COMMITMENTS AND CONTINGENCIES

Credit Related Commitments. The Bank 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 and in connection with its overall investment strategy. These instruments involve, to varying degrees, elements of credit, interest rate and liquidity risk. In accordance with GAAP, these instruments are not recorded in the consolidated financial statements. Such instruments primarily include lending obligations, including commitments to originate mortgage and consumer loans and to fund unused lines of credit.

The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies making commitments as it does for on-balance-sheet instruments.

The Bank had outstanding lending commitments and contractual obligations at March 31 as follows:



$ in thousands	2015		2014
Commitments to fund mortgage loans	$	30,972	$	5,750
Commitments to fund commercial and consumer loans	8,963		—
Lines of credit	5,355		6,140
Letters of credit	234		245
	$	45,524	$	12,135

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on management's credit evaluation of the counterparty.

Mortgage Representation & Warranty Liabilities

During the period 2004 through 2009, the Bank originated 1-4 family residential mortgage loans and sold the loans to the Federal National Mortgage Association (“FNMA”). The loans were sold to FNMA with the standard representations and warranties for loans sold to the Government Sponsored Entities (GSE's). The Bank may be required to repurchase these loans in the event of breaches of these representations and warranties. In the event of a repurchase, the Bank is typically required to pay the unpaid principal balance as well as outstanding interest and fees. The Bank then recovers the loan or, if the loan has been foreclosed, the underlying collateral. The Bank is exposed to any losses on repurchased loans after giving effect to any recoveries on the collateral.

The following table presents information on open requests from FNMA. The amounts presented are based on outstanding loan principal balances.



$ in thousands	Loans sold to FNMA
Open claims as of March 31, 2014 ⁽¹⁾	$	2,075
Gross new demands received	129
Loans repurchased/made whole	(129		)
Principal payments received on open claims	(30		)
Open claims as of March 31, 2015 ⁽¹⁾	$	2,045


⁽¹⁾	The open claims include all open requests received by the Bank where either FNMA has requested loan files for review, where FNMA has not formally rescinded the repurchase request or where the Bank has not agreed to repurchase the loan. The amounts reflected in this table are the unpaid principal balance and do not incorporate any losses the Bank would incur upon the repurchase of these loans.

The table below summarizes changes in our representation and warranty reserves during fiscal 2015.



$ in thousands	March 31, 2015
Representation and warranty repurchase reserve, as of March 31, 2014 ⁽¹⁾	$	287
Net provision for repurchase losses ⁽²⁾	119
Net realized losses ⁽²⁾	—
Representation and warranty repurchase reserve, as of March 31, 2015 ⁽¹⁾	$	406

⁽¹⁾Reported in consolidated statements of financial condition as a component of other liabilities.

⁽²⁾ Component of other non-interest expense.

Lease Commitments. Rentals under long-term operating leases for certain branches aggregated approximately $1.6 million, $1.5 million and $1.8 million for fiscal years 2015, 2014, and 2013, respectively. As of March 31, 2015, minimum rental commitments under all non-cancelable leases with initial or remaining terms of more than one year and expiring through 2025 follow:



$ in thousands
Year Ending March 31,	Minimum Rental		Sublet Income		Net
2015	$	1,558	$	—	$	1,558
2016	1,515		—		1,515
2017	1,543		—		1,543
2018	1,130		—		1,130
2019	1,032		—		1,032
Thereafter	3,364		—		3,364
	$	10,142	$	—	$	10,142

The Bank also has, in the normal course of business, commitments for services and supplies.

Legal Proceedings. From time to time, the Company and the Bank or one of its wholly owned subsidiaries are parties to various legal proceedings incident to their business. Certain claims, suits, complaints and investigations (collectively “proceedings”) involving the Company and the Bank or a subsidiary, arising in the ordinary course of business, have been filed or are pending. The Company is unable at this time to determine the ultimate outcome of each proceeding, but believes, after discussions with legal counsel representing the Company and the Bank or the subsidiary in these proceedings, that it has meritorious defenses to each proceeding and appropriate measures have been taken to defend the interests of the Company, Bank or subsidiary. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the financial condition or results of operations of the Company or the Bank. Further, there have been no material developments or changes associated with any litigation matters previously reported by the Company or the Bank.

In accordance with ASC Topic 450, Carver has accrued $30,000 for these lawsuits.