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Accounting for Certain Loans Acquired with Deteriorated Credit Quality
 12 Months Ended
Sep. 30, 2020
Receivables [Abstract]  
Accounting for Certain Loans Acquired with Deteriorated Credit Quality Accounting for Certain Loans Acquired with Deteriorated Credit Quality
In June 2010 and May 2016, the Company acquired certain loans in the TierOne Bank and HF Financial transactions, respectively, that had deteriorated credit quality known as ASC 310-30 loans, or purchased credit impaired loans. Several factors were considered when evaluating whether a loan was considered a purchased credit impaired loan, including delinquency status of the loan, updated borrower credit status, geographic information, and updated loan-to-values. Further, these purchased credit impaired loans had differences between contractual amounts owed and cash flows expected to be collected, that were at least in part, due to credit quality. U.S. GAAP allows purchasers to aggregate purchased credit impaired loans acquired in the same fiscal quarter in one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.
Loan pools are periodically reassessed to determine expected cash flows. In determining the expected cash flows, the timing of cash flows and prepayment assumptions for smaller, homogeneous loans are based on statistical models that take into account factors such as the loan interest rate, credit profile of the borrowers, the years in which the loans were originated, and whether the loans are fixed or variable rate loans. Prepayments may be assumed on large individual loans that consider similar prepayment factors listed above for smaller homogeneous loans.
The re-assessment of purchased credit impaired loans resulted in the following changes in the accretable yield during the fiscal years ended September 30, 2020, 2019 and 2018.
Fiscal Years Ended September 30,
202020192018
(dollars in thousands)
Balance, beginning of period$26,047 $34,973 $44,131 
Accretion(6,869)(9,202)(13,193)
Reclassification (to) from nonaccretable difference(3,790)276 4,035 
Balance, end of period$15,388 $26,047 $34,973 
The reclassifications (to) from nonaccretable difference noted in the table above represent instances where specific pools of loans are expected to perform (worse) better over the remaining lives of the loans than expected at the prior re-assessment date.
The following table provides purchased impaired loans at September 30, 2020 and 2019.
September 30, 2020September 30, 2019
Outstanding Balance ¹Recorded Investment ²Carrying Value ³Outstanding Balance ¹Recorded Investment ²Carrying Value ³
(dollars in thousands)
Commercial real estate$86,691 $20,928 $20,787 $90,295 $22,124 $21,965 
Agriculture3,954 2,969 2,969 4,462 2,756 2,491 
Commercial non-real estate6,937 192 163 7,190 221 192 
Residential real estate29,757 25,570 25,076 35,413 30,280 30,168 
Consumer351 292 262 493 438 438 
Total lending$127,690 $49,951 $49,257 $137,853 $55,819 $55,254 
1 Represents the legal balance of ASC 310-30 loans.
2 Represents the book balance of ASC 310-30 loans.
3 Represents the book balance of ASC 310-30 loans net of the related allowance for loan and lease losses.