Accounting For Certain Loans Acquired in A Transfer

3 Months Ended

Dec. 31, 2012

Notes

Accounting For Certain Loans Acquired in A Transfer

Note 5: 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 December 31 and June 30, 2012.  The amounts of these loans at December 31 and June 30, 2012, are as follows:

	December 31,	June 30,
	2012	2012
Real Estate Loans:
Conventional	$2,111,128	2,126,478
Construction	-	-
Commercial	2,017,552	2,087,192
Consumer loans	-	-
Commercial loans	1,880,089	1,947,738
Outstanding balance	$6,008,769	$6,161,408
Carrying amount, net of fair value adjustment of
$1,379,314 and $1,624,572 at December 31, 2012
and June 30, 2012, respectively	$4,629,455	$4,536,836

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

	Three-month period ended	Three-month period ended
	December 31, 2012	December 31, 2011
Balance at beginning of period	$838,049	$942,876
Additions	-	-
Accretion	(158,020)	(283,279)
Reclassification from nonaccretable difference	7,215	144,947
Disposals	-	-
Balance at end of period	$687,244	$804,544

	Six-month period ended	Six-month period ended
	December 31, 2012	December 2011
Balance at beginning of period	$489,356	$792,942
Additions	-	-
Accretion	(305,626)	(704,238)
Reclassification from nonaccretable difference	503,514	715,840
Disposals	-	-
Balance at end of period	$687,244	$804,544

During the six-month periods ended December 31, 2012 and 2011, the Company increased the allowance for loan losses by a charge to the income statement of $166,000 and $42,000 respectively, related to these purchased credit impaired loans.  During the same periods, allowance for loan losses of $5,300 and $0, respectively, was reversed.