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Investment Securities | 6 Months Ended
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Sep. 30, 2016
Notes |
Investment Securities |
5. | 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 |
September 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |
Available for sale: |  |  |  |  |  |  |  |  |  |  |  |
Trust preferred |  | $ | 1,786 |  |  | $ | - |  |  | $ | - |  |  | $ | 1,786 |
Agency securities |  |  | 14,006 |  |  |  | 55 |  |  |  | (10 | ) |  |  | 14,051 |
Real estate mortgage investment conduits (1) |  |  | 42,091 |  |  |  | 570 |  |  |  | - |  |  |  | 42,661 |
Mortgage-backed securities (1) |  |  | 75,662 |  |  |  | 1,175 |  |  |  | (15 | ) |  |  | 76,822 |
Other mortgage-backed securities (2) |  |  | 16,755 |  |  |  | 219 |  |  |  | (43 | ) |  |  | 16,931 |
Total available for sale |  | $ | 150,300 |  |  | $ | 2,019 |  |  | $ | (68 | ) |  | $ | 152,251 |
Held to maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities (3) |  | $ | 69 |  |  | $ | 2 |  |  | $ | - |  |  | $ | 71 |
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 |
(1) Comprised of Federal Home Loan Mortgage Corporation ("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 September 30, 2016 are as follows (in thousands):
|  | Available for Sale |  |  | Held to Maturity |
|  | Amortized Cost |  |  | Estimated Fair Value |  |  | Amortized Cost |  |  | Estimated Fair Value |
Due in one year or less |  | $ | 1,786 |  |  | $ | 1,786 |  |  | $ | - |  |  | $ | - |
Due after one year through five years |  |  | 16,485 |  |  |  | 16,590 |  |  |  | - |  |  |  | - |
Due after five years through ten years |  |  | 13,871 |  |  |  | 14,108 |  |  |  | 62 |  |  |  | 63 |
Due after ten years |  |  | 118,158 |  |  |  | 119,767 |  |  |  | 7 |  |  |  | 8 |
Total |  | $ | 150,300 |  |  | $ | 152,251 |  |  | $ | 69 |  |  | $ | 71 |
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 |
September 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |
Available for sale: |  |  |  |  |  |  |  |  |  |  |  |
Agency securities |  | $ | 4,989 |  |  | $ | (10 | ) |  | $ | - |  |  | $ | - |  |  | $ | 4,989 |  |  | $ | (10 | )
Mortgage-backed securities (2) |  |  | 2,936 |  |  |  | (2 | ) |  |  | 709 |  |  |  | (13 | ) |  |  | 3,645 |  |  |  | (15 | )
Other mortgage-backed securities (3) |  |  | 3,872 |  |  |  | (23 | ) |  |  | 1,126 |  |  |  | (20 | ) |  |  | 4,998 |  |  |  | (43 | )
Total available for sale |  | $ | 11,797 |  |  | $ | (35 | ) |  | $ | 1,835 |  |  | $ | (33 | ) |  | $ | 13,632 |  |  | $ | (68 | )
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 | )
(1) Comprised of FHLMC securities. |
(2) Comprised of FHLMC and FNMA issued securities. |
(3) Comprised of SBA issued securities. |
At September 30, 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). The Company has estimated an expected default rate of 43% 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 utilized a discount rate of 10% to estimate the fair value of this security. There was no excess subordination on this security. During the three months ended September 30, 2016, the Company recognized a $132,000 other than temporary impairment ("OTTI") charge on the above referenced collateralized debt obligation. The Company was notified that this collateralized debt obligation will be liquidated in accordance with provisions contain within the collateralized debt obligation indenture agreement. Management concluded that the collateralized debt obligation was other than temporarily impaired based upon the liquidation notice and has recorded a $132,000 charge through other non-interest income. Except for the collateralized debt obligation discussed above, 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. Except for the collateralized debt obligation discussed above, 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 other 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 three and six months ended September 30, 2016 and 2015. Investment securities available for sale with an amortized cost of $12.1 million and $10.2 million and a fair value of $12.3 million and $10.3 million at September 30, 2016 and March 31, 2016, respectively, were pledged as collateral for government public funds held by the Bank. Investment securities held to maturity with an amortized cost of $21,000 and $23,000 and a fair value of $21,000 and $24,000 at September 30, 2016 and March 31, 2016, respectively, were pledged as collateral for government public funds held by the Bank.

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