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Note 2: Organization and Summary of Significant Accounting Policies: New Accounting Pronouncements (Policies) | 3 Months Ended
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Sep. 30, 2020
Policies |
New Accounting Pronouncements | The following paragraphs summarize the impact of new accounting pronouncements: In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in this update remove disclosures that no longer are considered cost beneficial, modify/clarify the specific requirements of certain disclosures, and add disclosure requirements identified as relevant. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for certain removed and modified disclosures. Adoption of this standard did not have a significant impact on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which the Company adopted July 1, 2020. The Update amended guidance on reporting credit losses for financial assets held at amortized cost basis and available for sale debt securities. For financial assets held at amortized cost basis, Topic 326 eliminated the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The Update affects loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, and any other financial assets not excluded from the scope that have the contractual right to receive cash. Adoption was applied on a modified retrospective basis, through a cumulative-effect adjustment to retained earnings. Adoption resulted in an increase to the ACL of $8.9 million, related to the transition from the incurred loss model to the CECL ACI model and an increase of $434,000 related to the transition from PCI to PCD methodology, relative to the ALLL as of June 30, 2020. The Company also recorded an adjustment to the reserve for unfunded commitments recorded in other liabilities of $268,000. The impact at adoption was reflected as an adjustment to beginning retained earnings, net of income taxes, in the amount of $7.2 million. In accordance with the new standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On July 1, 2020, the amortized cost basis of the PCD loans were increased to reflect the addition of $434,000 to the ACL. The adoption of ASU 2016-13 in fiscal 2021 could also impact the Company’s future earnings, perhaps materially. The following table illustrates the impact of adoption of ASU 2016-13:
| July 1, 2020
| As reported | As reported | Impact of
| under | prior to | adoption
(dollars in thousands) | ASU 2016-13 | ASU 2016-13 | ASU 2016-13
Loans receivable | $ 2,142,363 | $ 2,141,929 | $ 434
Allowance for credit losses on loans: |  |  |
Real Estate Loans: |  |  |
Residential | 8,396 | 4,875 | 3,521
Construction | 1,889 | 2,010 | (121)
Commercial | 15,988 | 12,132 | 3,856
Consumer loans | 2,247 | 1,182 | 1,065
Commercial loans | 5,952 | 4,940 | 1,012
Total allowance for credit losses on loans | $ 34,472 | $ 25,139 | $ 9,333
Total allowance for credit losses on off-balance sheet credit exposures | $ 2,227 | $ 1,959 | $ 268
The above table includes the impact of ASU 2016-13 adoption for PCD assets previously classified as PCI. The change in the ACL includes $434,000 attributable to residential and commercial real estate loans, and the amortized cost basis of loans receivable was increased for those loans by that total amount. In March 2020, the CARES Act was signed into law, creating a forbearance program for federally backed mortgage loans, protects borrowers from negative credit reporting due to loan accommodations related to the National Emergency, and provides financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to troubled debt restructurings (TDR) for a limited period of time to account for the effects of COVID-19. The Company has elected to not apply ASC Subtopic 310-40 for loans eligible under the CARES Act, based on the modification’s (1) relation to COVID-19, (2) execution for a loan that was not more than 30-days past due as of December 31, 2019, and (3) execution between March 1, 2020, and the earlier of the date that falls 60 days following the termination of the declared National Emergency, or December 31, 2020.

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