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Derivative and Other Financial Instruments with Off-Balance Sheet Risks
 12 Months Ended
Jun. 30, 2018
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, 2018 and 2017, the Corporation had commitments to extend credit (on loans to be held for investment and loans to be held for sale) of $66.3 million and $111.8 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,
2018
June 30,
2017
(Dollars In Thousands)
 
 
Undisbursed loan funds – Construction loans
$
4,302

$
9,015

Undisbursed lines of credit – Commercial business loans
495

646

Undisbursed lines of credit – Consumer loans
503

562

Commitments to extend credit on loans to be held for investment
9,352

19,119

Total
$
14,652

$
29,342



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, 2018 and 2017 :
 
For the Year Ended
June 30,
(In Thousands)
2018
2017
Balance, beginning of the year
$
277

$
204

(Recovery) provision
(120
)
73

Balance, end of the year
$
157

$
277



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, 2018, $849,000 was included in other assets and $464,000 was included in other liabilities. At June 30, 2017, $1.5 million was included in other assets and $38,000 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 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, 2018, 2017 and 2016 was as follows:

(In Thousands)
For the Year Ended June 30,
Derivative Financial Instruments
2018
2017
2016
 
 
 
 
Commitments to extend credit on loans to be held for sale
$
16

$
(2,976
)
$
2,286

Mandatory loan sale commitments and TBA MBS trades
(1,026
)
3,782

(3,937
)
Option contracts
(37
)
260

(112
)
Total net (loss) gain
$
(1,047
)
$
1,066

$
(1,763
)


The outstanding derivative financial instruments at the dates indicated were as follows:
(In Thousands)
June 30, 2018
 
June 30, 2017
Derivative Financial Instruments
Amount
Fair
Value
 
Amount
Fair
Value
 
 
 
 
 
 
Commitments to extend credit on loans to be held for sale(1)
$
56,906

$
825

 
$
92,726

$
809

Best efforts loan sale commitments
(29,502
)
—

 
(17,225
)
—

Mandatory loan sale commitments and TBA MBS trades
(117,759
)
(440
)
 
(179,777
)
586

Option contracts
—

—

 
(3,000
)
37

Total
$
(90,355
)
$
385

 
$
(107,276
)
$
1,432


(1) 
Net of 24.7% at June 30, 2018 and 25.7% at June 30, 2017 of commitments, which management has estimated may not fund.