Fair Value of Financial Instruments (Tables)

3 Months Ended

Sep. 30, 2015

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



(In Thousands)	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Net Unrealized (Loss) Gain
As of September 30, 2015:
Loans held for investment, at fair value	$	4,036	$	4,167	$	(131	)
Loans held for sale, measured at fair value	$	163,644	$	156,901	$	6,743

As of June 30, 2015:
Loans held for investment, at fair value	$	4,518	$	4,495	$	23
Loans held for sale, measured at fair value	$	224,715	$	219,143	$	5,572

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 September 30, 2015 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities:
U.S. government agency MBS	$	—	$	7,573	$	—	$	7,573
U.S. government sponsored enterprise MBS	—		5,046		—		5,046
Private issue CMO	—		—		691		691
Common stock - community development financial institution	—		—		151		151
Investment securities	—		12,619		842		13,461

Loans held for investment, at fair value	—		—		4,036		4,036
Loans held for sale, at fair value	—		163,644		—		163,644
Interest-only strips	—		—		60		60

Derivative assets:
Commitments to extend credit on loans to be held for sale	—		—		2,510		2,510
Option contracts	—		—		57		57
Derivative assets	—		—		2,567		2,567
Total assets	$	—	$	176,263	$	7,505	$	183,768

Liabilities:
Derivative liabilities:
Commitments to extend credit on loans to be held for sale	$	—	$	—	$	6	$	6
Mandatory loan sale commitments	—		—		150		150
TBA MBS trades	—		1,542		—		1,542
Derivative liabilities	—		1,542		156		1,698
Total liabilities	$	—	$	1,542	$	156	$	1,698



	Fair Value Measurement at June 30, 2015 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities:
U.S. government agency MBS	$	—	$	7,906	$	—	$	7,906
U.S. government sponsored enterprise MBS	—		5,387		—		5,387
Private issue CMO	—		—		717		717
Common stock - community development financial institution	—		—		151		151
Investment securities	—		13,293		868		14,161

Loans held for investment, at fair value	—		4,518		—		4,518
Loans held for sale, at fair value	—		224,715		—		224,715
Interest-only strips	—		—		63		63

Derivative assets:
Commitments to extend credit on loans to be held for sale	—		—		1,636		1,636
TBAMBS trades	—		812		—		812
Option contracts	—		—		192		192
Derivative assets	—		812		1,828		2,640
Total assets	$	—	$	243,338	$	2,759	$	246,097

Liabilities:
Derivative liabilities:
Commitments to extend credit on loans to be held for sale	$	—	$	—	$	137	$	137
Mandatory loan sale commitments	—		—		71		71
Derivative liabilities	—		—		208		208
Total liabilities	$	—	$	—	$	208	$	208

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 September 30, 2015
	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)
(In Thousands)	Private Issue CMO			Common stock ⁽¹⁾		Loans Held For Investment, at fair value ⁽²⁾			Interest- Only Strips			Loan Commit- ments to Originate ₍₃₎		Manda- tory Commit- ments ⁽⁴⁾			Option Contracts			Total
Beginning balance at June 30, 2015	$	717		$	151	$	—		$	63		$	1,499	$	(71	)	$	192		$	2,551
Total gains or losses (realized/ unrealized):
Included in earnings	—			—		(155		)	—			1,005		(96		)	(88		)	666
Included in other comprehensive loss	(1		)	—		—			(3		)	—		—			—			(4		)
Purchases	—			—		—			—			—		—			89			89
Issuances	—			—		—			—			—		—			—			—
Settlements	(25		)	—		(638		)	—			—		17			(136		)	(782		)
Transfers in and/or out of Level 3	—			—		4,829			—			—		—			—			4,829
Ending balance at September 30, 2015	$	691		$	151	$	4,036		$	60		$	2,504	$	(150	)	$	57		$	7,349


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


⁽²⁾	Beginning fiscal 2016, the valuation of loans held for investment at fair value includes the management estimates of the specific credit risk attributes of each loan (Level 3), in addition to the quoted secondary-market prices which account for interest rate characteristics.


⁽³⁾	Consists of commitments to extend credit on loans to be held for sale.


⁽⁴⁾	Consists of mandatory loan sale commitments.



	For the Quarter Ended September 30, 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	—			—		—		(781		)	(156		)	(105		)	(1,042		)
Included in other comprehensive (loss) income	(1		)	—		8		—			—			—			7
Purchases	—			250		—		—			—			187			437
Issuances	—			—		—		—			—			—			—
Settlements	(24		)	—		—		—			4			(49		)	(69		)
Transfers in and/or out of Level 3	—			—		—		—			—			—			—
Ending balance at September 30, 2014	$	828		$	250	$	70	$	1,785		$	(245	)	$	33		$	2,721


⁽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.

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 September 30, 2015 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Non-performing loans	$	—	$	11,146	$	3,618	$	14,764
MSA	—		—		417		417
Real estate owned, net	—		3,674		—		3,674
Total	$	—	$	14,820	$	4,035	$	18,855



	Fair Value Measurement at June 30, 2015 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Non-performing loans	$	—	$	11,816	$	2,130	$	13,946
MSA	—		—		269		269
Real estate owned, net	—		2,398		—		2,398
Total	$	—	$	14,214	$	2,399	$	16,613

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 September 30, 2015:



(Dollars In Thousands)	Fair Value As of September 30, 2015		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	$	691	Market comparable pricing	Comparability adjustment	0.0% – 1.5% (1.2%)	Increase

Securities available-for sale: Common stock⁽³⁾	$	151	Relative value analysis	Adjusted book value	$ 38.6 million	Increase

Loans held for investment, at fair value	$	4,036	Relative value analysis	Broker quotes Credit risk factors	99.5% – 105.8% (102.2%) of par 1.2% - 100.0% (5.3%)	Increase Decrease

Non-performing loans	$	87	Discounted cash flow	Default rates	5.0%	Decrease
Non-performing loans	$	3,531	Relative value analysis	Loss severity	20.0% - 30.0% (20.8%)	Decrease

MSA	$	417	Discounted cash flow	Prepayment speed (CPR) Discount rate	7.8% - 60.0% (17.2%) 9.0% - 10.5% (9.1%)	Decrease Decrease

Interest-only strips	$	60	Discounted cash flow	Prepayment speed (CPR) Discount rate	16.4% - 23.6% (17.7%) 9.0%	Decrease Decrease

Commitments to extend credit on loans to be held for sale	$	2,510	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽⁴⁾	98.0% – 105.0% (102.2%) of par 19.8% - 31.7% (30.1%)	Decrease Decrease

Option contracts	$	57	Relative value analysis	Broker quotes	128.9% of par	Increase

Liabilities:

Commitments to extend credit on loans to be held for sale	$	6	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽⁴⁾	100.5% – 102.8% (101.0%) of par 19.8% - 31.7% (30.1%)	Increase Increase

Mandatory loan sale commitments	$	150	Relative value analysis	Investor quotes TBA MBS broker quotes Roll-forward costs ⁽⁵⁾	104.5% - 106.6% (104.8%) of par 0.005%	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⁾	Common stock of a community development financial institution.


⁽⁴⁾	The percentage of commitments to extend credit on loans to be held for sale which management has estimated may not fund.


⁽⁵⁾	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 September 30, 2015 and June 30, 2015 were as follows:



	September 30, 2015
(In Thousands)	Carrying Amount		Fair Value		Level 1	Level 2		Level 3
Financial assets:
Loans held for investment, not recorded at fair value	$	801,651	$	807,570	—	—		$	807,570
FHLB – San Francisco stock	$	8,094	$	8,094	—	$	8,094	—

Financial liabilities:
Deposits	$	924,866	$	896,555	—	—		$	896,555
Borrowings	$	91,351	$	94,330	—	—		$	94,330



	June 30, 2015
(In Thousands)	Carrying Amount		Fair Value		Level 1	Level 2		Level 3
Financial assets:
Loans held for investment, not recorded at fair value	$	809,716	$	815,385	—	—		$	815,385
FHLB – San Francisco stock	$	8,094	$	8,094	—	$	8,094	—

Financial liabilities:
Deposits	$	924,086	$	895,664	—	—		$	895,664
Borrowings	$	91,367	$	93,219	—	—		$	93,219