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 320-10-25 requires that securities be classified into three categories: trading, held-to-maturity, and available-for-sale. At March 31, 2015, $101.2 million, or 89.5%, of the Bank’s mortgage-backed and other investment securities were classified as available-for-sale, and the remaining $11.9 million, or 10.5%, were classified as held-to-maturity. The Bank had no securities classified as trading at March 31, 2015.

The following table sets forth the amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at March 31, 2015:



	Amortized		Gross Unrealized					Estimated
$ in thousands	Cost		Gains		Losses			Fair-Value
Available-for-Sale:
Mortgage-backed securities:
Government National Mortgage Association	$	5,575	$	9	$	(57	)	$	5,527
Federal Home Loan Mortgage Corporation	10,705		10		(127		)	10,588
Federal National Mortgage Association	10,925		35		(103		)	10,857
Other	47		—		—			47
Total mortgage-backed securities	27,252		54		(287		)	27,019
U.S. Government Agency Securities	58,464		48		(662		)	57,850
Other investments	16,514		—		(198		)	16,316
Total available-for-sale	102,230		102		(1,147		)	101,185
Held-to-Maturity:
Mortgage-backed securities:
Government National Mortgage Association	3,100		232		—			3,332
Federal National Mortgage Association	8,655		77		—			8,732
Total held-to-maturity mortgage-backed securities	11,755		309		—			12,064
Other investments	167		—		—			167
Total held-to-maturity	11,922		309		—			12,231
Total securities	$	114,152	$	411	$	(1,147	)	$	113,416

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 investments	207		—		—			207
Total held-to-maturity	9,029		225		(283		)	8,971
Total securities	$	103,262	$	225	$	(5,055	)	$	98,432

The following is a summary regarding proceeds from securities sales of the available-for-sale and held-to-maturity portfolios for the years ended March 31:



$ in thousands	2015		2014		2013
Available-for-Sale:
Proceeds	$	994	$	38,991	$	31,567
Gross gains	8		513		174
Gross losses	—		2		—

Held-to-Maturity:
Proceeds	—		2,814		—
Gross gains	—		43		—
Gross losses	—		2		—

There were no sales of held-to-maturity securities in fiscal years 2015 or 2013. In fiscal 2014, $2.8 million of held-to-maturity securities were sold, generating net gains of $41 thousand. These securities had been classified as matured under ASC Topic 320, as the principal repayments exceeded 85% of the initial principal. The net unrealized loss on available-for-sale securities was $1.0 million at March 31, 2015, compared to $4.8 million at March 31, 2014.

The Bank's investment portfolio is comprised primarily of fixed-rate mortgage-backed securities guaranteed by a Government Sponsored Enterprise (“GSE”) as issuer 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.

At March 31, 2015 the Bank pledged securities of $42.2 million as collateral for advances from the FHLB-NY.

The following table sets forth the unrealized losses and fair value of securities in an unrealized loss position at March 31, 2015 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	$	—		$	—	$	(287	)	$	22,297	$	(287	)	$	22,297
U.S. Government Agency Securities	(57		)	12,943		(605		)	26,400		(662		)	39,343
Other investments ⁽¹⁾	—			—		(198		)	9,802		(198		)	9,802
Total available-for-sale securities	(57		)	12,943		(1,090		)	58,499		(1,147		)	71,442
Total securities	$	(57	)	$	12,943	$	(1,090	)	$	58,499	$	(1,147	)	$	71,442

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 ⁽¹⁾	(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

⁽¹⁾CRA fund comprised of over 95% agency securities

A total of 23 securities had an unrealized loss at March 31, 2015 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 68.8% and 31.2% of total securities in an unrealized loss position at March 31, 2015. There were eight mortgage-backed securities and ten U.S. Government Agency securities in an unrealized loss position that had an unrealized loss for more than 12 months at March 31, 2015. 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. 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 Company 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 March 31, 2015 and 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 March 31, 2015, 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	16,481		16,483		1.28	%
Five through ten years	27,711		27,394		1.87	%
After ten years	52,505		51,775		1.6	%
	102,230		101,185		1.55	%
Held-to-maturity:
Five through ten years	6,347		6,453		2.62	%
After ten years	5,575		5,778		2.70	%
	$	11,922	$	12,231	2.66	%