Allowance for Possible Loan Losses

9 Months Ended

Jun. 30, 2011

Allowance for Possible Loan Losses

Allowance for Possible Loan Losses

Note 5 - Allowance for Possible Loan Losses

An analysis of the loan loss allowance at June 30, 2011 and June 30, 2010, respectively, is as follows (dollars in thousands):

	Three Months Ended June 30,						Nine Months Ended June 30,
	2011			2010			2011			2010
Balance at beginning of period	$	—		$	4,820		$	3,165		$	1,618
Recovery of previously provided allowance	(1,002		)	(365		)	(3,568		)	(365		)
Provision for loan loss	—			—			—			3,165
Charge-offs	—			(1,480		)	(608		)	(1,480		)
Recoveries	1,002			190			1,011			227
Balance at end of period	$	—		$	3,165		$	—		$	3,165

A loan is deemed to be impaired when based on current information and events, it is probable, in the judgment of management, that the Trust will not be able to collect all amounts due according to the contractual terms of the loan documents. When making this evaluation numerous factors are considered, including, market evaluations of the underlying collateral, estimated operating cash flow from the property during the projected holding period, and estimated sales value computed by applying an estimated capitalization rate to the projected stabilized net operating income of the specific property, less selling costs, discounted at market discount rates. If upon completion of the evaluation, the value of the collateral securing the loan is less than the recorded investment in the loan, an allowance is created with a corresponding charge to expense. The fair values related to the collateral securing our impaired loans are based on discounted cash flow models, which are considered to be Level 3 within the fair value hierarchy.  When the Trust acquires title to the property, the loan loss allowance is adjusted by charging off all amounts related to the loan and recording the property at the adjusted carrying value of the loan.

In the three and nine months ended June 30, 2011, the Trust recognized a recovery and the reversal of a previously provided loan loss allowance of $1,000,000 on a loan that was charged off in a prior year.  In the nine months ended June 30, 2011, the Trust also reversed $2,566,000 of previously provided loan loss allowance.  This allowance related primarily to a non-performing loan which was sold in the current nine month period.