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Derivative and Other Financial Instruments with Off-Balance Sheet Risks
 12 Months Ended
Jun. 30, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative and Other Financial Instruments with Off-Balance Sheet Risks
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 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 June 30, 2014 and 2013, the Corporation had commitments to extend credit (on loans to be held for investment and loans to be held for sale) of $134.8 million and $262.5 million, respectively.

The following table provides information at the dates indicated regarding undisbursed funds to borrowers on existing lines of credit with the Corporation as well as commitments to originate loans to be held for investment at the dates indicated below:

Commitments
June 30,
2014
June 30,
2013
(Dollars In Thousands)
 
 
Undisbursed loan funds – Construction loans
$
1,090

$
292

Undisbursed lines of credit – Mortgage loans
616

774

Undisbursed lines of credit – Commercial business loans
1,222

952

Undisbursed lines of credit – Consumer loans
774

779

Commitments to extend credit on loans to be held for investment
2,247

6,872

Total
$
5,949

$
9,669



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, TBA MBS trades, put option contracts and call option contracts are recorded at fair value on the Consolidated Statements of Financial Condition.  At June 30, 2014, $2.6 million was included in other assets and $1.4 million was included in other liabilities; at June 30, 2013, $7.4 million was included in other assets and $1.1 million 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 the Consolidated Statements of Operations.

The following table provides information regarding the allowance for loan losses for the undisbursed funds and commitments to extend credit on loans to be held for investment for the years ended June 30, 2014 and 2013:

 
For the Year Ended
June 30,
(In Thousands)
2014
2013
Balance, beginning of the year
$
115

$
66

(Recovery) provision
(54
)
49

Balance, end of the year
$
61

$
115



The net impact of derivative financial instruments on the gain on sale of loans contained in the Consolidated Statements of Operations for the years ended June 30, 2014, 2013 and 2012 was as follows:

(In Thousands)
For the Year Ended June 30,
Derivative Financial Instruments
2014
2013
2012
 
 
 
 
Commitments to extend credit on loans to be held for sale
$
3,598

$
(5,013
)
$
3,343

Mandatory loan sale commitments and TBA MBS trades
(8,233
)
8,121

(1,895
)
Option contracts
(18
)
214

(360
)
Total net (loss) gain
$
(4,653
)
$
3,322

$
1,088



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

(In Thousands)
June 30, 2014
 
June 30, 2013
Derivative Financial Instruments
Amount
Fair
Value
 
Amount
Fair
Value
 
 
 
 
 
 
Commitments to extend credit on loans to be held for sale (1)
$
132,567

$
2,566

 
$
255,635

$
(1,032
)
Best efforts loan sale commitments
(18,069
)
—

 
(29,847
)
—

Mandatory loan sale commitments and TBA MBS trades
(258,021
)
(1,428
)
 
(410,897
)
6,805

Option contracts
(10,000
)
—

 
(10,000
)
589

Total
$
(153,523
)
$
1,138

 
$
(195,109
)
$
6,362


(1) 
Net of 28.0% percent at June 30, 2014 and 23.6% percent at June 30, 2013 of commitments, which management has estimated may not fund.