Fair Value of Financial Instruments (Tables)

9 Months Ended

Mar. 31, 2013

Schedule of Aggregate Fair Value and Aggregate Unpaid Principal Balance of Loans Held for Sale

The following table describes the difference at the dates indicated between the aggregate fair value and the aggregate unpaid principal balance of loans held for sale at fair value.



(In Thousands)	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Net Unrealized Gain
As of March 31, 2013:
Loans held for sale, measured at fair value	$	169,571	$	164,000	$	5,571

As of June 30, 2012:
Loans held for sale, measured at fair value	$	231,639	$	220,849	$	10,790

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following fair value hierarchy table presents information at the dates indicated about the Corporation’s assets measured at fair value on a recurring basis:



	Fair Value Measurement at March 31, 2013 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities:
U.S. government agency MBS	$	—	$	11,387	$	—	$	11,387
U.S. government sponsored enterprise MBS	—		8,094		—		8,094
Private issue CMO	—		—		1,097		1,097
Investment securities	—		19,481		1,097		20,578

Loans held for sale, at fair value	—		169,571		—		169,571
Interest-only strips	—		—		125		125

Derivative assets:
Commitments to extend credit on loans to be held for sale	—		—		3,434		3,434
Mandatory loan sale commitments	—		—		18		18
TBA MBS trades	—		43		—		43
Option contracts	—		—		72		72
Derivative assets	—		43		3,524		3,567
Total assets	$	—	$	189,095	$	4,746	$	193,841

Liabilities:
Derivative liabilities:
Commitments to extend credit on loans to be held for sale	$	—	$	—	$	15	$	15
Mandatory loan sale commitments	—		—		18		18
TBA MBS trades	—		838		—		838
Derivative liabilities	—		838		33		871
Total liabilities	$	—	$	838	$	33	$	871



	Fair Value Measurement at June 30, 2012 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities:
U.S. government agency MBS	$	—	$	12,314	$	—	$	12,314
U.S. government sponsored enterprise MBS	—		9,342		—		9,342
Private issue CMO	—		—		1,242		1,242
Investment securities	—		21,656		1,242		22,898

Loans held for sale, at fair value	—		231,639		—		231,639
Interest-only strips	—		—		130		130

Derivative assets:
Commitments to extend credit on loans to be held for sale	—		—		3,998		3,998
Mandatory loan sale commitments	—		—		38		38
TBAMBS trades	—		121		—		121
Option contracts	—		—		36		36
Derivative assets	—		121		4,072		4,193
Total assets	$	—	$	253,416	$	5,444	$	258,860

Liabilities:
Derivative liabilities:
Commitments to extend credit on loans to be held for sale	$	—	$	—	$	17	$	17
Mandatory loan sale commitments	—		—		201		201
TBAMBS trades	—		1,274		—		1,274
Derivative liabilities	—		1,274		218		1,492
Total liabilities	$	—	$	1,274	$	218	$	1,492

Schedule for Reconciliation of Recurring Fair Value Measurements Using Level 3 Inputs

The following is a reconciliation of the beginning and ending balances during the periods shown of recurring fair value measurements recognized in the Condensed Consolidated Statements of Financial Condition using Level 3 inputs:



	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)
(In Thousands)	Private Issue CMO			Interest- Only Strips			Loan Commit- ments to originate ⁽¹⁾			Manda- tory Commit- ments ⁽²⁾			Option Contracts			Total
Beginning balance at December 31, 2012	$	1,156		$	130		$	3,238		$	(71	)	$	47		$	4,500
Total gains or losses (realized/unrealized):
Included in earnings	—			—			(3,238		)	71			(47		)	(3,214		)
Included in other comprehensive loss	—			(5		)	—			—			—			(5		)
Purchases	—			—			—			—			72			72
Issuances	—			—			3,419			—			—			3,419
Settlements	(59		)	—			—			—			—			(59		)
Transfers in and/or out of Level 3	—			—			—			—			—			—
Ending balance at March 31, 2013	$	1,097		$	125		$	3,419		$	—		$	72		$	4,713


⁽¹⁾	Consists of commitments to extend credit on loans to be held for sale.


⁽²⁾	Consists of mandatory loan sale commitments.



	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)
(In Thousands)	Private Issue CMO			Interest- Only Strips			Loan Commit- ments to originate ⁽¹⁾			Manda- tory Commit- ments ⁽²⁾			Option Contracts		Total
Beginning balance at December 31, 2011	$	1,244		$	156		$	2,118		$	(2	)	$	—	$	3,516
Total gains or losses (realized/unrealized):
Included in earnings	—			—			(2,118		)	2			—		(2,116		)
Included in other comprehensive loss	73			(21		)	—			—			—		52
Purchases	—			—			—			165			—		165
Issuances	—			—			2,406			—			—		2,406
Settlements	(26		)	—			—			—			—		(26		)
Transfers in and/or out of Level 3	—			—			—			—			—		—
Ending balance at March 31, 2012	$	1,291		$	135		$	2,406		$	165		$	—	$	3,997


⁽¹⁾	Consists of commitments to extend credit on loans to be held for sale.


⁽²⁾	Consists of mandatory loan sale commitments.



	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)
(In Thousands)	Private Issue CMO			Interest- Only Strips			Loan Commit- ments to originate ⁽¹⁾			Manda- tory Commit- ments ⁽²⁾			Option Contracts			Total
Beginning balance at June 30, 2012	$	1,242		$	130		$	3,981		$	(163	)	$	36		$	5,226
Total gains or losses (realized/unrealized):
Included in earnings	—			—			(15,589		)	1,348			(148		)	(14,389		)
Included in other comprehensive loss	(6		)	(5		)	—			—			—			(11		)
Purchases	—			—			—			(1,185		)	184			(1,001		)
Issuances	—			—			15,027			—			—			15,027
Settlements	(139		)	—			—			—			—			(139		)
Transfers in and/or out of Level 3	—			—			—			—			—			—
Ending balance at March 31, 2013	$	1,097		$	125		$	3,419		$	—		$	72		$	4,713


⁽¹⁾	Consists of commitments to extend credit on loans to be held for sale.


⁽²⁾	Consists of mandatory loan sale commitments.



	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)
(In Thousands)	Private Issue CMO			Interest- Only Strips			Loan Commit- ments to originate ⁽¹⁾			Manda- tory Commit- ments ⁽²⁾			Option Contracts			Total
Beginning balance at June 30, 2011	$	1,367		$	200		$	638		$	403		$	99		$	2,707
Total gains or losses (realized/unrealized):
Included in earnings	—			—			(6,219		)	(271		)	(241		)	(6,731		)
Included in other comprehensive loss	32			(65		)	—			—			—			(33		)
Purchases	—			—			—			33			142			175
Issuances	—			—			7,987			—			—			7,987
Settlements	(108		)	—			—			—			—			(108		)
Transfers in and/or out of Level 3	—			—			—			—			—			—
Ending balance at March 31, 2012	$	1,291		$	135		$	2,406		$	165		$	—		$	3,997


⁽¹⁾	Consists of commitments to extend credit on loans to be held for sale.


⁽²⁾	Consists of mandatory loan sale commitments.

Schedule of Fair Value Assets Measured on Nonrecurring Basis

The following fair value hierarchy table presents information about the Corporation’s assets measured at fair value at the dates indicated on a nonrecurring basis:



	Fair Value Measurement at March 31, 2013 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Non-performing loans	$	—	$	10,801	$	9,394	$	20,195
Mortgage servicing assets	—		—		263		263
Real estate owned, net	—		2,227		—		2,227
Total	$	—	$	13,028	$	9,657	$	22,685



	Fair Value Measurement at June 30, 2012 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Non-performing loans	$	—	$	10,335	$	25,006	$	35,341
Mortgage servicing assets	—		—		227		227
Real estate owned, net	—		5,976		—		5,976
Total	$	—	$	16,311	$	25,233	$	41,544

Schedule of Additional Information About Valuation Techniques and Inputs Used for Assets and Liabilities

The following table presents additional information about valuation techniques and inputs used for assets and liabilities, including derivative financial instruments, which are measured at fair value and categorized within Level 3 as of March 31, 2013 (dollars in thousands):



	Fair Value As of March 31, 2013		Valuation Techniques	Unobservable Inputs	Range ⁽¹⁾ (Weighted Average)	Impact to Valuation from an Increase in Inputs ⁽²⁾

Assets:

Securities available-for sale: Private issue CMO	$	1,097	Discounted cash flow	Probability of default Loss severity Prepayment speed	0.6% – 1.4% (0.8%) 35.8% - 37.6% (37.3%) 4.2% – 13.7% (7.1%)	Decrease Decrease Decrease

Non-performing loans	$	1,935	Discounted cash flow	Default rates Loss severity	23.8% 6.1%	Decrease Decrease
Non-performing loans	$	7,459	Relative value analysis	Default rates Loss severity	17.7% 3.5%	Decrease Decrease

MSA	$	263	Discounted cash flow	Prepayment speed (CPR) Discount rate	2.4% - 60.0% (23.5%) 9.0% - 10.5% (9.1%)	Decrease Decrease

Interest-only strips	$	125	Discounted cash flow	Prepayment speed (CPR) Discount rate	0.0% - 27.0% (15.1%) 9.0%	Decrease Decrease

Commitments to extend credit on loans to be held for sale	$	3,434	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽³⁾	97.6% – 105.2% (101.9%) of par 17.7% - 26.0% (25.3%)	Decrease Decrease

Mandatory loan sale commitments	$	18	Relative value analysis	Investor quotes TBA-MBS broker quotes Roll-forward costs ⁽⁴⁾	104.1% – 106.6% (104.7%) of par 101.5% of par 0.00%	Decrease Decrease Decrease

Option contracts	$	72	Relative value analysis	Broker quotes	102.9% – 103.2% (103.0%) of par	Increase

Liabilities:

Commitments to extend credit on loans to be held for sale	$	15	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽³⁾	100.0% – 102.5% (100.9%) of par 17.7% - 26.0% (25.3%)	Decrease Decrease

Mandatory loan sale commitments	$	18	Relative value analysis	Investor quotes	102.9% – 106.6% (105.0%) of par	Decrease


⁽¹⁾	The range is based on the historical estimated fair values and management estimates.


⁽²⁾	Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant changes in these inputs in isolation could result in significantly higher or lower fair value measurements.


⁽³⁾	The percentage of commitments to extend credit on loans to be held for sale which management has estimated may not fund.


⁽⁴⁾	An estimated cost to roll forward the mandatory loan sale commitments which management has estimated may not be delivered to the corresponding investors in a timely manner.

Schedule of Carrying Amount and Fair Value of Financial Instruments

The carrying amount and fair value of the Corporation’s other financial instruments as of March 31, 2013 and June 30, 2012 were as follows (dollars in thousands):



	March 31, 2013
	Carrying Amount		Fair Value		Level 1	Level 2		Level 3
Financial assets:
Loans held for investment, net	$	754,441	$	752,582	—	—		$	752,582
FHLB – San Francisco stock	$	17,227	$	17,227	—	$	17,227	—

Financial liabilities:
Deposits	$	935,100	$	917,894	—	—		$	917,894
Borrowings	$	106,505	$	113,361	—	—		$	113,361



	June 30, 2012
	Carrying Amount		Fair Value		Level 1	Level 2		Level 3
Financial assets:
Loans held for investment, net	$	796,836	$	801,081	—	—		$	801,081
FHLB – San Francisco stock	$	22,255	$	22,255	—	$	22,255	—

Financial liabilities:
Deposits	$	961,411	$	948,985	—	—		$	948,985
Borrowings	$	126,546	$	134,936	—	—		$	134,936

- Definition

Tabular disclosure of assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). Disclosures may include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3).

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- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

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