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Fair Value Of Financial Instruments | 3 Months Ended
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Dec. 31, 2011
Fair Value Of Financial Instruments |
Fair Value Of Financial Instruments |
14. | FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments is made in accordance with accounting guidance on the requirements of disclosures about fair value of financial instruments. 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. 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):
|  | December 31, 2011 |  |  | March 31, 2011 |
|  | Carrying Value |  |  | Fair value |  |  | Carrying Value |  |  | Fair Value |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | 36,313 |  |  | $ | 36,313 |  |  | $ | 51,752 |  |  | $ | 51,752 |
Certificates of deposit held for investment |  |  | 42,718 |  |  |  | 42,969 |  |  |  | 14,900 |  |  |  | 15,006 |
Investment securities held to maturity |  |  | 493 |  |  |  | 542 |  |  |  | 506 |  |  |  | 556 |
Investment securities available for sale |  |  | 6,337 |  |  |  | 6,337 |  |  |  | 6,320 |  |  |  | 6,320 |
Mortgage-backed securities held to maturity |  |  | 177 |  |  |  | 182 |  |  |  | 190 |  |  |  | 199 |
Mortgage-backed securities available for sale |  |  | 1,146 |  |  |  | 1,146 |  |  |  | 1,777 |  |  |  | 1,777 |
Loans receivable, net |  |  | 678,626 |  |  |  | 610,192 |  |  |  | 672,609 |  |  |  | 575,027 |
Loans held for sale |  |  | 659 |  |  |  | 659 |  |  |  | 173 |  |  |  | 173 |
Mortgage servicing rights |  |  | 299 |  |  |  | 735 |  |  |  | 396 |  |  |  | 970 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Demand – savings deposits |  |  | 491,966 |  |  |  | 491,966 |  |  |  | 453,380 |  |  |  | 453,380 |
Time deposits |  |  | 243,080 |  |  |  | 245,000 |  |  |  | 263,150 |  |  |  | 265,079 |
Junior subordinated debentures |  |  | 22,681 |  |  |  | 10,201 |  |  |  | 22,681 |  |  |  | 13,574 |
Fair value estimates were based on existing financial instruments without attempting to estimate the value of anticipated future business. The fair value has not been 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, where available. The fair value of the pooled trust preferred security was determined using a discounted cash flow method (see also Note 12 – Fair Value Measurement). Loans Receivable and Loans Held for Sale – Loans were priced using a discounted cash flow analysis. Nonperforming and criticized loans were priced using comparable market statistics. 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 (“MSRs”) – 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 December 31, 2011, the MSRs fair value was estimated using a range of prepayment speed assumptions that ranged from 100 to 529. 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. The discount rate was estimated using rates currently available for the Debentures. Off-Balance Sheet Financial Instruments – The estimated fair value of loan commitments approximates fees recorded associated with such commitments. Since the majority of the Company’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.

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