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Derivative and Other Financial Instruments with Off-Balance Sheet Risks
 9 Months Ended
Mar. 31, 2017
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 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 March 31, 2017 and June 30, 2016, the Corporation had commitments to extend credit (on loans to be held for investment and loans to be held for sale) of $138.2 million and $191.7 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
March 31, 2017
June 30, 2016
(In Thousands)
 
 
 
 
 
Undisbursed loan funds - Construction loans
$
9,468

$
11,258

Undisbursed lines of credit – Mortgage loans
—

20

Undisbursed lines of credit – Commercial business loans
618

821

Undisbursed lines of credit – Consumer loans
565

674

Commitments to extend credit on loans to be held for investment
20,247

9,955

Total
$
30,898

$
22,728



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 quarters and nine months ended March 31, 2017 and 2016.
 
For the Quarters
Ended
March 31,
 
For the Nine Months
Ended
March 31,
(In Thousands)
2017
2016
 
2017
2016
Balance, beginning of the period
$
173

$
149

 
$
204

$
76

Provision
67

4

 
36

77

Balance, end of the period
$
240

$
153

 
$
240

$
153



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, to be announced (“TBA”) MBS trades, put option contracts and call option contracts are recorded at fair value on the Condensed Consolidated Statements of Financial Condition.  At March 31, 2017, $2.1 million was included in other assets and $1.1 million was included in other liabilities; at June 30, 2016, $3.8 million was included in other assets and $3.2 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 earnings.

The net impact of derivative financial instruments is recorded within the gain on sale of loans contained in the Condensed Consolidated Statements of Operations during the quarters and nine months ended March 31, 2017 and 2016 was as follows:
 
For the Quarters
Ended
March 31,
 
 For the Nine Months
Ended
March 31,
Derivative Financial Instruments
2017
2016
 
2017
2016
(In Thousands)
 
 
 
 
 
Commitments to extend credit on loans to be held for sale
$
628

$
1,866

 
$
(1,681
)
$
1,537

Mandatory loan sale commitments and TBA MBS trades
(760
)
(1,435
)
 
2,105

(2,531
)
Option contracts, net
(11
)
85

 
333

(87
)
Total net (loss) gain
$
(143
)
$
516

 
$
757

$
(1,081
)


The outstanding derivative financial instruments and other loan sale agreements at the dates indicated were as follows:
 
March 31, 2017
 
June 30, 2016
Derivative Financial Instruments
Amount
Fair
Value
 
Amount
Fair
Value
(In Thousands)
 
 
 
 
 
Commitments to extend credit on loans to be held for sale (1)
$
117,993

$
2,104

 
$
181,780

$
3,785

Best efforts loan sale commitments
(15,372
)
—

 
(29,576
)
—

Mandatory loan sale commitments and TBA MBS trades
(194,040
)
(1,091
)
 
(302,727
)
(3,196
)
Option contracts, net
(5,000
)
31

 
(5,000
)
—

Total
$
(96,419
)
$
1,044

 
$
(155,523
)
$
589


(1) 
Net of 27.8% at March 31, 2017 and 37.5% at June 30, 2016 of commitments which management has estimated may not fund.