Fair Value of Financial Instruments (Tables)

6 Months Ended

Dec. 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 December 31, 2017:
Loans held for investment, at fair value	$	5,157	$	5,362	$	(205	)
Loans held for sale, at fair value	$	96,589	$	93,449	$	3,140

As of June 30, 2017:
Loans held for investment, at fair value	$	6,445	$	6,696	$	(251	)
Loans held for sale, at fair value	$	116,548	$	112,940	$	3,608

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, 2017 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities - available for sale:
U.S. government agency MBS	$	—	$	4,859	$	—	$	4,859
U.S. government sponsored enterprise MBS	—		3,127		—		3,127
Private issue CMO	—		—		419		419
Investment securities - available for sale	—		7,986		419		8,405

Loans held for investment, at fair value	—		—		5,157		5,157
Loans held for sale, at fair value	—		96,589		—		96,589
Interest-only strips	—		—		26		26

Derivative assets:
Commitments to extend credit on loans to be held for sale	—		—		737		737
TBA MBS trades	—		2		—		2
Derivative assets	—		2		737		739
Total assets	$	—	$	104,577	$	6,339	$	110,916

Liabilities:
Derivative liabilities:
Commitments to extend credit on loans to be held for sale	$	—	$	—	$	21	$	21
Mandatory loan sale commitments	—		—		24		24
TBA MBS trades	—		183		—		183
Derivative liabilities	—		183		45		228
Total liabilities	$	—	$	183	$	45	$	228



	Fair Value Measurement at June 30, 2017 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investment securities - available for sale:
U.S. government agency MBS	$	—	$	5,383	$	—	$	5,383
U.S. government sponsored enterprise MBS	—		3,474		—		3,474
Private issue CMO	—		—		461		461
Investment securities - available for sale	—		8,857		461		9,318

Loans held for investment, at fair value	—		—		6,445		6,445
Loans held for sale, at fair value	—		116,548		—		116,548
Interest-only strips	—		—		31		31

Derivative assets:
Commitments to extend credit on loans to be held for sale	—		—		847		847
Mandatory loan sale commitments	—		—		47		47
TBAMBS trades	—		539		—		539
Option contracts	—		—		37		37
Derivative assets	—		539		931		1,470
Total assets	$	—	$	125,944	$	7,868	$	133,812

Liabilities:
Derivative liabilities:
Commitments to extend credit on loans to be held for sale	$	—	$	—	$	38	$	38
Derivative liabilities	—		—		38		38
Total liabilities	$	—	$	—	$	38	$	38

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, 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⁾			Total
Beginning balance at September 30, 2017	$	448		$	6,924		$	28		$	687	$	(4	)	$	8,083
Total gains or losses (realized/unrealized):
Included in earnings	—			38			—			29		(20		)	47
Included in other comprehensive loss	—			—			(2		)	—		—			(2		)
Purchases	—			—			—			—		—			—
Issuances	—			—			—			—		—			—
Settlements	(29		)	(1,805		)	—			—		—			(1,834		)
Transfers in and/or out of Level 3	—			—			—			—		—			—
Ending balance at December 31, 2017	$	419		$	5,157		$	26		$	716	$	(24	)	$	6,294


⁽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 December 31, 2016
	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 September 30, 2016	$	560		$	5,529		$	42		$	2,574		$	(24	)	$	22		$	8,703
Total gains or losses (realized/unrealized):
Included in earnings	—			(139		)	—			(1,098		)	(250		)	366			(1,121		)
Included in other comprehensive income (loss)	—			—			(5		)	—			—			—			(5		)
Purchases	—			—			—			—			—			94			94
Issuances	—			—			—			—			—			—			—
Settlements	(22		)	(250		)	—			—			(6		)	(482		)	(760		)
Transfers in and/or out of Level 3	—			824			—			—			—			—			824
Ending balance at December 31, 2016	$	538		$	5,964		$	37		$	1,476		$	(280	)	$	—		$	7,735


⁽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 Six Months Ended December 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, 2017	$	461		$	6,445		$	31		$	809		$	47		$	37		$	7,830
Total gains or losses (realized/unrealized):
Included in earnings	—			46			—			(93		)	(73		)	(37		)	(157		)
Included in other comprehensive loss	1			—			(5		)	—			—			—			(4		)
Purchases	—			—			—			—			—			—			—
Issuances	—			—			—			—			—			—			—
Settlements	(43		)	(1,856		)	—			—			2			—			(1,897		)
Transfers in and/or out of Level 3	—			522			—			—			—			—			522
Ending balance at December 31, 2017	$	419		$	5,157		$	26		$	716		$	(24	)	$	—		$	6,294


⁽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 Six Months Ended December 31, 2016
	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	—			(101		)	—			(2,309		)	(255		)	344			(2,321		)
Included in other comprehensive (loss) income	1			—			(10		)	—			—			—			(9		)
Purchases	—			—			—			—			—			138			138
Issuances	—			—			—			—			—			—			—
Settlements	(64		)	(678		)	—			—			6			(482		)	(1,218		)
Transfers in and/or out of Level 3	—			1,584			—			—			—			—			1,584
Ending balance at December 31, 2016	$	538		$	5,964		$	37		$	1,476		$	(280	)	$	—		$	7,735

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, 2017 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Non-performing loans	$	—	$	7,038	$	947	$	7,985
MSA	—		—		450		450
Real estate owned, net	—		621		—		621
Total	$	—	$	7,659	$	1,397	$	9,056



	Fair Value Measurement at June 30, 2017 Using:
(In Thousands)	Level 1		Level 2		Level 3		Total
Non-performing loans	$	—	$	7,049	$	946	$	7,995
MSA	—		—		407		407
Real estate owned, net	—		1,615		—		1,615
Total	$	—	$	8,664	$	1,353	$	10,017

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, 2017:



(Dollars In Thousands)	Fair Value As of December 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	$	419	Market comparable pricing	Comparability adjustment	0.6% – 1.7% (1.5%)	Increase

Loans held for investment, at fair value	$	5,157	Relative value analysis	Broker quotes Credit risk factors	97.9% – 104.8% (100.8%) of par 1.2% - 100.0% (4.6%)	Increase Decrease

Non-performing loans	$	61	Discounted cash flow	Default rates	5.0%	Decrease
Non-performing loans	$	886	Relative value analysis	Loss severity	20.0% - 30.0% (21.4%)	Decrease

MSA	$	450	Discounted cash flow	Prepayment speed (CPR) Discount rate	10.2% - 60.0% (21.3%) 9.0% - 10.5% (9.2%)	Decrease Decrease

Interest-only strips	$	26	Discounted cash flow	Prepayment speed (CPR) Discount rate	15.6% - 29.7% (27.4%) 9.0%	Decrease Decrease

Commitments to extend credit on loans to be held for sale	$	737	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽³⁾	99.3% – 105.1% (102.0%) of par 12.9% - 32.0% (30.6%)	Increase Decrease

Liabilities:

Commitments to extend credit on loans to be held for sale	$	21	Relative value analysis	TBA-MBS broker quotes Fall-out ratio ⁽³⁾	98.5% – 101.5% (100.8%) of par 12.9% - 32.0% (30.6%)	Increase Decrease

Mandatory loan sale commitments	$	24	Relative value analysis	TBA MBS broker quotes Roll-forward costs ⁽⁴⁾	100.9% - 103.4% (103.4%) of par 0.012%	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 December 31, 2017 and June 30, 2017 was as follows:



	December 31, 2017
(In Thousands)	Carrying Amount		Fair Value		Level 1	Level 2		Level 3
Financial assets:
Investment securities - held to maturity	$	87,626	$	87,336	—	$	87,336	$	—
Loans held for investment, not recorded at fair value	$	880,819	$	864,096	—	—		$	864,096
FHLB – San Francisco stock	$	8,108	$	8,108	—	$	8,108	—

Financial liabilities:
Deposits	$	907,788	$	874,441	—	—		$	874,441
Borrowings	$	111,189	$	111,141	—	—		$	111,141



	June 30, 2017
(In Thousands)	Carrying Amount		Fair Value		Level 1	Level 2		Level 3
Financial assets:
Investment securities - held to maturity	$	60,441	$	60,629	—	$	60,629	—
Loans held for investment, not recorded at fair value	$	898,474	$	885,650	—	—		$	885,650
FHLB – San Francisco stock	$	8,108	$	8,108	—	$	8,108	—

Financial liabilities:
Deposits	$	926,521	$	896,140	—	—		$	896,140
Borrowings	$	126,226	$	126,083	—	—		$	126,083