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 September 30, 2012, the Bank had no securities classified as trading. At September 30, 2012, $114.5 million, or 91.9%, of the Bank’s mortgage-backed and other investment securities, were classified as available-for-sale. The remaining $10.0 million, or 8.1%, 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 September 30, 2012 :



$ in thousands	Amortized		Gross Unrealized
	Cost		Gains		Losses			Fair-Value
Available-for-Sale:
Mortgage-backed securities:
Government National Mortgage Association	$	25,217	$	203	$	(210	)	$	25,210
Federal Home Loan Mortgage Corporation	7,500		68		(31		)	7,537
Federal National Mortgage Association	5,204		151		—			5,355
Small Business Association	1,962		34		—			1,996
Other	51		—		—			51
Total mortgage-backed securities	39,934		456		(241		)	40,149
U.S. Government Agency Securities	43,128		153		(20		)	43,261
U.S. Government Securities	3,102		3		—			3,105
Corporates Bonds	1,904		114		—			2,018
Asset-backed Securities	15,237		48		(21		)	15,264
Other	10,485		180		—			10,665
Total available-for-sale	113,790		954		(282		)	114,462
Held-to-Maturity:
Mortgage-backed securities:
Government National Mortgage Association	5,983		483		—			6,466
Federal Home Loan Mortgage Corporation	2,559		124		—			2,683
Federal National Mortgage Association	1,496		92		—			1,588
Total held-to-maturity mortgage-backed securities	10,038		699		—			10,737

Total securities	$	123,828	$	1,653	$	(282	)	$	125,199

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
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 September 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	$	(188	)	$	17,123	$	(53	)	$	3,986	$	(241	)	$	21,109
Asset-backed securities	(21		)	6,716		—			—		(21		)	6,716
U.S. Government Agency Securities	(20		)	11,044		—			—		(20		)	11,044
U.S. Government Securities	—			1,552		—			—		—			1,552
Total available-for-sale securities	(229		)	36,435		(53		)	3,986		(282		)	40,421

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
U.S. Government Agency Securities	(63		)	9,917		—		—		(63		)	9,917
U.S. Government Securities	(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 13 securities had an unrealized loss at September 30, 2012 compared to 14 at March 31, 2012. The majority of the securities in an unrealized loss position were mortgage-backed securities, U.S. Government Agency securities, asset-backed securities and U.S. Treasury securities, representing 42.4%, 16.6%, 27.3% and 3.8% of total securities in an unrealized loss position that had an unrealized loss for less than 12 months at September 30, 2012. One security representing 9.9% of those securities in an unrealized loss position had an unrealized loss for more than 12 months at September 30, 2012.

Given the U.S. government's guarantees of the mortgage-backed and agency securities and U.S. Treasury Notes, there is no reason to believe that these securities will experience permanent impairment. Management believes that these unrealized losses are a direct result of the current rate environment and will recover as the economic conditions improve. On the two impaired asset-backed securities, the credit ratings from Moody's and Standard & Poor's were triple and double 'A' for the respective securities. Management believes that these securities impairments are due to interest rate cycles and will not be permanent.

For the quarter ended September 30, 2012, there was a Government National Mortgage Association security impaired for more than 12 months. Management believes that this security impairment is due to interest rate cycle and intends to keep the security in the portfolio for the foreseeable future. Given the Bank's ample liquidity, the bank also has the ability to hold this security in the portfolio.

Following FASB guidance, the amount of an other-than-temporary impairment, when there are credit and non-credit 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, 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 September 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 September 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 Yield
Available-for-Sale:
Less than one year	$	3,103	$	3,105	0.39	%
One through five years	9,898		10,074		1.53	%
Five through ten years	30,615		30,778		1.58	%
After ten years	70,174		70,505		1.46	%
Total	113,790		114,462		1.46	%

Held-to-maturity:
Five through ten years	204		214		3.92	%
After ten years	9,834		10,523		4.09	%
Total	$	10,038	$	10,737	4.09	%