Note 5: Accounting For Certain Loans Acquired in A Transfer

6 Months Ended

Dec. 31, 2019

Notes

Note 5: Accounting For Certain Loans Acquired in A Transfer

Note 5: Accounting for Certain Loans Acquired in a Transfer

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 the Bank’s 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 December 31 and June 30, 2019. The amount of these loans is shown below:  

(dollars in thousands)		December 31, 2019		June 30, 2019
Residential real estate	$	1,532	$	1,921
Construction real estate		1,340		1,397
Commercial real estate		19,733		24,669
Consumer loans		-		-
Commercial loans		7,349		8,381
Outstanding balance	$	$29,954	$	$36,368
Carrying amount, net of fair value adjustment of     $5,844 and $7,821 at December 31, 2019 and       June 30, 2019, respectively	$	$24,110	$	$28,547

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

	For the three-month period ended
(dollars in thousands)		December 31, 2019		December 31, 2018
Balance at beginning of period	$	183	$	305
Additions		-		102
Accretion		(79)		(144)
Reclassification from nonaccretable difference		83		108
Disposals		-		-
Balance at end of period	$	187	$	371

	For the six-month period ended
(dollars in thousands)		December 31, 2019		December 31, 2018
Balance at beginning of period	$	220	$	589
Additions		-		102
Accretion		(163)		(1,089)
Reclassification from nonaccretable difference		130		973
Disposals		-		(204)
Balance at end of period	$	187	$	371

During the three- and six- month periods ended December 31, 2019 and December 31, 2018, the Company did not increase or reverse the allowance for loan losses related to these purchased credit impaired loans.