HVBC 2016 Annual Report

HV Bancorp, Inc. and Subsidiary Notes to the Consolidated Financial Statements Years Ended June 30, 2017 and 2016 85 The following table represents assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at June 30, 2017: Level 3 Bank Cds Corporate notes IRLC- Asset IRLC- Liability Total Beginning Balance: July 1, 2016 $ — $ — $ 1,084 $ (32) $ 1,052 Total losses (unrealized): Included in other comprehensive income (7) (32) — — (39) Total gains or (losses) included in earnings and held at reporting date — — (298) 13 (285) Transfers in and/or out of Level 3 250 1,000 — — 1,250 Ending Balance: June 30, 2017 $ 243 $ 968 $ 786 $ (19) $ 1,978 Level 3 IRLC- Asset IRLC- Liability Beginning Balance: July 1, 2015 $ — $ — Transfers in and/or out of Level 3 1,084 (32) Ending Balance: June 30, 2016 $ 1,084 $ (32) The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at June 30, 2017 and June 30, 2016: Cash and Cash Equivalents These short-term assets are valued at their face value, which approximate fair value. Investments (Available-for- Sale and Held-to-Maturity) Where quoted prices are available in an active market for identical instruments, investment securities are classified within Level 1 of the valuation hierarchy. Level 1 investment securities include highly liquid U.S. Treasury securities and most equity securities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Examples of such instruments, which would generally be classified within Level 2 of the valuation hierarchy, include certain Mortgage Backed Securities (MBS). In cases where there is limited activity or less transparency around inputs to the valuation, investment securities are classified within Level 3 of the valuation hierarchy. Investment securities classified within Level 3 include certain equity securities that do not have readily available market prices, certain municipal bonds, certain Asset Backed Securities (ABS), certain Banks CDs and Corporate notes and other less liquid investment securities. If observable market-based inputs are not available, we use unobservable inputs to determine appropriate valuation adjustments by reviewing valuation reports provided a third- party (Level 3). Loans Held for Sale All mortgage loans held for sale are carried at fair value which is determined on a recurring basis by utilizing quoted prices from dealers in such loans. The Company's mortgage loans held for sale are generally classified within Level 2 of the valuation hierarchy.