CHFC 2018 Annual Report

Standard Description/Required Date of Adoption Expected impact on the financial statements and other significant matters ASU No. 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ASU No. 2018-19 - Codification Improvements to Topic 326, Financial Instruments: Credit Losses This standard amends the guidance on reporting credit losses for financial assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAPand, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP; however, Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. The measurement of expected credit loss should be based on relevant information about past events, current conditions, and reasonable forecasts. An allowance will be recognized for purchased credit-deteriorated assets through a gross-up approach measuring the amortized cost as the sum of the purchase price and estimated credit loss at the acquisition date. Adjustments in allowance will be recognized immediately in earnings. The newly required disclosures include both qualitative and quantitative information about an entity’s financial assets and the allowance for credit losses, including among others: (a) how an entity developed its allowance for financial assets measured at amortized cost, (b) information about the credit quality for financial receivables and net investments in leases measured at amortized cost, and (c) an allowance roll- forward for available-for-sale securities and an aging analysis for securities past due. The amendments in the 2018 update clarify that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842. Required adoption date of January 1, 2020, with early adoption permitted as of January 1, 2019. Currently, we do not have plans for early adoption. Upon adoption, a cumulative-effect adjustment to retained earnings will be recorded as of the beginning of the first reporting period in which the guidance is effective. We are currently evaluating the potential impact adoption ofASU 2016-13 will have on our consolidated financial statements and disclosures. While we are currently unable to reasonably estimate the impact of adopting ASU 2016-13, we expect that the impact of adoption could be significantly influenced by the composition, characteristics and quality of our loan portfolio as well as the prevailing economic conditions and forecasts as of the adoption date. We have been working with an industry leading vendor and using their software programto develop a model to determine the expected credit losses in our loan portfolio. Starting in the fourth quarter of 2018, we began to develop and refine multiple scenarios and identify portfolio segmentation. We will continue this process in 2019 and run parallel analysis with our current credit loss model.We will additionally continue our analysis of other applicable requirements of the standard. ASU No. 2017-04, Intangible - Goodwill and Other (Topic 350) Accounting for goodwill impairment is simplified by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Subsequent to the adoption, goodwill impairment will be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance largely remains unchanged. Required adoption date of January 1, 2020, with early adoption permitted. Adoption is not expected to have a material impact on our consolidated financial condition or results of operations. ASU No. 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960) This update clarifies the reporting requirements by an employee benefit plan for its interest in a master trust and removes redundancy relating to 401(h) account disclosures. The amendment requires a plan's interest in a master trust to be presented in separate line items in the statement of net assets available and in the statement of changes in net assets available. Additionally, the requirement to disclose the percentage interest in the master trust is removed and replaced by the required disclosure of the dollar amount of interest in each investment type. Required adoption date of January 1, 2019, with early adoption permitted. Adoption is not expected to have a material impact on our consolidated financial condition or results of operations. ASU No. 2018-07, Compensation-Stock Compensation (Topic 718) This update expands the scope of stock compensation requirements to include share-based payment transactions for acquiring goods and services from nonemployees. The amendment requires that nonemployee share-based payment awards meet the accounting requirements of employee share- based payment awards. Required adoption date of January 1, 2019, with early adoption permitted. Adoption is not expected to have a material impact on our consolidated financial condition or results of operations. 45