Investment Securities

3 Months Ended

Sep. 30, 2023

Investment Securities

Investment Securities

Note 4: Investment Securities

The amortized cost and estimated fair value of investment securities as of September 30, 2023 and June 30, 2023 were as follows:

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair		Carrying
September 30, 2023	Cost		Gains		(Losses)		Value		Value
(In Thousands)
Held to maturity
U.S. government sponsored enterprise MBS(1)	$	143,070	$	1	$	(20,376)	$	122,695	$	143,070
U.S. government sponsored enterprise CMO(2)		3,870		—		(347)		3,523		3,870
U.S. SBA securities(3)		634		—		(1)		633		634
Total investment securities - held to maturity		147,574		1		(20,724)		126,851		147,574
Available for sale
U.S. government agency MBS		1,379		—		(39)		1,340		1,340
U.S. government sponsored enterprise MBS		662		—		(10)		652		652
Private issue CMO		101		—		(3)		98		98
Total investment securities - available for sale		2,142		—		(52)		2,090		2,090
Total investment securities	$	149,716	$	1	$	(20,776)	$	128,941	$	149,664

(1)Mortgage-Backed Securities (“MBS”).

(2)Collateralized Mortgage Obligations (“CMO”).

(3)Small Business Administration (“SBA”).

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair		Carrying
June 30, 2023	Cost		Gains		(Losses)		Value		Value
(In Thousands)
Held to maturity
U.S. government sponsored enterprise MBS	$	149,803	$	—	$	(18,459)	$	131,344	$	149,803
U.S. government sponsored enterprise CMO		3,883		—		(336)		3,547		3,883
U.S. SBA securities		651		—		(1)		650		651
Total investment securities - held to maturity		154,337		—		(18,796)		135,541		154,337
Available for sale
U.S. government agency MBS		1,417		—		(47)		1,370		1,370
U.S. government sponsored enterprise MBS		697		—		(14)		683		683
Private issue CMO		103		—		(1)		102		102
Total investment securities - available for sale		2,217		—		(62)		2,155		2,155
Total investment securities	$	156,554	$	—	$	(18,858)	$	137,696	$	156,492

In the first quarters of fiscal 2024 and 2023, the Corporation received MBS principal payments of $6.7 million and $9.3 million, respectively, and there were no purchases or sales of investment securities during these periods.

The Corporation held investments with an unrealized loss position of $20.8 million at September 30, 2023 and $18.9 million at June 30, 2023.

As of September 30, 2023	Unrealized Holding Losses				Unrealized Holding Losses				Unrealized Holding Losses
(In Thousands)	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses
Held to maturity
U.S. government sponsored enterprise MBS	$	2,237	$	3	$	119,202	$	20,373	$	121,439	$	20,376
U.S. government sponsored enterprise CMO		—		—		3,523		347		3,523		347
U.S. SBA securities		—		—		633		1		633		1
Total investment securities - held to maturity		2,237		3		123,358		20,721		125,595		20,724
Available for sale
U.S government agency MBS		—		—		1,340		39		1,340		39
U.S. government sponsored enterprise MBS		62		1		558		9		620		10
Private issue CMO		—		—		98		3		98		3
Total investment securities - available for sale		62		1		1,996		51		2,058		52
Total investment securities	$	2,299	$	4		125,354	$	20,772	$	127,653	$	20,776

As of June 30, 2023	Unrealized Holding Losses				Unrealized Holding Losses				Unrealized Holding Losses
(In Thousands)	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses
Held to maturity
U.S. government sponsored enterprise MBS	$	10,839	$	253	$	120,506	$	18,206	$	131,345	$	18,459
U.S. government sponsored enterprise CMO		—		—		3,547		336		3,547		336
U.S. SBA securities		650		1		—		—		650		1
Total investment securities - held to maturity		11,489		254		124,053		18,542		135,542		18,796
Available for sale
U.S government agency MBS		696		20		673		27		1,369		47
U.S. government sponsored enterprise MBS		87		2		558		12		645		14
Private issue CMO		—		—		102		1		102		1
Total investment securities - available for sale		783		22		1,333		40		2,116		62
Total investment securities	$	12,272	$	276	$	125,386	$	18,582	$	137,658	$	18,858

The Corporation adopted ASC 326 on July 1, 2023. The Corporation evaluates individual investment securities quarterly for impairment. At September 30, 2023, predominately all of the $20.8 million of unrealized holding losses were in a loss position for 12 months or more; while at June 30, 2023, $18.6 million of the $18.9 million of unrealized holding losses were in a loss position for 12 months or more. The unrealized losses on investment securities were attributable to changes

in interest rates relative to when the investment securities were purchased and not due to the credit quality of the investment securities, which are predominately U.S. government sponsored enterprise (GSE) securities that are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses. Therefore, the Corporation has determined that the unrealized losses are due to the fluctuating nature of interest rates, and not related to credit risks. As a part of the Corporation’s monthly risk assessment, the Corporation runs a number of stressed liquidity scenarios. These liquidity scenarios support the Corporation’s assessment that the Corporation has the ability to hold these securities until maturity and does not need to liquidate these investment securities in order to maintain adequate liquidity. As a result, no ACL on investment securities was recorded at adoption and at September 30, 2023.

In order to maintain adequate liquidity, the Bank has established borrowing facilities with various counterparties. The Bank had a remaining borrowing capacity of $286.9 million as of September 30, 2023 at the FHLB of San Francisco. In addition, the Bank has secured an estimated $185.3 million discount window facility at the FRB of San Francisco collateralized by investment securities with total balance of $143.6 million and loans with total balance of $106.6 million as of September 30, 2023. As of September 30, 2023, the Bank also has a borrowing arrangement in the form of a federal funds facility with its correspondent bank for $50.0 million. The Bank had no advances under the Federal Reserve discount window or correspondent bank facility as of September 30, 2023.

At June 30, 2023, the Bank had a remaining borrowing capacity of $287.9 million at the FHLB of San Francisco. In addition, the Bank had secured an estimated $139.0 million discount window facility at the FRB of San Francisco collateralized by investment securities with a June 30, 2023 total balance of $150.3 million. As of June 30, 2023, the Bank also had a borrowing arrangement in the form of a federal funds facility with its correspondent bank for $50.0 million. The Bank had no advances under the Federal Reserve discount window or correspondent bank facility as of June 30, 2023.

At September 30, 2023 and 2022, the Corporation did not hold any investment securities with the intent to sell and determined it had the ability to hold these investment securities until maturity. It also determined that it was more likely than not that the Corporation would not be required to sell the securities prior to recovery of the amortized cost basis; therefore, no impairment losses were recorded for the quarters ended September 30, 2023 and 2022.

Contractual maturities of investment securities as of September 30, 2023 and June 30, 2023 were as follows:

	September 30, 2023				June 30, 2023
			Estimated				Estimated
	Amortized		Fair		Amortized		Fair
(In Thousands)	Cost		Value		Cost		Value
Held to maturity
Due in one year or less	$	101	$	100	$	303	$	300
Due after one through five years		6,861		6,557		7,686		7,365
Due after five through ten years		57,770		51,267		61,043		54,686
Due after ten years		82,842		68,927		85,305		73,190
Total investment securities - held to maturity		147,574		126,851		154,337		135,541
Available for sale
Due in one year or less		—		—		—		—
Due after one through five years		—		—		—		—
Due after five through ten years		569		560		590		580
Due after ten years		1,573		1,530		1,627		1,575
Total investment securities - available for sale		2,142		2,090		2,217		2,155
Total investment securities	$	149,716	$	128,941	$	156,554	$	137,696