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 Subtopics 320-942 requires that securities be classified into three categories: trading, held-to-maturity, and available-for-sale. At September 30, 2013, $87.2 million, or 87.5%, of the Bank’s mortgage-backed and other investment securities were classified as available-for-sale, and the remaining $12.4 million, or 12.5%, were classified as held-to-maturity. The Bank had no securities classified as trading at September 30, 2013.

The following table sets forth the amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at September 30, 2013:



	Amortized		Gross Unrealized
$ in thousands	Cost		Gains		Losses			Fair-Value
Available-for-Sale:
Mortgage-backed securities:
Government National Mortgage Association	$	6,099	$	—	$	(161	)	$	5,938
Federal Home Loan Mortgage Corporation	14,066		6		(475		)	13,597
Federal National Mortgage Association	11,388		—		(430		)	10,958
Other	49		—		—			49
Total mortgage-backed securities	31,602		6		(1,066		)	30,542
U.S. Government Agency Securities	50,490		—		(3,431		)	47,059
Other	10,000		—		(379		)	9,621
Total available-for-sale	92,092		6		(4,876		)	87,222
Held-to-Maturity ^*:
Mortgage-backed securities:
Government National Mortgage Association	4,232		254		—			4,486
Federal Home Loan Mortgage Corporation	1,870		75		—			1,945
Federal National Mortgage Association	6,317		71		(277		)	6,111
Total held-to-maturity mortgage-backed securities	12,419		400		(277		)	12,542
Total securities	$	104,511	$	406	$	(5,153	)	$	99,764
* The carrying amount and amortized cost are the same for all held to maturity securities, as no OTTI has been recorded.

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:



	Amortized		Gross Unrealized					Estimated
$ in thousands	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 held-to-maturity mortgage-backed securities	9,043		586		—			9,629
Total securities	$	124,052	$	1,918	$	(290	)	$	125,680
* The carrying amount and amortized cost are the same for all held to maturity securities, as no OTTI has been recorded.

The following table sets forth the unrealized losses and fair value of securities at September 30, 2013 for less than 12 months and 12 months or longer:



	Less than 12 months					12 months or longer					Total
$ in thousands	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value
Available-for-Sale:
Mortgage-backed securities	$	(1,066	)	$	29,132	$	—		$	—	$	(1,066	)	$	29,132
U.S. Government Agency Securities	(3,291		)	45,200		(140		)	1,859		(3,431		)	47,059
Other	(379		)	9,621		—			—		(379		)	9,621
Total available-for-sale securities	(4,736		)	83,953		(140		)	1,859		(4,876		)	85,812

Held-to-Maturity:
Mortgage-backed securities	(277		)	4,851		—			—		(277		)	4,851
Total held-to-maturity	(277		)	4,851		—			—		(277		)	4,851
Total securities	$	(5,013	)	$	88,804	$	(140	)	$	1,859	$	(5,153	)	$	90,663

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:



	Less than 12 months					12 months or longer				Total
$ in thousands	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
Other	(9		)	9,991		—		—		(9		)	9,991
Total available-for-sale securities	$	(290	)	$	45,579	$	—	$	—	$	(290	)	$	45,579

A total of 32 securities had an unrealized loss at September 30, 2013 compared to 13 at March 31, 2013. The majority of the securities in an unrealized loss position were U.S. Government Agency securities and mortgage-backed securities, representing 52.7% and 33.9% of total securities in an unrealized loss position that had an unrealized loss for less than 12 months at September 30, 2013. One U.S. Government Agency security representing 2.2% of those securities in an unrealized loss position had an unrealized loss for more than 12 months at September 30, 2013. Given the U.S. government's guarantees of the mortgage-backed and agency securities, there is no reason to believe that these securities will experience credit related losses. Management believes that these unrealized losses are a direct result of the current rate environment and will recover as economic conditions improve.

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 loss. At September 30, 2013, the Bank does not have any securities that are 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, 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 Average Yield
Available-for-Sale:
One through five years	$	2,000	$	1,984	1.50	%
Five through ten years	24,467		23,256		1.95	%
After ten years	65,625		61,982		2.11	%
Total	$	92,092	$	87,222	2.06	%

Held-to-maturity:
One through five years	$	124	$	126	3.12	%
Five through ten years	5,174		4,903		2.71	%
After ten years	7,121		7,513		4.00	%
Total	$	12,419	$	12,542	3.45	%