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Investment Securities

3 Months Ended

Sep. 30, 2011

5.	INVESTMENT SECURITIES

The amortized cost and fair value of investment securities held to maturity consisted of the following (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
September 30, 2011
Municipal bonds	$	499	$	50	$	-	$	549

March 31, 2011
Municipal bonds	$	506	$	50	$	-	$	556

The contractual maturities of investment securities held to maturity are as follows (in thousands):

September 30, 2011		Amortized Cost		Estimated Fair Value
Due in one year or less	$	-	$	-
Due after one year through five years		-		-
Due after five years through ten years		499		549
Due after ten years		-		-
Total	$	499	$	549

The amortized cost and fair value of investment securities available for sale consisted of the following (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
September 30, 2011
Trust preferred	$	2,974	$	-	$	(1,795	)	$	1,179
Agency securities		5,000		9		-			5,009
Municipal bonds		519		-		-			519
Total	$	8,493	$	9	$	(1,795	)	$	6,707

March 31, 2011
Trust preferred	$	2,974	$	-	$	(2,058	)	$	916
Agency securities		5,000		-		(136	)		4,864
Municipal bonds		540		-		-			540
Total	$	8,514	$	-	$	(2,194	)	$	6,320

The contractual maturities of investment securities available for sale are as follows (in thousands):

September 30, 2011		Amortized Cost		Estimated Fair Value
Due in one year or less	$	-	$	-
Due after one year through five years		5,000		5,009
Due after five years through ten years		-		-
Due after ten years		3,493		1,698
Total	$	8,493	$	6,707

The fair value of temporarily impaired securities, the amount of unrealized losses and the length of time these unrealized losses existed are as follows (in thousands):

	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2011

Trust preferred	$	-	$	-		$	1,179	$	(1,795	)	$	1,179	$	(1,795	)

March 31, 2011

Trust preferred	$	-	$	-		$	916	$	(2,058	)	$	916	$	(2,058	)
Agency securities		4,864		(136	)		-		-			4,864		(136	)
Total	$	4,864	$	(136	)	$	916	$	(2,058	)	$	5,780	$	(2,194	)

At September 30, 2011, the Company had a single collateralized debt obligation which is secured by trust preferred securities issued by 18 other financial institution holding companies, which we refer to as a pooled trust preferred security. The Company holds the mezzanine tranche of this security. Four of the issuers in this pool have defaulted (representing 38% of the remaining collateral), and seven others are currently in deferral (29% of the remaining collateral). The Company has estimated an expected default rate of 44% for the security. The expected default rate was estimated based primarily on an analysis of the financial condition of the underlying financial institution holding companies and their subsidiary banks. There was no excess subordination on this security.

During the three and six months ended September 30, 2011, the Company determined that there was no additional other than temporary impairment (“OTTI”) charge on the above pooled trust preferred security. The Company does not intend to sell this security and it is not more likely than not that the Company will be required to sell the security before the anticipated recovery of the remaining amortized cost basis.

To determine the component of gross OTTI related to credit losses, the Company compared the amortized cost basis of the OTTI security to the present value of the revised expected cash flows, discounted using the current pre-impairment yield. The revised expected cash flow estimates are based primarily on an analysis of default rates, prepayment speeds and third-party analytical reports. Significant judgment of management is required in this analysis that includes, but is not limited to, assumptions regarding the ultimate collectibility of principal and interest on the underlying collateral.