Page 14 - Annual Report 2017

TEXAS GULF BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements
December 31, 2016 and 2015

NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

Nature of Operations - The Company, through its Bank subsidiary, operates ten branches and
is primarily engaged in the business of accepting retail deposits, funding commercial, real
estate and consumer installment loans primarily in the Brazoria, Galveston and Harris County
areas. The Company’s primary sources of revenue are from investing funds received from
depositors and from providing loans and financial services to customers.

Basis of Presentation - The accompanying consolidated financial statements include the
accounts of Texas Gulf Bancshares, Inc. (the Company) and its wholly owned subsidiary
Texas Gulf Bank, N.A. (the Bank). All material intercompany balances and transactions have
been eliminated in consolidation. The accounting and reporting policies of the Company and
the Bank are in accordance with accounting principles generally accepted in the United States
of America (U.S. GAAP) and the prevailing practices within the financial services industry.
The Company meets the definition of a Public Business Entity.

Subsequent Events - The Company has evaluated subsequent events for potential recognition
and/or disclosure through February 24, 2017, the date these financial statements were
available to be issued. No subsequent events occurred which require adjustment or
disclosure to the consolidated financial statements at December 31, 2016.

Use of Estimates - The preparation of financial statements in conformity with U.S. GAAP,
requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the
consolidated balance sheets and reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from these estimates. Material estimates that are
particularly susceptible to significant change in the near term relate to the determination of
the allowance for possible credit losses and securities estimated fair values.

Cash Flow Reporting - Cash and cash equivalents include cash, interest-bearing and
noninterest-bearing deposits with other financial institutions that have an initial maturity of
90 days or less, and federal funds sold. Cash flows are reported net for loans, deposits and
short-term borrowings. Additional cash flow information follows:

2016 2015

Cash paid during the year for interest $ 1,645,263 $ 1,524,283

Distributions declared and not paid $ 454,442 $ 454,442

Real estate assets acquired through foreclosure $ - $ 5,504

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