Accounting For Certain Loans Acquired in A Transfer

12 Months Ended

Jun. 30, 2012

Notes

Accounting For Certain Loans Acquired in A Transfer

NOTE 4: 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 June 30, 2012. The amounts of loans at June 30, 2012, are as follows:

	June 30,
Real Estate Loans:	2012	2011
Conventional	$2,126,478	$  2,307,417
Construction	-	-
Commercial	2,087,192	3,857,364
Consumer loans	-	-
Commercial loans	1,947,738	4,728,158
Outstanding balance	$6,161,408	$10,892,939
Carrying amount, net of fair value adjustment of $1,624,572 and $3,692,086 at 2012 and 2011	$4,536,836	$  7,200,853

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

	June 30,
	2012	2011
Balance at June 30,	$    792,942	$  413,525
Additions	-	600,788
Accretion	(1,515,270)	(233,530)
Reclassification from nonaccretable difference	1,211,684	12,159
Disposals	-	-
Balance at June 30	$    489,356	$  792,942

During the fiscal years ended June 30, 2012 and 2011, the Company increased the allowance for the loan losses by a charge to the income statement of $381,000 and $121,000, respectively, related to these purchased credit impaired loans. During the same periods, allowance for loan losses of $105,000 and $0, respectively, was reversed.