Fair Value Measurements

6 Months Ended

Sep. 30, 2012

FAIR VALUE MEASUREMENTS [Abstract]

Fair Value Disclosures [Text Block]

FAIR VALUE MEASUREMENTS

ASC 820 clarifies that fair value is an “exit” price, representing the amount that would be received when selling an asset, or paid when transferring a liability, in an orderly transaction between market participants. Fair value is thus a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

• Level 1— Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2— Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3— Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

A financial instrument’s categorization within this valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following table presents, by valuation hierarchy, assets that are measured at fair value on a recurring basis as of September 30, 2012 and March 31, 2012, and that are included in the Company’s Consolidated Statements of Financial Condition at these dates:

$ in thousands	Fair Value Measurements at September 30, 2012, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
	(in thousands)
Assets:
Mortgage servicing rights	$	—	$	—	$	465	$	465
Investment securities:
Available for sale:
U.S. Government Securities	3,105		—		—		3,105
Government National Mortgage Association	—		25,210		—		25,210
Federal Home Loan Mortgage Corporation	—		7,537		—		7,537
Federal National Mortgage Association	—		5,355		—		5,355
Asset-Backed Securities	—		15,264		—		15,264
Corporates	—		2,018		—		2,018
Other	—		55,922		51		55,973
Total available for sale securities	$	3,105	$	111,306	$	51	$	114,462
Total assets	$	3,105	$	111,306	$	516	$	114,927

$ in thousands	Fair Value Measurements at March 31, 2012, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
	(in thousands)
Assets:
Mortgage servicing rights	$	—	$	—	$	491	$	491
Investment securities:
Available for sale:
U.S. Government Securities	3,361		—		—		3,361
Government National Mortgage Association	—		27,612		—		27,612
Federal Home Loan Mortgage Corporation	—		5,305		—		5,305
Federal National Mortgage Association	—		6,141		—		6,141
Corporates	—		1,949		—		1,949
Other	—		40,686		52		40,738
Total available for sale securities	$	3,361	$	81,693	$	52	$	85,106
Total assets	$	3,361	$	81,693	$	543	$	85,597

Instruments for which unobservable inputs are significant to their fair value measurement (i.e., Level 3) include mortgage servicing rights. Level 3 assets accounted for 0.1% of the Company’s total assets at September 30, 2012 and March 31, 2012.

 The Company reviews and updates the fair value hierarchy classifications on a quarterly basis. Changes from one quarter to the next that are related to the observable inputs to a fair value measurement may result in a reclassification from one hierarchy level to another.

Below is a description of the methods and significant assumptions utilized in estimating the fair value of available-for-sale securities and mortgage servicing rights (“MSR”):

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government securities and exchange-traded securities. 

If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. These pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to market information, models also incorporate transaction details, such as maturity and cash flow assumptions. Securities valued in this manner would generally be classified within Level 2 of the valuation hierarchy and primarily include such instruments as mortgage-related securities and corporate debt.

In the period ended September 30, 2012, there were no transfers of investments between the Level 1 and Level 2 categories.

In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. In valuing certain securities, the determination of fair value may require benchmarking to similar instruments or analyzing default and recovery rates. Quoted price information for the MSRs is not available. Therefore, MSRs are valued using market-standard models to model the specific cash flow structure. Key inputs to the model consist of principal balance of loans being serviced, servicing fees and prepayment rates.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The following table includes a roll-forward of assets classified by the Company within Level 3 of the valuation hierarchy for the six months ended September 30, 2012 and 2011:

$ in thousands	Mortgage Servicing Rights			Securities Available for Sale
Beginning balance, April 1, 2012	$	491		$	52
Decrease in fair value due to other changes (1)	(26		)	(1		)
Issuances / (Settlements)	—			—
Transfers to/(from) Level 3	—			—
Ending balance, September 30, 2012	$	465		$	51

⁽¹⁾ Includes net servicing cash flows and the passage of time.

$ in thousands	Mortgage Servicing			Securities Available for
	Rights			Sale
Beginning April 1, 2011	$	626		$	45
Decrease in fair value due to other changes (1)	(105		)	—
Issuances / (Settlements)	—			—
Transfers to/(from) Level 3	—			—
Ending balance, September 30, 2011	$	521		$	45
(1) Includes net servicing cash flows and the passage of time.

Certain assets are measured at fair value on a non-recurring basis. Such instruments are subject to fair value adjustments under certain circumstances (e.g. when there is evidence of impairment). The following table presents assets and liabilities that were measured at fair value on a non-recurring basis as of September 30, 2012 and March 31, 2012 and that are included in the Company’s Consolidated Statements of Financial Condition as these dates:

$ in thousands	Fair Value Measurements at September 30, 2012, Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable		Total Fair
	(Level 1)		(Level 2)		Inputs (Level 3)		Value
Loans held-for-sale	$	—	$	26,830	$	—	$	26,830
Impaired loans with a specific reserve allocated	$	—	$	—	$	11,956	$	11,956

$ in thousands	Fair Value Measurements at March 31, 2012, Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable		Total Fair
	(Level 1)		(Level 2)		Inputs (Level 3)		Value
Loans held-for-sale	$	—	$	29,626	$	—	$	29,626
Impaired loans with a specific reserve allocated	$	—	$	—	$	17,784	$	17,784

Loans held-for-sale are carried at the lower of cost or market value. The valuation methodology for loans held for sale for the period ended September 30, 2012 was based upon amounts offered, appraisals or other acceptable valuation methods and, in some instances, prior loan loss experience of Carver in connection with note sales since March 31, 2011.

The fair values of collateral-dependent impaired loans are determined using various valuation techniques, including consideration of appraised values and other pertinent real estate market data.