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Fair Value Of Financial Instruments

12 Months Ended

Mar. 31, 2012

Fair Value Of Financial Instruments:

18.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial instruments is made in accordance with applicable accounting standards. The Company, using available market information and appropriate valuation methodologies, has determined the estimated fair value amounts. However, considerable judgment is necessary to interpret market data in the development of the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in the future. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The estimated fair value of financial instruments is as follows (in thousands):

	Carry Value		Quoted prices in active markets for identical assets		Other observable inputs		Significant unobservable inputs			Fair Value
March 31, 2012	March 31, 2012		(Level 1)		(Level 2)		(Level 3)			March 31, 2012
Assets:
Cash	$	46,393	$	46,393	$	-	$	-	$	46,393
Certificates of deposit held for investment		41,473		-		41,767		-		41,767
Investment securities held to maturity		493		-		542		-		542
Investment securities available for sale		6,314		-		5,148		1,166		6,314
Mortgage-backed securities held to maturity		171		-		177		-		177
Mortgage-backed securities available for sale		974		-		974		-		974
Loans receivable, net		664,888		-		-		596,552		596,552
Loans held for sale		480		480		-		-		480
Federal Home Loan Bank stock		7,350		-		7,350		-		7,350
Mortgage servicing rights		278		-		767		-		767

Liabilities:
Demand – savings deposits	$	514,446	$	-	$	514,446	$	-	$	514,446
Time deposits		230,009		-		231,631		-		231,631
Junior subordinated debentures		22,681		-		-		9,831		9,831

March 31, 2011
Assets:
Cash	$	51,752	$	51,752	$	-	$	-	$	51,752
Certificates of deposit held for investment		14,900		-		15,006		-		15,006
Investment securities held to maturity		506		-		556		-		556
Investment securities available for sale		6,320		-		5,404		916		6,320
Mortgage-backed securities held to maturity		190		-		199		-		199
Mortgage-backed securities available for sale		1,777		-		1,777		-		1,777
Loans receivable, net		672,609		-				575,027		575,027
Loans held for sale		173		173		-		-		173
Federal Home Loan Bank stock		7,350		-		7,350		-		7,350
Mortgage servicing rights		396		-		970		-		970

Liabilities:
Demand – savings deposits	$	453,380	$	-	$	453,380	$	-	$	453,380
Time deposits		263,150		-		265,079		-		265,079
Junior subordinated debentures		22,681		-		-		13,574		13,574

Fair value estimates were based on existing financial instruments without attempting to estimate the value of anticipated future business. The fair value was not estimated for assets and liabilities that were not considered financial instruments.

Fair value estimates, methods and assumptions are set forth below.

Cash - Fair value approximates the carrying amount.

Certificates of Deposit held for investment – The fair value of certificates of deposit with stated maturity was based on the discounted value of contractual cash flows. The discount rate was estimated using rates currently available in the local market.

Investments and Mortgage-Backed Securities – Fair values were based on quoted market rates and dealer quotes. The fair value of the trust preferred investment was determined using a discounted cash flow method (see also Note 17 – Fair Value Measurements).

Loans Receivable and Loans Held for Sale – Performing and noncriticized loans were priced using a discounted cash flow analysis. Nonperforming and criticized loans were priced using comparable market statistics. The nonperforming and criticized loan portfolio was segregated and a weighted average valuation discount that approximated similar loan sales was applied to each of these categories. The fair value of loans held for sale was based on the loans carrying value as the agreements to sell these loans are short term fixed rate commitments and no material difference between the carrying value is likely.

Mortgage Servicing Rights - The fair value of MSRs was determined using the Company’s model, which incorporates the expected life of the loans, estimated cost to service the loans, servicing fees received and other factors. The Company calculates MSRs fair value by stratifying MSRs based on the predominant risk characteristics that include the underlying loan’s interest rate, cash flows of the loan, origination date and term. Key economic assumptions that vary due to changes in market interest rates are used to determine the fair value of the MSRs and include expected prepayment speeds, which impact the average life of the portfolio, annual service cost, annual ancillary income and the discount rate used in valuing the cash flows. At March 31, 2012, the MSRs fair value totaled $767,000 which was estimated using a range of prepayment speed assumptions values that ranged from 110 to 781.

Deposits - The fair value of deposits with no stated maturity such as non-interest-bearing demand deposits, interest checking, money market and savings accounts was equal to the amount payable on demand. The fair value of time deposits with stated maturity was based on the discounted value of contractual cash flows. The discount rate was estimated using rates currently available in the local market.

Junior Subordinated Debentures - The fair value of the Debentures was based on the discounted cash flow method. Management believes that the discount rate utilized is indicative of those that would be used by market participants for similar types of debentures.

Off-Balance Sheet Financial Instruments - The estimated fair value of loan commitments approximates fees recorded associated with such commitments as of March 31, 2012 and 2011. Since the majority of the Bank’s off-balance-sheet instruments consist of non-fee producing, variable rate commitments, the Bank has determined they do not have a distinguishable fair value.