Note 5: Accounting For Certain Loans Acquired in A Transfer

9 Months Ended

Mar. 31, 2019

Note 5: Accounting For Certain Loans Acquired in A Transfer

Note 5: Accounting for Certain Loans Acquired in a Transfer

The Company acquired loans in transfers during the fiscal years ended June 30, 2011, 2015, 2017, and 2019. 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 March 31, 2019 and June 30, 2018. The amount of these loans is shown below:

(dollars in thousands)	March 31, 2019	June 30, 2018
Residential real estate	$ 2,058	$ 3,861
Construction real estate	1,417	1,544
Commercial real estate	24,805	8,909
Consumer loans	-	-
Commercial loans	7,895	3,073
Outstanding balance	$ 36,175	$ 17,387
Carrying amount, net of fair value adjustment of $7,971 and $2,816 at March 31, 2019, and June 30, 2018, respectively	$ 28,204	$ 14,571

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

	For the three-month period ended
(dollars in thousands)	March 31, 2019	March 31, 2018
Balance at beginning of period	$ 371	$ 607
Additions	-	-
Accretion	(114)	(334)
Reclassification from nonaccretable difference	55	335
Disposals	-	-
Balance at end of period	$ 312	$ 608

	For the nine-month period ended
(dollars in thousands)	March 31, 2019	March 31, 2018
Balance at beginning of period	$ 589	$ 609
Additions	102	-
Accretion	(1,203)	(594)
Reclassification from nonaccretable difference	1,028	593
Disposals	(204)	-
Balance at end of period	$ 312	$ 608

During the three- and nine- month periods ended March 31, 2019 and 2018, the Company did not increase or reverse the allowance for loan losses related to these purchased credit impaired loans.