1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations —

Bear State Financial, Inc. (the “Company”) is a bank holding company headquartered in Little Rock, Arkansas. Its subsidiary bank, Bear State Bank (the “Bank”), is a community oriented bank providing a broad line of financial products to individuals and business customers. As of

December

31,

2016,

the Bank operates

branches and

three

loan production offices throughout Arkansas, Missouri and Southeast Oklahoma.

The Company completed its merger with First National Security Company (“FNSC”) and the accompanying acquisition of FNSC’s subsidiaries, including First National Bank of Hot Springs (“First National”) and Heritage Bank, N.A. (“Heritage Bank”), on

June

13,

2014.

February

13,

2015,

First Federal Bank, First National and Heritage Bank were consolidated into a single charter forming Bear State Bank, N.A. On

October

2015,

the Company completed its acquisition of Metropolitan National Bank (“Metropolitan”). Except as the context otherwise requires, any reference in this Annual Report on Form

-K to the “Bank” means (i) with respect to the period between

January

2014

through

June

12,

2014,

First Federal Bank; (ii) with respect to the period from

June

13,

2014

through

February

12,

2015,

First Federal Bank, First National and Heritage Bank, collectively; (iii) with respect to the period from

February

13,

2015

through

September

30,

2015

or as of the date hereof, Bear State Bank, N.A.; and (iv) with respect to the period from

October

2015

through

February

18,

2016,

Bear State Bank, N.A. and Metropolitan, collectively. On

February

19,

2016,

Metropolitan was merged into the Bear State Bank, N.A. charter and on

June

28,

2016,

Bear State Bank, N.A. converted from a national bank to an Arkansas state-chartered bank, Bear State Bank.

Principles of Consolidation—

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries described above. Intercompany transactions and balances have been eliminated in consolidation.

Operating Segments—

The Company consolidated its subsidiary banks into

one

bank during the

first

quarter of

2016

and its operations are organized on a regional basis. While the chief decision-makers monitor revenue streams of various products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Each region provides a group of similar community banking products and services, including loans, time deposits, and checking and savings accounts. The individual regions have similar operating and economic characteristics and are reported as

one

aggregated operating segment.

Use of Estimates—

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be significant. Valuation of assets acquired and liabilities assumed in business combinations, valuation of real estate owned, fair value of financial instruments, valuation of deferred tax assets and the allowance for loan and lease losses are material estimates that are particularly susceptible to significant change in the near term.

Cash Flow Reporting—

For the purpose of presentation in the consolidated statements of cash flows, cash and cash equivalents includes cash on hand and amounts due from depository institutions, which includes interest bearing amounts available upon demand. Net cash flows are reported for customer loan and deposit transactions and short term borrowings with original maturities of

three

months or less.

Investment Securities—

The Company classifies investment securities into

one

two

categories: held to maturity or available for sale. The Company does not engage in trading activities. Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at cost, adjusted for the amortization of premiums and the accretion of discounts.

Investment securities that the Company intends to hold for indefinite periods of time are classified as available for sale and are recorded at fair value. Unrealized holding gains and losses are excluded from earnings and reported net of tax in other comprehensive income. Investment securities in the available for sale portfolio

may

be used as part of the Company’s asset and liability management practices and

may

be sold in response to changes in interest rate risk, prepayment risk, or other economic factors.

Premiums are amortized into interest income using the interest method to the earlier of maturity or call date, or in the case of mortgage-backed securities, over the estimated life of the security. Discounts are accreted into interest income using the interest method over the period to maturity. The specific identification method of accounting is used to compute gains or losses on the sales of investment securities.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis. In evaluating whether impairment is other than temporary, management primarily considers the length of time and the extent to which the fair value has been less than the amortized cost basis, the nature of the investment, the cause of the impairment, whether any periodic coupon payments have been missed, whether the security has been downgraded by rating agencies, and whether the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. The assessment of whether OTTI exists involves a high degree of subjectivity and judgment and is based on information available to management at a point in time. Management has determined that

OTTI charges were necessary during the years ended

December

31,

2016,

2015

2014.

Other Investments—

The Bank is a member of the Federal Home Loan Bank (“FHLB”) system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and

may

invest in additional amounts. The Bank is a member of and owns stock in the Federal Reserve Bank (“FRB”) as well as First National Bankers Bank and Midwest Independent Bank, both institutions that provide correspondent banking services to community banks. Stock in these institutions is classified as other investments and is recorded at redemption value which approximates fair value. The Bank periodically evaluates the restricted stock for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Loans Receivable—

The Bank originates and maintains loans receivable that are substantially concentrated in its lending markets of Arkansas, Missouri and Southeast Oklahoma. The majority of the Bank’s loans are residential mortgage loans, nonfarm nonresidential loans, and commercial and industrial loans. The Bank’s policies generally call for collateral or other forms of security to be received from the borrower at the time of loan origination. Such collateral or other form of security is subject to changes in economic value due to various factors beyond the control of the Bank.

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are stated at unpaid principal balances, net of purchase premiums and discounts, charge-offs, the allowance for loan and lease losses, and deferred loan fees or costs. Interest income is accrued on the unpaid principal balance. Deferred loan fees or costs on loans are amortized or accreted to income using the level-yield method over the remaining period to contractual maturity without anticipating prepayments.

Mortgage loans originated and committed for sale in the

secondary

market are carried at the lower of cost or estimated market value in the aggregate. Such loans are generally carried at cost due to the short period of time between funding and sale, generally within

thirty

days.

Loans are considered past due when the contractual amounts due with respect to principal and/or interest are not received within

days of the contractual due date. The accrual of interest on loans is generally discontinued when the loan becomes

days past due, or, in management’s opinion, the borrower is judged to be unable to meet payments as they become due. Nonaccrual loans and loans past due

days and still accruing include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

When interest accrual is discontinued, all unpaid accrued interest is reversed against interest income. The interest on these loans is accounted for on the cash basis or cost recovery method until qualifying for return to accrual, except when doubt exists as to ultimate collectability of principal and interest. Under the cost recovery method, interest income is not recognized until the loan balance is reduced to

zero.

Under the cash basis method, interest income is recorded when the payment is received in cash. A loan is generally returned to accrual status when the loan is no longer past due and, in the opinion of management, collection of the remaining balance can be reasonably expected. The Company

may

continue to accrue interest on certain loans that are

days past due or more if such loans are well-secured and in the process of collection.

Acquisition Accounting and Acquired Loans—

The Company accounts for its acquisitions under ASC Topic

805,

Business Combinations

, which requires the use of the purchase method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. Acquired loans and leases are recorded at fair value at the date of acquisition. No allowance for loan and lease losses (“ALLL”) is recorded on the acquisition date as the fair value of the acquired assets incorporates assumptions regarding credit risk. The fair value adjustment on acquired loans without evidence of credit deterioration since origination are accreted into earnings as a yield adjustment using the effective yield method over the remaining life of the loan.

Purchased Credit Impaired Loans –

Acquired loans and leases with evidence of credit deterioration since origination such that it is probable at acquisition that the Bank will be unable to collect all contractually required payments are accounted for under the guidance in ASC Topic

310

30,

Loans and Debt Securities Acquired with Deteriorated Credit Quality

. As of the acquisition date, the difference between contractually required payments and the cash flows expected to be collected is the nonaccretable difference, which is included as a reduction of the carrying amount of acquired loans and leases. If the timing and amount of the future cash flows is reasonably estimable, any excess of cash flows expected at acquisition over the estimated fair value is the accretable yield and is recognized in interest income over the asset's remaining life using the level yield method.

Acquired loan amounts deemed uncollectible at acquisition date become part of the fair value calculation and are excluded from the ALLL. Following acquisition, a regular review is completed on acquired loans to determine if changes in estimated cash flows have occurred. Subsequent decreases in the amount expected to be collected

may

result in a provision for loan and lease losses with a corresponding increase in the ALLL. Subsequent increases in the amount expected to be collected result in a reversal of any previously recorded provision for loan and lease losses and related increase to ALLL, if any, or prospective adjustment to the accretable yield if no provision for loan and lease losses had been recorded or if the provision is less than the subsequent increase.

Allowance for Loan and Lease Losses—

The ALLL is a valuation allowance for probable incurred credit losses. The ALLL is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the ALLL when management believes it is likely that a loan balance is uncollectible. Subsequent recoveries, if any, are credited to the ALLL.

The ALLL represents management’s estimate of incurred credit losses inherent in the Company’s loan portfolio as of the balance sheet date. The estimation of the ALLL is based on a variety of factors, including past loan loss experience, the current credit profiles of the Company’s borrowers, adverse situations that have occurred that

may

affect borrowers’ ability to repay, the estimated value of underlying collateral, and general economic conditions. Losses are recognized when available information indicates that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or conditions change.

The ALLL consists of

(1)

an allocated allowance on identified impaired loans and leases (sometimes referred to as a specific allowance) and

(2)

a general allowance on the remainder of the loan and lease portfolio. Although the Bank determines the amount of each component of the ALLL separately, the entire allowance is available to absorb losses in the loan portfolio.

Allocated (Specific) Allowance

Allocated, or specific, allowances represent impairment measurements on certain impaired loans as further described below. A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the note. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the short fall in relation to the principal and interest owed. Each quarter, classified loans where the borrower’s total loan relationship exceeds

$500,000

are evaluated for impairment on a loan-by-loan basis. Nonaccrual loans and TDRs are considered to be impaired loans. TDRs are restructurings in which the Bank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that the Bank would not otherwise consider. Impairment is measured quarterly on a loan-by-loan basis for all TDRs and impaired loans where the aggregate relationship balance exceeds

$500,000

by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral, if the loan is collateral dependent. Impaired loans under this threshold are aggregated and included in loan pools with their ALLL calculated as described in the following paragraph.

Groups of smaller balance homogeneous loans are collectively evaluated for impairment. Homogeneous loans are those that are considered to have common characteristics that provide for evaluation on an aggregate or pool basis. The Bank considers the characteristics of

(1)

one

- to

four

-family residential mortgage loans;

(2)

unsecured consumer loans; and

(3)

collateralized consumer loans to permit consideration of the appropriateness of the ALLL of each group of loans on a pool basis. The primary methodology used to determine the appropriateness of the ALLL includes segregating impaired loans from the pools of loans, valuing these loans, and then applying a loss factor to the remaining pool balance based on several factors including past loss experience, inherent risks, and economic conditions in the primary market areas.

General Allowance

The general component covers loans that are collectively evaluated for impairment and is based on historical loss experience adjusted for current qualitative environmental factors. The Company maintains a loss migration analysis that tracks loan losses and recoveries based on loan class as well as the loan risk grade assignment. At

December

31,

2016,

an average of

four

quarterly migration periods of

eight

quarters each was generally used to calculate historical loss experience. These historical loss percentages are adjusted (both upwards and downwards) for certain qualitative environmental factors, including economic trends, credit quality trends, valuation trends, concentration risk, quality of loan review, changes in personnel, competition, increasing interest rates, external factors and other considerations. The general component also includes impaired loans that are not individually measured for impairment based on the Bank’s threshold described above as well as loans that are individually evaluated but not considered impaired.

Rate Lock Commitments—

The Bank enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (rate lock commitments) as well as corresponding commitments to sell such loans to investors. Rate lock commitments as well as the related sales commitments on mortgage loans that are intended to be sold are considered to be derivatives. Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded at fair value in derivative assets or liabilities, with changes in fair value recorded in the net gain or loss on sale of mortgage loans. Fair value is based on fees currently charged to enter into similar agreements, and for fixed rate commitments also considers the difference between current levels of interest rates and the committed rates.

Real Estate Owned, Net—

Real estate owned represents foreclosed assets held for sale and is initially recorded at estimated fair value less estimated costs to sell, establishing a new cost basis. Subsequent to foreclosure, management periodically performs valuations and the assets are carried at the lower of carrying amount or fair value less costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Costs and expenses related to major additions and improvements are capitalized while maintenance and repairs that do not extend the lives of the respective assets are expensed. At

December

31,

2016,

the Bank had approximately

$473,000

one

- to

four

-family loans in the process of foreclosure.

Office Properties and Equipment, Net—

Land is carried at cost. Buildings and equipment are stated at cost less accumulated depreciation and amortization. The Company computes depreciation using the straight-line method over the estimated useful lives of the individual assets, which range from

years. Leasehold improvements are amortized on the straight-line method over the terms of the related leases, including expected renewals, or over the useful lives of the improvements, whichever is shorter. Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized.

Cash Surrender Value of Life Insurance—

Cash surrender value of life insurance represents life insurance purchased by the Bank on a qualifying group of officers with the Bank designated as owner and beneficiary of the policies. The yield on these policies is used to offset a portion of employment benefit costs. The policies are recorded on the consolidated statements of financial condition at their cash surrender values with changes in cash surrender values reported in noninterest income. Death benefits in excess of the cash surrender value are recorded in noninterest income at the time of death.

Long-Lived Assets –

Premises and equipment and other long-lived assets are reviewed for impairment when events indicate their carrying amount

may

not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Goodwill and Other Intangible

Assets

The Company accounts for business combinations using the acquisition method of accounting. Accordingly, the identifiable assets acquired, the liabilities assumed, and any non-controlling interest of an acquired business are recorded at their estimated fair values as of the date of acquisition with any excess of the cost of the acquisition over the fair value recorded as goodwill. Other intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability.

Goodwill is not amortized but is evaluated for impairment annually, or more often if events or circumstances indicate it

may

be impaired. Finite-lived intangible assets, which consist primarily of core deposit intangibles (long-term customer-relationship intangible assets) are amortized on a straight-line basis over their weighted-average estimated useful lives, ranging from

twelve

thirteen

years, and are tested for impairment whenever events or circumstances indicate that their carrying amount

may

not be recoverable. An impairment loss is recognized when the carrying amount of an intangible asset with a finite useful life is not recoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and the fair value of the asset.

Goodwill is evaluated for impairment by comparing the estimated fair value of each reporting unit to its carrying value, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, the goodwill of that reporting unit is not considered impaired, and no impairment loss is recognized. However, if the carrying amount of the reporting unit exceeds its fair value, step

two,

which involves comparing the implied fair value of goodwill to its carrying value, is completed and to the extent that the carrying value of goodwill exceeds its implied fair value, an impairment loss is recognized.

Loan Commitments and Related Financial Instruments –

Financial instruments include off-balance sheet credit instruments, such as commitments to originate loans and letters of credit, issued to meet customer financing needs. The face amount of these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Stock Based Compensation—

Compensation cost for stock based compensation is recognized based on the fair value of these awards at the date of grant over the requisite service period. In most cases the requisite service period is the same as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

Income Taxes—

The Company estimates its income taxes payable based on the amounts it expects to owe to the various taxing authorities (i.e. federal, state and local). In estimating income taxes, management assesses the relative merits and risks of the tax treatment of transactions, taking into account statutory, judicial and regulatory guidance in the context of the Company’s tax position. Management also relies on tax opinions, recent audits, and historical experience.

Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various statement of financial condition assets and liabilities and gives current recognition to changes in tax rates and laws. Deferred tax assets and liabilities are recognized for the future tax consequences related to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax credits. Deferred tax assets are evaluated for recoverability using a consistent approach that considers the relative impact of negative and positive evidence, including our historical profitability and projections of future taxable income. A valuation allowance for deferred tax assets is established if, based on available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets will not be realized. In evaluating the need for a valuation allowance, future taxable income is estimated based on management-approved business plans and ongoing tax planning strategies. This process involves significant management judgment about assumptions that are subject to change from period to period based on changes in tax laws or variances between projected operating performance, actual results and other factors.

The Company recognizes a tax position as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that has a greater than

50%

likelihood of being realized upon examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has

uncertain tax positions.

Penalties and interest are classified as income tax expense when incurred.

Interest Rate Risk—

The Company’s asset base is exposed to risk including the risk resulting from changes in interest rates and changes in the timing of cash flows. The Company monitors the effect of such risks by considering the mismatch of the maturities of its assets and liabilities in the current interest rate environment and the sensitivity of assets and liabilities to changes in interest rates. The Company’s management has considered the effect of significant increases and decreases in interest rates and believes such changes, if they occurred, would be manageable and would not affect the ability of the Company to hold its assets as planned.

Earnings Per Common Share—

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that

may

be issued by the Company include shares underlying outstanding stock options, restricted stock units and warrants and are determined using the treasury stock method. The shares used in the calculation of basic and diluted earnings per share have been adjusted to give effect to the

11%

common stock dividend paid by the Company in

December

2014.

Loss Contingencies

– Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.

Recently Adopted Accounting Standards—

January

2015,

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

2015

01,

Income Statement-Extraordinary and Unusual Items

, to simplify income statement classification by removing the concept of extraordinary items from U.S. GAAP. As a result, items that are both unusual and infrequent will no longer be separately reported net of tax after continuing operations. The existing requirement to separately present items that are of an unusual nature or occur infrequently on a pre-tax basis within income from continuing operations has been retained and expanded to include items that are both unusual and infrequent. The standard is effective for periods beginning after

December

15,

2015.

The Company’s adoption of this ASU on

January

2016,

did not have a material impact on the Company’s financial statements.

February

2015,

the FASB issued ASU

2015

02,

Consolidation

(Topic

810)

– Amendments to the Consolidation Analysis

. The new guidance applies to entities in all industries and the amendments significantly change the consolidation analysis required under U.S. GAAP. This ASU makes targeted amendments to the current consolidation guidance in the investment management industry and ends the deferral granted to investment companies from applying the variable interest entities guidance. The standard became effective for public business entities for annual periods beginning after

December

15,

2015.

The Company’s adoption of this ASU on

January

2016,

did not have a material impact on the Company’s financial statements.

April

2015,

the FASB issued ASU

2015

03,

Interest – Imputation of Interest (Subtopic

835

30)

. To simplify presentation of debt issuance costs, the amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. For public business entities, the amendments in this ASU became effective for financial statements issued for fiscal years beginning after

December

15,

2015,

and interim periods within those fiscal years. An entity should apply the new guidance on a retrospective basis. The Company’s adoption of this ASU on

January

2016,

did not have a material impact on the Company’s financial statements.

April

2015,

the FASB issued ASU

2015

05,

Intangibles – Goodwill and Other Internal-Use Software (Subtopic

350

40):

Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement

. This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for a customer’s accounting for service contracts. ASU

2015

became effective for interim and annual reporting periods beginning after

December

15,

2015.

The Company’s adoption of this ASU on

January

2016,

did not have a material impact on the Company’s financial statements.

May

2015,

the FASB issued ASU

2015

07,

Fair Value Measurement

(Topic

820):

Disclosures for Investments in Certain Entities that Calculate Net Asset Value Per Share

. This ASU permits a reporting entity, as a practical expedient, to measure the fair value of certain investments using the net asset value per share of the investment. Currently, there is diversity in practice related to how certain investments measured at net asset value with redemption dates in the future are categorized within the fair value hierarchy. The amendments in this ASU remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. The amendments in this ASU became effective for public business entities for fiscal years beginning after

December

15,

2015,

and interim periods within those fiscal years with early adoption. The Company’s adoption of this ASU on

January

2016,

did not have a material impact on the Company’s financial statements.

September

2015,

the FASB issued ASU No.

2015

16,

Business Combinations

(Topic

805):

Simplifying the Accounting for Measurement-Period Adjustments

. This ASU applies to all entities that have reported provisional amounts for items in a business combination for which the accounting is incomplete by the end of the reporting period in which the combination occurs and during the measurement period have an adjustment to provisional amounts recognized. The amendments in this ASU require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this ASU require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments in this ASU require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The amendments in this ASU became effective for fiscal years beginning after

December

15,

2015,

including interim periods within those fiscal years. The amendments in this ASU should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this ASU with earlier application permitted for financial statements that have not been issued. The Company’s adoption of this ASU on

January

2016,

did not have a material impact on the Company’s financial statements.

New Accounting Standards Not Yet Effective—

May

2014,

the FASB issued ASU

2014

09,

creating FASB Topic

606,

Revenue from Contracts with Customers

. The guidance in ASU

2014

affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance 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. The guidance provides steps to follow to achieve the core principle. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after

December

15,

2017.

We do not expect the new standard to result in a material change from our current accounting for revenue because the majority of the Company’s financial instruments are not within the scope of Topic

606,

but it will result in new disclosure requirements.

January

2016,

the FASB issued ASU

2016

01,

Recognition and Measurement of Financial Assets and Financial Liabilities

(Subtopic

825

10)

This ASU requires certain equity investments to be measured at fair value with changes in fair value recognized in net income and simplifies the impairment assessment of such investments; eliminates the requirement for public entities to disclose the methods and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost; requires public entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets and requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. For public entities, ASU

2016

is effective for fiscal years beginning after

December

15,

2017,

including interim periods within those fiscal years. The adoption of this ASU is not expected to have a material impact on the Company’s financial statements since it does not have any marketable equity securities and there are no indications that its nonmarketable equity securities are impaired.

February

2016,

the FASB issued ASU

2016

02,

Leases

(Topic

842).

This ASU applies to all leases and is intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. The previous standards did not require lessees to recognize operating leases on the balance sheet. This ASU provides for accounting requirements so that lessees will be required to recognize the rights and obligations associated with operating leases. The guidance on lessor accounting was not fundamentally changed with this ASU. For public entities, ASU

2016

is effective for interim and annual periods beginning after

December

15,

2018,

however, early adoption is permitted. The Company is in the process of evaluating the impact this ASU will have on its financial statements and will subsequently implement new processes and update current accounting policies to comply with the amendments of this Update.

March

2016,

the FASB issued ASU

2016

09,

Compensation – Stock Compensation

(Topic

718).

This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU will require all excess income tax benefits and tax deficiencies on share based payment awards to be recognized in the income statement when the awards vest or are settled and will likewise change the calculation of assumed proceeds in applying the treasury stock method for calculating diluted earnings per share. It also will allow an employer to make a policy election to account for forfeitures as they occur. The ASU also eliminates the guidance in Topic

718

that was indefinitely deferred. For public entities, ASU

2016

is effective for interim and annual periods beginning after

December

15,

2016.

Early adoption is permitted. The Company will adopt the amendments as of

January

2017

and does not anticipate a material impact at the date of adoption. The Company’s stock based compensation plan has not historically generated material amounts of excess tax benefits or deficiencies. However, the magnitude of any income tax benefits or deficiencies in the future will depend on the Company’s stock price at the dates awards vest or are settled. The Company will adopt the amendments as of

January

2017

and does not anticipate a material impact at the date of adoption.

June

2016,

the FASB issued ASU

2016

13,

Financial Instruments – Credit Losses (Topic

326):

Measurement of Credit Losses on Financial Instruments.

This ASU requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. Current U.S. GAAP requires an incurred loss methodology for recognizing credit losses that delays loss recognition until it is probable that a loss has been incurred. The amendments in this ASU replace the current incurred loss impairment methodology 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 amendments affect entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. Existing purchased credit impaired assets will be grandfathered and classified as purchased credit deteriorated (“PCD”) assets at the date of adoption. The asset will be grossed up for the allowance for expected credit losses for all PCD assets at the date of adoption and will continue to recognize the noncredit discount in interest income based on the yield of such assets as of the adoption date. Subsequent changes in expected credit losses will be recorded through the allowance. ASU

2016

will be effective for the Company in the fiscal year beginning after

December

15,

2019,

including interim periods within that fiscal year. Early adoption is permitted for fiscal years beginning after

December

15,

2018,

including interim periods within those years. An entity will apply the amendments in this ASU through a cumulative effect adjustment to retained earnings as of the beginning of the

first

reporting period in which the guidance is effective. The Company is in the process of forming a committee to evaluate the impact this ASU will have on its financial statements and to begin developing and implementing processes and procedures during the next

two

years to ensure the Company is compliant with the amendments by the adoption date.

August

2016,

the FASB issued ASU

2016

15,

Statement of Cash Flows (Topic

230):

Classification of Certain Cash Receipts and Cash Payments.

This ASU adds or clarifies guidance on the classification of certain cash receipts and cash payments in the statement of cash flows in an attempt to reduce the diversity of financial reporting. For public entities, ASU

2016

is effective for interim and annual periods beginning after

December

15,

2017.

Early adoption is permitted. Entities must apply the guidance retrospectively to all periods presented but

may

apply prospectively if retrospective application is impractical. The Company is in the process of evaluating the impact this ASU will have on its financial statements.

January

2017,

the FASB issued ASU

2017

04,

Intangibles - Goodwill and Other (Topic

350),

Simplifying the Test for Goodwill Impairment

. The objective of the ASU is to expand the simplification of the subsequent measurement of goodwill to include public business entities and not-for-profit entities. The simplification eliminates Step

from the goodwill impairment test, which measures a goodwill impairment loss by comparing the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. For public companies that are U.S. Securities and Exchange Commission (SEC) filers, the ASU is effective for fiscal years beginning after

December

15,

2019,

including interim periods, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after

January

2017.

The Company has goodwill from prior acquisitions and performs an annual impairment test or more frequently if changes or circumstances occur that would more-likely-than-not reduce the fair value of the reporting unit below its carrying value. During

2016,

the Company performed its impairment assessment and determined the fair value of the aggregated reporting units exceed the carrying value, such that the Company’s goodwill was not considered impaired. Although the Company cannot anticipate future goodwill impairment assessments, based on the most recent assessment, it is unlikely that an impairment amount would need to be calculated and, therefore, the Company does not anticipate a material impact from these amendments to the Company’s financial position and results of operations. The current accounting policies and processes are not anticipated to change, except for the elimination of the Step

analysis. For additional information regarding goodwill impairment testing, see Note

Reclassifications—

Various items within the accompanying consolidated financial statements for the previous years have been reclassified to conform to the classifications used for reporting in

2016.

These reclassifications had no effect on net earnings.