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Note 4: Accounting For Certain Acquired Loans
 12 Months Ended
Jun. 30, 2018
Notes  
Note 4: Accounting For Certain Acquired Loans

NOTE 4: Accounting for Certain Acquired Loans

 

The Company acquired loans in transfers during the fiscal years ended June 30, 2011, June 30, 2015 and June 30, 2017. At acquisition, certain transferred 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 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 those loans is included in the balance sheet amounts of loans receivable at June 30, 2018 and June 30, 2017. The amount of these loans is shown below:

 

 

June 30,

(dollars in thousands)

2018

2017

Residential real estate

 $               3,861

 $               4,158

Construction real estate

                  1,544

                  1,660

Commercial real estate

                  8,909

                13,394

Consumer loans

                       -  

                       -  

Commercial loans

                  3,073

                  4,502

      Outstanding balance

 $             17,387

 $             23,714

     Carrying amount, net of fair value adjustment of      $2,816 and $3,584 at June 30, 2018 and 2017      respectively

 $             14,571

 $             20,130

 

 

Accretable yield, or income expected to be collected, is as follows:

 

 

June 30,

(dollars in thousands)

2018

2017

2016

Balance at beginning of period

 $                  609

 $                  656

 $                  548

      Additions

                         -

                         -

                         -

      Accretion

                   (683)

                   (391)

                   (435)

      Reclassification from nonaccretable difference

                     663

                     344

                     543

      Disposals

                         -

                         -

                         -

Balance at end of period

 $                  589

 $                  609

 $                  656

 

 

During the fiscal years ended June 30, 2018 and 2017, the Company did not increase or reverse the allowance for loan losses related to these purchased credit impaired loans.