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 320-10-25 requires that securities be classified into three categories: trading, held-to-maturity, and available-for-sale. At June 30, 2014, $95.7 million, or 91.6%, of the Bank’s mortgage-backed and other investment securities were classified as available-for-sale, and the remaining $8.8 million, or 8.4%, were classified as held-to-maturity. The Bank had no securities classified as trading at June 30, 2014.

The following table sets forth the amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at June 30, 2014:



	Amortized		Gross Unrealized
$ in thousands	Cost		Gains		Losses			Fair-Value
Available-for-Sale:
Mortgage-backed securities:
Government National Mortgage Association	$	5,909	$	—	$	(241	)	$	5,668
Federal Home Loan Mortgage Corporation	11,809		8		(314		)	11,503
Federal National Mortgage Association	10,619		2		(247		)	10,374
Other	48		—		—			48
Total mortgage-backed securities	28,385		10		(802		)	27,593
U.S. Government Agency Securities	55,010		1		(2,079		)	52,932
Other investments	15,533		—		(343		)	15,190
Total available-for-sale	98,928		11		(3,224		)	95,715
Held-to-Maturity^*:
Mortgage-backed securities:
Government National Mortgage Association	3,576		242		—			3,818
Federal National Mortgage Association	5,254		—		(132		)	5,122
Total held-to-maturity mortgage-backed securities	8,830		242		(132		)	8,940
Total securities	$	107,758	$	253	$	(3,356	)	$	104,655

^* 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, 2014:



	Amortized		Gross Unrealized					Estimated
$ in thousands	Cost		Gains		Losses			Fair Value
Available-for-Sale:
Mortgage-backed securities:
Government National Mortgage Association	$	5,972	$	—	$	(307	)	$	5,665
Federal Home Loan Mortgage Corporation	12,160		—		(564		)	11,596
Federal National Mortgage Association	10,897		—		(466		)	10,431
Other	49		—		—			49
Total mortgage-backed securities	29,078		—		(1,337		)	27,741
U.S. Government Agency Securities	55,155		—		(2,966		)	52,189
Other investments	10,000		—		(469		)	9,531
Total available-for-sale	94,233		—		(4,772		)	89,461
Held-to-Maturity^*:
Mortgage-backed securities:
Government National Mortgage Association	3,743		225		—			3,968
Federal National Mortgage Association	5,079		—		(283		)	4,796
Total held-to-maturity mortgage-backed securities	8,822		225		(283		)	8,764
Other	207		—		—			207
Total held-to-maturity	9,029		225		(283		)	8,971
Total securities	$	103,262	$	225	$	(5,055	)	$	98,432

^* 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 in an unrealized loss position at June 30, 2014 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	$	—	$	—	$	(802	)	$	25,707	$	(802	)	$	25,707
U.S. Government Agency Securities	—		—		(2,079		)	45,931		(2,079		)	45,931
Other investments	—		—		(343		)	9,657		(343		)	9,657
Total available-for-sale securities	—		—		(3,224		)	81,295		(3,224		)	81,295

Held-to-Maturity:
Mortgage-backed securities	—		—		(132		)	4,923		(132		)	4,923
Total held-to-maturity securities	—		—		(132		)	4,923		(132		)	4,923
Total securities	$	—	$	—	$	(3,356	)	$	86,218	$	(3,356	)	$	86,218

The following table sets forth the unrealized losses and fair value of securities in an unrealized loss position at March 31, 2014 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	$	(322	)	$	7,569	$	(1,015	)	$	20,123	$	(1,337	)	$	27,692
U.S. Government Agency Securities	(1,646		)	34,074		(1,320		)	18,115		(2,966		)	52,189
Other investments	(469		)	9,531		—			—		(469		)	9,531
Total available-for-sale securities	(2,437		)	51,174		(2,335		)	38,238		(4,772		)	89,412

Held-to-Maturity:
Mortgage-backed securities	(283		)	4,796		—			—		(283		)	4,796
Total held-to-maturity securities	(283		)	4,796		—			—		(283		)	4,796
Total securities	$	(2,720	)	$	55,970	$	(2,335	)	$	38,238	$	(5,055	)	$	94,208

A total of 29 securities had an unrealized loss at June 30, 2014 compared to 34 at March 31, 2014. The majority of the securities in an unrealized loss position were U.S. Government Agency securities and mortgage-backed securities, representing 56.5% and 31.6% of total available-for-sale securities in an unrealized loss position at June 30, 2014. There were seventeen mortgage-backed securities and nine U.S. Government Agency securities in an unrealized loss position that had an unrealized loss for more than 12 months at June 30, 2014. Given the high credit quality of the securities which are backed by the U.S. government's guarantees, the risk of credit loss is minimal. 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 Bank 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. The remaining difference between the debt security’s amortized cost basis and its fair value would be included in other comprehensive income (loss). At June 30, 2014, 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 June 30, 2014, 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	$	5,533	$	5,533	0.25	%
One through five years	8,000		7,995		0.98	%
Five through ten years	24,106		23,153		1.65	%
After ten years	61,289		59,034		2.07	%
Total	$	98,928	$	95,715	1.77	%

Held-to-maturity:
Five through ten years	$	5,056	$	4,924	2.37	%
After ten years	3,774		4,016		3.72	%
Total	$	8,830	$	8,940	2.95	%