Mortgage Banking Activities

9 Months Ended

Mar. 31, 2012

Mortgage Banking Activities [Abstract]

Mortgage Banking Activities

NOTE 4 — MORTGAGE BANKING ACTIVITIES

Loans held for sale at March 31, 2012 and June 30, 2011 were $16,385,607 and $9,392,389, respectively.

The Company utilizes the fair value option for accounting for its loans held for sale. The fair value of loans held for sale exceeded the unpaid principal balance of these loans by $397,749 and $181,964 as of March 31, 2012 and June 30, 2011, respectively. The gain on loans held for sale as of March 31, 2012 was reported as gain on sale of mortgage loans on the consolidated statement of operations. Interest on loans held for sale was reported in interest income.

The Company services real estate loans for investors that are not included in the accompanying consolidated financial statements. Mortgage servicing rights are established based on the fair value of servicing rights retained on loans originated by the Company and subsequently sold in the secondary market. Mortgage servicing rights are included in the consolidated statements of financial condition under the caption "Prepaid expenses and other assets." At March 31, 2012, the mortgage loan servicing portfolio was approximately $1.0 billion.

Originated mortgage servicing rights capitalized and amortized during the three months ended March 31, 2012 and 2011 were as follows:

	Three months ended March 31,
	2012			2011
Servicing rights:
Beginning of period	$	6,696,594		$	7,065,460
Additions		1,132,160			855,323
Amortized to expense		(1,031,394	)		(374,152	)
Recovery of valuation allowance for impairment		102,773			126,658
End of period	$	6,900,133		$	7,673,289

Originated mortgage servicing rights capitalized and amortized during the nine months ended March 31, 2012 and 2011 were as follows:

	Nine months ended March 31,
	2012			2011
Servicing rights:
Beginning of period	$	7,519,287		$	6,960,969
Additions		2,738,575			3,545,737
Amortized to expense		(2,777,426	)		(2,494,990	)
Valuation allowance for impairment		(580,303	)		(338,427	)
End of period	$	6,900,133		$	7,673,289

Activity in the valuation allowance for mortgage servicing rights over the three months and nine months ended March 31, 2012, as compared with the same periods during 2011, were as follows:

	Three months ended March 31, 2012			Three months ended March 31, 2011
Balance, beginning of period	$	(987,077	)	$	(465,085	)
Impairment charges		—			—
Impairment recoveries		102,773			126,658
Balance, end of period	$	(884,304	)	$	(338,427	)
	Nine months ended March 31, 2012			Nine months ended March 31, 2011
Balance, beginning of period	$	(304,001	)	$	—
Impairment charges		(698,468	)		(1,183,799	)
Impairment recoveries		118,165			845,372
Balance, end of period	$	(884,304	)	$	(338,427	)

Mortgage banking activities for the three and nine months ended March 31, 2012 and 2011, net consisted of the following:

	Three months ended March 31,						Nine months ended March 31,
	2012			2011			2012			2011
Mortgage loan servicing fees	$	411,947		$	672,852		$	1,701,629		$	1,967,297
Amortization of mortgage loan servicing rights		(1,031,394	)		(374,152	)		(2,777,426	)		(2,494,990	)
Recovery (impairment) of mortgage loan servicing rights		102,773			126,658			(580,303	)		(338,427	)
Mortgage loan servicing income (loss), net		(516,674	)		425,358			(1,656,100	)		(866,120	)
Changes in fair value of mortgage banking derivatives		520,128			(388,116	)		1,092,922			(870,314	)
Realized gains on sale of loans		3,329,093			766,414			6,712,912			7,514,596
Gain on the sale of mortgage loans		3,849,221			378,298			7,805,834			6,644,282
Mortgage banking activities, net	$	3,332,547		$	803,656		$	6,149,734		$	5,778,162

The above amounts do not include non-interest expense related to mortgage banking activities.

At March 31, 2012 and June 30, 2011, the Company had interest rate-lock commitments on $59,601,352 and $17,625,864, respectively, of loans intended for sale in the secondary market. These commitments are considered to be free-standing derivatives and the change in fair value is recorded in the consolidated financial statements. The fair value of these commitments as of March 31, 2012 and June 30, 2011 was estimated to be $1,214,899 and $231,031, respectively, which is included in accrued expenses and other liabilities in the consolidated statements of financial position. In order to mitigate the interest rate risk represented by these interest rate-lock commitments, the Company entered into contracts to sell mortgage loans of $50,560,900 and $21,679,521 as of March 31, 2012 and June 30, 2011, respectively. These contracts are also considered to be free-standing derivatives and the change in fair value is also recorded in the consolidated financial statements. The fair value of these contracts at March 31, 2012 and June 30, 2011 were estimated to be $(52,823) and $53,908 respectively. These amounts were added to (netted against) the fair value of interest rate-lock commitments recorded in accrued expenses and other liabilities. Changes in fair value for both types of derivatives are reported in mortgage banking activities in the consolidated statements of operations.