Fair Value of Financial Instruments (Tables)

12 Months Ended

Jun. 30, 2014

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 (Loss)
As of June 30, 2014:
Loans held for sale, measured at fair value	$	158,883	$	152,192	$	6,691

As of June 30, 2013:
Loans held for sale, measured at fair value	$	188,050	$	188,545	$	(495	)

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 June 30, 2014 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities:
U.S. government agency MBS	$	—	$	9,109	$	—	$	9,109
U.S. government sponsored enterprise MBS	—		6,385		—		6,385
Private issue CMO	—		—		853		853
Investment securities	—		15,494		853		16,347

Loans held for sale, at fair value	—		158,883		—		158,883
Interest-only strips	—		—		62		62

Derivative assets:
Commitments to extend credit on loans to be held for sale	—		—		2,570		2,570
Derivative assets	—		—		2,570		2,570
Total assets	$	—	$	174,377	$	3,485	$	177,862

Liabilities:
Derivative liabilities:
Commitments to extend credit on loans to be held for sale	$	—	$	—	$	4	$	4
Mandatory loan sale commitments	—		—		93		93
TBA MBS trades	—		1,335		—		1,335
Derivative liabilities	—		1,335		97		1,432
Total liabilities	$	—	$	1,335	$	97	$	1,432



	Fair Value Measurement at June 30, 2013 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities:
U.S. government agency MBS	$	—	$	10,816	$	—	$	10,816
U.S. government sponsored enterprise MBS	—		7,675		—		7,675
Private issue CMO	—		—		1,019		1,019
Investment securities	—		18,491		1,019		19,510

Loans held for sale, at fair value	—		188,050		—		188,050
Interest-only strips	—		—		98		98

Derivative assets:
Commitments to extend credit on loans to be held for sale	—		—		1,338		1,338
Mandatory loan sale commitments	—		—		405		405
TBAMBS trades	—		7,251		—		7,251
Option contracts	—		—		589		589
Derivative assets	—		7,251		2,332		9,583
Total assets	$	—	$	213,792	$	3,449	$	217,241

Liabilities:
Derivative liabilities:
Commitments to extend credit on loans to be held for sale	$	—	$	—	$	2,370	$	2,370
Mandatory loan sale commitments	—		—		322		322
TBAMBS trades	—		529		—		529
Derivative liabilities	—		529		2,692		3,221
Total liabilities	$	—	$	529	$	2,692	$	3,221

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 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 June 30, 2013	$	1,019		$	98		$	(1,032	)	$	83		$	589		$	757
Total gains or losses (realized/unrealized):
Included in earnings	—			—			3,598			(207		)	(18		)	3,373
Included in other comprehensive loss	28			(36		)	—			—			—			(8		)
Purchases	—			—			—			—			603			603
Issuances	—			—			—			—			—			—
Settlements	(194		)	—			—			31			(1,174		)	(1,337		)
Transfers in and/or out of Level 3	—			—			—			—			—			—
Ending balance at June 30, 2014	$	853		$	62		$	2,566		$	(93	)	$	—		$	3,388


⁽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	—			—			(5,013		)	156			214			(4,643		)
Included in other comprehensive loss	(16		)	(31		)	—			—			—			(47		)
Purchases	—			—			—			—			1,084			1,084
Issuances	—			—			—			—			—			—
Settlements	(207		)	(1		)	—			90			(745		)	(863		)
Transfers in and/or out of Level 3	—			—			—			—			—			—
Ending balance at June 30, 2013	$	1,019		$	98		$	(1,032	)	$	83		$	589		$	757


⁽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 June 30, 2014 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Non-performing loans	$	—	$	10,910	$	5,026	$	15,936
Mortgage servicing assets	—		—		241		241
Real estate owned, net	—		2,467		—		2,467
Total	$	—	$	13,377	$	5,267	$	18,644



	Fair Value Measurement at June 30, 2013 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Non-performing loans	$	—	$	11,650	$	10,032	$	21,682
Mortgage servicing assets	—		—		174		174
Real estate owned, net	—		2,296		—		2,296
Total	$	—	$	13,946	$	10,206	$	24,152

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 June 30, 2014:



(Dollars In Thousands)	Fair Value As of June 30, 2014		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	$	853	Market comparable pricing	Comparability adjustment	0.5% - 1.5% (1.4%)	Increase

Non-performing loans	$	81	Discounted cash flow	Default rates	0.0% - 30.0% (0.0%)	Decrease
Non-performing loans	$	4,945	Relative value analysis	Loss severity	20.0% - 38.0% (18.6%)	Decrease

Mortgage servicing assets	$	241	Discounted cash flow	Prepayment speed (CPR) Discount rate	13.5% - 61.1% (43.1%) 9.0% - 10.5% (9.2%)	Decrease Decrease

Interest-only strips	$	62	Discounted cash flow	Prepayment speed (CPR) Discount rate	9.3% - 61.8% (44.3%) 9.0%	Decrease Decrease

Commitments to extend credit on loans to be held for sale	$	2,570	Relative value analysis	TBA MBS broker quotes Fall-out ratio ⁽³⁾	97.5% – 105.0% (102.2%) of par 23.2% - 28.4% (28.0%)	Decrease Decrease

Liabilities:

Commitments to extend credit on loans to be held for sale	$	4	Relative value analysis	TBA MBS broker quotes Fall-out ratio ⁽³⁾	100.0% – 101.5% (101.5%) of par 23.2% - 28.4% (28.0%)	Increase Increase

Mandatory loan sale commitments	$	93	Relative value analysis	Investor quotes TBA MBS broker quotes Roll-forward costs ⁽⁴⁾	108.1% of par 103.7% - 109.1% (105.3%) of par 0.0018%	Increase Increase Increase


⁽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 June 30, 2014 and 2013 were as follows:



	June 30, 2014
(In Thousands)	Carrying Amount		Fair Value		Level 1	Level 2		Level 3
Financial assets:
Loans held for investment, net	$	772,141	$	778,851	—	—		$	778,851
FHLB – San Francisco stock	$	7,056	$	7,056	—	$	7,056	—

Financial liabilities:
Deposits	$	897,870	$	875,440	—	—		$	875,440
Borrowings	$	41,431	$	44,424	—	—		$	44,424



	June 30, 2013
(In Thousands)	Carrying Amount		Fair Value		Level 1	Level 2		Level 3
Financial assets:
Loans held for investment, net	$	748,397	$	742,256	—	—		$	742,256
FHLB – San Francisco stock	$	15,273	$	15,273	—	$	15,273	—

Financial liabilities:
Deposits	$	923,010	$	903,654	—	—		$	903,654
Borrowings	$	106,491	$	110,404	—	—		$	110,404

- 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, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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