Fair Value of Financial Instruments (Tables)

6 Months Ended

Dec. 31, 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
As of December 31, 2014:
Loans held for sale, measured at fair value	$	228,783	$	219,859	$	8,924

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

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

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



	Fair Value Measurement at December 31, 2014 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities:
U.S. government agency MBS	$	—	$	8,491	$	—	$	8,491
U.S. government sponsored enterprise MBS	—		5,837		—		5,837
Private issue CMO	—		—		799		799
Common stock - community development financial institution	—		—		250		250
Investment securities	—		14,328		1,049		15,377

Loans held for sale, at fair value	—		228,783		—		228,783
Interest-only strips	—		—		64		64

Derivative assets:
Commitments to extend credit on loans to be held for sale	—		—		2,134		2,134
Option contracts	—		—		110		110
Derivative assets	—		—		2,244		2,244
Total assets	$	—	$	243,111	$	3,357	$	246,468

Liabilities:
Derivative liabilities:
Commitments to extend credit on loans to be held for sale	$	—	$	—	$	5	$	5
Mandatory loan sale commitments	—		—		86		86
TBA MBS trades	—		2,019		—		2,019
Derivative liabilities	—		2,019		91		2,110
Total liabilities	$	—	$	2,019	$	91	$	2,110



	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
TBAMBS trades	—		1,335		—		1,335
Derivative liabilities	—		1,335		97		1,432
Total liabilities	$	—	$	1,335	$	97	$	1,432

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

The following tables summarize reconciliations 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:



	For the Quarter Ended December 31, 2014
	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)
(In Thousands)	Private Issue CMO			Common stock ⁽¹⁾		Interest- Only Strips			Loan Commit- ments to Originate ₍₂₎		Manda- tory Commit- ments ⁽³⁾			Option Contracts			Total
Beginning balance at September 30, 2014	$	828		$	250	$	70		$	1,785	$	(245	)	$	33		$	2,721
Total gains or losses (realized/ unrealized):
Included in earnings	—			—		—			344		149			(57		)	436
Included in other comprehensive loss	(4		)	—		(6		)	—		—			—			(10		)
Purchases	—			—		—			—		—			134			134
Issuances	—			—		—			—		—			—			—
Settlements	(25		)	—		—			—		10			—			(15		)
Transfers in and/or out of Level 3	—			—		—			—		—			—			—
Ending balance at December 31, 2014	$	799		$	250	$	64		$	2,129	$	(86	)	$	110		$	3,266


⁽¹⁾	Common stock of a community development financial institution.


⁽²⁾	Consists of commitments to extend credit on loans to be held for sale.


⁽³⁾	Consists of mandatory loan sale commitments.



	For the Quarter Ended December 31, 2013
	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 September 30, 2013	$	953		$	103		$	3,365		$	(141	)	$	82		$	4,362
Total gains or losses (realized/unrealized):
Included in earnings	—			—			(3,117		)	329			158			(2,630		)
Included in other comprehensive loss	19			(15		)	—			—			—			4
Purchases	—			—			—			—			155			155
Issuances	—			—			—			—			—			—
Settlements	(47		)	—			—			8			(64		)	(103		)
Transfers in and/or out of Level 3	—			—			—			—			—			—
Ending balance at December 31, 2013	$	925		$	88		$	248		$	196		$	331		$	1,788


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


⁽²⁾	Consists of mandatory loan sale commitments.



	For the Six Months Ended December 31, 2014
	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)
(In Thousands)	Private Issue CMO			Common stock ⁽¹⁾		Interest- Only Strips		Loan Commit- ments to Originate ₍₂₎			Manda- tory Commit- ments ⁽³⁾			Option Contracts			Total
Beginning balance at June 30, 2014	$	853		$	—	$	62	$	2,566		$	(93	)	$	—		$	3,388
Total gains or losses (realized/ unrealized):
Included in earnings	—			—		—		(437		)	(7		)	(162		)	(606		)
Included in other comprehensive loss	(5		)	—		2		—			—			—			(3		)
Purchases	—			250		—		—			—			321			571
Issuances	—			—		—		—			—			—			—
Settlements	(49		)	—		—		—			14			(49		)	(84		)
Transfers in and/or out of Level 3	—			—		—		—			—			—			—
Ending balance at December 31, 2014	$	799		$	250	$	64	$	2,129		$	(86	)	$	110		$	3,266


⁽¹⁾	Common stock of a community development financial institution.


⁽²⁾	Consists of commitments to extend credit on loans to be held for sale.


⁽³⁾	Consists of mandatory loan sale commitments.



	For the Six Months Ended December 31, 2013
	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	—			—			1,280			99		266			1,645
Included in other comprehensive loss	19			(10		)	—			—		—			9
Purchases	—			—			—			—		370			370
Issuances	—			—			—			—		—			—
Settlements	(113		)	—			—			14		(894		)	(993		)
Transfers in and/or out of Level 3	—			—			—			—		—			—
Ending balance at December 31, 2013	$	925		$	88		$	248		$	196	$	331		$	1,788

Schedule of Fair Value Assets Measured on Nonrecurring Basis

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



	Fair Value Measurement at December 31, 2014 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Non-performing loans	$	—	$	9,138	$	2,013	$	11,151
MSA	—		—		208		208
Real estate owned, net	—		3,496		—		3,496
Total	$	—	$	12,634	$	2,221	$	14,855



	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
MSA	—		—		241		241
Real estate owned, net	—		2,467		—		2,467
Total	$	—	$	13,377	$	5,267	$	18,644

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 December 31, 2014:



(Dollars In Thousands)	Fair Value As of December 31, 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	$	799	Market comparable pricing	Comparability adjustment	(0.4)% – 1.1% (0.9%)	Increase

Common stock of community development financial institution	$	250	Market pricing	Pricing indications from recent transactions	$0.00 - $0.14 ($0.05)	Increase

Non-performing loans	$	92	Discounted cash flow	Default rates	0.0% - 30.0% (0.0%)	Decrease
Non-performing loans	$	1,921	Relative value analysis	Loss severity	20.0% - 30.0% (21.9%)	Decrease

MSA	$	208	Discounted cash flow	Prepayment speed (CPR) Discount rate	19.5% - 60.0% (31.0%) 9.0% - 10.5% (9.2%)	Decrease Decrease

Interest-only strips	$	64	Discounted cash flow	Prepayment speed (CPR) Discount rate	20.2% - 39.2% (25.7%) 9.0%	Decrease Decrease

Commitments to extend credit on loans to be held for sale	$	2,134	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽³⁾	99.1% – 106.2% (102.3%) of par 22.5% - 30.3% (29.3%)	Decrease Decrease

Option contracts	$	110	Relative value analysis	Broker quotes	126.8% of par	Increase

Liabilities:

Commitments to extend credit on loans to be held for sale	$	5	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽³⁾	101.4% – 103.9% (102.3%) of par 22.5% - 30.3% (29.3%)	Increase Increase

Mandatory loan sale commitments	$	86	Relative value analysis	TBA MBS broker quotes Roll-forward costs ⁽⁴⁾	101.2% - 105.0% (104.3%) of par 0.007%	Increase Increase


⁽¹⁾	The range is based on the 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 December 31, 2014 and June 30, 2014 were as follows:



	December 31, 2014
(In Thousands)	Carrying Amount		Fair Value		Level 1	Level 2		Level 3
Financial assets:
Loans held for investment, net	$	797,783	$	804,707	—	—		$	804,707
FHLB – San Francisco stock	$	7,056	$	7,056	—	$	7,056	—

Financial liabilities:
Deposits	$	905,512	$	882,526	—	—		$	882,526
Borrowings	$	41,400	$	44,440	—	—		$	44,440



	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

- 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.

+ References+ Details

- 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.

+ References+ Details