Fair Value Measurement (Tables)
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3 Months Ended |
Mar. 31, 2019 |
|---|
| Fair Value Disclosures [Abstract] |
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| Fair value measurement methodologies |
The following table summarizes the fair value measurement methodologies, including significant inputs and assumptions, and classification of the Company's assets and liabilities. | | | | | | Asset/Liability class | | Valuation methodology, inputs and assumptions | | Classification | Investment securities | | | | | Investment securities available for sale | | Observable market prices of identical or similar securities are used where available.
| | Level 2 recurring fair value measurement. | | | If market prices are not readily available, value is based on discounted cash flows using the following significant inputs: • Expected prepayment speeds • Estimated credit losses • Market liquidity adjustments | | Level 3 recurring fair value measurement. | Loans held for sale | | | | | Single family loans, excluding loans transferred from held for investment | | Fair value is based on observable market data, including: • Quoted market prices, where available • Dealer quotes for similar loans • Forward sale commitments | | Level 2 recurring fair value measurement. | | | When not derived from observable market inputs, fair value is based on discounted cash flows, which considers the following inputs: • Benchmark yield curve • Estimated discount spread to the benchmark yield curve • Expected prepayment speeds | | Estimated fair value classified as Level 3. | Mortgage servicing rights | | | | | Single family MSRs | | For information on how the Company measures the fair value of its single family MSRs, including key economic assumptions and the sensitivity of fair value to changes in those assumptions, see Note 7, Mortgage Banking Operations. | | Level 3 recurring fair value measurement. | Derivatives | | | | | Eurodollar futures | | Fair value is based on closing exchange prices. | | Level 1 recurring fair value measurement. | Interest rate swaps Interest rate swaptions Forward sale commitments | | Fair value is based on quoted prices for identical or similar instruments, when available.
When quoted prices are not available, fair value is based on internally developed modeling techniques, which require the use of multiple observable market inputs including:
• Forward interest rates
• Interest rate volatilities | | Level 2 recurring fair value measurement. | Interest rate lock and purchase loan commitments | | The fair value considers several factors including:
• Fair value of the underlying loan based on quoted prices in the secondary market, when available.
• Value of servicing
• Fall-out factor | | Level 3 recurring fair value measurement. |
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| Schedule of fair value hierarchy measurement |
The following table presents the levels of the fair value hierarchy for the Company's assets and liabilities measured at fair value on a recurring basis. | | | | | | | | | | | | | | | | | (in thousands) | Fair Value at March 31, 2019 | | Level 1 | | Level 2 | | Level 3 | | | | | | | | | Assets: | | | | | | | | Investment securities available for sale | | | | | | | | Mortgage backed securities: | | | | | | | | Residential | $ | 112,146 |
| | $ | — |
| | $ | 110,302 |
| | $ | 1,844 |
| Commercial | 30,382 |
| | — |
| | 30,382 |
| | — |
| Collateralized mortgage obligations: | | | | | | | | Residential | 156,308 |
| | — |
| | 156,308 |
| | — |
| Commercial | 122,969 |
| | — |
| | 122,969 |
| | — |
| Municipal bonds | 351,360 |
| | — |
| | 351,360 |
| | — |
| Corporate debt securities | 18,464 |
| | — |
| | 18,371 |
| | 93 |
| U.S. Treasury securities | 11,037 |
| | — |
| | 11,037 |
| | — |
| Agency debentures | 9,766 |
| | — |
| | 9,766 |
| | — |
| Single family mortgage servicing rights | 68,250 |
| | — |
| | — |
| | 68,250 |
| Single family loans held for sale (1) | 360,496 |
| | — |
| | 355,971 |
| | 4,525 |
| Single family loans held for investment | 4,830 |
| | — |
| | — |
| | 4,830 |
| Derivatives (1) | | | | | | | | Eurodollar futures | 105 |
| | 105 |
| | — |
| | — |
| Forward sale commitments | 2,797 |
| | — |
| | 2,797 |
| | — |
| Interest rate swaptions | 84 |
| | — |
| | 84 |
| | — |
| Interest rate lock and purchase loan commitments | 14,118 |
| | — |
| | — |
| | 14,118 |
| Interest rate swaps | 12,852 |
| | — |
| | 12,852 |
| | — |
| Total assets | $ | 1,275,964 |
| | $ | 105 |
| | $ | 1,182,199 |
| | $ | 93,660 |
| Liabilities: | | | | | | | | Derivatives | | | | | | | | Forward sale commitments | $ | 4,830 |
| | $ | — |
| | $ | 4,830 |
| | $ | — |
| Interest rate lock and purchase loan commitments | 62 |
| | — |
| | — |
| | 62 |
| Interest rate swaps | 4,765 |
| | — |
| | 4,765 |
| | — |
| Total liabilities | $ | 9,657 |
| | $ | — |
| | $ | 9,595 |
| | $ | 62 |
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(1) Includes both continuing and discontinued operations. | | | | | | | | | | | | | | | | | (in thousands) | Fair Value at December 31, 2018 | | Level 1 | | Level 2 | | Level 3 | | | | | | | | | Assets: | | | | | | | | Investment securities available for sale | | | | | | | | Mortgage backed securities: | | | | | | | | Residential | $ | 107,961 |
| | $ | — |
| | $ | 107,961 |
| | $ | — |
| Commercial | 34,514 |
| | — |
| | 34,514 |
| | — |
| Collateralized mortgage obligations: | | | | | | | | Residential | 166,744 |
| | — |
| | 166,744 |
| | — |
| Commercial | 116,674 |
| | — |
| | 116,674 |
| | — |
| Municipal bonds | 385,655 |
| | — |
| | 385,655 |
| | — |
| Corporate debt securities | 19,995 |
| | — |
| | 19,995 |
| | — |
| U.S. Treasury securities | 10,900 |
| | — |
| | 10,900 |
| | — |
| Agency debentures | 9,525 |
| | — |
| | 9,525 |
| | — |
| Single family mortgage servicing rights | 252,168 |
| | — |
| | — |
| | 252,168 |
| Single family loans held for sale | 321,868 |
| | — |
| | 319,177 |
| | 2,691 |
| Single family loans held for investment | 4,057 |
| | — |
| | — |
| | 4,057 |
| Derivatives | | | | | | | | Forward sale commitments | 3,025 |
| | — |
| | 3,025 |
| | — |
| Interest rate swaptions | 203 |
| | — |
| | 203 |
| | — |
| Interest rate lock and purchase loan commitments | 10,289 |
| | — |
| | — |
| | 10,289 |
| Interest rate swaps | 14,566 |
| | — |
| | 14,566 |
| | — |
| Total assets | $ | 1,458,144 |
| | $ | — |
| | $ | 1,188,939 |
| | $ | 269,205 |
| Liabilities: | | | | | | | | Derivatives | | | | | | | | Eurodollar futures | $ | 110 |
| | $ | 110 |
| | $ | — |
| | $ | — |
| Forward sale commitments | 5,340 |
| | — |
| | 5,340 |
| | — |
| Interest rate lock and purchase loan commitments | 5 |
| | — |
| | — |
| | 5 |
| Interest rate swaps | 11,550 |
| | — |
| | 11,550 |
| | — |
| Total liabilities | $ | 17,005 |
| | $ | 110 |
| | $ | 16,890 |
| | $ | 5 |
|
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| Schedule of inputs used to measure fair value |
The following information presents significant Level 3 unobservable inputs used to measure fair value of certain investment securities available for sale.
| | | | | | | | | | | | | | | (dollars in thousands) | At March 31, 2019 | Fair Value | | Valuation Technique | | Significant Unobservable Input | | Low | | High | | Weighted Average | | | | | | | | | | | | | Investment securities available for sale (1) | $ | 1,937 |
| | Income approach | | Implied spread to benchmark interest rate curve | | 2.00% | | 2.00% | | 2.00% |
| | (1) | In conjunction with adopting ASU 2017-12 in the first quarter of 2019, we transferred $66.2 million HTM securities to AFS, therefore we did not have any similar activity in March 31, 2018. |
The following information presents significant Level 3 unobservable inputs used to measure fair value of single family loans held for investment where fair value option was elected.
| | | | | | | | | | | | | | | (dollars in thousands) | At March 31, 2019 | Fair Value | | Valuation Technique | | Significant Unobservable Input | | Low | | High | | Weighted Average | | | | | | | | | | | | | Loans held for investment, fair value option | $ | 4,830 |
| | Income approach | | Implied spread to benchmark interest rate curve | | 3.76% | | 4.91% | | 4.35% |
| | | | | | | | | | | | | | | (dollars in thousands) | At December 31, 2018 | Fair Value | | Valuation Technique | | Significant Unobservable Input | | Low | | High | | Weighted Average | | | | | | | | | | | | | Loans held for investment, fair value option | $ | 4,057 |
| | Income approach | | Implied spread to benchmark interest rate curve | | 3.34% | | 5.15% | | 4.20% |
The following information presents significant Level 3 unobservable inputs used to measure fair value of certain single family loans held for sale where fair value option was elected.
| | | | | | | | | | | | | | | (dollars in thousands) | At March 31, 2019 | Fair Value | | Valuation Technique | | Significant Unobservable Input | | Low | | High | | Weighted Average | | | | | | | | | | | | | Loans held for sale, fair value option | $ | 4,525 |
| | Income approach | | Implied spread to benchmark interest rate curve | | 4.26% | | 4.96% | | 4.63% | | | | | | Market price movement from comparable bond | | 0.82% | | 0.92% | | 0.87% |
| | | | | | | | | | | | | | | (dollars in thousands) | At December 31, 2018 | Fair Value | | Valuation Technique | | Significant Unobservable Input | | Low | | High | | Weighted Average | | | | | | | | | | | | | Loans held for sale, fair value option | $ | 2,691 |
| | Income approach | | Implied spread to benchmark interest rate curve | | 4.26% | | 4.96% | | 4.40% | | | | | | Market price movement from comparable bond | | 0.71% | | 1.09% | | 0.90% |
The following information presents significant Level 3 unobservable inputs used to measure fair value of interest rate lock and purchase loan commitments.
| | | | | | | | | | | | | | | (dollars in thousands) | At March 31, 2019 | Fair Value | | Valuation Technique | | Significant Unobservable Input | | Low | | High | | Weighted Average | | | | | | | | | | | | | Interest rate lock and purchase loan commitments, net | $ | 14,056 |
| | Income approach | | Fall-out factor | | —% | | 67.25% | | 12.45% | | | | | | Value of servicing | | 0.58% | | 1.79% | | 1.09% |
| | | | | | | | | | | | | | | (dollars in thousands) | At December 31, 2018 | Fair Value | | Valuation Technique | | Significant Unobservable Input | | Low | | High | | Weighted Average | | | | | | | | | | | | | Interest rate lock and purchase loan commitments, net | $ | 10,284 |
| | Income approach | | Fall-out factor | | —% | | 67.92% | | 19.84% | | | | | | Value of servicing | | 0.54% | | 1.64% | | 0.93% |
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| Schedule of fair value changes and activity for Level 3 |
The following table present fair value changes and activity for Level 3 investment securities available for sale. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended March 31, 2019 | | | Beginning balance | | Additions | | Transfers | | Payoffs/Sales | | Change in mark to market | | Ending balance | (in thousands) | | | | | | | | | | | | | | | | Investment securities available for sale (1) | | $ | — |
| | $ | — |
| | $ | 2,379 |
| | $ | (40 | ) | | $ | (402 | ) | | $ | 1,937 |
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| | (1) | In conjunction with adopting ASU 2017-12 in the first quarter of 2019, we transferred $66.2 million HTM securities to AFS. therefore we did not have any similar activity for the three months ended March 31, 2018. |
The following tables present fair value changes and activity for Level 3 loans held for sale and loans held for investment. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended March 31, 2019 | | | Beginning balance | | Additions | | Transfers | | Payoffs/Sales | | Change in mark to market | | Ending balance | (in thousands) | | | | | | | | | | | | | | | | Loans held for sale | | $ | 2,691 |
| | $ | 1,886 |
| | $ | — |
| | $ | — |
| | $ | (52 | ) | | $ | 4,525 |
| Loans held for investment | | 4,057 |
| | 725 |
| | — |
| | (3 | ) | | 51 |
| | 4,830 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended March 31, 2018 | | | Beginning balance | | Additions | | Transfers | | Payoffs/Sales | | Change in mark to market | | Ending balance | (in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | Loans held for sale | | $ | 1,336 |
| | $ | 2,045 |
| | $ | — |
| | $ | — |
| | $ | (55 | ) | | $ | 3,326 |
| Loans held for investment | | 5,477 |
| | — |
| | — |
| | — |
| | (173 | ) | | 5,304 |
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The following table presents fair value changes and activity for Level 3 interest rate lock and purchase loan commitments. | | | | | | | | | | | | Three Months Ended March 31, | (in thousands) | | 2019 | | 2018 | | | | | | Beginning balance, net | | $ | 10,284 |
| | $ | 12,925 |
| Total realized/unrealized gains | | 19,665 |
| | 22,514 |
| Settlements | | (15,893 | ) | | (18,763 | ) | Ending balance, net | | $ | 14,056 |
| | $ | 16,676 |
|
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| Schedule of assets that had changes in their recorded fair value |
The following tables present assets that had changes in their recorded fair value during the three months ended March 31, 2019 and 2018 and assets held at the end of the respective reporting period.
| | | | | | | | | | | | | | | | | | | | | | At or for the Three Months Ended March 31, 2019 | (in thousands) | Fair Value of Assets Held at March 31, 2019 | | Level 1 | | Level 2 | | Level 3 | | Total Gains (Losses) | | | | | | | | | | | Loans held for investment (1) | $ | 270 |
| | $ | — |
| | $ | — |
| | $ | 270 |
| | $ | (4 | ) | Total | $ | 270 |
| | $ | — |
| | $ | — |
| | $ | 270 |
| | $ | (4 | ) |
| | | | | | | | | | | | | | | | | | | | | | At or for the Three Months Ended March 31, 2018 | (in thousands) | Fair Value of Assets Held at March 31, 2018 | | Level 1 | | Level 2 | | Level 3 | | Total Gains (Losses) | | | | | | | | | | | Loans held for investment (1) | $ | 607 |
| | $ | — |
| | $ | — |
| | $ | 607 |
| | $ | (122 | ) | Total | $ | 607 |
| | $ | — |
| | $ | — |
| | $ | 607 |
| | $ | (122 | ) |
(1)Represents the carrying value of loans for which adjustments are based on the fair value of the collateral.
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| Schedule of the fair value hierarchy |
The following presents the carrying value, estimated fair value and the levels of the fair value hierarchy for the Company's financial instruments other than assets and liabilities measured at fair value on a recurring basis. | | | | | | | | | | | | | | | | | | | | | | At March 31, 2019 | (in thousands) | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 | | | | | | | | | | | Assets: | | | | | | | | | | Cash and cash equivalents | $ | 67,690 |
| | $ | 67,690 |
| | $ | 67,690 |
| | $ | — |
| | $ | — |
| Investment securities held to maturity | 4,446 |
| | 4,492 |
| | — |
| | 4,492 |
| | — |
| Loans held for investment | 5,341,139 |
| | 5,431,390 |
| | — |
| | — |
| | 5,431,390 |
| Loans held for sale – multifamily and other | 3,982 |
| | 3,982 |
| | — |
| | 3,982 |
| | — |
| Mortgage servicing rights – multifamily | 27,692 |
| | 30,369 |
| | — |
| | — |
| | 30,369 |
| Federal Home Loan Bank stock | 32,533 |
| | 32,533 |
| | — |
| | 32,533 |
| | — |
| Liabilities: | | | | | | | | | | Time deposits | $ | 1,644,768 |
| | $ | 1,644,390 |
| | $ | — |
| | $ | 1,644,390 |
| | $ | — |
| Federal Home Loan Bank advances | 599,590 |
| | 601,384 |
| | — |
| | 601,384 |
| | — |
| Federal funds purchased and securities sold under agreements to repurchase | 27,000 |
| | 27,000 |
| | 27,000 |
| | — |
| | — |
| Long-term debt | 125,509 |
| | 113,359 |
| | — |
| | 113,359 |
| | — |
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| | | | | | | | | | | | | | | | | | | | | | At December 31, 2018 | (in thousands) | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 | | | | | | | | | | | Assets: | | | | | | | | | | Cash and cash equivalents | $ | 57,982 |
| | $ | 57,982 |
| | $ | 57,982 |
| | $ | — |
| | $ | — |
| Investment securities held to maturity | 71,285 |
| | 70,546 |
| | — |
| | 70,546 |
| | — |
| Loans held for investment | 5,071,314 |
| | 5,099,960 |
| | — |
| | — |
| | 5,099,960 |
| Loans held for sale – multifamily and other | 25,139 |
| | 25,139 |
| | — |
| | 25,139 |
| | — |
| Mortgage servicing rights – multifamily | 28,328 |
| | 31,168 |
| | — |
| | — |
| | 31,168 |
| Federal Home Loan Bank stock | 45,497 |
| | 45,497 |
| | — |
| | 45,497 |
| | — |
| Liabilities: | | | | | | | | | | Time deposits | $ | 1,579,806 |
| | $ | 1,575,139 |
| | $ | — |
| | $ | 1,575,139 |
| | $ | — |
| Federal Home Loan Bank advances | 932,590 |
| | 935,021 |
| | — |
| | 935,021 |
| | — |
| Federal funds purchased and securities sold under agreements to repurchase | 19,000 |
| | 19,021 |
| | 19,021 |
| | — |
| | — |
| Long-term debt | 125,462 |
| | 112,475 |
| | — |
| | 112,475 |
| | — |
|
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