Current Accounting Developments and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Current Accounting Developments and Summary of Significant Accounting Policies

Current Accounting Developments and Summary of Significant Accounting Policies

Accounting Pronouncements Adopted in 2023

Standard	Required Date of Adoption	Description	Effect on Financial Statements
ASU 2022-02, Financial Instruments —Credit Losses (Topic 326): Troubled Debt Restructurings and the Vintage Disclosures	January 1, 2023 Early adoption is permitted	ASU 2022-02 eliminates the •accounting guidance for troubled debt restructurings (“TDR”), and requires the Company to apply the loan refinancing and restructuring guidance to determine whether a modification made to a loan results in a new loan or a continuation of an existing loan; and •requirement to use a discounted cash flow method to measure receivables. The guidance also requires •enhanced disclosures for certain loan refinancings and restructurings by creditors when the borrower is experiencing financial difficulty; and •vintage disclosures of current period gross charge-offs (on a current year-to-date basis) by year of loan origination for financing receivables and net investments in leases within the scope of ASC 326-20: Financial Instruments — Credit Losses — Measured at Amortized Cost.	The Company adopted ASU 2022-02 on January 1, 2023 on a prospective basis, except for the guidance related to the elimination of TDR recognition and measurement, which was adopted on a modified retrospective approach. This adoption increased the allowance for loan losses on TDRs as of December 31, 2022 by $6.0 million and decreased opening retained earnings on January 1, 2023 by $4.3 million after-tax. Disclosures as of September 30, 2023 are presented in accordance with this guidance while prior year amounts are reported in accordance with previously applicable GAAP.

Recent Accounting Pronouncements Yet to be Adopted

Standard	Required Date of Adoption	Description	Effect on Financial Statements
Standards Not Yet Adopted
ASU 2023-01, Leases (Topic 842): Common Control Arrangements	January 1, 2024 Early adoption is permitted	ASU 2023-01 amends the accounting for leasehold improvements for leases between entities under common control arrangements. The guidance requires leasehold improvements associated with leases between companies under common control to be amortized by a lessee over the economic life of the leasehold improvements, regardless of the lease term or, until the lessee ceases to control the use of the underlying asset through a lease, at which time the remaining value of the leasehold improvement would be accounted for as a transfer between companies under common control through an adjustment to equity. The amendments in this guidance may be applied retrospectively to the beginning of the period in which the entity first applied Topic 842 or prospectively (1) to all new leasehold improvements recognized on or after the date the entity first applies the amendments, or (2) to all new and existing leasehold improvements recognized on or after the date the entity first applies the amendments.	The Company does not expect the adoption of this guidance to have a material impact on the Company’s Consolidated Financial Statements. The Company expects to adopt ASU 2023-01 on January 1, 2024 on a prospective basis.
ASU 2023-02, Investments — Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method	January 1, 2024 Early adoption is permitted	ASU 2023-02 expands the scope of the proportional amortization method to equity tax credit investment programs if certain conditions are met. Previously, the proportional amortization method could only be used for investments in low-income housing tax credit structures. Under this guidance, companies are able to elect, on a tax credit program-by-tax credit program basis, to apply the proportional amortization method to all equity investments meeting the criteria in ASC 323-740-25-1. The amendments in this guidance must be applied on a modified retrospective or a retrospective basis.	The Company is currently evaluating the impact of this guidance on the Company’s Consolidated Financial Statements.
ASU 2023-05, Business Combinations — Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement	January 1, 2025 Early adoption is permitted	ASU 2023-05 requires a joint venture to recognize and initially measure assets contributed to the joint venture in a formation transaction to be measured at fair value. Under this guidance, the initial formation of the joint venture would trigger a new basis of accounting and recognize contributed net assets generally at fair value as of the joint venture’s formation date. The excess of the fair value of the joint venture’s outstanding equity interests over the fair value of its identifiable assets and liabilities is recognized as goodwill, regardless of whether the joint venture meets the definition of a business in its stand-alone financial statements, and measure its contributed total net assets upon formation as the fair value of the joint venture as a whole, which would equal the fair value of 100% of the joint venture’s outstanding equity interests. The guidance also allows a joint venture to apply the measurement period guidance, which is largely consistent with the acquisition method for business combination in ASC 805-10. The guidance also introduces new disclosure requirements related to the nature and financial effect of the joint venture. The amendments in this guidance are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. Additionally, joint ventures that were formed before January 1, 2025 may elect to apply the amendments retrospectively if sufficient information exists.	The Company does not expect the adoption of this guidance to have a material impact on the Company’s Consolidated Financial Statements. The Company expects to adopt ASU 2023-05 on January 1, 2025.

Significant Accounting Policies Update

Loan Modifications — Certain loans are modified in the normal course of business for competitive reasons or in conjunction with the Company’s loss mitigation activities. Upon the adoption of ASU 2022-02, the Company applies the general loan modification guidance provided in ASC 310-20 to all loan modifications, including modifications made to borrowers experiencing financial difficulty. Under the general loan modification guidance, a modification is treated as a new loan only if the following two conditions are met: (1) the terms of the new loan are at least as favorable to the Company as the terms for comparable loans to other customers with similar collection risks; and (2) modifications to the terms of the original loan are more than minor. If either condition is not met, the modification is accounted for as a continuation of the existing loan with any effect of the modification treated as a prospective adjustment to the loan’s effective interest rate. A modification made to borrowers experiencing financial difficulty may vary by program and by borrower-specific characteristics, and may include rate reductions, principal forgiveness, term extensions, and payment delays, and is intended to minimize the Company’s economic loss and to avoid foreclosure or repossession of collateral. The Company applies the same credit loss methodology it uses for similar loans that were not modified. For the Company’s accounting policy related to the loan modifications’ allowance for loan losses, see Note 7 — Loans Receivable and Allowance for Credit Losses — Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.