MBS AND OTHER INVESTMENTS

MBS and other investments have been classified according to management’s intent and are as follows as of December 31, 2013 and September 30, 2013 (dollars in thousands):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2013
Held to Maturity
MBS:
U.S. government agencies	$	1,152	$	33	$	(2	)	$	1,183
Private label residential	1,451		805		(21		)	2,235
U.S. agency securities	14		1		—			15
Total	$	2,617	$	839	$	(23	)	$	3,433

Available for Sale
MBS:
U.S. government agencies	$	2,012	$	111	$	(2	)	$	2,121
Private label residential	763		112		(9		)	866
Mutual funds	1,000		—		(57		)	943
Total	$	3,775	$	223	$	(68	)	$	3,930

September 30, 2013
Held to Maturity
MBS:
U.S. government agencies	$	1,202	$	31	$	(2	)	$	1,231
Private label residential	1,521		781		(15		)	2,287
U.S. agency securities	14		1		—			15
Total	$	2,737	$	813	$	(17	)	$	3,533

Available for Sale
MBS:
U.S. government agencies	$	2,144	$	87	$	(2	)	$	2,229
Private label residential	804		120		(10		)	914
Mutual funds	1,000		—		(42		)	958
Total	$	3,948	$	207	$	(54	)	$	4,101

The following table summarizes the estimated fair value and gross unrealized losses for all securities and the length of time these unrealized losses existed as of December 31, 2013 (dollars in thousands):



	Less Than 12 Months						12 Months or Longer						Total
	Estimated Fair Value		Gross Unrealized Losses			Qty	Estimated Fair Value		Gross Unrealized Losses			Qty	Estimated Fair Value		Gross Unrealized Losses
Held to Maturity
MBS:
U.S. government agencies	$	18	$	—		4	$	85	$	(2	)	7	$	103	$	(2	)
Private label residential	79		(7		)	4	217		(14		)	12	296		(21		)
Total	$	97	$	(7	)	8	$	302	$	(16	)	19	$	399	$	(23	)

Available for Sale
MBS:
U.S. government agencies	$	41	$	(2	)	2	$	—	$	—		1	$	41	$	(2	)
Private label residential	—		—			—	101		(9		)	2	101		(9		)
Mutual Funds	943		(57		)	1	—		—			—	943		(57		)
Total	$	984	$	(59	)	3	$	101	$	(9	)	3	$	1,085	$	(68	)

The following table summarizes the estimated fair value and gross unrealized losses for all securities and the length of time the unrealized losses existed as of September 30, 2013 (dollars in thousands):



	Less Than 12 Months						12 Months or Longer						Total
	Estimated Fair Value		Gross Unrealized Losses			Qty	Estimated Fair Value		Gross Unrealized Losses			Qty	Estimated Fair Value		Gross Unrealized Losses
Held to Maturity
MBS:
U.S. government agencies	$	3	$	—		6	$	88	$	(2	)	4	$	91	$	(2	)
Private label residential	80		(4		)	4	239		(11		)	14	319		(15		)
Total	$	83	$	(4	)	10	$	327	$	(13	)	18	$	410	$	(17	)

Available for Sale
MBS:
U.S. government agencies	$	96	$	(2	)	3	$	—	$	—		1	$	96	$	(2	)
Private label residential	—		—			—	108		(10		)	2	108		(10		)
Mutual Funds	958		(42		)	1	—		—			—	958		(42		)
Total	$	1,054	$	(44	)	4	$	108	$	(10	)	3	$	1,162	$	(54	)

During the three months ended December 31, 2013 and 2012, the Company recorded net OTTI charges through earnings on residential MBS of $2,000 and $10,000, respectively. The Company provides for the bifurcation of OTTI into (i) amounts related to credit losses which are recognized through earnings, and (ii)amounts related to all other factors which are recognized as a component of other comprehensive income.

To determine the component of the gross OTTI related to credit losses, the Company compared the amortized cost basis of each OTTI security to the present value of its revised expected cash flows, discounted using its pre-impairment yield. The revised expected cash flow estimates for individual securities are based primarily on an analysis of default rates and prepayment speeds included in third-party analytic reports. Significant judgment by management is required in this analysis that includes, but is not limited to, assumptions regarding the collectability of principal and interest, net of related expenses, on the underlying loans.

The following table presents a summary of the significant inputs utilized to measure management’s estimate of the credit loss component on OTTI securities as of December 31, 2013 and September 30, 2013:



	Range				Weighted
	Minimum		Maximum		Average
December 31, 2013
Constant prepayment rate	6.00	%	15.00	%	12.72	%
Collateral default rate	0.52	%	20.40	%	6.79	%
Loss severity rate	20.34	%	71.52	%	43.78	%

September 30, 2013
Constant prepayment rate	6.00	%	15.00	%	12.33	%
Collateral default rate	0.73	%	22.53	%	7.84	%
Loss severity rate	20.48	%	75.02	%	52.69	%

The following tables present the OTTI losses for the three months ended December 31, 2013 and 2012 (dollars in thousands):



	Three Months Ended December 31, 2013					Three Months Ended December 31, 2012
	Held To Maturity			Available For Sale		Held To Maturity			Available For Sale
Total OTTI	$	(3	)	$	—	$	(6	)	$	(1	)
Adjustment for portion recorded as (transferred from) other comprehensive income (loss) before taxes (1)	1			—		(3		)	—
Net OTTI recognized in earnings (2)	$	(2	)	$	—	$	(9	)	$	(1	)

________________________


(1)	Represents OTTI related to all other factors.


(2)	Represents OTTI related to credit losses.

The following table presents a roll-forward of the credit loss component of held to maturity and available for sale debt securities that have been written down for OTTI with the credit loss component recognized in earnings and the remaining impairment loss related to all other factors recognized in other comprehensive income for the three months ended December 31, 2013 and 2012 (dollars in thousands):



	Three Months Ended December 31,
	2013			2012
Beginning balance of credit loss	$	2,084		$	2,703
Additions:
Credit losses for which OTTI was not previously recognized	2			4
Additional increases to the amount related to credit loss for which OTTI was previously recognized	—			6
Subtractions:
Realized losses previously recorded as credit losses	(40		)	(232		)
Ending balance of credit loss	$	2,046		$	2,481

There was no realized gain on sale of securities for the three months ended December 31, 2013 and 2012. During the three months ended December 31, 2013, the Company recorded a $40,000 realized loss (as a result of the securities being deemed worthless) on 14 held to maturity residential MBS and six available for sale residential MBS, of which the entire amount had been recognized previously as a credit loss. During the three months ended December 31, 2012, the Company recorded a $232,000 realized loss (as a result of the securities being deemed worthless) on 16 held to maturity residential MBS and six available for sale residential MBS, of which the entire amount had been recognized previously as a credit loss.

The amortized cost of residential mortgage-backed and agency securities pledged as collateral for public fund deposits, federal treasury tax and loan deposits, FHLB collateral, retail repurchase agreements and other non-profit organization deposits totaled $4.15 million and $4.54 million at December 31, 2013 and September 30, 2013, respectively.

The contractual maturities of debt securities at December 31, 2013 were as follows (dollars in thousands). Expected maturities may differ from scheduled maturities as a result of the prepayment of principal or call provisions.



	Held to Maturity				Available for Sale
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due within one year	$	—	$	—	$	—	$	—
Due after one year to five years	20		22		26		26
Due after five to ten years	18		18		27		27
Due after ten years	2,579		3,393		2,722		2,934
Total	$	2,617	$	3,433	$	2,775	$	2,987