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 March 31, 2013, $116.1 million, or 92.8%, of the Bank’s mortgage-backed and other investment securities were classified as available-for-sale, and the remaining $9.0 million, or 7.2%, were classified as held-to-maturity. The Bank had no securities classified as trading at March 31, 2013.

The following table sets forth the amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at March 31, 2013:



$ in thousands	Amortized		Gross Unrealized					Estimated
	Cost		Gains		Losses			Fair-Value
Available-for-Sale:
Mortgage-backed securities:
Government National Mortgage Association	$	23,164	$	676	$	—		$	23,840
Federal Home Loan Mortgage Corporation	16,059		104		(104		)	16,059
Federal National Mortgage Association	4,186		117		—			4,303
Other	50		—		—			50
Total mortgage-backed securities	43,459		897		(104		)	44,252
U.S. Government Agency Securities	44,363		139		(177		)	44,325
Asset Backed Securities	15,268		251		—			15,519
Small Business Administration	1,919		45		—			1,964
Other	10,000		—		(9		)	9,991
Total available-for-sale	115,009		1,332		(290		)	116,051

Held-to-Maturity:
Mortgage-backed securities:
Government National Mortgage Association	5,335		404		—			5,739
Federal Home Loan Mortgage Corporation	2,387		103		—			2,490
Federal National Mortgage Association	1,321		79		—			1,400
Total mortgage-backed securities	9,043		586		—			9,629
Total held-to-maturity	9,043		586		—			9,629
Total securities	$	124,052	$	1,918	$	(290	)	$	125,680

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	51		—		—			51
Total mortgage-backed securities	45,833		327		(25		)	46,135
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	10,485		—		(27		)	10,458
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 mortgage-backed securities	11,081		693		—			11,774
Total held-to-maturity	11,081		693		—			11,774
Total securities	$	95,821	$	1,175	$	(116	)	$	96,880

The following is a summary regarding proceeds from securities sales of the available-for-sale portfolio for the years ended March 31:



$ in thousands	2013		2012		2011
Available-for-Sale:
Proceeds	$	31,567	$	16,847	$	48,399
Gross gains	174		8		871
Gross losses	—		—		107

The Bank's investment portfolio is comprised primarily of fixed-rate mortgage-backed securities guaranteed by a Government Sponsored Enterprise (“GSE”) as issuer, commercial mortgage obligations ("CMOs") and Agency securities. Carver maintains a portfolio of mortgage-backed securities in the form of Government National Mortgage Association (“GNMA”) pass-through certificates, Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”) participation certificates. GNMA pass-through certificates are guaranteed as to the payment of principal and interest by the full faith and credit of the United States Government, while FNMA and FHLMC certificates are each guaranteed by their respective agencies as to principal and interest. Based on the high quality of the Bank's investment portfolio, current market conditions have not significantly impacted the pricing of the portfolio or the Bank's ability to obtain reliable prices.

The net unrealized gain on available-for-sale securities was $1 million after taxes at March 31, 2013 compared to a net unrealized gain of $0.4 million after taxes at March 31, 2012. There were no sales of held-to-maturity securities in fiscal 2013, 2012 or 2011.

At March 31, 2013 the Bank pledged securities of $23 million as collateral for advances from the FHLB-NY, and $0.1 million against certain large deposits.

The following table sets forth the unrealized losses and fair value of securities in an unrealized loss position at March 31, 2013 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	$	(104	)	$	10,298	$	—	$	—	$	(104	)	$	10,298
U.S. Government Agency Securities	(177		)	25,290		—		—		(177		)	25,290
Others	(9		)	9,991		—		—		(9		)	9,991
Total available-for-sale securities	(290		)	45,579		—		—		(290		)	45,579

The following table sets forth the unrealized losses and fair value of securities in an unrealized loss position 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	$	(116	)	$	35,144	$	—	$	—	$	(116	)	$	35,144

A total of 13 securities had an unrealized loss at March 31, 2013 compared to 14 at March 31, 2012. The majority of the securities in an unrealized loss position were U.S. Government Agency securities, which represented 55.5% of total securities in an unrealized loss position that had an unrealized loss for less than 12 months at March 31, 2013. 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. 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 March 31, 2013 and 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 March 31, 2013, 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 Avg Rate
Available-for-Sale:
One through five years	999		1,045		2.00	%
Five through ten years	32,553		32,807		1.51	%
After ten years	81,457		82,199		2.64	%
	$	115,009	$	116,051	2.31	%

Held-to-maturity:
One through five years	$	9	$	9	2.32	%
Five through ten years	171		179		4.43	%
After ten years	8,863		9,441		4.32	%
	$	9,043	$	9,629	4.32	%