INVESTMENT SECURITIES

The Bank utilizes mortgage-backed and other investment securities in its asset/liability management strategy. In making investment decisions, the Bank considers, among other things, its yield and interest rate objectives, its interest rate and credit risk position, and its liquidity and cash flow.

Generally, the investment policy of the Bank is to invest funds among categories of investments and maturities based upon the Bank’s asset/liability management policies, investment quality, loan and deposit volume and collateral requirements, liquidity needs and performance objectives. ASC 320-10-25 requires that securities be classified into three categories: trading, held-to-maturity, and available-for-sale. At March 31, 2014, $89.5 million, or 90.8%, of the Bank’s mortgage-backed and other investment securities were classified as available-for-sale, and the remaining $9.0 million, or 9.2%, were classified as held-to-maturity. The Bank had no securities classified as trading at March 31, 2014.

The following table sets forth the amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at March 31, 2014:



	Amortized		Gross Unrealized					Estimated
$ in thousands	Cost		Gains		Losses			Fair-Value
Available-for-Sale:
Mortgage-backed securities:
Government National Mortgage Association	$	5,972	$	—	$	(307	)	$	5,665
Federal Home Loan Mortgage Corporation	12,160		—		(564		)	11,596
Federal National Mortgage Association	10,897		—		(466		)	10,431
Other	49		—		—			49
Total mortgage-backed securities	29,078		—		(1,337		)	27,741
U.S. Government Agency Securities	55,155		—		(2,966		)	52,189
CRA investment fund	10,000		—		(469		)	9,531
Total available-for-sale	94,233		—		(4,772		)	89,461
Held-to-Maturity:
Mortgage-backed securities:
Government National Mortgage Association	3,743		225		—			3,968
Federal National Mortgage Association	5,079		—		(283		)	4,796
Total held-to-maturity mortgage-backed securities	8,822		225		(283		)	8,764
Other	207		—		—			207
Total held-to-maturity	9,029		225		(283		)	8,971
Total securities	$	103,262	$	225	$	(5,055	)	$	98,432

The following table sets forth the amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at March 31, 2013:



	Amortized		Gross Unrealized					Estimated
$ in thousands	Cost		Gains		Losses			Fair-Value
Available-for-Sale:
Mortgage-backed securities:
Government National Mortgage Association	$	23,164	$	676	$	—		$	23,840
Federal Home Loan Mortgage Corporation	16,059		104		(104		)	16,059
Federal National Mortgage Association	4,186		117		—			4,303
Other	50		—		—			50
Total mortgage-backed securities	43,459		897		(104		)	44,252
U.S. Government Agency Securities	44,363		139		(177		)	44,325
Asset-backed securities	15,268		251		—			15,519
Small Business Administration	1,919		45		—			1,964
CRA investment fund	10,000		—		(9		)	9,991
Total available-for-sale	115,009		1,332		(290		)	116,051
Held-to-Maturity:
Mortgage-backed securities:
Government National Mortgage Association	5,335		404		—			5,739
Federal Home Loan Mortgage Corporation	2,129		103		—			2,232
Federal National Mortgage Association	1,321		79		—			1,400
Total held-to-maturity mortgage-backed securities	8,785		586		—			9,371
Other	258		—		—			258
Total held-to-maturity	9,043		586		—			9,629
Total securities	$	124,052	$	1,918	$	(290	)	$	125,680

The following is a summary regarding proceeds from securities sales of the available-for-sale and held-to-maturity portfolios for the years ended March 31:



$ in thousands	2014		2013		2012
Available-for-Sale:
Proceeds	$	38,991	$	31,567	$	16,847
Gross gains	513		174		8
Gross losses	2		—		—

Held-to-Maturity:
Proceeds	2,814		—		—
Gross gains	43		—		—
Gross losses	2		—		—

There were 15 securities that were classified as matured under ASC Topic 320, as the principal repayments exceeded 85% of the initial principal. These securities were sold from the held-to-maturity portfolio during fiscal 2014. These sales generated proceeds of $2.8 million with net gains of $41 thousand. There were no sales of held-to-maturity securities in fiscal years 2013 or 2012. The net unrealized loss on available-for-sale securities was $4.8 million at March 31, 2014 compared to a net unrealized gain of $1 million at March 31, 2013.

The Bank's investment portfolio is comprised primarily of fixed-rate mortgage-backed securities guaranteed by a Government Sponsored Enterprise (“GSE”) as issuer and Agency securities. Carver maintains a portfolio of mortgage-backed securities in the form of Government National Mortgage Association (“GNMA”) pass-through certificates, Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”) participation certificates. GNMA pass-through certificates are guaranteed as to the payment of principal and interest by the full faith and credit of the United States Government, while FNMA and FHLMC certificates are each guaranteed by their respective agencies as to principal and interest. Based on the high quality of the Bank's investment portfolio, current market conditions have not significantly impacted the pricing of the portfolio or the Bank's ability to obtain reliable prices.

At March 31, 2014 the Bank pledged securities of $29.7 million as collateral for advances from the FHLB-NY.

The following table sets forth the unrealized losses and fair value of securities in an unrealized loss position at March 31, 2014 for less than 12 months and 12 months or longer:



	Less than 12 months					12 months or longer					Total
$ in thousands	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value
Available-for-Sale:
Mortgage-backed securities	$	(322	)	$	7,569	$	(1,015	)	$	20,123	$	(1,337	)	$	27,692
U.S. Government Agency Securities	(1,646		)	34,074		(1,320		)	18,115		(2,966		)	52,189
CRA investment fund	(469		)	9,531		—			—		(469		)	9,531
Total available-for-sale securities	(2,437		)	51,174		(2,335		)	38,238		(4,772		)	89,412

Held-to-Maturity:
Mortgage-backed securities	(283		)	4,796		—			—		(283		)	4,796
Total held-to-maturity securities	(283		)	4,796		—			—		(283		)	4,796
Total securities	$	(2,720	)	$	55,970	$	(2,335	)	$	38,238	$	(5,055	)	$	94,208

The following table sets forth the unrealized losses and fair value of securities in an unrealized loss position at March 31, 2013 for less than 12 months and 12 months or longer:



	Less than 12 months					12 months or longer				Total
$ in thousands	Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value
Available-for-Sale:
Mortgage-backed securities	$	(104	)	$	10,298	$	—	$	—	$	(104	)	$	10,298
U.S. Government Agency Securities	(177		)	25,290		—		—		(177		)	25,290
CRA investment fund	(9		)	9,991		—		—		(9		)	9,991
Total available-for-sale securities	$	(290	)	$	45,579	$	—	$	—	$	(290	)	$	45,579

A total of 34 securities had an unrealized loss at March 31, 2014 compared to 13 at March 31, 2013. The majority of the securities in an unrealized loss position were U.S. Government Agency securities and mortgage-backed securities, which represented 58.4% and 31.0% of total securities in an unrealized loss position at March 31, 2014. Six mortgage-backed securities and eight U.S. Government Agency securities representing 22.5% and 20.3% of total securities in an unrealized loss position had an unrealized loss for more than 12 months at March 31, 2014. The cause of the temporary impairment is directly related to changes in interest rates. In general, as interest rates decline, the fair value of securities will rise, and conversely as interest rates rise, the fair value of securities will decline. Management considers fluctuations in fair value as a result of interest rate changes to be temporary, which is consistent with the Bank's experience. The impairments are deemed temporary based on the direct relationship of the rise in fair value to movements in interest rates, the life of the investments and their high credit quality. Given the U.S. government's guarantees of the mortgage-backed and agency securities, there is no reason to believe that these securities will experience credit related losses. Management believes that these unrealized losses are a direct result of the current rate environment and has the ability and intent to hold the securities until maturity or the valuation recovers.

The amount of an other-than-temporary impairment when there are credit and non-credit losses on a debt security which management does not intend to sell, and for which it is more likely than not that the Bank will not be required to sell the security prior to the recovery of the non-credit impairment, the portion of the total impairment that is attributable to the credit loss would be recognized in earnings. The remaining difference between the debt security's amortized cost basis and its fair value would be included in other comprehensive income (loss). At March 31, 2014 and 2013, the Bank does not have any securities that are classified as having other-than-temporary impairment in its investment portfolio.

The following is a summary of the carrying value (amortized cost) and fair value of securities at March 31, 2014, by remaining period to contractual maturity (ignoring earlier call dates, if any). Actual maturities may differ from contractual maturities because certain security issuers have the right to call or prepay their obligations. The table below does not consider the effects of possible prepayments or unscheduled repayments.



$ in thousands	Amortized Cost		Fair Value		Weighted Average Yield
Available-for-Sale:
One through five years	$	7,000	$	6,981	0.79	%
Five through ten years	25,176		23,835		1.66	%
After ten years	62,057		58,645		1.75	%
	$	94,233	$	89,461	1.65	%
Held-to-maturity:
Five through ten years	5,079		4,796		2.37	%
After ten years	3,950		4,175		3.97	%
	$	9,029	$	8,971	3.07	%