12.	Recent Accounting Pronouncements (continued)

Newly Issued

Not

Yet Effective Accounting Standards

June 2016,

the FASB issued ASU

2016

13,

“Financial Instruments - Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments”. ASU

2016

significantly changes the way impairment of financial instruments is recognized by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of the financial instruments. The main provisions of the guidance include (

) replacing the “incurred loss” approach under current GAAP with an “expected loss” model for instruments measured at amortized cost, (

) requiring entities to record an allowance for available-for-sale debt securities rather than reduce the carrying amount of the investments, as is required by the other-than-temporary impairment model under current GAAP, and (

) a simplified accounting model for purchased credit-impaired debt securities and loans. The ASU is effective for interim and annual reporting periods beginning after

December 15, 2019,

although early adoption is permitted. Management is currently in the developmental stages of collecting available historical information in order to assess the expected credit losses and determine the impact of the adoption of ASU

2016

on the Corporation's financial statements.

January 2017,

FASB ASU

2017

04,

"Simplifying the Test for Goodwill Impairment". This ASU simplifies the measurement of goodwill by eliminating Step

from the goodwill impairment test. Instead, under this amendment, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss should

not

exceed the total amount of goodwill allocated to that reporting unit. The amendments are effective for public business entities for the

first

interim and annual reporting periods beginning after

December 15, 2019.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after

January 1, 2017.

The Corporation has goodwill from prior business combinations 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. The Corporation's most recent annual impairment assessment determined that the Corporation's goodwill was

not

impaired. Although the Corporation 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, does

not

anticipate a material impact from these amendments to the Corporation'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.

Adoption of New Accounting Policies

February 2016,

the FASB issued ASU

2016

"Leases". This ASU requires lessees to record most leases on their balance sheet but recognize expenses in the income statement in a manner similar to current accounting treatment. This ASU changes the guidance on sale-leaseback transactions, initial direct costs and lease execution costs, and, for lessors, modifies the classification criteria and the accounting for sales-type and direct financing leases. ASU

2016

was effective for annual periods beginning after

December 15, 2018,

and interim periods therein. In

January 2018,

the FASB issued ASU

2018

01,

which allows entities the option to apply the provisions of the new lease guidance at the effective date without adjusting the comparative periods presented. Adoption of this guidance as of

January 1, 2019

resulted in the recording of operating lease right-of-use assets of

$1.6

million and operating lease liabilities of

$1.8

million. The Corporation recorded a cumulative adjustment to retained earning for prior periods of

$170,000,

net of deferred taxes of

$45,000.

See Note

Leases for more information.

March 2017,

the FASB issued ASU

2017

08,

“Receivable - Nonrefundable Fees and Other Costs (Subtopic

310

) Premium Amortization on Purchased Callable Debt Securities.” ASU

2017

amends guidance on the amortization period of premiums on certain purchased callable debt securities to shorten the amortization period of premiums on certain purchased callable debt securities to the earliest call date. The amendments are effective for public business entities for fiscal years beginning after

December 15, 2018,

and interim periods therein. The adoption of this guidance on

January 1, 2019

resulted in a cumulative adjustment to retained earnings of

$10,000,

net of deferred taxes of

$3,000,

for the prior periods. The remaining securities subject to this guidance have a call date

one

month prior to maturity, therefore the impact to the statement of income in subsequent periods is immaterial.

August 2017,

the FASB issued ASU

2017

12,

"Derivatives and Hedging (Topic

815

): Targeted Improvements to Accounting for Hedging Activities." The amendments in this Update are to better reflect the economic results of hedging in the financial statements along with simplification of certain hedge accounting requirements. Specifically, the entire change in the fair value of the hedging instrument is required to be presented in the same income statement line as and in the same period that the earnings effect of the hedged item is recognized. Therefore, hedge ineffectiveness will

not

be reported separately or in a different period. In addition, hedge effectiveness can be determined qualitatively in periods following inception. The amendments permit an entity to measure the change in fair value of the hedged item on the basis of the benchmark rate component. They also permit an entity to measure the hedged item in a partial-term fair value hedge of interest rate risk by assuming the hedged item has a term that reflects only the designated cash flows being hedged. For a closed portfolio of prepayable financial assets, an entity is permitted to designate the amount that is

not

expected to be affected by prepayments or defaults as the hedged item. For public business entities, the new guidance was effective for fiscal years beginning after

December 15, 2018,

and interim periods therein. The Corporation currently does

not

have derivative or hedging instruments so this guidance had

impact on consolidated financial statements.