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 December 31, 2012, the Bank had no securities classified as trading. At December 31, 2012, $109.9 million, or 92.0%, of the Bank’s mortgage-backed and other investment securities, were classified as available-for-sale. The remaining $9.6 million, or 8.0%, 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 December 31, 2012:



$ in thousands	Amortized		Gross Unrealized
	Cost		Gains		Losses			Fair-Value
Available-for-Sale:
Mortgage-backed securities:
Government National Mortgage Association	$	23,019	168		(182		)	23,005
Federal Home Loan Mortgage Corporation	6,813		107		—			6,920
Federal National Mortgage Association	4,669		136		—			4,805
Other	50		—		—			50
Total mortgage-backed securities	34,551		411		(182		)	34,780
U.S. Government Agency Securities	41,983		309		(42		)	42,250
U.S. Government Securities	2,800		2		—			2,802
Corporates Bonds	1,911		111		—			2,022
Asset-backed Securities	15,252		97		—			15,349
Small Business Association	1,940		39		—			1,979
Other	10,691		63		—			10,754
Total available-for-sale	109,128		1,032		(224		)	109,936
Held-to-Maturity:
Mortgage-backed securities:
Government National Mortgage Association	5,660		429		—			6,089
Federal Home Loan Mortgage Corporation	2,479		114		—			2,593
Federal National Mortgage Association	1,426		83		—			1,509
Total held-to-maturity mortgage-backed securities	9,565		626		—			10,191

Total securities	$	118,693	$	1,658	$	(224	)	$	120,127

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 December 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	$	(88	)	$	7,720	$	(94	)	$	7,090	$	(182	)	$	14,810
U.S. Government Agency Securities	(42		)	4,956		—			—		(42		)	4,956
U.S. Government Securities	—			1,250		—			—		—			1,250
Total available-for-sale securities	(130		)	13,926		(94		)	7,090		(224		)	21,016

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 6 securities had an unrealized loss at December 31, 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, and U.S. Treasury securities, representing 36.7%, 23.6% and 6% of total securities in an unrealized loss position that had an unrealized loss for less than 12 months at December 31, 2012. Two mortgage-backed securities representing 33.7% of those securities in an unrealized loss position had an unrealized loss for more than 12 months at December 31, 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.

For the quarter ended December 31, 2012, there were two Government National Mortgage Association securities that were impaired for more than 12 months. Management believes that these securities impairments are due to interest rate cycles and that the Bank intends to keep the securities in the portfolio for the foreseeable future. Given the Bank's ample liquidity, the bank also has the ability to hold these securities 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, 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 income. At December 31, 2012, the Bank does not have any 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 December 31, 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	$	5,799	$	5,802	0.35	%
One through five years	6,895		7,058		1.90	%
Five through ten years	29,313		29,456		1.54	%
After ten years	67,121		67,620		1.36	%
Total	109,128		109,936		1.39	%

Held-to-maturity:
Five through ten years	191		199		3.91	%
After ten years	9,374		9,992		4.00	%
Total	$	9,565	$	10,191	4.00	%