Note 4 - Securities Available for Sale

3 Months Ended

Dec. 31, 2012

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 4: Securities Available for Sale

Securities available for sale are summarized as follows:

	December 31, 2012
	Amortized Cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Other Investment Securities:
Tax-free municipals	$	12,122,631	$	23,682	$	(1,458	)	$	12,144,855
U.S. government sponsored entities		10,123,015		81,163		-			10,204,178
Mortgage-backed securities:
FNMA certificates		88,075,657		1,163,277		-			89,238,934
GNMA certificates		4,257,863		335,957		-			4,593,820
FHLMC certificates		41,715,064		736,557		(7,410	)		42,444,211
Collateralized mortgage obligations:
FNMA		5,993,604		193,206		-			6,186,810
GNMA		323,861		2,978		-			326,839
FHLMC		493,861		53,573		-			547,434
Private-label mortgage securities: [2]
Investment grade		2,271,612		25,238		(222,462	)		2,074,388
Split rating [1]		1,435,267		50,661		-			1,485,928
Non investment grade		12,986,851		-		(2,988,066	)		9,998,785
Total	$	179,799,286	$	2,666,292	$	(3,219,396	)	$	179,246,182

[1] Bonds with split ratings represent securities with separate investment and non investment grades.

[2] Credit ratings are current as of December 31, 2012.

	September 30, 2012
	Amortized Cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Other investment securities:
Tax-free municipals	$	11,555,068	$	25,004	$	(1,571	)	$	11,578,501
U.S. government sponsored entities		16,519,624		107,431		—			16,627,055
Mortgage-backed securities:
FNMA certificates		84,836,714		1,748,088		—			86,584,802
GNMA certificates		4,568,181		377,231		—			4,945,412
FHLMC certificates		45,178,602		1,065,844		—			46,244,446
Collateralized mortgage obligations:
FNMA		7,712,770		314,386		—			8,027,156
GNMA		499,503		3,960		(152	)		503,311
FHLMC		533,379		46,710		—			580,089
Private-label mortgage securities:
Investment grade		2,480,412		32,214		(155,882	)		2,356,744
Split Rating [1]		6,922,884		—		(676,581	)		6,246,303
Non investment grade		8,264,044		—		(2,578,530	)		5,685,514
Total	$	189,071,181	$	3,720,867	$	(3,412,716	)	$	189,379,333

[1] Bonds with split ratings represent securities with separate investment and non investment grades.

The amortized cost and estimated fair value of investment securities available for sale as of December 31, 2012, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.  All of the municipal bonds in the table below are pre-funded and are expected to be prepaid before contractual maturity.

	Amortized cost		Estimated fair value
Less than 1 year	$	5,123,015	$	5,142,638
1-5 years		8,252,737		8,317,669
Greater than 5 years		8,869,894		8,888,727
Mortgage-backed securities		157,553,640		156,897,148
	$	179,799,286	$	179,246,182

Proceeds from called or matured securities available for sale during the three months ended December 31, 2012 and 2011 were $7,066,500 and $1,036,000, respectively. Proceeds from sales for the three months ended December 31, 2012 and 2011 were $13,952,478 and $27,413,474, respectively.  Gross realized gains on the sale of these securities were $219,913 and $634,791 for the three months ended December 31, 2012 and 2011, respectively.  Gross realized losses on the sale of these securities were $0 and $2,198 for the three months ended December 31, 2012 and 2011, respectively.  

Securities available for sale with an aggregate carrying amount of $114,602,149 and $127,617,291 at December 31, 2012 and September 30, 2012, respectively, were pledged to secure FHLB advances.

Securities available for sale that had been in a continuous unrealized loss position for less than 12 months at December 31, 2012 are as follows:

	December 31, 2012
	Amortized cost		Gross unrealized losses			Estimated fair value
Mortgage-backed securities:
FHLMC certificates		8,290,299		(7,410	)		8,282,889
	$	8,290,299	$	(7,410	)	$	8,282,889

There were no securities available for sale in a continuous unrealized loss position for less than 12 months at September 30, 2012.

Securities available for sale that had been in a continuous unrealized loss position for greater than 12 months at December 31, 2012 and September 30, 2012 are as follows:

	December 31, 2012
			Gross
	Amortized		unrealized			Estimated
	cost		losses			fair value
Other investment securities:
Tax-free municipals		260,264		(1,458	)		258,806
Collateralized mortgage obligations:
Private-label mortgage securities		14,256,142		(3,210,528	)		11,045,614
	$	14,516,406	$	(3,211,986	)	$	11,304,420

	September 30, 2012
			Gross
	Amortized		unrealized			Estimated
	cost		losses			fair value
Other investment securities:
Tax-free municipals		262,550		(1,571	)		260,979
Collateralized mortgage obligations:
GNMA		133,587		(152	)		133,435
Private-label mortgage securities		16,485,944		(3,410,993	)		13,074,951
	$	16,882,081	$	(3,412,716	)	$	13,469,365

At December 31, 2012 the Company had approximately $3.2 million of gross unrealized losses on non-GSE collateralized mortgage obligations with aggregate amortized cost of approximately $14.3 million.  During the quarter ended December 31, 2012 the Company did not record any other than temporary impairment charges.  Other than previously stated, the Company is projecting that it will receive essentially all contractual cash flows so there is no break in yield or additional other than temporary impairment. 

Regularly, the Company performs an assessment to determine whether there have been any events or economic circumstances to indicate that a security on which there is an unrealized loss is impaired other-than-temporarily. The assessment considers many factors including the severity and duration of the impairment, the Company’s intent and ability to hold the security for a period of time sufficient for recovery in value, recent events specific to the industry, and current characteristics of each security such as delinquency and foreclosure levels, credit enhancements, and projected losses and loss coverage ratios. It is possible that the underlying collateral of these securities will perform worse than current expectations, which may lead to adverse changes in cash flows on these securities and potential future other-than-temporary impairment losses. Events that may trigger material declines in fair values for these securities in the future include but are not limited to, deterioration of credit metrics, significantly higher levels of default and severity of loss on the underlying collateral, deteriorating credit enhancement and loss coverage ratios, or further illiquidity. All of these securities were evaluated for other-than-temporary impairment based on an analysis of the factors and characteristics of each security as previously enumerated. The Company considers these unrealized losses to be temporary impairment losses primarily because of continued sufficient levels of credit enhancements and credit coverage levels of less senior tranches to tranches held by the Company.

The following table summarizes the changes in the amount of credit losses on the Company’s investment securities recognized in earnings for the three months ended December 31, 2012 and 2011:

	Three Months Ended December 31
	2012		2011
Beginning balance of credit losses previously recognized in earnings	$	380,446	$	4,822,916
Amount related to credit losses for securities for which an other-than-temporary impairment was not previously recognized in earnings		-		-
Amount related to credit losses for securities for which an other-than-temporary impairment was recognized in earnings		-		100,000
Ending balance of cumulative credit losses recognized in earnings	$	380,446	$	4,922,916

The following table shows issuer-specific information, including current par value, book value, fair value, credit rating and unrealized gain (loss) for the Company's portfolio of non-agency collateralized mortgage obligations as of December 31, 2012:

Cusip	Description	Credit Rating [1]			Cumulative Net Impairment Losses Recognized in Earnings		Current Par Value		Book Value		Market Value		Unrealized Gain (Loss)
		Moody	S&P	Fitch					(Dollars in thousands)
Investment Grade
36228FQF6	GSR 2003-4F 1A2	n/a	AA+	AA	$	-	$	296	$	296	$	301	$	5
55265KL80	MASTR 2003-8 4A1	n/a	A+	AAA		-		711		706		726		20
86359BVF5	SARM 2004-6 3A3	n/a	A+	n/a		-		1,269		1,269		1,047		(222	)
	Total				$	-	$	2,277	$	2,271	$	2,074	$	(197	)
Split Rating
17307GDL9	CMLTI 2004-HYB1 A31	B1	n/a	BBB	$	-	$	1,435	$	1,435	$	1,486	$	51
	Total				$	-	$	1,435	$	1,435	$	1,486	$	51
Non Investment Grade
576433QD1	MARM 2004-7 5A1	Ba3	BB	n/a		-		5,136		5,136		4,503		(633	)
576433UQ7	MARM 2004-13 B1	NR	CCC	n/a	$	380	$	5,561	$	5,181	$	3,052	$	(2,129	)
576433VN3	MARM 2004-15 4A1	B3	n/a	B		-		2,670		2,670		2,444		(226	)
	Total				$	380	$	13,367	$	12,987	$	9,999	$	(2,988	)
	Grand Total				$	380	$	17,079	$	16,693	$	13,559	$	(3,134	)

[1] Credit ratings are current as of December 31, 2012.

The Bank’s investment in the MARM 2004-13 B1 security represents the largest unrealized loss position in the investment portfolio at $2.1 million. Based on assessments of expected cash flows no additional other than temporary impairment exists on this security at December 31, 2012. This bond has previously taken a total of $380,000 in OTTI. The favorable cash flow profile is attributable to a number of pertinent factors, including the relatively low levels of delinquency and the stable levels of default, foreclosure, and severities upon foreclosure. The security has a housing price index adjusted weighted average loan-to-value ratio of 53% on the underlying mortgages, average credit scores of 737 and its 2004 origination indicates its seasoning. Furthermore, 90% of the underlying mortgages have been timely payers for the past 24 months. We believe the unrealized loss position is attributed to liquidity risk.