HVBC 2016 Annual Report

HV Bancorp, Inc. and Subsidiary Notes to the Consolidated Financial Statements Years Ended June 30, 2017 and 2016 86 The following table reflects the difference between the carrying amount of mortgage loans held for sale, measured at fair value and the aggregate unpaid principal amount that the Company is contractually entitled to receive at maturity as of June 30, 2017 and 2016 (dollars in thousands): Loans held for sale Carrying Amount Aggregated Unpaid Principal Balance Excess Carrying Amount Over Aggregate Unpaid Principal Balance June 30, 2017 $12,784 $ 12,534 $ 250 June 30, 2016 $24,676 $ 23,848 $ 828 The Company did not have any mortgage loans held for sale recorded at fair value that were 90 or more days past due and on non-accrual at June 30, 2017 or June 30, 2016. Interest Rate Lock Commitments (“IRLC”) The fair value of the Company’s IRLC instruments are based upon the underlying mortgage loan adjusted for the probability of such commitments being exercised and estimated costs to complete and originate the loan. The Company’s IRLCs are classified within Level 3 of the valuation hierarchy as a result of unobservable market data inputs. Forward Loan Sale Commitments Fair values for forward loan sales commitments are based on forward prices with dealers in such securities. Due to the observable inputs used by the Company, the Company’s forward loan sales commitments are classified within Level 2 of the valuation hierarchy To Be Announced Securities (“TBAs”) TBAs are valued based on forward dealer marks from the Company’s approved counterparties. The Company utilizes a third party market pricing service which compiles current prices for instruments from market sources, and those prices represent the current executable price. Due to the observable inputs used by the Company, the Company’s TBAs are classified within Level 2 of the valuation hierarchy. Loan Receivable, Net Fair values are estimated for portfolios of loans with similar financial characteristics. For loans that reprice frequently, the carrying value approximates fair value. The fair value of other type of loans is estimated by discounting expected cash flows using the current rates at which similar loans would be made to borrowers with comparable credit ratings and for similar remaining maturities. Impaired Loans Impaired loans include those collateral-dependent loans and leases for which the practical expedient under ASC 310-40 was applied, resulting in a fair value adjustment to the loans. Fair value is measured based on the value of the discounted cash flow or collateral securing these loans less cost to sell and is classified at Level 3 in the fair value hierarchy. The fair value of collateral is based on appraisals performed by qualified licensed appraisers hired by the Company. Restricted Investment in Bank Stock The stock is carried at cost; which approximates fair value and considers the limited marketability of such securities.