Page 21 - 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 (CONTINUED)

Transfer of Financial Assets - Transfers of financial assets are accounted for as sales when
control over the assets has been surrendered. Control over transferred assets is deemed to
be surrendered when (i) the assets have been isolated from the Company, (ii) the transferee
obtains the right (free of conditions that constrain it from taking advantage of the right) to
pledge or exchange the transferred assets, and (iii) the Company does not maintain effective
control over the transferred assets through an agreement to repurchase them before their
maturity.

If a transfer of an entire financial asset, a group of entire financial assets, or a participating
interest in an entire financial asset does not meet the conditions for sale treatment, or if a
transfer of a portion of an entire financial interest does not meet the definition of a
participating interest, the Company accounts for the transfer as a secured borrowing with
pledge of collateral and continues to report the transferred financial assets in its financial
statements with no change in their measurement.

At December 31, 2016 and 2015, all of the Company’s loan participations sold met the
conditions to be treated as a sale.

Recent Accounting Standards and Disclosure Requirements - Accounting Standards Update
(ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09
implements a common revenue standard that clarifies the principles for recognizing revenue.
The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or
services. To achieve that core principle, an entity should apply the following steps: (i) identify
the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii)
determine the transaction price, (iv) allocate the transaction price to the performance
obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a
performance obligation. ASU 2014-09 was originally going to be effective for years beginning
after December 15, 2016; however, ASU 2015-14, Revenue from Contracts with Customers
(Topic 606) – Deferral of the Effective Date deferred the effective date of ASU 2014-09 by
one year to years beginning after December 15, 2017. We are currently evaluating the
potential impact of ASU 2014-09 on our financial statements.

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