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Investment Securities
 3 Months Ended
Jun. 30, 2012
Notes  
Investment Securities

 

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

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

Municipal bonds

$

487

 

$

47

 

$

-

 

$

534

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2012

 

 

 

 

 

 

 

 

 

 

 

Municipal bonds

$

493

 

$

49

 

$

-

 

$

542

 

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

 

 

June 30, 2012

 

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

 

487

 

 

534

 

Due after ten years

 

-

 

 

-

 

      Total

$

487

 

$

534

 

 

The amortized cost and approximate 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

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

Trust preferred

$

2,974

 

$

-

 

$

(1,847

)

$

1,127

Agency securities

 

5,000

 

 

22

 

 

-

 

 

5,022

Municipal bonds

 

142

 

 

-

 

 

-

 

 

142

      Total

$

8,116

 

$

22

 

$

(1,847

)

$

6,291

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2012

 

 

 

 

 

 

 

 

 

 

 

Trust preferred

$

2,974

 

$

-

 

$

(1,808

)

$

1,166

Agency securities

 

5,000

 

 

-

 

 

(1

)

 

4,999

Municipal bonds

 

149

 

 

-

 

 

-

 

 

149

      Total

$

8,123

 

$

-

 

$

(1,809

)

$

6,314

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

June 30, 2012

 

Amortized

Cost

 

 

Estimated

Fair Value

 

 

 

 

 

 

 

 

Due in one year or less

$

-

 

$

-

 

Due after one year through five years

 

5,000

 

 

5,022

 

Due after five years through ten years

 

-

 

 

-

 

Due after ten years

 

3,116

 

 

1,269

 

      Total

$

8,116

 

$

6,291

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trust preferred

$

-

 

$

-

 

$

1,127

 

$

(1,847

)

$

1,127

 

$

(1,847

)

 

March 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trust preferred

$

-

 

$

-

 

$

1,166

 

$

(1,808

)

$

1,166

 

$

(1,808

)

Agency securities

 

4,999

 

 

(1

)

 

-

 

 

-

 

 

4,999

 

 

(1

)

      Total

$

4,999

 

$

(1

)

$

1,166

 

$

(1,808

)

$

6,165

 

$

(1,809

)

 

At June 30, 2012, the Company had a single collateralized debt obligation which is secured by trust preferred securities issued by 19 other holding companies. 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 six other issuers are currently in deferral (27% of the remaining collateral). The Company has estimated an expected default rate of 45% for this security. The expected default rate was estimated based primarily on an analysis of the financial condition of the underlying banks. The Company estimates that a default rate of 46% would trigger additional other than temporary impairment (“OTTI”) of this security. The Company utilized a discount rate of 22% to estimate the fair value of this security. There was no excess subordination on this security.

 

During the three months ended June 30, 2012, the Company determined that there was no additional 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.

 

The Company realized no gains or losses on sales of investment securities for the three months ended June 30, 2012 and 2011. There were no investment securities pledged as collateral by the Bank at June 30, 2012 and March 31, 2012.