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Investment Securities

12 Months Ended

Mar. 31, 2016

Notes

Investment Securities

3. INVESTMENT SECURITIES

The amortized cost and approximate fair value of investment securities consisted of the following at the dates indicated (in thousands):

	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value

March 31, 2016
Available for sale:
Trust preferred	$	1,919		$	-		$	(111	)	$	1,808
Agency securities		19,520			63			(14	)		19,569
Real estate mortgage investment conduits ⁽¹⁾		43,293			632			(1	)		43,924
Mortgage-backed securities ⁽¹⁾		75,404			980			(31	)		76,353
Other mortgage-backed securities ⁽²⁾		8,875			185			(24	)		9,036
Total available for sale	$	149,011		$	1,860		$	(181	)	$	150,690

Held to maturity:
Mortgage-backed securities ⁽³⁾		75		$	1		$	-		$	76

March 31, 2015
Available for sale:
Trust preferred	$	1,919		$	-		$	(107	)	$	1,812
Agency securities		14,008			38			(107	)		13,939
Real estate mortgage investment conduits ⁽³⁾		22,455			255			(1	)		22,709
Mortgage-backed securities ⁽¹⁾		67,568			1,006			(60	)		68,514
Other mortgage-backed securities ⁽²⁾		5,359			142			(12	)		5,489
Total available for sale	$	111,309		$	1,441		$	(287	)	$	112,463

Held to maturity:
Mortgage-backed securities ⁽³⁾	$	86		$	2		$	-		$	88

⁽¹⁾ Comprised of FHLMC, Federal National Mortgage Association (“FNMA”) and Ginnie Mae (“GNMA”) issued securities.
⁽²⁾ Comprised of U.S. Small Business Administration (“SBA”) issued securities and commercial real estate (“CRE”) secured securities issued by FNMA.
⁽³⁾ Comprised of FHLMC and FNMA issued securities.

The contractual maturities of investment securities as of March 31, 2016 are as follows (in thousands):

		Available for Sale						Held to Maturity
		Amortized Cost			Estimated Fair Value			Amortized Cost			Estimated Fair Value

Due after one year through five years	$	18,982		$	19,097		$	-		$	-
Due after five years through ten years		17,418			17,631			66			67
Due after ten years		112,611			113,962			9			9
Total	$	149,011		$	150,690		$	75		$	76

Expected maturities of investment securities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.

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

	Less than 12 months						12 months or longer						Total
		Estimated Fair Value			Unrealized Losses			Estimated Fair Value			Unrealized Losses			Estimated Fair Value			Unrealized Losses
March 31, 2016

Available for sale:
Trust preferred	$	-		$	-		$	1,808		$	(111	)	$	1,808		$	(111	)
Agency securities		5,508			(6	)		4,991			(8	)		10,499			(14	)
Real estate mortgage investment conduits ⁽¹⁾		1,636			(1	)		-			-			1,636			(1	)
Mortgage-backed securities ⁽²⁾		831			(10	)		3,051			(21	)		3,882			(31	)
Other mortgage-backed securities ⁽³⁾		1,891			(6	)		1,229			(18	)		3,120			(24	)
Total available for sale	$	9,866		$	(23	)	$	11,079		$	(158	)	$	20,945		$	(181	)

March 31, 2015

Available for sale:
Trust preferred	$	-		$	-		$	1,812		$	(107	)	$	1,812		$	(107	)
Agency securities		-			-			12,893			(107	)		12,893			(107	)
Real estate mortgage investment conduits ⁽¹⁾		1,323			(1	)		-			-			1,323			(1	)
Mortgage-backed securities ⁽²⁾		-			-			5,098			(60	)		5,098			(60	)
Other mortgage-backed securities ⁽³⁾		-			-			1,417			(12	)		1,417			(12	)
Total available for sale	$	1,323		$	(1	)	$	21,220		$	(286	)	$	22,543		$	(287	)

⁽¹⁾ Comprised of FHLMC issued securities.
⁽²⁾ Comprised of FHLMC and FNMA issued securities.
⁽³⁾ Comprised of SBA issued securities.

At March 31, 2016, the Company had a single collateralized debt obligation which is secured by a pool of trust preferred securities issued by 15 other bank holding companies. The Company holds the mezzanine tranche of this security. All tranches senior to the mezzanine tranche have been repaid by the issuer. Four of the issuers of trust preferred securities in this pool have defaulted (representing 51% of the remaining collateral, including excess collateral), and one other issuer is currently deferring interest payments (representing 2% of the remaining collateral). The Company has estimated an expected default rate of 44% for its portion of this security. The expected default rate was estimated based primarily on an analysis of the financial condition of the underlying issuers. The Company estimates that a default rate of 75% would trigger OTTI of this security. The Company utilized a discount rate of 10% to estimate the fair value of this security. There was no excess subordination on this security.

During the year ended March 31, 2016, the Company determined that there was no OTTI charge on this collateralized debt obligation. 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 collateralized debt obligation 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 collectability of principal and interest on the underlying collateral.

The unrealized losses on the Company’s investment securities were primarily attributable to increases in market interest rates subsequent to their purchase by the Company. The Company expects the fair value of these securities to recover as the securities approach their maturity dates or sooner if market yields for such securities decline. The Company does not believe that these securities are other than temporarily impaired because of their credit quality or related to any issuer or industry specific event. Based on management’s evaluation and intent, the unrealized losses related to the investment securities in the above tables are considered temporary.

The Company had no sales and realized no gains or losses on sales of investment securities for the years ended March 31, 2016 and 2014. Proceeds from sales of investment securities available for sale totaled $16.8 million for the year ended March 31, 2015. Gross realized gains on sales of investment securities available for sale totaled $158,000 for the year ended March 31, 2015. The gross realized gain of $158,000 was recorded in other non-interest income in the consolidated statement of income for the year ended March 31, 2015. The related income tax of $54,000 related to these realized gains was recorded in the provision for income taxes in the consolidated statement of income for the year ended March 31, 2015. Investment securities available for sale with an amortized cost of $10.2 million and $4.3 million and a fair value of $10.3 million and $4.3 million at March 31, 2016 and 2015, respectively, were pledged as collateral for government public funds held by the Bank. Investment securities held to maturity with an amortized cost of $23,000 and $27,000 and a fair value of $24,000 and $27,000 at March 31, 2016 and 2015, respectively were pledged as collateral for government public funds held by the Bank.

- Definition

The entire disclosure for investments in certain debt and equity securities.

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