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FAIR VALUE | 3 Months Ended
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Sep. 30, 2022
Fair Value Disclosures [Abstract] |
FAIR VALUE | FAIR VALUE The Company’s financial assets and liabilities measured at fair value on a recurring basis at September 30, 2022 and June 30, 2022 are classified in their entirety based on the lowest level of input significant to the fair value measurement.
|  | September 30, 2022
(Dollars in thousands) |  |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
ASSETS: |  |  |  |  |  |  |
Securities—Trading: Municipal |  |  | $ | 75 |  |  | $ | — |  |  | $ | 75 |
Securities—Available-for-Sale: |  |  |  |  |  |  |
Agency MBS 1 |  |  | 23,763 |  |  | — |  |  | 23,763 |
Non-Agency MBS 2 |  |  | — |  |  | 184,012 |  |  | 184,012 |
Municipal |  |  | 2,995 |  |  | — |  |  | 2,995 |
Asset-backed securities and structured notes |  |  | 46,864 |  |  | — |  |  | 46,864 |
Total—Securities—Available-for-Sale |  |  | $ | 73,622 |  |  | $ | 184,012 |  |  | $ | 257,634 |
Loans Held for Sale |  |  | $ | 9,463 |  |  | $ | — |  |  | $ | 9,463 |
Mortgage servicing rights |  |  | $ | — |  |  | $ | 26,373 |  |  | $ | 26,373 |
Other assets—Derivative instruments |  |  | $ | — |  |  | $ | 897 |  |  | $ | 897 |
LIABILITIES: |  |  |  |  |  |  |
Other liabilities—Derivative instruments |  |  | $ | — |  |  | $ | 362 |  |  | $ | 362 |
|  | June 30, 2022
(Dollars in thousands) |  |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
ASSETS: |  |  |  |  |  |  |
Securities—Trading: Municipal |  |  | $ | 1,758 |  |  | $ | — |  |  | $ | 1,758 |
Securities—Available-for-Sale: |  |  |  |  |  |  |
Agency MBS 1 |  |  | 25,325 |  |  | — |  |  | 25,325 |
Non-Agency MBS 2 |  |  | — |  |  | 186,814 |  |  | 186,814 |
Municipal |  |  | 3,248 |  |  | — |  |  | 3,248 |
Asset-backed securities and structured notes |  |  | 47,131 |  |  | — |  |  | 47,131 |
Total—Securities—Available-for-Sale |  |  | $ | 75,704 |  |  | $ | 186,814 |  |  | $ | 262,518 |
Loans Held for Sale |  |  | $ | 4,973 |  |  | $ | — |  |  | $ | 4,973 |
Mortgage servicing rights |  |  | $ | — |  |  | $ | 25,213 |  |  | $ | 25,213 |
Other assets—Derivative instruments |  |  | $ | — |  |  | $ | 464 |  |  | $ | 464 |
LIABILITIES: |  |  |  |  |  |  |
Other liabilities—Derivative instruments |  |  | $ | — |  |  | $ | — |  |  | $ | — |
1 Includes securities guaranteed by Ginnie Mae, a U.S. government agency, and the government sponsored enterprises Fannie Mae and Freddie Mac. 2 Private sponsors of securities collateralized primarily by first-lien mortgage loans on commercial properties or by pools of 1-4 family residential first mortgages. Primarily super senior securities secured by Alt-A or pay-option ARM mortgages. Additional information is presented below about assets measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value:
|  |  | For the Three Months Ended
|  |  | September 30, 2022
(Dollars in thousands) |  |  | Securities – Available-for-Sale: Non-Agency RMBS |  | Mortgage Servicing Rights 1 |  | Derivative Instruments, net |  |  |  | Total
Opening Balance |  |  | $ | 186,814 |  |  | $ | 25,213 |  |  | $ | 464 |  |  |  |  | $ | 212,491 |
Total gains or losses for the period: |  |  |  |  |  |  |  |  |  |  |
Included in earnings—Mortgage banking income |  |  | — |  |  | 953 |  |  | 71 |  |  |  |  | 1,024 |
Included in other comprehensive income |  |  | (2,473) |  |  | — |  |  | — |  |  |  |  | (2,473) |
Purchases, retentions, issues, sales and settlements: |  |  |  |  |  |  |  |  |  |  |
Purchases/Retentions |  |  | — |  |  | 207 |  |  | — |  |  |  |  | 207 |
Settlements |  |  | (329) |  |  | — |  |  | — |  |  |  |  | (329) |
Closing balance |  |  | $ | 184,012 |  |  | $ | 26,373 |  |  | $ | 535 |  |  |  |  | $ | 210,920 |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period |  |  | $ | — |  |  | $ | 953 |  |  | $ | 71 |  |  |  |  | $ | 1,024 |
1 Earnings from mortgage servicing rights (“MSR”) were attributable to: Time and payoffs, representing a decrease in MSR value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or paid off during the period of $0.4 million, and an increase in MSR value resulting from market-driven changes in interest rates of $1.4 million. A dditions to mortgage servicing rights were retained upon sale of loans held for sale.
|  |  | For the Three Months Ended |  |
|  |  | September 30, 2021
(Dollars in thousands) |  |  | Securities – Available-for-Sale: Non-Agency RMBS |  | Mortgage Servicing Rights 1 |  | Derivative Instruments, net |  | Total |  |
Opening Balance |  |  | $ | 67,615 |  |  | $ | 17,911 |  |  | $ | 2,205 |  |  | $ | 87,731 |  |  |
Total gains or losses for the period: |  |  |  |  |  |  |  |  |  |  |
Included in earnings—Mortgage banking income |  |  | — |  |  | (1,185) |  |  | 21 |  |  | (1,164) |  |  |
Included in other comprehensive income |  |  | (112) |  |  | — |  |  | — |  |  | (112) |  |  |
Purchases, retentions, issues, sales and settlements: |  |  |  |  |  |  |  |  |  |  |
Purchases/Retentions |  |  | — |  |  | 1,712 |  |  | — |  |  | 1,712 |  |  |
Settlements |  |  | (7,652) |  |  | — |  |  | — |  |  | (7,652) |  |  |
Closing balance |  |  | $ | 59,851 |  |  | $ | 18,438 |  |  | $ | 2,226 |  |  | $ | 80,515 |  |  |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period |  |  | $ | — |  |  | $ | (1,185) |  |  | $ | 21 |  |  | $ | (1,164) |  |  |
1 Earnings from mortgage servicing rights were attributable to: Time and payoffs, representing a decrease in MSR value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or paid off during the period of $1.6 million, and an increase in MSR value resulting from market-driven changes in interest rates of $0.4 million. Additions to mortgage servicing rights were retained upon sale of loans held for sale. The table below summarizes the quantitative information about level 3 fair value measurements as of the dates indicated:
| September 30, 2022
(Dollars in thousands) | Fair Value | Valuation Technique | Unobservable Input | Range (Weighted Average)
Securities – Non-agency MBS | $ | 184,012 |  | Discounted Cash Flow | Projected Constant Prepayment Rate, Projected Constant Default Rate, Projected Loss Severity, Discount Rate over LIBOR | 0.0 to 30.0% (21.4%) 0.0 to 15.9% (2.3%) 0.0 to 68.6% (26.6%) 2.7 to 8.8% (2.7%)
Mortgage Servicing Rights | $ | 26,373 |  | Discounted Cash Flow | Projected Constant Prepayment Rate, Life (in years), Discount Rate | 3.8 to 38.0% (9.3%) 0.9 to 13.0 (9.4) 9.5 to 11.0% (9.5%)
Derivative Instruments | $ | 535 |  | Sales Comparison Approach | Projected Sales Profit of Underlying Loans | -3.1 to 1.2% (-1.2%)
| June 30, 2022
(Dollars in thousands) | Fair Value | Valuation Technique | Unobservable Input | Range (Weighted Average)
Securities – Non-agency MBS | $ | 186,814 |  | Discounted Cash Flow | Projected Constant Prepayment Rate, Projected Constant Default Rate, Projected Loss Severity, Discount Rate over LIBOR | 0.0 to 30.0% (21.4%) 0.0 to 7.9% (2.2%) 0.0 to 68.4% (26.7%) 2.7 to 9.3% (2.8%)
Mortgage Servicing Rights | $ | 25,213 |  | Discounted Cash Flow | Projected Constant Prepayment Rate, Life (in years), Discount Rate | 7.9 to 56.3% (11.0%) 1.2 to 9.9 (8.4) 9.5 to 11.5% (9.5%)
Derivative Instruments | $ | 464 |  | Sales Comparison Approach | Projected Sales Profit of Underlying Loans | -3.1 to 0.8% (-1.2%)
The significant unobservable inputs used in the fair value measurement of the Company’s residential mortgage-backed securities are projected prepayment rates, probability of default, projected loss severity in the event of default and discount rate over LIBOR. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the projected loss severity and a directionally opposite change in the assumption used for projected prepayment rates. The table below summarizes assets measured for impairment on a non-recurring basis:
| September 30, 2022
(Dollars in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Balance
Other real estate owned and foreclosed assets: |  |  |  |  |  |  |
Single family real estate | $ | — |  |  | $ | — |  |  | $ | 4,534 |  |  | $ | 4,534 |
Autos and RVs | $ | — |  |  | $ | — |  |  | $ | 768 |  |  | $ | 768 |
Total | $ | — |  |  | $ | — |  |  | $ | 5,302 |  |  | $ | 5,302 |
| June 30, 2022
(Dollars in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Balance
Other real estate owned and foreclosed assets: |  |  |  |  |  |  |
Autos and RVs | — |  |  | — |  |  | 798 |  |  | 798 |
Total | $ | — |  |  | $ | — |  |  | $ | 798 |  |  | $ | 798 |
Non-recurring fair value measurements for other real estate owned and foreclosed assets represent charge-offs of $307 thousand for the three months ended September 30, 2022 and $12 thousand for the three months ended September 30, 2021. The Company has elected the fair value option for Agency loans held for sale. These loans are intended for sale and fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans. None of these loans are 90 days or more past due nor on nonaccrual as of September 30, 2022 and June 30, 2022. As of September 30, 2022 and June 30, 2022, the aggregate fair value of loans held for sale, carried at fair value, contractual balance (including accrued interest), and unrealized gain was as follows:
(Dollars in thousands) | September 30, 2022 |  | June 30, 2022
Aggregate fair value | $ | 9,463 |  |  | $ | 4,973 |
Contractual balance | 9,348 |  |  | 4,881 |
Unrealized gain | $ | 115 |  |  | $ | 92 |
Gains and losses from changes in fair value included in earnings for loans held for sale for the periods indicated below were:
|  |  | For the Three Months Ended
|  |  | September 30,
(Dollars in thousands) |  |  |  |  | 2022 |  | 2021
Interest income |  |  |  |  | $ | 50 |  |  | $ | 200 |
Change in fair value |  |  |  |  | 91 |  |  | 43 |
Total |  |  |  |  | $ | 141 |  |  | $ | 243 |
The following table presents quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at the periods indicated:
| September 30, 2022
(Dollars in thousands) | Fair Value | Valuation Technique(s) | Unobservable Input | Range (Weighted Average) 1
Other real estate owned and foreclosed assets: |  |  |  |
Single family real estate | $ | 4,534 |  | Sales comparison approach | Adjustment for differences between the comparable sales | 3.5 to 12.1% (4.1%)
Autos and RVs | $ | 768 |  | Sales comparison approach | Adjustment for differences between the comparable sales | -13.7 to -0.5% (-3.4%)
| June 30, 2022
(Dollars in thousands) | Fair Value | Valuation Technique(s) | Unobservable Input | Range (Weighted Average) 1
Other real estate owned and foreclosed assets: |  |  |  |
Autos and RVs | $ | 798 |  | Sales comparison approach | Adjustment for differences between the comparable sales | -17.2 to 4.6% (-7.5%)
1 For other real estate owned and foreclosed assets the ranges shown may vary positively or negatively based on the comparable sales reported in the current appraisal. In certain instances, the range can be significant due to small sample sizes and in some cases the property being valued having limited comparable sales with similar characteristics at the time the current appraisal is conducted. Fair Value of Financial Instruments Carrying amounts and estimated fair values of financial instruments at September 30, 2022 and June 30, 2022 were:
| September 30, 2022
|  |  | Fair Value |  |
(Dollars in thousands) | Carrying Amount |  | Level 1 |  | Level 2 |  | Level 3 |  | Total Fair Value
Financial assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 1,698,048 |  |  | $ | 1,698,048 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,698,048 |
Securities — trading | 75 |  |  | — |  |  | 75 |  |  | — |  |  | 75 |
Securities — available-for-sale | 257,634 |  |  | — |  |  | 73,622 |  |  | 184,012 |  |  | 257,634 |
Loans held for sale, at fair value | 9,463 |  |  | — |  |  | 9,463 |  |  | — |  |  | 9,463 |
Loans held for sale, at lower of cost or fair value | 10,476 |  |  | — |  |  | — |  |  | 10,489 |  |  | 10,489 |
Loans held for investment—net | 15,211,573 |  |  | — |  |  | — |  |  | 14,893,655 |  |  | 14,893,655 |
Securities borrowed | 87,622 |  |  | — |  |  | — |  |  | 86,728 |  |  | 86,728 |
Customer, broker-dealer and clearing receivables | 410,842 |  |  | — |  |  | — |  |  | 411,171 |  |  | 411,171 |
Mortgage servicing rights | 26,373 |  |  | — |  |  | — |  |  | 26,373 |  |  | 26,373 |
Financial liabilities: |  |  |  |  |  |  |  |  |
Total deposits | 15,176,631 |  |  | — |  |  | 13,373,113 |  |  | — |  |  | 13,373,113 |
Advances from the Federal Home Loan Bank | 112,500 |  |  | — |  |  | 105,387 |  |  | — |  |  | 105,387 |
Borrowings, subordinated notes and debentures | 425,818 |  |  | — |  |  | 385,257 |  |  | — |  |  | 385,257 |
Securities loaned | 206,889 |  |  | — |  |  | — |  |  | 206,910 |  |  | 206,910 |
Customer, broker-dealer and clearing payables | 500,584 |  |  | — |  |  | — |  |  | 500,584 |  |  | 500,584 |
| June 30, 2022
|  |  | Fair Value |  |
(Dollars in thousands) | Carrying Amount |  | Level 1 |  | Level 2 |  | Level 3 |  | Total Fair Value
Financial assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 1,574,699 |  |  | $ | 1,574,699 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,574,699 |
Securities — trading | 1,758 |  |  | — |  |  | 1,758 |  |  | — |  |  | 1,758 |
Securities — available-for-sale | 262,518 |  |  | — |  |  | 75,704 |  |  | 186,814 |  |  | 262,518 |
Loans held for sale, at fair value | 4,973 |  |  | — |  |  | 4,973 |  |  | — |  |  | 4,973 |
Loans held for sale, at lower of cost or fair value | 10,938 |  |  | — |  |  | — |  |  | 10,985 |  |  | 10,985 |
Loans held for investment—net | 14,091,061 |  |  | — |  |  | — |  |  | 14,015,157 |  |  | 14,015,157 |
Securities borrowed | 338,980 |  |  | — |  |  | — |  |  | 329,963 |  |  | 329,963 |
Customer, broker-dealer and clearing receivables | 417,417 |  |  | — |  |  | — |  |  | 414,383 |  |  | 414,383 |
Mortgage servicing rights | 25,213 |  |  | — |  |  | — |  |  | 25,213 |  |  | 25,213 |
Financial liabilities: |  |  |  |  |  |  |  |  |
Total deposits | 13,946,422 |  |  | — |  |  | 12,812,512 |  |  | — |  |  | 12,812,512 |
Advances from the Federal Home Loan Bank | 117,500 |  |  | — |  |  | 117,500 |  |  | — |  |  | 117,500 |
Borrowings, subordinated notes and debentures | 445,244 |  |  | — |  |  | 416,947 |  |  | — |  |  | 416,947 |
Securities loaned | 474,400 |  |  | — |  |  | — |  |  | 473,831 |  |  | 473,831 |
Customer, broker-dealer and clearing payables | 511,654 |  |  | — |  |  | — |  |  | 471,859 |  |  | 471,859 |
Carrying amount is the estimated fair value for cash and cash equivalents, interest bearing deposits, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully. For fixed rate loans, deposits, borrowings or subordinated debt and for variable rate loans, deposits, borrowings or subordinated debt with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. A discussion of the methods of valuing trading securities, available for sale securities and loans held for sale can be found in Note 3 – “Fair Value” of the 2022 Form 10-K. The carrying amount of stock of regulatory agencies approximates the estimated fair value of this investment. The fair value of off-balance sheet items is not material.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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