Loans, Allowance for Loan Losses and Credit Quality

Loans are carried at the principal amounts outstanding, or amortized acquired fair value in the case of acquired loans, adjusted by partial charge-offs and net of deferred loan costs or fees. Loan fees and certain direct origination costs are deferred and amortized into interest income over the expected term of the loan using the level-yield method. When a loan is paid off in full, the unamortized portion is recognized in interest income. Interest income is accrued based upon the daily principal amount outstanding, except for loans on nonaccrual status.

Loans purchased by the Company are accounted for under ASC

310

30,

Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality

("ASC

310

30"

). At acquisition, the effective interest rate is determined based on the discount rate that equates the present value of the Company's estimate of cash flows with the purchase price of the loan. Prepayments are

not

assumed in determining a purchased loan's effective interest rate and income accretion. The application of ASC

310

limits the yield that

may

be accreted on the purchased loan, or the "accretable yield," to the excess of the Company's estimate, at acquisition, of the expected undiscounted principal, interest, and other cash flows over the Company's initial investment in the loan. The excess of contractually required payments receivable over the cash flows expected to be collected on the loan represents the purchased loan's "nonaccretable difference." Subsequent improvements in expected cash flows of loans with nonaccretable differences result in a prospective increase to the loan's effective yield through a reclassification of some, or all, of the nonaccretable difference to accretable yield. The effect of subsequent credit-related declines in expected cash flows of purchased loans are recorded through a specific allocation in the allowance for loan losses.

Loans are generally placed on nonaccrual status when they are past due

days as to either principal or interest, or when in management's judgment the collectability of interest or principal of the loan has been impaired. Loans accounted for under ASC

310

are placed on nonaccrual when it is

not

possible to reach a reasonable expectation of the timing and amount of cash flows to be collected on the loan. When a loan has been placed on nonaccrual status, previously accrued and uncollected interest is reversed against interest on loans. Interest on nonaccrual loans is accounted for on a cash-basis or using the cost-recovery method when collectability is doubtful. A loan is returned to accrual status when collectability of principal and interest is reasonably assured and the loan has performed for a reasonable period of time.

In cases where a borrower experiences financial difficulties and the Company makes certain concessionary modifications to contractual terms, the loan is classified as a troubled debt restructuring ("TDR"), and therefore by definition is an impaired loan. Concessionary modifications

may

include adjustments to interest rates, extensions of maturity, and other actions intended to minimize economic loss and avoid foreclosure or repossession of collateral. For loans accounted for under ASC

310

30,

the Company evaluates whether it has granted a concession by comparing the restructured debt terms to the expected cash flows at acquisition plus any additional cash flows expected to be collected arising from changes in estimate after acquisition. As a result, if an ASC

310

loan is modified to be consistent with, or better than, the Company's expectations at acquisition, the modified loan would

not

qualify as a TDR. Nonaccrual loans that are restructured generally remain on nonaccrual status for a minimum period of

six

months to demonstrate that the borrower can meet the restructured terms. If the restructured loan is on accrual status prior to being modified, it is reviewed to determine if the modified loan should remain on accrual status. If the borrower's ability to meet the revised payment schedule is

not

reasonably assured, the loan is classified as a nonaccrual loan. With limited exceptions, loans classified as TDRs remain classified as such until the loan is paid off.

The composition of the Company’s loan portfolio is as follows on the dates indicated.

	December 31, 2018
	Originated		Purchased		Total
	(Dollars in thousands)
Commercial real estate	$	259,451	$	313,261	$	572,712
Commercial and industrial		202,150		788		202,938
Residential real estate		75,972		16,594		92,566
Consumer		2,788		-		2,788
SBA		67,282		-		67,282
Total loans	$	607,643	$	330,643	$	938,286

	June 30, 2018
	Originated		Purchased		Total
	(Dollars in thousands)
Commercial real estate	$	249,428	$	276,051	$	525,479
Commercial and industrial		181,800		995		182,795
Residential real estate		86,202		13,926		100,128
Consumer		3,244		-		3,244
SBA		60,156		-		60,156
Total loans	$	580,830	$	290,972	$	871,802

Total loans include deferred loan origination costs, net, of

$190

thousand and

$223

thousand as of

December 31, 2018

and

June 30, 2018,

respectively.

Past Due and Nonaccrual Loans

The following is a summary of past due and nonaccrual loans:

	December 31, 2018
	Past Due 30-59		Past Due 60-89		Past Due 90 Days or More-Still		Past Due 90 Days or More-		Total Past		Total		Total		Nonaccrual
	Days		Days		Accruing		Nonaccrual		Due		Current		Loans		Loans
	(Dollars in thousands)
Originated portfolio:
Residential real estate	$	1,141	$	247	$	-	$	1,640	$	3,028	$	72,944	$	75,972	$	2,595
Commercial real estate		238		309		-		2,237		2,784		256,667		259,451		2,351
Commercial and industrial		-		-		-		40		40		202,110		202,150		40
Consumer		62		67		-		121		250		2,538		2,788		216
SBA		1,325		62		-		1,273		2,660		64,622		67,282		1,793
Total originated portfolio		2,766		685		-		5,311		8,762		598,881		607,643		6,995
Purchased portfolio:
Residential real estate		-		-		-		202		202		16,392		16,594		202
Commercial real estate		5,363		1,205		-		2,612		9,180		304,081		313,261		4,755
Commercial and industrial		-		-		-		139		139		649		788		394
Total purchased portfolio		5,363		1,205		-		2,953		9,521		321,122		330,643		5,351
Total loans	$	8,129	$	1,890	$	-	$	8,264	$	18,283	$	920,003	$	938,286	$	12,346

	June 30, 2018
	Past Due 30-59 Days		Past Due 60-89 Days		Past Due 90 Days or More-Still Accruing		Past Due 90 Days or More- Nonaccrual		Total Past Due		Total Current		Total Loans		Nonaccrual Loans
	(Dollars in thousands)
Originated portfolio:
Residential real estate	$	493	$	181	$	-	$	1,355	$	2,029	$	84,173	$	86,202	$	3,212
Commercial real estate		27		210		-		98		335		249,093		249,428		1,428
Commercial and industrial		-		-		-		32		32		181,768		181,800		34
Consumer		77		82		-		19		178		3,066		3,244		134
SBA		-		-		-		831		831		59,325		60,156		1,405
Total originated portfolio		597		473		-		2,335		3,405		577,425		580,830		6,213

Purchased portfolio:
Residential real estate		-		-		-		202		202		13,724		13,926		202
Commercial real estate		659		274		-		3,086		4,019		272,032		276,051		5,180
Commercial and industrial		17		-		-		91		108		887		995		363
Total purchased portfolio		676		274		-		3,379		4,329		286,643		290,972		5,745
Total loans	$	1,273	$	747	$	-	$	5,714	$	7,734	$	864,068	$	871,802	$	11,958

Allowance for Loan Losses and Impaired Loans

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. For residential and consumer loans, a charge-off is recorded

later than the point at which a loan is

180

days past due if the loan balance exceeds the fair value of the collateral, less estimated costs to sell. For commercial loans, a charge-off is recorded on a case-by-case basis when all or a portion of the loan is deemed to be uncollectible. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses consists of general, specific, and unallocated reserves and reflects management’s estimate of probable loan losses inherent in the loan portfolio at the balance sheet date. Management uses a consistent and systematic process and methodology to evaluate the appropriateness of the allowance for loan losses on a quarterly basis. The calculation of the allowance for loan losses is segregated by portfolio segments, which include: residential real estate, commercial real estate, commercial and industrial, consumer, purchased loans, and SBA loans. Risk characteristics relevant to each portfolio segment are as follows:

Residential real estate: All loans in this segment are collateralized by residential real estate and repayment is primarily dependent on the credit quality, loan-to-value ratio and income of the individual borrower. The overall health of the economy, particularly unemployment rates and housing prices, has a significant effect on the credit quality in this segment. For purposes of the Company’s allowance for loan loss calculation, home equity loans and lines of credit are included in residential real estate.

Commercial real estate: Loans in this segment are primarily income-producing properties. For owner-occupied properties, the cash flows are derived from an operating business, and the underlying cash flows

may

be adversely affected by deterioration in the financial condition of the operating business. The underlying cash flows generated by non-owner occupied properties

may

be adversely affected by increased vacancy rates. Management periodically obtains rent rolls and operating statements, with which it monitors the cash flows of these loans. Adverse developments in either of these areas will have an adverse effect on the credit quality of this segment. For purposes of the allowance for loan losses, this segment also includes construction loans.

Commercial and industrial: Loans in this segment are made to businesses and are generally secured by the assets of the business. Repayment is expected from the cash flows of the business. This segment also includes loans to non-bank lenders, which are generally secured by a collateral assignment of the notes and mortgages on loans originated by the non-bank lenders. Weakness in national or regional economic conditions, and a corresponding weakness in consumer or business spending, will have an adverse effect on the credit quality of this segment.

Consumer: Loans in this segment are generally secured, and repayment is dependent on the credit quality of the individual borrower. Repayment of consumer loans is generally based on the earnings of individual borrowers, which

may

be adversely impacted by regional labor market conditions.

Purchased: Loans in this segment are typically secured by commercial real estate, multi-family residential real estate, or business assets and have been acquired by the Bank’s Loan Acquisition and Servicing Group (“LASG”). Loans acquired by the LASG are, with limited exceptions, performing loans at the date of purchase. Repayment of loans in this segment is largely dependent on cash flow from the successful operation of the property, in the case of non-owner occupied property, or operating business, in the case of owner-occupied property. Loan performance

may

be adversely affected by factors affecting the general economy or conditions specific to the real estate market, such as geographic location or property type. Loans in this segment are evaluated for impairment under ASC

310

30.

The Company reviews expected cash flows from purchased loans on a quarterly basis. The effect of a decline in expected cash flows subsequent to the acquisition of the loan is recognized through a specific allocation in the allowance for loan losses.

SBA: Loans in this segment are comprised of both commercial real estate and commercial and industrial loans to small businesses, underwritten and originated by the Bank’s national SBA group (“SBA Division”). Loans are underwritten and originated primarily in accordance with SBA

(a) guidelines, and are partially guaranteed by the SBA. Loans are primarily secured by income-producing properties and/or assets of the businesses or borrowers. Adverse developments in national or regional economic conditions, and a corresponding weakness in consumer or business spending, will have an adverse effect on the credit quality of this segment.

The general component of the allowance for loan losses for originated loans is based on historical loss experience adjusted for qualitative factors stratified by loan segment. The Company does

not

weight periods used in that analysis to determine the average loss rate in each portfolio segment. This historical loss factor is adjusted for the following qualitative factors:

●

Levels and trends in delinquencies;

●

Trends in the volume and nature of loans;

●

Trends in credit terms and policies, including underwriting standards, procedures and practices, and the experience and ability of lending management and staff;

●

Trends in portfolio concentration;

●

National and local economic trends and conditions;

●

Effects of changes or trends in internal risk ratings; and

●

Other effects resulting from trends in the valuation of underlying collateral.

The allocated component of the allowance for loan losses relates to loans that are classified as impaired. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows or collateral value of the impaired loan is lower than the carrying value of the loan.

For all portfolio segments, except loans accounted for under ASC

310

30,

a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Loans that experience insignificant payment delays and payment shortfalls generally are

not

classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. For the purchased loan segment, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to realize cash flows as expected at acquisition. For loans accounted for under ASC

310

for which cash flows can reasonably be estimated, loan impairment is measured based on the decrease in expected cash flows from those estimated at acquisition, excluding changes due to changes in interest rate indices and other non-credit related factors, discounted at the loan’s effective rate assumed at acquisition. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting the scheduled principal and interest payments when due.

The following table sets forth activity in the Company’s allowance for loan losses.

	Three Months Ended December 31, 2018
	Residential			Commercial			Commercial
	Real Estate			Real Estate			and Industrial		Consumer			Purchased		SBA		Total
	(Dollars in thousands)
Beginning balance	$	625		$	1,627		$	789	$	43		$	597	$	1,607	$	5,288
Provision (credit)		40			(76	)		83		(24	)		2		76		101
Recoveries		1			-			2		12			-		-		15
Charge-offs		(81	)		-			-		(15	)		-		-		(96	)
Ending balance	$	585		$	1,551		$	874	$	16		$	599	$	1,683	$	5,308

	Three Months Ended December 31, 2017
	Residential			Commercial		Commercial
	Real Estate			Real Estate		and Industrial			Consumer			Purchased		SBA		Total
	(Dollars in thousands)
Beginning balance	$	508		$	1,248	$	596		$	41		$	310	$	1,331	$	4,034
Provision (credit)		176			64		(40	)		19			210		8		437
Recoveries		1			-		5			25			-		-		31
Charge-offs		(112	)		-		-			(35	)		-		-		(147	)
Ending balance	$	573		$	1,312	$	561		$	50		$	520	$	1,339	$	4,355

	Six Months Ended December 31, 2018
	Residential			Commercial		Commercial
	Real Estate			Real Estate		and Industrial			Consumer			Purchased		SBA		Total
	(Dollars in thousands)
Beginning balance	$	605		$	1,527	$	620		$	39		$	587	$	1,429	$	4,807
Provision		139			17		246			(35	)		12		254		633
Recoveries		3			7		10			30			-		-		50
Charge-offs		(162	)		-		(2	)		(18	)		-		-		(182	)
Ending balance	$	585		$	1,551	$	874		$	16		$	599	$	1,683	$	5,308

	Six Months Ended December 31, 2017
	Residential			Commercial		Commercial
	Real Estate			Real Estate		and Industrial		Consumer			Purchased		SBA		Total
	(Dollars in thousands)
Beginning balance	$	472		$	1,219	$	394	$	53		$	303	$	1,224	$	3,665
Provision		217			93		144		6			217		115		792
Recoveries		8			-		23		31			-		-		62
Charge-offs		(124	)		-		-		(40	)		-		-		(164	)
Ending balance	$	573		$	1,312	$	561	$	50		$	520	$	1,339	$	4,355

The following table sets forth information regarding the allowance for loan losses by portfolio segment and impairment methodology.

	December 31, 2018
	Residential		Commercial		Commercial
	Real Estate		Real Estate		and Industrial		Consumer		Purchased		SBA		Total
	(Dollars in thousands)
Allowance for loan losses:
Individually evaluated	$	260	$	148	$	2	$	4	$	-	$	313	$	727
Collectively evaluated		325		1,403		872		12		-		1,370		3,982
ASC 310-30		-		-		-		-		599		-		599
Total	$	585	$	1,551	$	874	$	16	$	599	$	1,683	$	5,308

Loans:
Individually evaluated	$	4,856	$	3,434	$	40	$	270	$	-	$	3,642	$	12,242
Collectively evaluated		71,116		256,017		202,110		2,518		-		63,640		595,401
ASC 310-30		-		-		-		-		330,643		-		330,643
Total	$	75,972	$	259,451	$	202,150	$	2,788	$	330,643	$	67,282	$	938,286

	June 30, 2018
	Residential		Commercial		Commercial
	Real Estate		Real Estate		and Industrial		Consumer		Purchased		SBA		Total
	(Dollars in thousands)
Allowance for loan losses:
Individually evaluated	$	322	$	139	$	8	$	6	$	-	$	112	$	587
Collectively evaluated		283		1,388		612		33		-		1,317		3,633
ASC 310-30		-		-		-		-		587		-		587
Total	$	605	$	1,527	$	620	$	39	$	587	$	1,429	$	4,807

Loans:
Individually evaluated	$	5,682	$	2,687	$	33	$	292	$	-	$	3,170	$	11,864
Collectively evaluated		80,520		246,741		181,767		2,952		-		56,986		568,966
ASC 310-30		-		-		-		-		290,972		-		290,972
Total	$	86,202	$	249,428	$	181,800	$	3,244	$	290,972	$	60,156	$	871,802

The following table sets forth information regarding impaired loans. Loans accounted for under ASC

310

that have performed based on cash flow and accretable yield expectations determined at date of acquisition are

not

considered impaired assets and have been excluded from the tables below.

	December 31, 2018						June 30, 2018
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
	(Dollars in thousands)
Impaired loans without a valuation allowance:
Originated:
Residential real estate	$	2,782	$	2,766	$	-	$	3,162	$	3,154	$	-
Commercial real estate		2,369		2,364		-		1,445		1,438		-
Commercial and industrial		12		12		-		-		-		-
Consumer		252		275		-		271		296		-
SBA		1,920		1,920		-		2,597		2,597		-
Purchased:
Residential real estate		202		217		-		202		217		-
Commercial real estate		6,456		8,782		-		6,601		9,330		-
Commercial and industrial		85		163		-		108		186		-
Total		14,078		16,499		-		14,386		17,218		-

Impaired loans with a valuation allowance:
Originated:
Residential real estate		2,074		2,146		260		2,520		2,497		322
Commercial real estate		1,065		1,057		148		1,242		1,234		139
Commercial and industrial		28		28		2		33		33		8
Consumer		18		19		4		21		22		6
SBA		1,722		1,722		313		573		573		112
Purchased:
Residential real estate		-		-		-		-		-		-
Commercial real estate		3,587		3,856		240		4,748		5,362		280
Commercial and industrial		404		463		359		349		407		307
Total		8,898		9,291		1,326		9,486		10,128		1,174
Total impaired loans	$	22,976	$	25,790	$	1,326	$	23,872	$	27,346	$	1,174

The following tables set forth information regarding interest income recognized on impaired loans.

	Three Months Ended December 31,
	2018					2017
	Average		Interest			Average		Interest
	Recorded		Income			Recorded		Income
	Investment		Recognized			Investment		Recognized
	(Dollars in thousands)
Impaired loans without a valuation allowance:
Originated:
Residential real estate	$	2,907	$	12		$	3,992	$	38
Commercial real estate		1,816		(3	)		2,454		1
Commercial and industrial		15		-			-		-
Consumer		266		1			285		7
SBA		1,878		49			1,794		2
Purchased:
Residential real estate		202		-			566		-
Commercial real estate		6,419		68			9,814		102
Commercial and industrial		90		-			26		-
Total		13,593		127			18,931		150

Impaired loans with a valuation allowance:
Originated:
Residential real estate		2,090		31			1,904		42
Commercial real estate		1,171		19			1,388		27
Commercial and industrial		29		-			44		2
Consumer		40		-			32		1
SBA		1,736		1			806		-
Purchased:
Residential real estate		-		-			83		1
Commercial real estate		3,994		24			4,108		38
Commercial and industrial		381		1			228		3
Total		9,441		76			8,593		114
Total impaired loans	$	23,034	$	203		$	27,524	$	264

	Six Months Ended December 31,
	2018				2017
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
	(Dollars in thousands)
Impaired loans without a valuation allowance:
Originated:
Residential real estate	$	2,992	$	31	$	4,012	$	74
Commercial real estate		1,692		-		1,756		94
Commercial and industrial		10		-		-		-
Consumer		267		3		273		13
SBA		2,118		89		1,819		39
Purchased:
Residential real estate		202		-		729		-
Commercial real estate		6,479		127		9,441		182
Commercial and industrial		96		-		28		-
Total		13,856		250		18,058		402

Impaired loans with a valuation allowance:
Originated:
Residential real estate		2,233		54		1,811		63
Commercial real estate		1,195		41		1,392		49
Commercial and industrial		30		-		30		3
Consumer		33		-		36		2
SBA		1,348		7		811		3
Purchased:
Residential real estate		-		-		55		1
Commercial real estate		4,245		55		3,915		65
Commercial and industrial		370		1		183		3
Total		9,454		158		8,233		189
Total impaired loans	$	23,310	$	408	$	26,291	$	591

Credit Quality

The Company utilizes a

ten

-point internal loan rating system for commercial real estate, construction, commercial and industrial, and certain residential loans as follows:

Loans rated

–

Loans in these categories are considered “pass” rated loans. Loans in categories

are considered to have low to average risk. Loans rated

are considered marginally acceptable business credits and have more than average risk.

Loans rated

Loans in this category are considered “special mention.” These loans show signs of potential weakness and are being closely monitored by management.

Loans rated

Loans in this category are considered “substandard.” Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have a well-defined weakness or weaknesses that jeopardize the orderly repayment of the debt.

Loans rated

Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in

one

graded

with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loans rated

10:

Loans in this category are considered “loss” and of such little value that their continuance as loans is

not

warranted.

On an annual basis, or more often if needed, the Company formally reviews the ratings of all loans subject to risk ratings. Annually, the Company engages an independent

third

-party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process. Risk ratings on purchased loans, with and without evidence of credit deterioration at acquisition, are determined relative to the Company’s recorded investment in that loan, which

may

be significantly lower than the loan’s unpaid principal balance.

The following tables present the Company’s loans by risk rating.

	December 31, 2018
	Originated Portfolio
	Commercial		Commercial						Purchased
	Real Estate		and Industrial		SBA		Residential (1)		Portfolio		Total
	(Dollars in thousands)
Loans rated 1- 6	$	255,540	$	201,858	$	60,248	$	14,583	$	318,693	$	850,922
Loans rated 7		1,521		-		5,100		93		6,467		13,181
Loans rated 8		2,390		292		1,934		812		5,483		10,911
Loans rated 9		-		-		-		-		-		-
Loans rated 10		-		-		-		-		-		-
Total	$	259,451	$	202,150		67,282	$	15,488	$	330,643	$	875,014

	June 30, 2018
	Originated Portfolio
	Commercial		Commercial						Purchased
	Real Estate		and Industrial		SBA		Residential (1)		Portfolio		Total
	(Dollars in thousands)
Loans rated 1- 6	$	246,107	$	181,515	$	54,730	$	13,403	$	279,111	$	774,866
Loans rated 7		1,821		-		3,882		100		5,899		11,702
Loans rated 8		1,500		285		1,544		823		5,962		10,114
Loans rated 9		-		-		-		-		-		-
Loans rated 10		-		-		-		-		-		-
Total	$	249,428	$	181,800		60,156	$	14,326	$	290,972	$	796,682

(

)

Certain of the Company’s loans made for commercial purposes, but secured by residential collateral, are rated under the Company’s risk-rating system.

roubled Debt Restructurings

The following table shows the Company’s post-modification balance of TDRs by type of modification.

	Three Months Ended December 31,								Six Months Ended December 31,
	2018				2017				2018				2017
	Number of		Recorded		Number of		Recorded		Number of		Recorded		Number of		Recorded
	Contracts		Investment		Contracts		Investment		Contracts		Investment		Contracts		Investment
	(Dollars in thousands)
Extended maturity		2	$	20		-	$	-		2	$	20		1	$	18
Adjusted interest rate		-		-		1		15		-		-		1		15
Rate and maturity		1		-		3		2,263		4		170		3		2,263
Principal deferment		-		-		2		283		-		-		3		938
		3	$	20		6	$	2,561		6	$	190		8	$	3,234

The following table shows loans modified in a TDR and the change in the recorded investment subsequent to the modifications occurring.

	Three Months Ended December 31,
	2018						2017
			Recorded		Recorded				Recorded		Recorded
	Number of		Investment		Investment		Number of		Investment		Investment
	Contracts		Pre-Modification		Post-Modification		Contracts		Pre-Modification		Post-Modification
	(Dollars in thousands)
Originated portfolio:
Residential real estate		-	$	-	$	-		2	$	29	$	30
Commercial real estate		-		-		-		2		2,079		2,140
Commercial and industrial		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Total originated portfolio		-		-		-		4		2,108		2,170
Purchased portfolio:
Residential real estate		-		-		-		-		-		-
Commercial real estate		-		-		-		1		123		123
Commercial and industrial		3		20		20		1		268		268
Total purchased portfolio		3		20		20		2		391		391
Total		3	$	20	$	20		6	$	2,499	$	2,561

	Six Months Ended December 31,
	2018						2017
			Recorded		Recorded				Recorded		Recorded
	Number of		Investment		Investment		Number of		Investment		Investment
	Contracts		Pre-Modification		Post-Modification		Contracts		Pre-Modification		Post-Modification
	(Dollars in thousands)
Originated portfolio:
Residential real estate		3	$	170	$	170		3	$	47	$	48
Commercial real estate		-		-		-		2		2,079		2,140
Commercial and industrial		-		-		-		1		655		655
Consumer		-		-		-		-		-		-
Total originated portfolio		3		170		170		6		2,781		2,843
Purchased portfolio:
Residential real estate		-		-		-		-		-		-
Commercial real estate		-		-		-		1		123		123
Commercial and industrial		3		20		20		1		268		268
Total purchased portfolio		3		20		20		2		391		391
Total		6	$	190	$	190		8	$	3,172	$	3,234

The Company considers TDRs past due

days or more to be in payment default.

Two

loans modified in a TDR in the last

twelve

months totaling

$1.5

million defaulted during both the

three

and

six

months ended

December 31, 2018.

As of

December 31, 2018,

there were

further commitments to lend to borrowers associated with loans modified in a TDR.

ASC

310

Loans

The following tables present a summary of loans accounted for under ASC

310

that were acquired by the Company during the period indicated.

	Three Months Ended December 31, 2018			Three Months Ended December 31, 2017
	(Dollars in thousands)
Contractually required payments receivable	$	60,028		$	49,408
Nonaccretable difference		(875	)		(1,667	)
Cash flows expected to be collected		59,153			47,741
Accretable yield		(9,819	)		(12,939	)
Fair value of loans acquired	$	49,334		$	34,802

	Six Months Ended December 31, 2018			Six Months Ended December 31, 2017
	(Dollars in thousands)
Contractually required payments receivable	$	121,568		$	55,320
Nonaccretable difference		(1,049	)		(1,824	)
Cash flows expected to be collected		120,519			53,496
Accretable yield		(36,382	)		(15,043	)
Fair value of loans acquired	$	84,137		$	38,453

Certain loans accounted for under ASC

310

that were acquired by the Company are

not

accounted for using the income recognition model because the Company cannot reasonably estimate cash flows expected to be collected. These loans when acquired are placed on nonaccrual. The carrying amounts of such loans are as follows.

	As of and for the Three Months Ended December 31, 2018		As of and for the Six Months Ended December 31, 2018
	(Dollars in thousands)
Loans acquired during the period	$	-	$	-
Loans at end of period		4,908		4,908

The following tables summarize the activity in the accretable yield for loans accounted for under ASC

310

30.

	Three Months Ended December 31, 2018			Three Months Ended December 31, 2017
	(Dollars in thousands)
Beginning balance	$	152,794		$	122,923
Acquisitions		9,819			12,939
Accretion		(5,648	)		(4,244	)
Reclassifications from non-accretable difference to accretable yield		410			1,095
Disposals and other changes		(4,540	)		(7,810	)
Ending balance	$	152,835		$	124,903

	Six Months Ended December 31, 2018			Six Months Ended December 31, 2017
	(Dollars in thousands)
Beginning balance	$	138,178		$	131,197
Acquisitions		36,382			15,043
Accretion		(11,181	)		(8,669	)
Reclassifications from non-accretable difference to accretable yield		988			4,523
Disposals and other changes		(11,532	)		(17,191	)
Ending balance	$	152,835		$	124,903

The following table provides information related to the unpaid principal balance and carrying amounts of ASC

310

loans.

	December 31, 2018		June 30, 2018
	(Dollars in thousands)
Unpaid principal balance	$	361,741	$	318,876
Carrying amount		324,890		284,317