INVESTMENT SECURITIES

The Bank utilizes mortgage-backed and other investment securities in its asset/liability management strategy. In making investment decisions, the Bank considers, among other things, its yield and interest rate objectives, its interest rate and credit risk position and its liquidity and cash flow.

Generally, the investment policy of the Bank is to invest funds among categories of investments and maturities based upon the Bank’s asset/liability management policies, investment quality, loan and deposit volume and collateral requirements, liquidity needs and performance objectives. ASC subtopic 320-942 requires that securities be classified into three categories: trading, held-to-maturity, and available-for-sale. At June 30, 2012, the Bank had no securities classified as trading. At June 30, 2012, 90.8 million, or 89.7% of the Bank’s mortgage-backed and other investment securities, were classified as available-for-sale. The remaining 10.4 million or 10.3% were classified as held-to-maturity.

The following table sets forth the amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at June 30, 2012 :



$ in thousands	Amortized		Gross Unrealized
	Cost		Gains		Losses			Fair-Value
Available-for-Sale:
Mortgage-backed securities:
Government National Mortgage Association	$	27,138	$	148	$	(207	)	$	27,079
Federal Home Loan Mortgage Corporation	8,180		44		(34		)	8,190
Federal National Mortgage Association	6,694		148		—			6,842
Small Business Association	2,027		12		—			2,039
Other	51		—		—			51
Total mortgage-backed securities	44,090		352		(241		)	44,201
U.S. Government Agency Securities	30,976		64		(40		)	31,000
U.S. Government Securities	3,104		5		(1		)	3,108
Corporates Bonds	1,897		43		—			1,940
Others	10,485		99		—			10,584
Total available-for-sale	90,552		563		(282		)	90,833
Held-to-Maturity:
Mortgage-backed securities:
Government National Mortgage Association	6,202		476		—			6,678
Federal Home Loan Mortgage Corporation	2,637		128		—			2,765
Federal National Mortgage Association	1,562		86		—			1,648
Total held-to-maturity mortgage-backed securities	10,401		690		—			11,091

Total securities	$	100,953	$	1,253	$	(282	)	$	101,924

The following table sets forth the amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at March 31, 2012:



$ in thousands	Amortized		Gross Unrealized					Estimated
	Cost		Gains		Losses			Fair-Value
Available-for-Sale:
Mortgage-backed securities:
Government National Mortgage Association	$	31,100	$	269	$	(23	)	$	31,346
Federal Home Loan Mortgage Corporation	7,468		8		(1		)	7,475
Federal National Mortgage Association	7,214		50		(1		)	7,263
Other	—		—		—			—
Total mortgage-backed securities	45,782		327		(25		)	46,084
U.S. Government Agency Securities	23,176		91		(63		)	23,204
U.S. Government Securities	3,356		6		(1		)	3,361
Corporate Bonds	1,890		58		—			1,948
Other	10,536		—		(27		)	10,509
Total available-for-sale	84,740		482		(116		)	85,106
Held-to-Maturity:
Mortgage-backed securities:
Government National Mortgage Association	6,659		473		—			7,132
Federal Home Loan Mortgage Corporation	2,794		134		—			2,928
Federal National Mortgage Association	1,628		86		—			1,714
Total held-to-maturity mortgage-backed securities	11,081		693		—			11,774
Total securities	$	95,821	$	1,175	$	(116	)	$	96,880

The following table sets forth the unrealized losses and fair value of securities at June 30, 2012 for less than 12 months and 12 months or longer:



$ in thousands	Less than 12 months					12 months or longer				Total
	Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value
Available-for-Sale:
Mortgage-backed securities	$	(241	)	$	25,419	$	—	$	—	$	(241	)	$	25,419
Agencies	(40		)	16,954		—		—		(40		)	16,954
Treasuries	(1		)	1,554		—		—		(1		)	1,554
Total available-for-sale securities	(282		)	43,927		—		—		(282		)	43,927

The following table sets forth the unrealized losses and fair value of securities at March 31, 2012 for less than 12 months and 12 months or longer:



$ in thousands	Less than 12 months					12 months or longer				Total
	Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value
Available-for-Sale:
Mortgage-backed securities	$	(25	)	$	13,699	$	—	$	—	$	(25	)	$	13,699
Agencies	(63		)	9,917		—		—		(63		)	9,917
Treasuries	(1		)	1,555		—		—		(1		)	1,555
Others	(27		)	9,973		—		—		(27		)	9,973
Total available-for-sale securities	(116		)	35,144		—		—		(116		)	35,144

A total of 17 securities had an unrealized loss at June 30, 2012 compared to 14 at March 31, 2012, based on estimated fair value. The majority of the securities in an unrealized loss position were mortgage-backed securities, U.S. Government Agency securities and U.S. Treasury securities, representing 57.9%, 38.6% and 3.5% of total securities that had an unrealized loss at June 30, 2012. The cause of the temporary impairment is directly related to changes in interest rates. In general, as interest rates decline, the fair value of securities will rise, and conversely as interest rates rise, the fair value of securities will decline. Management considers fluctuations in fair value as a result of interest rate changes to be temporary, which is consistent with the Bank's experience. The impairments are deemed temporary based on the direct relationship of the rise in fair value to movements in interest rates, the life of the investments and their high credit quality. Unrealized losses identified as other than temporary are recognized in earnings when there are losses on a debt security which management does not intend to sell, and for which it is more-likely-than-not that the entity will not be required to sell the security prior to the recovery of the non-credit impairment. In those situations, the portion of the total impairment that is attributable to the credit loss would be recognized in earnings, and the remaining difference between the debt security's amortized cost basis and its fair value would be included in other comprehensive loss. At June 30, 2012 the Bank does not have any other securities that may be classified as having other than temporary impairment in its investment portfolio.

The following is a summary of the carrying value (amortized cost) and fair value of securities at June 30, 2012, by remaining period to contractual maturity (ignoring earlier call dates, if any). Actual maturities may differ from contractual maturities because certain security issuers have the right to call or prepay their obligations. The table below does not consider the effects of possible prepayments or unscheduled repayments.



$ in thousands	Amortized Cost		Fair Value		Weighted Average Rate
Available-for-Sale:
Less than one year	$	3,104	$	3,108	0.39	%
One through five years	14,891		15,002		1.37	%
Five through ten years	14,896		14,983		1.50	%
After ten years	57,661		57,740		1.54	%
Total	90,552		90,833		1.46	%

Held-to-maturity:
Five through ten years	217		227		4.02	%
After ten years	10,184		10,864		4.09	%
Total	$	10,401	$	11,091	4.09	%