Note 4. PCI Loans and Related Allowance for Loan Losses

On January 30, 2009, the Company entered into a Purchase and Assumption Agreement with the FDIC to assume all of the deposits and certain other liabilities and acquire substantially all assets of SFSB. The Company is applying the provisions of FASB ASC 310‑30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, to all loans acquired in the SFSB transaction (the “PCI” loans). Of the total $198.3 million in loans acquired, $49.1 million met the criteria of FASB ASC 310‑30. These loans, consisting mainly of construction loans, were deemed impaired at the acquisition date. The remaining $149.1 million of loans acquired, comprised mainly of residential 1‑4 family, were analogized to meet the criteria of FASB ASC 310‑30. Analysis of this portfolio revealed that SFSB utilized weak underwriting and documentation standards, which led the Company to believe that significant losses were probable given the economic environment at the time.

As of December 31, 2019 and 2018, the outstanding contractual balance of the PCI loans was $53.2 million and $62.2 million, respectively. The carrying amount, by loan type, as of these dates is as follows (dollars in thousands):


	2019				2018
			% of PCI				% of PCI
	Amount		Loans		Amount		Loans
Mortgage loans on real estate:
Residential 1‑4 family	$	29,465	90.58	%	$	34,240	89.43	%
Commercial		490	1.51			746	1.95
Construction and land development		1,172	3.60			1,326	3.46
Second mortgages		1,169	3.59			1,729	4.52
Multifamily		232	0.72			244	0.64
Total real estate loans		32,528	100.00			38,285	100.00
Total PCI loans	$	32,528	100.00	%	$	38,285	100.00	%

There was no activity in the allowance for loan losses on PCI loans for the year ended December 31, 2019. During the year ended December 31, 2018, the Company recorded charge-offs of $62,000 and recoveries of $18,000 on PCI loans in the residential 1‑4 family loan category.

The following table presents information on the PCI loans collectively evaluated for impairment in the allowance for loan losses as of December 31, 2019 and 2018 (dollars in thousands):


	2019				2018
	Allowance		Recorded			Allowance	Recorded
	for loan		investment in		for loan		investment in
	losses		loans		losses		loans
Mortgage loans on real estate:
Residential 1‑4 family	$	156	$	29,465	$	156	$	34,240
Commercial		—		490		—		746
Construction and land development		—		1,172		—		1,326
Second mortgages		—		1,169		—		1,729
Multifamily		—		232		—		244
Total real estate loans		156		32,528		156		38,285
Total PCI loans	$	156	$	32,528	$	156	$	38,285

The change in the accretable yield balance for the years ended December 31, 2019 and 2018 is as follows (dollars in thousands):



Balance, January 1, 2018	$	44,126
Accretion		(5,219)
Reclassification to nonaccretable difference		(800)
Balance, December 31, 2018	$	38,107
Accretion		(6,010)
Reclassification from nonaccretable difference		1,369
Balance, December 31, 2019	$	33,466

The PCI loans were not classified as nonperforming assets as of December 31, 2019 or 2018, as the loans are accounted for on a pooled basis, and interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, is being recognized on all PCI loans.