Fair Value of Financial Instruments (Tables)

3 Months Ended

Sep. 30, 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 (Loss)
As of September 30, 2013:
Loans held for sale, measured at fair value	$	183,765	$	176,541	$	7,224

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 September 30, 2013 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities:
U.S. government agency MBS	$	—	$	10,241	$	—	$	10,241
U.S. government sponsored enterprise MBS	—		7,370		—		7,370
Private issue CMO	—		—		953		953
Investment securities	—		17,611		953		18,564

Loans held for sale, at fair value	—		183,765		—		183,765
Interest-only strips	—		—		103		103

Derivative assets:
Commitments to extend credit on loans to be held for sale	—		—		3,367		3,367
Mandatory loan sale commitments	—		—		51		51
TBA MBS trades	—		3		—		3
Option contracts	—		—		82		82
Derivative assets	—		3		3,500		3,503
Total assets	$	—	$	201,379	$	4,556	$	205,935

Liabilities:
Derivative liabilities:
Commitments to extend credit on loans to be held for sale	$	—	$	—	$	2	$	2
Mandatory loan sale commitments	—		—		192		192
TBA MBS trades	—		4,305		—		4,305
Derivative liabilities	—		4,305		194		4,499
Total liabilities	$	—	$	4,305	$	194	$	4,499



	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 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 June 30, 2013	$	1,019		$	98	$	(1,032	)	$	83		$	589		$	757
Total gains or losses (realized/unrealized):
Included in earnings	—			—		6,502			(230		)	107			6,379
Included in other comprehensive loss	—			5		—			—			—			5
Purchases	—			—		—			(141		)	216			75
Issuances	—			—		3,365			—			—			3,365
Settlements	(66		)	—		(5,470		)	147			(830		)	(6,219		)
Transfers in and/or out of Level 3	—			—		—			—			—			—
Ending balance at September 30, 2013	$	953		$	103	$	3,365		$	(141	)	$	82		$	4,362


⁽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	—			—			(3,981		)	163			(36		)	(3,854		)
Included in other comprehensive loss	1			(13		)	—			—			—			(12		)
Purchases	—			—			—			(1,114		)	65			(1,049		)
Issuances	—			—			8,370			—			—			8,370
Settlements	(45		)	—			—			—			—			(45		)
Transfers in and/or out of Level 3	—			—			—			—			—			—
Ending balance at September 30, 2012	$	1,198		$	117		$	8,370		$	(1,114	)	$	65		$	8,636


⁽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 September 30, 2013 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Non-performing loans	$	—	$	12,761	$	5,791	$	18,552
MSA	—		—		187		187
Real estate owned, net	—		3,172		—		3,172
Total	$	—	$	15,933	$	5,978	$	21,911



	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
MSA	—		—		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 September 30, 2013:



(Dollars In Thousands)	Fair Value As of September 30, 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	$	953	Discounted cash flow	Probability of default Loss severity Prepayment speed	1.2% – 3.0% (2.8%) 35.4% - 37.5% (37.2%) 7.7% – 22.6% (10.9%)	Decrease Decrease Decrease

Non-performing loans	$	85	Discounted cash flow	Default rates	0.0% - 30.0% (14.3%)	Decrease
Non-performing loans	$	5,706	Relative value analysis	Loss severity	15.0% - 60.0% (21.1%)	Decrease

MSA	$	187	Discounted cash flow	Prepayment speed (CPR) Discount rate	24.2% - 60.0% (29.9%) 9.0% - 10.5% (9.2%)	Decrease Decrease

Interest-only strips	$	103	Discounted cash flow	Prepayment speed (CPR) Discount rate	0.0% - 31.1% (16.1%) 9.0%	Decrease Decrease

Commitments to extend credit on loans to be held for sale	$	3,367	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽³⁾	97.8% – 104.5% (102.0%) of par 22.0% - 26.8% (26.6%)	Decrease Decrease

Mandatory loan sale commitments	$	51	Relative value analysis	Investor quotes TBA MBS broker quotes Roll-forward costs ⁽⁴⁾	99.1% of par 105.2% - 107.5% (106.2%) of par 0.002%	Decrease Decrease Decrease

Option contracts	$	82	Relative value analysis	Broker quotes	104.6% of par	Increase

Liabilities:

Commitments to extend credit on loans to be held for sale	$	2	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽³⁾	99.8% – 102.9% (100.5%) of par 22.0% - 26.8% (26.6%)	Decrease Decrease

Mandatory loan sale commitments	$	192	Relative value analysis	Investor quotes TBA MBS broker quotes Roll-forward costs ⁽⁴⁾	102.9% - 104.0% (103.9%) of par 100.6% - 107.8% (104.8%) of par 0.002%	Decrease Decrease 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 September 30, 2013 and June 30, 2013 were as follows:



	September 30, 2013
(In Thousands)	Carrying Amount		Fair Value		Level 1	Level 2		Level 3
Financial assets:
Loans held for investment, net	$	748,956	$	738,940	—	—		$	738,940
FHLB – San Francisco stock	$	13,308	$	13,308	—	$	13,308	—

Financial liabilities:
Deposits	$	919,095	$	899,302	—	—		$	899,302
Borrowings	$	56,476	$	59,702	—	—		$	59,702



	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 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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 15

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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 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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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 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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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 4: http://www.xbrl.org/2003/role/presentationRef

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-Name Accounting Standards Codification

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 10

-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 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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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 11: http://www.xbrl.org/2003/role/presentationRef

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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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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