COMMITMENTS AND CONTINGENCIES

3 Months Ended

Dec. 31, 2012

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 6. COMMITMENTS AND CONTINGENCIES

At December 31, 2012 and September 30, 2012, the Company had outstanding commitments to originate and purchase loans and unused lines of credit totaling $56.8 million and $56.4 million, respectively.  It is expected that outstanding loan commitments will be funded with existing liquid assets.  At December 31, 2012, the Company had seven commitments to purchase securities available for sale totaling $42.1 million.

Legal Proceedings

In addition to the previously disclosed ATM lawsuits, there were two additional lawsuits filed concerning ATMs sponsored by MetaBank, each involving claims that a notification required to be placed upon an automated teller machine was absent on a specific date, in violation of Regulation E of the Electronic Fund Transfer Act:  Steve Klemetson, Individually and on Behalf of All Others Similarly Situated, vs. Temecula Stage Stop, Temecula Wine and Beer Garden, Ed Dool, National Link Incorporated, MetaBank, Meta Payment Systems, and Does 1-10, inclusive, Case No. 3:12-cv-02636-MMA-WVG, filed in the United States District Court for the Southern District of California; and Pete Orcino, Individually and on Behalf of All Others Similarly Situated, vs. United Oil Gas Station, National Link Incorporated, MetaBank, Meta Payment Systems, and Does 1-10, inclusive, Case No. 3:12-cv-02861-IEG-WMC, filed in the United States District Court for the Southern District of California.  The Company denies liability in these matters, and will contest these lawsuits with the ATM operators, which are each obligated to indemnify the Company for losses, costs and expenses in these matters.  An estimate of a range of possible loss cannot be made at this stage of the litigation because the extent of the Company's indemnification by the ATM operators is unknown.

On December 20, 2012, H.R. 4367 was signed into law relating to ATM disclosures. The Electronic Funds Transfer Act ("EFTA") previously required ATM operators to provide two separate notices to consumers about the fees that could be charged for use of an ATM, both an onscreen disclosure and a physical placard attached to the machine. If the physical placard was not attached, the ATM operator could be found liable for noncompliance. This led to numerous lawsuits alleging noncompliance with the placard requirement, even though the user had to accept the imposition of the fee via the onscreen notice. H.R. 4367 removes the physical placard requirement from the EFTA, and retains the onscreen disclosure and acceptance of fees.

The Bank utilizes various third parties for, among other things, its processing needs, both with respect to standard Bank operations and with respect to its MPS division.  MPS was notified in April 2008 by one of the processors that the processor's computer system had been breached, which led to the unauthorized load and spending of funds from Bank-issued cards.  The Bank believes the amount in question to be approximately $2.0 million.  The processor and program manager both have agreements with the Bank to indemnify it for any losses as a result of such unauthorized activity, and the matter is reflected as such in its financial statements.  In addition, the Bank has given notice to its own insurer.  The Bank has been notified by the processor that its insurer has denied the claim filed.  The Bank made demand for payment and filed a demand for arbitration to recover the unauthorized loading and spending amounts and certain damages.  The Bank has settled its claim with the program manager, and has received an arbitration award against the processor.  That arbitration award has been entered as a judgment in the State of South Dakota, which judgment has been transferred to the State of Florida for garnishment proceedings against the processor and its insurer.  The Company's estimate of a range of possible loss is approximately$0 to $0.8million as of the filing date of this Quarterly Report on Form 10-Q.

Certain corporate clients of an unrelated company named Springbok Services, Inc. ("Springbok") requested through counsel a mediation as a means of reaching a settlement in lieu of commencing litigation against MetaBank.  The results of that mediation have not led to a settlement.  These claimants purchased MetaBank prepaid reward cards from Springbok, prior to Springbok's bankruptcy.  As a result of Springbok's bankruptcy and cessation of business, some of the rewards cards which had been purchased were never activated or funded.  Counsel for these companies have indicated that they are prepared to assert claims totaling approximately $1.5 million against MetaBank based on principal/agency or failure to supervise theories.  The Company denies liability with respect to these claims.  The Company's estimate of a range of possible loss is approximately$0 to $0.3 million.

See Note 12 to the Condensed Consolidated Financial Statements for a discussion of the settlement of OTS enforcement matters and on-going compliance matters.

Other than the matters set forth above, there are no other new material pending legal proceedings or updates to which the Company or its subsidiaries is a party other than ordinary litigation routine to their respective businesses.