Recently Issued Accounting Standards, Not Yet Adopted

9 Months Ended

Sep. 30, 2019

Recently Issued Accounting Standards, Not Yet Adopted

The following provides a brief description of accounting standards that have been issued but are not yet adopted that could have a material effect on the Company's financial statements:



ASU 2016-13, Financial Instruments –Credit Losses (Topic 326)
Description	In June 2016, FASB issued guidance to replace the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (CECL) model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables and held to maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (i.e. loan commitments, standby letters of credit, financial guarantees and other similar instruments).
Date of Adoption	This amendment is effective for SEC registrants that are not Smaller Reporting Companies, including the Company, for reporting periods beginning after December 15, 2019, including interim periods within that reporting period.
Effect on the Consolidated Financial Statements	The Company continues to validate and refine the credit loss estimation techniques and related processes that have been developed under the direction of the Company's transition oversight committee. Updates to business processes and the documentation of accounting policy decisions are ongoing. A validation of the CECL model has been completed by a third party and the the Company is currently conducting parallel runs of the CECL model process. The Company expects to recognize an increase in the allowance for credit losses upon adoption, which will be recorded as a one-time cumulative adjustment to retained earnings at the adoption date, January 1, 2020. The magnitude of the increase, however, has not yet been determined. The expected increase is primarily attributed to the impact of the new guidance on the Company’s acquired loan portfolio. For loans currently classified as purchased unimpaired (“PUL”), the CECL standard requires a reserve for expected credit losses to be established regardless of the impact of a purchase discount on the amortized cost basis. The accounting for existing PUL purchase discounts and premiums is not affected by the standard, and these will continue to accrete into interest income over the remaining lives of the loans on a level yield basis. Existing purchased credit impaired (“PCI”) loans will be classified as purchased credit deteriorated (“PCD”) loans and a reserve for expected credit losses will be established. The impact at adoption will be influenced by the outcome of our continuing review of the model, assumptions, methodologies and judgments, and by the loan portfolio composition and by macroeconomic conditions and forecasts at the adoption date. Additionally, the CECL model could produce higher volatility in the quarterly provision for credit losses than our current reserve process. The Company does not expect adoption of the standard to materially impact its held to maturity debt security portfolio, which is comprised of securities guaranteed either explicitly or implicitly by government sponsored entities. While available for sale (“AFS”) securities are not subject to the CECL allowance requirement, the new guidance requires the Company to record an allowance for AFS securities in an unrealized loss position if a portion of the unrealized loss is credit related. The Company does not expect a material impact to AFS securities upon adoption.



ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Description	In January 2017, the FASB amended the existing guidance to simplify the goodwill impairment measurement test by eliminating Step 2. The amendment requires the Company to perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the fair value. Additionally, an entity should consider the tax effects from any tax deductible goodwill on the carrying amount when measuring the impairment loss.
Date of Adoption	This amendment is effective for public business entities for reporting periods beginning after December 15, 2019, including interim periods within that reporting period. Early adoption is permitted on annual goodwill impairment tests performed after January 1, 2017.
Effect on the Consolidated Financial Statements	The impact to the Company's consolidated financial statements from the adoption of this pronouncement is not expected to be material.