Recently Issued Accounting Standards, Not Adopted at December 31, 2019

12 Months Ended

Dec. 31, 2019

Accounting Changes and Error Corrections [Abstract]

Recently Issued Accounting Standards, Not Adopted at December 31, 2019

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	The Company will adopt this accounting standard effective January 1, 2020.
Effect on the Consolidated Financial Statements	The Company currently expects that the initial adjustment to the allowance for loan losses will be an increase of approximately $19 - $23 million, bringing the ratio of allowance to total loans from 0.68% to between 1.06% and 1.12%. The increase is primarily attributed to the impact of the new guidance on the Company’s acquired loan portfolio, and to the new requirement to estimate losses over the full remaining expected life of the loans. For loans previously classified as purchased unimpaired (“PUL”), the standard requires that a reserve for expected credit losses be recorded through a cumulative effect adjustment in retained earnings, regardless of the impact of a purchase discount on the amortized cost basis. Existing purchase discounts and premiums on these loans are not affected by adoption of the standard, and these amounts 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 with a corresponding adjustment to the loans’ amortized cost basis. The remaining non-credit discounts on these loans will accrete into interest income on a level-yield basis over the remaining lives of the loans. The estimation process applies an economic forecast scenario which, as of January 1, 2020, projects a stable macroeconomic environment over the Company’s three year forecast period. For portfolio segments with a weighted average life longer than three years, the Company reverts to longer term historical loss experience, adjusted for prepayments, to estimate losses over the remaining life of the loans within each segment. The Company estimates the impact on the tier one capital ratio upon adoption is a decrease of approximately 32 basis points. Federal banking regulatory agencies have provided banks with the ability to mitigate the impact on capital at adoption by allowing the impact to be phased in over a four year period; however, the Company expects to forgo the phased in approach and recognize the impact to capital at the time of adoption. The Company does not expect adoption of the standard to have a material impact to 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 debt (“AFS”) securities are not subject to the CECL allowance requirement, the new guidance requires the Company to record an allowance for AFS debt securities in an unrealized loss position if a portion of the unrealized loss is credit related. The Company does not expect adoption of the standard to have a material impact to AFS securities upon adoption. The disclosed estimates are subject to further refinement upon finalization of the Company’s review of the calculations, assumptions, methodologies and judgments. Internal controls over financial reporting relating to these new processes have been designed and implemented and are being evaluated. The Company is in the final stages of completing the formal governance and approval process. The ongoing impact to the Company’s results of operations in future periods will be influenced by the loan portfolio composition and by macroeconomic conditions and forecasts at each reporting date. Adoption of the standard is expected to result in higher volatility in the quarterly provision for credit losses when compared to the Company’s historical results under the incurred loss model.



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 consolidated financial statements from the adoption of this pronouncement is not expected to be material.