XML 27 R13.htm IDEA: XBRL DOCUMENT

Derivative and Other Financial Instruments

3 Months Ended

Dec. 31, 2011

Derivative and Other Financial Instruments

Derivative and Other Financial Instruments

Note 7: Derivative and Other Financial Instruments with Off-Balance Sheet Risks

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit in the form of originating loans or providing funds under existing lines of credit, loan sale commitments to third parties and option contracts. These instruments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the accompanying Condensed Consolidated Statements of Financial Condition. The Corporation’s exposure to credit loss, in the event of non-performance by the counterparty to these financial instruments, is represented by the contractual amount of these instruments. The Corporation uses the same credit policies in entering into financial instruments with off-balance sheet risk as it does for on-balance sheet instruments.

As of December 31, 2011 and June 30, 2011, the Corporation had commitments to extend credit (on loans to be held for investment and loans to be held for sale) of $128.0 million and $107.7 million, respectively.

The following table provides information regarding undisbursed funds to borrowers on existing lines of credit with the Bank as well as commitments to originate loans to be held for investment.

	December 31,	June 30,
Commitments	2011	2011
(In Thousands)

Undisbursed lines of credit – Mortgage loans	$ 1,106	$ 1,028
Undisbursed lines of credit – Commercial business loans	1,894	2,867
Undisbursed lines of credit – Consumer loans	902	956
Commitments to extend credit on loans to be held for investment	200	200
Total	$ 4,102	$ 5,051

In accordance with ASC 815, “Derivatives and Hedging,” and interpretations of the Derivatives Implementation Group of the FASB, the fair value of the commitments to extend credit on loans to be held for sale, loan sale commitments, commitments to sell MBS, put option contracts and call option contracts are recorded at fair value on the Condensed Consolidated Statements of Financial Condition. At December 31, 2011, $2.1 million was included in other assets and $1.9 million was included in other liabilities; at June 30, 2011, $1.3 million was included in other assets and $0 was included in other liabilities. The Corporation does not apply hedge accounting to its derivative financial instruments; therefore, all changes in fair value are recorded in earnings.

The following table provides information regarding allowance for losses of the undisbursed funds and commitments to extend credit on loans to be held for investment.

	For the Quarters Ended December 31,				For the Six Months Ended December 31,
(In Thousands)	2011		2010		2011		2010

Balance, beginning of the period	$ 93		$ 104		$ 94		$ 119
Recovery	(21	)	(12	)	(22	)	(27	)
Balance, end of the period	$ 72		$ 92		$ 72		$ 92

The net impact of derivative financial instruments on the Gain on sale of loans of the Condensed Consolidated Statements of Operations during the quarters and six months ended December 31, 2011 and 2010 was as follows:

	For the Quarters Ended December 31,				For the Six Months Ended December 31,
Derivative Financial Instruments	2011		2010		2011		2010
(In Thousands)

Commitments to extend credit on loans to be held for sale	$ (1,344	)	$ (1,477	)	$ 1,480		$ (2,005	)
Mandatory loan sale commitments	128		(350	)	(405	)	204
TBA(1) MBS trades	(153	)	1,762		(2,092	)	4,403
Option contracts	(135	)	-		(289	)	(25	)
Total	$ (1,504	)	$ (65	)	$ (1,306	)	$ 2,577

(1) To be announced (“TBA”).

The outstanding derivative financial instruments at the dates indicated were as follows:

	December 31, 2011				June 30, 2011
			Fair				Fair
Derivative Financial Instruments	Amount		Value		Amount		Value
(In Thousands)

Commitments to extend credit on loans
to be held for sale (1)	$ 127,843		$ 2,118		$ 107,458		$ 638
Best efforts loan sale commitments	(9,699	)	-		(8,159	)	-
Mandatory loan sale commitments	(109,500	)	(2	)	(96,356	)	403
TBA MBS trades	(218,500	)	(1,916	)	(183,500	)	176
Put option contracts	-		-		(13,000	)	99
Total	$ (209,856	)	$ 200		$ (193,557	)	$ 1,316

(1)	Net of 37.2 percent at December 31, 2011 and 31.0 percent at June 30, 2011 of commitments, which management has estimated may not fund.