Note 6 - Accounting for Certain Loans Acquired

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

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

Note

6:

Accounting for Certain Loans Acquired

As part of the Hometown acquisition in

2018,

certain loans were acquired that 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 purchased credit impaired loans are included in the balance sheet amounts of loans receivable at

March 31, 2020

and

December 31, 2019.

The amount of these loans is shown below:

	March 31,		December 31,
	2020		2019
	(In Thousands)		(In Thousands)
Real estate - commercial	$	3,018	$	3,069
Commercial loans		232		242
Consumer and other loans		-		-
Outstanding balance	$	3,250	$	3,311
Carrying amount, net of fair value adjustment of $429 at March 31, 2020 and $476 at December 31, 2019	$	2,821	$	2,835

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

three

months ended

March 31, 2020:

	Three months ended			Three months ended
	March 31, 2020			March 31, 2019
	(In Thousands)			(In Thousands)
Balance at beginning of period	$	(69	)	$	265
Additions		-			-
Accretion		(49	)		(35	)
Reclassification from nonaccretable difference		2			-
Disposals		-			-
Balance at end of period	$	(116	)	$	230

During the

three

months ended

March 31, 2020,

the Company increased the allowance for loan losses related to these purchased credit impaired loans by

$2,718.