NOTE 2 – INVESTMENT AND MORTGAGE RELATED SECURITIES

The amortized cost and fair value of securities available-for-sale and held-to-maturity as of March 31, 2013 and December 31, 2012 are summarized as follows:

	March 31, 2013 (Unaudited)

			Gross		Gross
	Amortized		Unrealized		Unrealized		OTTI		Fair
	Cost		Gains		Losses		in AOCI		Value
	(In Thousands)
Available-for-Sale Securities:

Obligations of U.S. government agencies	$	300	$	13	$	-	$	-	$	313
Corporate securities	12,182		96		(49)		-		12,229
	12,482		109		(49)		-		12,542

Private label commercial mortgage related securities	4,630		49		-		-		4,679
Agency residential mortgage related securities	294,196		5,306		(1,454)		-		298,048
Total mortgage related securities	298,826		5,355		(1,454)		-		302,727
Total available-for-sale securities	$	311,308	$	5,464	$	(1,503)	$	-	$	315,269


Held-to-Maturity Securities:

Agency residential mortgage related securities	$	25,611	$	1,027	$	-	$	-	$	26,638
Total mortgage related securities	25,611		1,027		-		-		26,638
Total held-to-maturity securities	$	25,611	$	1,027	$	-	$	-	$	26,638


	December 31, 2012

			Gross		Gross
	Amortized		Unrealized		Unrealized		OTTI		Fair
	Cost		Gains		Losses		in AOCI		Value
	(In Thousands)
Available-for-Sale Securities:

Obligations of U.S. government agencies	$	300	$	14	$	-	$	-	$	314
Corporate securities	12,207		91		(121)		-		12,177
	12,507		105		(121)		-		12,491

Private label commercial mortgage related securities	6,119		78		-		-		6,197
Agency residential mortgage related securities	270,461		7,023		(65)		-		277,419
Total mortgage related securities	276,580		7,101		(65)		-		283,616
Total available-for-sale securities	$	289,087	$	7,206	$	(186)	$	-	$	296,107


Held-to-Maturity Securities:

Agency residential mortgage related securities	$	28,369	$	1,082	$	-	$	-	$	29,451
Total mortgage related securities	28,369		1,082		-		-		29,451
Total held-to-maturity securities	$	28,369	$	1,082	$	-	$	-	$	29,451

The following tables show gross unrealized losses and fair value of securities, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2013 and December 31, 2012.

	March 31, 2013 (Unaudited)
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(In Thousands)
Available-for-Sale Securities:
Obligations of U.S. government agencies	$	-	$	-	$	-	$	-	$	-	$	-
Corporate securities	-		-		2,951		(49)		2,951		(49)
	-		-		2,951		(49)		2,951		(49)

Private label commercial mortgage related securities	-		-		-		-		-		-
Agency residential mortgage related securities	101,021		(1,454)		-		-		101,021		(1,454)
Total mortgage related securities	101,021		(1,454)		-		-		101,021		(1,454)
Total available-for-sale securities	$	101,021	$	(1,454)	$	2,951	$	(49)	$	103,972	$	(1,503)

Held-to-Maturity Securities:
Agency residential mortgage related securities	-		-		-		-		-		-
Total mortgage related securities	-		-		-		-		-		-
Total held-to-maturity securities	$	-	$	-	$	-	$	-	$	-	$	-
Total Temporarily Impaired Securities	$	101,021	$	(1,454)	$	2,951	$	(49)	$	103,972	$	(1,503)



	December 31, 2012
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(In Thousands)
Available-for-Sale Securities:
Obligations of U.S. government agencies	$	-	$	-	$	-	$	-	$	-	$	-
Corporate securities	-		-		2,879		(121)		2,879		(121)
	-		-		2,879		(121)		2,879		(121)

Private label commercial mortgage related securities	-		-		-		-		-		-
Agency residential mortgage related securities	29,092		(65)		-		-		29,092		(65)
Total mortgage related securities	29,092		(65)		-		-		29,092		(65)
Total available-for-sale securities	$	29,092	$	(65)	$	2,879	$	(121)	$	31,971	$	(186)

Held-to-Maturity Securities:
Agency residential mortgage related securities	-		-		-		-		-		-
Total mortgage related securities	-		-		-		-		-		-
Total held-to-maturity securities	$	-	$	-	$	-	$	-	$	-	$	-
Total Temporarily Impaired Securities	$	29,092	$	(65)	$	2,879	$	(121)	$	31,971	$	(186)

During the three months ended March 31, 2013, the Company sold three mortgage related securities with an amortized cost of $6.5 million and recognized gross gains of $361,000.

The Company evaluates a variety of factors when concluding whether a security is other-than-temporarily impaired. These factors include, but are not limited to, the type and purpose of the security, the underlying rating of the issuer, and the presence of credit enhancements.

At March 31, 2013, gross unrealized losses totaled $1.5 million. One corporate security, with a fair value of $3.0 million and an unrealized loss position of $49,000, had an unrealized loss position for twelve months or longer as of March 31, 2013. This security has a rating of “Baa2”. The remaining securities in an unrealized position at March 31, 2013 have been in an unrealized loss position for less than twelve months. These securities are all agency residential mortgage related securities whose fair value primarily fluctuates with changes in market conditions for the underlying securities and changes in the interest rate environment. The Company does not intend to sell these securities in an unrealized loss position and it is not more likely than not that it will be required to sell these securities before a recovery of fair value, which may be maturity. Upon review of the attributes of the individual securities, the Company concluded these securities were not other-than-temporarily impaired.

As of March 31, 2013, the Company held three private label CMBS with an amortized cost of $4.6 million. These securities had a net unrealized gain of $49,000 at March 31, 2013 and all individual securities were held at an unrealized gain. As of December 31, 2012, the Company held three private label CMBS with an amortized cost of $6.1 million. These securities had a net unrealized gain of $78,000 at December 31, 2012 and all individual securities were held at an unrealized gain.

The Company evaluates current characteristics of each of these private label securities such as delinquency and foreclosure levels, credit enhancement, projected losses, coverage and actual and projected cash flows, on a quarterly basis. 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 would 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.

The following schedules provide a summary of the components of net investment securities gains (losses) in the Company’s consolidated statements of operations for the three month periods ended March 31, 2013 and 2012.

	Three Months Ended March 31, 2013 (Unaudited):
					Other-than-
	Gross		Gross		Temporary		Portion of
	Realized		Realized		Impairment		OTTI		Net Gains
	Gains		Losses		Losses		in OCI		(Losses)
	(In thousands)

Obligations of U.S. government agencies	$	-	$	-	$	-	$	-	$	-
Corporate securities	-		-		-		-		-
	-		-		-		-		-

Private label residential mortgage related security	-		-		-		-		-
Private label commercial mortgage related securities	-		-		-		-		-
Agency residential mortgage related securities	361		-		-		-		361
Total mortgage related securities	361		-		-		-		361

Total securities available-for-sale	$	361	$	-	$	-	$	-	$	361


	Three Months Ended March 31, 2012 (Unaudited):
					Other-than-
	Gross		Gross		Temporary		Portion of
	Realized		Realized		Impairment		OTTI		Net Gains
	Gains		Losses		Losses		in OCI		(Losses)
	(In thousands)

Obligations of U.S. government agencies	$	-	$	-	$	-	$	-	$	-
Corporate securities	-		-		-		-		-
	-		-		-		-		-

Private label residential mortgage related security	-		-		-		-		-
Private label commercial mortgage related securities	-		-		-		-		-
Agency residential mortgage related securities	-		-		-		-		-
Total mortgage related securities	-		-		-		-		-

Total securities available-for-sale	$	-	$	-	$	-	$	-	$	-

The amortized cost and estimated fair value of investment securities available-for-sale and held-to-maturity at March 31, 2013 and December 31, 2012 by contractual maturity are as follows:

	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)

March 31, 2013 (Unaudited)
Due in one year or less	$	3,968	$	4,003	$	-	$	-
Due after one year through five years	8,514		8,539		-		-
Due after five years through ten years	-		-		-		-
Due after ten years	-		-		-		-
Total mortgage related securities	298,826		302,727		25,611		26,638
	$	311,308	$	315,269	$	25,611	$	26,638


December 31, 2012
Due in one year or less	$	2,019	$	2,032	$	-	$	-
Due after one year through five years	10,488		10,459		-		-
Due after five years through ten years	-		-		-		-
Due after ten years	-		-		-		-
Total mortgage related securities	276,580		283,616		28,369		29,451
	$	289,087	$	296,107	$	28,369	$	29,451

Securities with a carrying value of $7.6 million and $8.3 million at March 31, 2013 and December 31, 2012, respectively, were pledged to secure public deposits and for other purposes as required or permitted by law.

Securities with a carrying value of $40.8 million and $46.6 million at March 31, 2013 and December 31, 2012, respectively, were used to secure other borrowed funds. See Note 7.