (Reg. S-K, Items 302(a) and (c)) (not required for smaller reporting company filers, as defined by the SECa) • Certain pension disclosures (ASC 715) • Certain stock compensation disclosures (ASC 718) • Earnings per share (ASC 260) • Segment information (ASC 280) • Tax footnote reconciliation of the domestic federal statutory tax rate/amount to the reported tax rate/amount (Reg. S-X, Rule 4-08(h) and ASC 740-10-50-12) (reconciliation not required for nonpublic companies but disclosure of the nature of significant reconciling items required (ASC 740-10-50-13)) • Parent-only financial information (Reg. S-X, Rule 9-06) • Loan commitment