Fair Value of Financial Instruments (Tables)

9 Months Ended

Mar. 31, 2017

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 March 31, 2017:
Loans held for investment, at fair value	$	6,250	$	6,526	$	(276	)
Loans held for sale, at fair value	$	105,531	$	101,887	$	3,644

As of June 30, 2016:
Loans held for investment, at fair value	$	5,159	$	5,324	$	(165	)
Loans held for sale, at fair value	$	189,458	$	181,380	$	8,078

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 March 31, 2017 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities - available for sale:
U.S. government agency MBS	$	—	$	5,700	$	—	$	5,700
U.S. government sponsored enterprise MBS	—		3,661		—		3,661
Private issue CMO	—		—		501		501
Investment securities - available for sale	—		9,361		501		9,862

Loans held for investment, at fair value	—		—		6,250		6,250
Loans held for sale, at fair value	—		105,531		—		105,531
Interest-only strips	—		—		35		35

Derivative assets:
Commitments to extend credit on loans to be held for sale	—		—		2,116		2,116
Option contracts	—		—		31		31
Derivative assets	—		—		2,147		2,147
Total assets	$	—	$	114,892	$	8,933	$	123,825

Liabilities:
Derivative liabilities:
Commitments to extend credit on loans to be held for sale	$	—	$	—	$	12	$	12
Mandatory loan sale commitments	—		—		59		59
TBA MBS trades	—		1,032		—		1,032
Derivative liabilities	—		1,032		71		1,103
Total liabilities	$	—	$	1,032	$	71	$	1,103



	Fair Value Measurement at June 30, 2016 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities - available for sale:
U.S. government agency MBS	$	—	$	6,572	$	—	$	6,572
U.S. government sponsored enterprise MBS	—		4,223		—		4,223
Private issue CMO	—		—		601		601
Common stock - community development financial institution	—		147		—		147
Investment securities - available for sale	—		10,942		601		11,543

Loans held for investment, at fair value	—		—		5,159		5,159
Loans held for sale, at fair value	—		189,458		—		189,458
Interest-only strips	—		—		47		47

Derivative assets:
Commitments to extend credit on loans to be held for sale	—		—		3,788		3,788
Derivative assets	—		—		3,788		3,788
Total assets	$	—	$	200,400	$	9,595	$	209,995

Liabilities:
Derivative liabilities:
Commitments to extend credit on loans to be held for sale	$	—	$	—	$	3	$	3
Mandatory loan sale commitments	—		—		31		31
TBAMBS trades	—		3,165		—		3,165
Derivative liabilities	—		3,165		34		3,199
Total liabilities	$	—	$	3,165	$	34	$	3,199

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 March 31, 2017
	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)
(In Thousands)	Private Issue CMO			Loans Held For Investment, at fair value ⁽¹⁾			Interest- Only Strips			Loan Commit- ments to Originate ⁽²⁾		Manda- tory Commit- ments ⁽³⁾			Option Contracts			Total
Beginning balance at December 31, 2016	$	538		$	5,964		$	37		$	1,476	$	(280	)	$	—		$	7,735
Total gains or losses (realized/unrealized):
Included in earnings	—			(10		)	—			628		216			(11		)	823
Included in other comprehensive income (loss)	—			—			(2		)	—		—			—			(2		)
Purchases	—			—			—			—		—			42			42
Issuances	—			—			—			—		—			—			—
Settlements	(37		)	(399		)	—			—		5			—			(431		)
Transfers in and/or out of Level 3	—			695			—			—		—			—			695
Ending balance at March 31, 2017	$	501		$	6,250		$	35		$	2,104	$	(59	)	$	31		$	8,862


⁽¹⁾	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.


⁽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 March 31, 2016
	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 December 31, 2015	$	654		$	143		$	4,210		$	54		$	1,170	$	(51	)	$	24		$	6,204
Total gains or losses (realized/ unrealized):
Included in earnings	—			—			59			—			1,866		(105		)	85			1,905
Included in other comprehensive (loss) income	(5		)	4			—			(4		)	—		—			—			(5		)
Purchases	—			—			—			—			—		—			82			82
Issuances	—			—			—			—			—		—			—			—
Settlements	(32		)	—			(1,165		)	—			—		31			(167		)	(1,333		)
Transfers in and/or out of Level 3	—			(147		)	1,479			—			—		—			—			1,332
Ending balance at March 31, 2016	$	617		$	—		$	4,583		$	50		$	3,036	$	(125	)	$	24		$	8,185


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


⁽²⁾	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 Nine Months Ended March 31, 2017
	Fair Value Measurement Using Significant Other Unobservable Inputs (Level 3)
(In Thousands)	Private Issue CMO			Loans Held For Investment, at fair value ⁽¹⁾			Interest- Only Strips			Loan Commit- ments to Originate ⁽²⁾			Manda- tory Commit- ments ⁽³⁾			Option Contracts			Total
Beginning balance at June 30, 2016	$	601		$	5,159		$	47		$	3,785		$	(31	)	$	—		$	9,561
Total gains or losses (realized/unrealized):
Included in earnings	—			(111		)	—			(1,681		)	(39		)	333			(1,498		)
Included in other comprehensive loss	1			—			(12		)	—			—			—			(11		)
Purchases	—			—			—			—			—			180			180
Issuances	—			—			—			—			—			—			—
Settlements	(101		)	(1,077		)	—			—			11			(482		)	(1,649		)
Transfers in and/or out of Level 3	—			2,279			—			—			—			—			2,279
Ending balance at March 31, 2017	$	501		$	6,250		$	35		$	2,104		$	(59	)	$	31		$	8,862


⁽¹⁾	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.


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


⁽³⁾	Consists of mandatory loan sale commitments.



	For the Nine Months Ended March 31, 2016
	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	—			—			(149		)	—			1,537		(101		)	(87		)	1,200
Included in other comprehensive (loss) income	(7		)	(4		)	—			(13		)	—		—			—			(24		)
Purchases	—			—			—			—			—		—			222			222
Issuances	—			—			—			—			—		—			—			—
Settlements	(93		)	—			(1,816		)	—			—		47			(303		)	(2,165		)
Transfers in and/or out of Level 3	—			(147		)	6,548			—			—		—			—			6,401
Ending balance at March 31, 2016	$	617		$	—		$	4,583		$	50		$	3,036	$	(125	)	$	24		$	8,185

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 March 31, 2017 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Non-performing loans	$	—	$	7,423	$	1,429	$	8,852
MSA	—		—		137		137
Real estate owned, net	—		2,768		—		2,768
Total	$	—	$	10,191	$	1,566	$	11,757



	Fair Value Measurement at June 30, 2016 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Non-performing loans	$	—	$	7,350	$	2,959	$	10,309
MSA	—		—		627		627
Real estate owned, net	—		2,706		—		2,706
Total	$	—	$	10,056	$	3,586	$	13,642

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, 2017:



(Dollars In Thousands)	Fair Value As of March 31, 2017		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	$	501	Market comparable pricing	Comparability adjustment	0.2% – 1.0% (0.9%)	Increase

Loans held for investment, at fair value	$	6,250	Relative value analysis	Broker quotes Credit risk factors	97.6% – 105.0% (100.9%) of par 1.2% - 100.0% (5.1%)	Increase Decrease

Non-performing loans	$	68	Discounted cash flow	Default rates	5.0%	Decrease
Non-performing loans	$	1,361	Relative value analysis	Loss severity	20.0% - 30.0% (18.9%)	Decrease

MSA	$	137	Discounted cash flow	Prepayment speed (CPR) Discount rate	9.8% - 60.0% (24.9%) 9.0% - 10.5% (9.3%)	Decrease Decrease

Interest-only strips	$	35	Discounted cash flow	Prepayment speed (CPR) Discount rate	14.4% - 23.4% (22.3%) 9.0%	Decrease Decrease

Commitments to extend credit on loans to be held for sale	$	2,116	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽³⁾	98.1% – 104.9% (101.8%) of par 21.1% - 28.2% (27.7%)	Increase Decrease

Option contracts	$	31	Relative value analysis	Broker quotes	124.6% of par	Increase

Liabilities:

Commitments to extend credit on loans to be held for sale	$	12	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽³⁾	100.4% – 104.3% (101.9%) of par 21.1% - 28.2% (27.7%)	Increase Decrease

Mandatory loan sale commitments	$	59	Relative value analysis	TBA MBS broker quotes Roll-forward costs ⁽⁴⁾	100.8% - 105.7% (104.0%) of par 0.020%	Decrease Decrease


⁽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 March 31, 2017 and June 30, 2016 was as follows:



	March 31, 2017
(In Thousands)	Carrying Amount		Fair Value		Level 1	Level 2		Level 3
Financial assets:
Investment securities - held to maturity	$	41,035	$	41,270	—	$	41,270	$	—
Loans held for investment, not recorded at fair value	$	874,260	$	859,852	—	—		$	859,852
FHLB – San Francisco stock	$	8,094	$	8,094	—	$	8,094	—

Financial liabilities:
Deposits	$	938,306	$	909,920	—	—		$	909,920
Borrowings	$	111,244	$	111,673	—	—		$	111,673



	June 30, 2016
(In Thousands)	Carrying Amount		Fair Value		Level 1	Level 2		Level 3
Financial assets:
Investment securities - held to maturity	$	39,979	$	40,438	—	$	40,438	—
Loans held for investment, not recorded at fair value	$	834,863	$	844,124	—	—		$	844,124
FHLB – San Francisco stock	$	8,094	$	8,094	—	$	8,094	—

Financial liabilities:
Deposits	$	926,384	$	896,033	—	—		$	896,033
Borrowings	$	91,299	$	95,898	—	—		$	95,898