Note 5 - Accounting for Certain Loans Acquired

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Accounting for Certain Loans and Debt Securities Acquired in Transfer Disclosure [Text Block]

NOTE  5 : ACCOUNTING FOR CERTAIN LOANS ACQUIRED

The Company acquired loans during the quarter ended

June 30, 2018

as part of the acquisition of Hometown. At acquisition, certain acquired 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 the 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 or 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. During the year ended

December 31, 2018,

the Company had

$4.9

million of unexpected full payoffs of certain purchased credit impaired loans and recognized

$1.8

million of yield accretion due to these payoffs.

The carrying amount of remaining purchased credit impaired loans are included in the balance sheet amounts of loans receivable at

December 31, 2018.

The amount of these loans is shown below:

	December 31,
	2018
	(In Thousands)
Real estate - commercial	$	3,358
Commercial loans		296
Consumer and other loans		329
Outstanding balance	$	3,983
Carrying amount, net of fair value adjustment of $810 at December 31, 2018	$	3,173

Changes in the carrying amount of the accretable yield for all purchased credit impaired loans were as follows for year ended

December 31, 2018:

	Year ended
	December 31,
	2018
	(In Thousands)
Balance at beginning of period	$	-
Additions		238
Reclassification from nonaccretable difference		1,834
Accretion		(1,807	)
Disposals		-
Balance at end of period	$	265

During the year ended

December 31, 2018,

the Company did

not

increase or reverse any allowance for loan losses related to these purchased credit impaired loans.