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 December 31, 2013, $84.6 million, or 87.5%, of the Bank’s mortgage-backed and other investment securities were classified as available-for-sale, and the remaining $12.1 million, or 12.5%, were classified as held-to-maturity. The Bank had no securities classified as trading at December 31, 2013.

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



	Amortized		Gross Unrealized
$ in thousands	Cost		Gains		Losses			Fair-Value
Available-for-Sale:
Mortgage-backed securities:
Government National Mortgage Association	$	6,036	$	—	$	(369	)	$	5,667
Federal Home Loan Mortgage Corporation	13,642		—		(662		)	12,980
Federal National Mortgage Association	11,124		—		(582		)	10,542
Other	49		—		—			49
Total mortgage-backed securities	30,851		—		(1,613		)	29,238
U.S. Government Agency Securities	50,187		—		(4,300		)	45,887
CRA investment fund	10,000		—		(523		)	9,477
Total available-for-sale	91,038		—		(6,436		)	84,602
Held-to-Maturity ^*:
Mortgage-backed securities:
Government National Mortgage Association	4,069		230		—			4,299
Federal Home Loan Mortgage Corporation	1,794		66		—			1,860
Federal National Mortgage Association	6,226		68		(361		)	5,933
Total held-to-maturity mortgage-backed securities	12,089		364		(361		)	12,092
Total securities	$	103,127	$	364	$	(6,797	)	$	96,694
* 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
CRA investment fund	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 December 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	$	(1,082	)	$	20,773	$	(531	)	$	8,415	$	(1,613	)	$	29,188
U.S. Government Agency Securities	(3,253		)	38,961		(1,047		)	6,926		(4,300		)	45,887
CRA investment fund	(523		)	9,477		—			—		(523		)	9,477
Total available-for-sale securities	(4,858		)	69,211		(1,578		)	15,341		(6,436		)	84,552

Held-to-Maturity:
Mortgage-backed securities	(361		)	4,742		—			—		(361		)	4,742
Total held-to-maturity	(361		)	4,742		—			—		(361		)	4,742
Total securities	$	(5,219	)	$	73,953	$	(1,578	)	$	15,341	$	(6,797	)	$	89,294

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
CRA investment fund	(9		)	9,991		—		—		(9		)	9,991
Total available-for-sale securities	$	(290	)	$	45,579	$	—	$	—	$	(290	)	$	45,579

A total of 33 securities had an unrealized loss at December 31, 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 46.1% and 24.6% of total securities in an unrealized loss position that had an unrealized loss for less than 12 months at December 31, 2013. Two mortgage-backed securities and four U.S. Government Agency securities representing 10.0% and 8.2% of total securities in an unrealized loss position had an unrealized loss for more than 12 months at December 31, 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 has the ability and intent to hold the securities until maturity or the valuation recovers.

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) income. At December 31, 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 December 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 Average Yield
Available-for-Sale:
One through five years	$	2,000	$	1,967	1.50	%
Five through ten years	24,387		22,823		1.65	%
After ten years	64,651		59,812		1.70	%
Total	$	91,038	$	84,602	1.69	%

Held-to-maturity:
One through five years	$	113	$	115	2.68	%
Five through ten years	5,209		4,860		2.49	%
After ten years	6,767		7,117		3.63	%
Total	$	12,089	$	12,092	3.13	%