Accounting For Certain Loans Acquired in A Transfer

3 Months Ended

Mar. 31, 2012

Accounting For Certain Loans Acquired in A Transfer [Abstract]

Accounting For Certain Loans Acquired in A Transfer

Note 6: Accounting for Certain Loans Acquired in a Transfer

The Company acquired loans in a transfer during the fiscal year ended June 30, 2011.  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, 2012.  The amounts of loans at March 31, 2012, are as follows:

Real Estate Loans:
Conventional	$2,140,875
Construction	-
Commercial	2,892,345
Consumer loans	-
Commercial loans	2,003,971
Outstanding balance	$7,037,191
Carrying amount, net of fair value adjustment of $1,811,343	$5,225,848

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

Balance at June 30, 2011	$792,942
Additions	-
Accretion	(1,392,723)
Reclassification from nonaccretable difference	1,178,668
Disposals	-
Balance at March 31, 2012	$578,887

During the nine month periods ended March 31, 2012 and 2011, the Company increased the allowance for loan losses by a charge to the income statement of $120,000 and $0, respectively, as a result of a decrease in expected cash flows for certain loans acquired with deteriorated credit quality.  No allowance for loan losses was reversed for the nine-month periods ended March 31, 2012 and 2011.