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NOTE 4: Accounting for Certain Acquired Loans
 12 Months Ended
Jun. 30, 2019
Notes  
NOTE 4: Accounting for Certain Acquired Loans

NOTE 4: Accounting for Certain Acquired Loans

During the fiscal years ended June 30, 2011, 2015, 2017, and 2019, the Company acquired certain loans which evidenced deterioration of credit quality since origination and for which 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 June 30, 2019 and June 30, 2018. The amount of these loans is shown below:

 

 

 

June 30,

(dollars in thousands)

2019

2018

Residential real estate

 $              1,921

 $              3,861

Construction real estate

                 1,397

                 1,544

Commercial real estate

               24,669

                 8,909

Consumer loans

                       -  

                       -  

Commercial loans

                 8,381

                 3,073

      Outstanding balance

 $            36,368

 $            17,387

     Carrying amount, net of fair value adjustment of      $7,821 and $2,816 at June 30, 2019 and 2018,       respectively  

 $            28,547

 $            14,571

 

 

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

 

 

June 30,

(dollars in thousands)

2019

2018

2017

Balance at beginning of period

 $                 589

 $                 609

 $                 656

      Additions

                    102

                         -

                         -

      Accretion

                (1,342)

                   (683)

                   (391)

      Reclassification from nonaccretable difference

                 1,075

                    663

                    344

      Disposals

                   (204)

                         -

                         -

Balance at end of period

 $                 220

 $                 589

 $                 609

 

 

During the fiscal years ended June 30, 2019 and 2018, the Company did not increase or reverse the allowance for loan losses related to these purchased credit impaired loans.