Note 4: Loans and Allowance For Loan Losses: Troubled Debt Restructurings Policy (Policies)

3 Months Ended

Sep. 30, 2012

Policies

Troubled Debt Restructurings Policy

Included in certain loan categories in the impaired loans are troubled debt restructurings (TDRs), where economic concessions have been granted to borrowers who have experienced financial difficulties.  These concessions typically result from our loss mitigation activities, and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions.  Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months. 

When loans and leases are modified into a TDR, the Company evaluates any possible impairment similar to other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan or lease agreement, and uses the current fair value of the collateral, less selling costs, for collateral dependent loans.  If the Company determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs, and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance.  In periods subsequent to modification, the Company evaluates all TDRs, including those that have payment defaults, for possible impairment and recognizes impairment through the allowance.

During the three-month periods ended September 30, 2011 and 2012, certain loans were classified as TDRs. They are show, segregated by class, in the table below.

	For the three-month periods ended
	September 30, 2012		June 30, 2012
	Number of	Recorded	Number of	Recorded
	modifications	Investment	modifications	Investment
Conventional real estate	-	$-	1	$97,783
Construction real estate	1	99,200	-	-
Commercial real estate	2	600,000	5	1,005,830
Consumer loans	-	-	-	-
Commercial loans	4	304,016	3	1,019,712
Total	7	$1,003,216	9	$2,123,326

At September 30 and June 30, 2012, the Company had $3.5 and $3.1, respectively, of commercial real estate loans, $1.6 and $1.7, respectively, of commercial loans, and $99,000 and $0, respectively, of  construction loans, and $6,000 and $40,000 respectively, of conventional real estate loans that were modified in TDRs and considered impaired.  All loans classified as TDRs at September 30, 2012, and June 30, 2012, were so classified due to interest rate concessions.

Performing loans classified as troubled debt restructurings and outstanding at September 30 and June 30, 2012, segregated by class, are shown in the table below.  Nonperforming TDRs are shown as nonaccrual loans.