RECENT ACCOUNTING PRONOUNCEMENTS



Standard	Description	Date of adoption	Effect on the financial statements or other significant matters

Standards not adopted by the Bank during 2018

ASU 2016-02, Leases (Topic 842) and subsequent related ASUs	This Standard requires that a lessee recognize assets and liabilities for leases on the balance sheet. For leases with a term of 12 months or less, however, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend primarily on its classification as a finance or operating lease. The standard also requires disclosures to better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements.	January 1, 2019	The Bank has elected the second of two modified retrospective approaches for adoption of the standard. Under this method, upon adoption, we have recorded a right-of-use asset of approximately $225 million and an offsetting lease liability of $242 million. The impact to retained earnings upon adoption was not material.

ASU 2017-08, Nonrefundable Fees and Other Costs (Subtopic 310-20). Premium Amortization on Purchased Callable Debt Securities	The amendments in this ASU shorten the amortization period for certain callable debt securities held at a premium. The standard requires the premium to be amortized to the earliest call date. The update does not change the accounting for securities held at a discount.	January 1, 2019	Using a modified retrospective transition approach, we recorded a cumulative-effect adjustment of a $3 million increase to retained earnings upon adoption of the ASU.



Standard	Description	Date of adoption	Effect on the financial statements or other significant matters

Standards not adopted by the Bank during 2018 (continued)

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement	The purpose of this ASU is to improve the effectiveness of disclosures in the notes to the financial statements. This Update removes, modifies, and makes certain additions to the disclosure requirements on fair value measurement.	January 1, 2019	The effective date of this standard is January 1, 2020. However, we have elected to early adopt this ASU as of January 1, 2019. This standard will be applied prospectively after the adoption date. The Bank has determined that the changes to the disclosure requirements for fair value measurements are expected to be immaterial to its financial statements.

ASU 2018-15, Intangibles – Goodwill and Other-Internal-Use Software (Topic 350-40): Customer’s Accounting for Implementation Cost Incurred in a Cloud Computing Arrangement That Is a Service Contract	This ASU provides revised accounting guidance related to the accounting for implementation costs associated with Cloud Computing Arrangements that meet the criteria for a service contract. Some of the main provisions include: -Implementation costs for cloud computing arrangements will be capitalized as an asset or recognized as an expense when incurred on the basis of existing GAAP, specifically guidance already provided around internal-use software. -The amortization period for capitalized amounts will be the noncancelable hosting contract term plus any expected renewal periods. -Entities in a hosting arrangement that is a service contract must provide certain qualitative and quantitative disclosures. -For transition there is an option to either apply guidance retrospectively or prospectively.	January 1, 2019	The effective date of this ASU is January 1, 2020 but we have elected to early adopt this Standard, as of January 1, 2019, prospectively. However, a primary purpose of this ASU was to clarify existing accounting guidance and reduce diversity in practice and the Bank has historically already been applying the guidance as clarified in this ASU. Consequently, adoption will have little, if any, impact on the Bank’s financial statements.

ASU 2016-13, Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard replaces today’s “incurred loss” approach with an “expected loss” model for instruments such as loans and HTM securities that are measured at amortized cost. The standard requires credit losses relating to AFS debt securities to be recorded through an ACL rather than a reduction of the carrying amount and replaces the historically required OTTI analysis. It also changes the accounting for purchased credit-impaired debt securities and loans. The standard retains many of the current disclosure requirements in U.S. GAAP and expands certain disclosure requirements. Early adoption of the guidance is permitted as of January 1, 2019.	January 1, 2020	We have formed an implementation team led jointly by Credit, Treasury, and the Corporate Controller’s group, that also includes other lines of business and functions within the Bank. The implementation team is developing models that can meet the requirements of the new guidance. While this standard may potentially have a material impact on the Bank’s financial statements, we are still in process of conducting our evaluation. This ASU is required to be applied by means of a cumulative-effect adjustment to the opening retained earnings as of the beginning of the first period of adoption as previously noted. The Bank does not plan to early adopt this new guidance.



Standard	Description	Date of adoption	Effect on the financial statements or other significant matters

Standards not adopted by the Bank during 2018 (continued)
ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment	This ASU removes the requirements in step two of the current impairment model, eliminating the requirement to calculate and compare the implied fair value of the reporting entity with the carrying amount of that entity, including goodwill, to measure any impairment charge. Instead, entities would record an impairment charge based on the excess of a reporting unit’s carrying amount of goodwill over its implied fair value of goodwill (i.e., measure the charge based on step one of the current guidance). The standard also continues to allow entities to perform the optional qualitative goodwill impairment assessment before determining whether to proceed to step one. The standard is effective for the Bank as of January 1, 2020. Early adoption is allowed for any goodwill impairment test performed after January 1, 2017.	January 1, 2020	We do not currently expect this guidance will have a material impact on the Bank’s financial statements since the fair values of our reporting units were not lower than their respective carrying amounts of goodwill at the time of our impairment analysis for 2018 and there are no expected decreases in the fair value of the relevant reporting units in the foreseeable future. The Bank is not planning to early adopt this new guidance. The transition and adoption provisions are to be applied prospectively.
Standard	Description	Date of adoption	Effect on the financial statements or other significant matters

Standards adopted by the Bank during 2018

ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and subsequent related ASUs	The core principle of the new guidance is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The banking industry does not expect significant changes because major sources of revenue are from financial instruments that have been excluded from the scope of the new standard, (including loans, derivatives, debt and equity securities, etc.). However, these new standards affect other fees charged by banks, such as asset management fees, credit card interchange fees, deposit account fees, etc. Adoption may be made on a full retrospective basis with practical expedients, or on a modified retrospective basis with a cumulative effect adjustment. Additionally, the new guidance significantly increases the disclosures related to revenue recognition practices.	January 1, 2018	We adopted this guidance using the modified retrospective transition method. There was no material impact at adoption to the Bank’s consolidated financial statements. New disclosures are found in Footnote 16.

ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities	This ASU provides revised accounting guidance related to the accounting for and reporting of financial instruments. Some of the main provisions include: – Equity investments that do not result in consolidation and are not accounted for under the equity method would be measured at fair value through net income. – Changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option would be recognized in OCI – Elimination of the requirement to disclose the methods and significant assumptions used to estimate the fair value of financial instruments carried at amortized cost. However, it will require the use of exit price when measuring the fair value of financial instruments measured at amortized cost for disclosure purposes.	January 1, 2018	The transition adjustment upon adoption was booked through a cumulative-effect adjustment to the balance sheet as of the beginning of the year. Amendments related to equity securities without readily determinable fair values were applied prospectively to equity investments that existed as of the adoption date, if applicable. The adoption of this guidance was determined to be immaterial in all aspects. We refined our valuation models to better account for the exit price, which does not impact our financial statements, but does have an impact on our disclosures, as provided in Footnote 3.



Standard	Description	Date of adoption	Effect on the financial statements or other significant matters

Standards adopted by the Bank during 2018 (continued)

ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities	The purpose of this standard is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The standard is effective for public business entities for fiscal years beginning after December 15, 2018, with early adoption, including adoption in an interim period, permitted. The standard requires a modified retrospective transition method that requires recognition of the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption.	January 1, 2018	We early adopted this guidance in the first quarter. The adoption of this guidance did not have a material impact on our consolidated financial statements at transition.