Note 5: Accounting For Certain Loans Acquired in A Transfer

3 Months Ended

Sep. 30, 2014

Notes

Note 5: Accounting For Certain Loans Acquired in A Transfer

Note 5: Accounting for Certain Loans Acquired in a Transfer

The Company acquired loans in transfers during the fiscal year ended June 30, 2011 and during the three months ended September 30, 2014. At acquisition, certain transferred loans evidenced deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. Purchased credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporate the estimate of current key assumptions, such as default rates, severity and prepayment speeds.

The carrying amount of those loans is included in the balance sheet amounts of loans receivable at September 30, 2014. The amounts of these loans at September 30, 2014, are as follows: 

	September 30, 2014	June 30, 2014
(dollars in thousands)
Residential real estate	$4,688	$2,068
Construction real estate	3,329	-
Commercial real estate	14,529	1,276
Consumer loans	207	-
Commercial loans	1,236	115
Outstanding balance	$23,989	$3,459
Carrying amount, net of fair value adjustment of      $3,549 and $287 at September 30, 2014      and June 30, 2014, respectively	$20,440	$3,172

Accretable yield, or income expected to be collected, is as follows:

	Three-month period ending
	September 30 2014	September 30, 2013
(dollars in thousands)
Balance at beginning of period	$380	$799
Additions	4	-
Accretion	(60)	(90)
Reclassification from nonaccretable difference	-	2
Disposals	-	-
Balance at end of period	$324	$711

During the three-month period ended September 30, 2014, the Company had no  increases to the allowance for loan losses by a charge to the income statement related to these purchased credit impaired loans. During the three -month period ended September 30, 2014, no allowance for loan losses related to these loans was reversed.