NOTE 8 – Other-Than-Temporary Impairment Losses

The following table summarizes gross unrealized losses and fair value, aggregated by investment category and length of time the investments have been in a continuous unrealized loss position, at June 30, 2012 and March 31, 2012:


		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair	Unrealized			Fair		Unrealized
		Value		Losses		Value	Losses			Value		Losses
June 30, 2012:	(In thousands)
Debt securities issued by states of the
United States and political subdivisions
of the states	$	9,024	$	165	$	1,517	$	24	$	10,541	$	189
Debt securities issued by the U.S. Treasury
and other U.S. government corporations
and agencies		--		--		--		--		--		--
Mortgage-backed securities		6,866		58		609		23		7,475		81
Total temporarily impaired securities	$	15,890	$	223	$	2,126	$	47	$	18,016	$	270
Other-than-temporarily impaired securities
Mortgage-backed securities		--		--		513		77		513		77
Total temporarily impaired and
other than temporarily impaired
securities	$	15,890	$	223	$	2,639	$	124	$	18,529	$	347


March 31, 2012:
Debt securities issued by states of the
United States and political subdivisions
of the states	$	3,212	$	37	$	--		--	$	3,212	$	37
Debt securities issued by the U.S. Treasury
and other U.S. government corporations
and agencies		11,219		240		1,502		51		12,721		291
Mortgage-backed securities		6,469		98		1,231		73		7,700		171
Total temporarily impaired securities		20,900		375		2,733		124		23,633		499
Other-than-temporarily impaired securities
Mortgage-backed securities		--		--		372		82		372		82
Total temporarily impaired and
other than temporarily impaired
securities	$	20,900	$	375	$	3,105	$	206	$	24,005	$	581

Management has assessed the securities which are classified as available-for-sale and in an unrealized loss position at June 30, 2012 and determined the decline in fair value below amortized cost to be temporary, except for those securities described below. In making this determination management considered the period of time the securities were in a loss position, the percentage decline in comparison to the securities' amortized cost, the financial condition of the issuer and the Company's ability and intent to hold these securities until their fair value recovers to their amortized cost. Management believes the decline in fair value is primarily related to the current interest rate environment and not to the credit deterioration of the individual issuer, except for those securities described below.

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis and more frequently when economic or market conditions warrant such evaluation. The investment securities portfolio is generally evaluated for other-than-temporary impairment under ASC 320-10, "Investments – Debt and Equity Securities." However, certain purchased beneficial interests, including non-agency mortgage-backed securities and pooled trust preferred securities are evaluated using ASC 325-40, "Beneficial Interests in Securitized Financial Assets."

For those debt securities for which the fair value of the security is less than its amortized cost and the Company does not intend to sell such security and it is more likely than not that it will not be required to sell such security prior to the recovery of its amortized cost basis less any credit losses, ASC 320-10 requires that the credit component of the other-than-temporary impairment losses be recognized in earnings while the noncredit component is recognized in other comprehensive loss, net of related taxes.

Activity related to the credit component recognized in earnings on debt securities held by the Company for which a portion of other-than-temporary impairment was recognized in other comprehensive income for the three months ended June 30, 2012 is as follows:

		Non-Agency
		Mortgage-Backed
		(In thousands)
Balance, April 1, 2012	$	96
Additions for the credit component on debt securities
in which other-than-temporary impairment was
not previously recognized		17

Balance, June 30, 2012	$	113

In accordance with ASC 320-10, the Company estimated the portion of loss attributable to credit using a discounted cash flow model. Significant inputs for the non-agency mortgage-backed securities included the estimated cash flows of the underlying collateral based on key assumptions, such as default rate, loss severity and prepayment rate. Assumptions used can vary widely from loan to loan, and are influenced by such factors as loan interest rate, geographical location of the borrower, borrower characteristics and collateral type. The present value of the expected cash flows was compared to the Company's holdings to determine the credit-related impairment loss. Based on the expected cash flows derived from the model, the Company expects to recover the remaining unrealized losses on non-agency mortgage-backed securities. Significant assumptions used in the valuation of non-agency mortgage-backed securities were as follows as of June 30, 2012.


	Weighted		Range
	Average		Minimum		Maximum
Prepayment rates	13.8	%	5.1	%	20.1	%
Default rates	11.3		5.4		19.9
Loss severity	46.7		36.4		61.8