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Securities

6 Months Ended

Dec. 31, 2021

(4) Securities

Securities at December 31, 2021 consisted of the following:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available-for-sale:
U.S. government sponsored enterprises	$	13,073	$	5	$	308	$	12,770
U.S. treasury securities		19,621		21		109		19,533
State and political subdivisions		219,758		91		6		219,843
Mortgage-backed securities-residential		33,432		189		214		33,407
Mortgage-backed securities-multi-family		115,769		420		3,203		112,986
Corporate debt securities		3,007		83		5		3,085
Total securities available-for-sale		404,660		809		3,845		401,624
Securities held-to-maturity:
U.S. treasury securities		10,943		-		117		10,826
State and political subdivisions		446,852		16,330		644		462,538
Mortgage-backed securities-residential		22,945		442		97		23,290
Mortgage-backed securities-multi-family		169,615		3,276		1,323		171,568
Corporate debt securities		15,884		157		63		15,978
Other securities		55		-		-		55
Total securities held-to-maturity		666,294		20,205		2,244		684,255
Total securities	$	1,070,954	$	21,014	$	6,089	$	1,085,879

Securities at June 30, 2021 consisted of the following:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available-for-sale:
U.S. government sponsored enterprises	$	13,079	$	36	$	212	$	12,903
U.S. treasury securities		19,672		165		1		19,836
State and political subdivisions		200,436		220		-		200,656
Mortgage-backed securities-residential		34,861		287		167		34,981
Mortgage-backed securities-multi-family		119,359		1,042		994		119,407
Corporate debt securities		3,008		129		30		3,107
Total securities available-for-sale		390,415		1,879		1,404		390,890
Securities held-to-maturity:
U.S. treasury securities		10,938		28		2		10,964
State and political subdivisions		341,364		17,184		303		358,245
Mortgage-backed securities-residential		28,450		584		90		28,944
Mortgage-backed securities-multi-family		100,330		4,635		12		104,953
Corporate debt securities		9,892		111		65		9,938
Other securities		5,940		58		-		5,998
Total securities held-to-maturity		496,914		22,600		472		519,042
Total securities	$	887,329	$	24,479	$	1,876	$	909,932

Greene County Bancorp, Inc.’s current policies generally limit securities investments to U.S. Government and securities of government sponsored enterprises, federal funds sold, municipal bonds, corporate debt obligations, subordinated debt of banks and certain mutual funds. In addition, the Company’s policies permit investments in mortgage-backed securities, including securities issued and guaranteed by Fannie Mae, Freddie Mac, and GNMA, and collateralized mortgage obligations issued by these entities. At December 31, 2021, all mortgage-backed securities including collateralized mortgage obligations were securities of government sponsored enterprises, no private-label mortgage-backed securities or collateralized mortgage obligations were held in the securities portfolio. The Company’s investments in state and political subdivisions securities generally are municipal obligations that are general obligations supported by the general taxing authority of the issuer, and in some cases are insured. The obligations issued by school districts are supported by state aid. Primarily, these investments are issued by municipalities within New York State.

The Company’s current securities investment strategy utilizes a risk management approach of diversified investing among three categories: short-, intermediate- and long-term. The emphasis of this approach is to increase overall investment securities yields while managing interest rate risk. The Company will only invest in high quality securities as determined by management’s analysis at the time of purchase. The Company generally does not engage in any derivative or hedging transactions, such as interest rate swaps or caps.

The following table shows fair value and gross unrealized losses, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2021.

	Less Than 12 Months						More Than 12 Months						Total
(In thousands, except number of securities)	Fair Value		Unrealized Losses		Number of Securities		Fair Value		Unrealized Losses		Number of Securities		Fair Value		Unrealized Losses		Number of Securities
Securities available-for-sale:
U.S. government sponsored enterprises	$	6,088	$	105		3	$	4,797	$	203		1	$	10,885	$	308		4
U.S. treasury securities		17,592		109		6		-		-		-		17,592		109		6
State and political subdivisions		43,224		6		34		-		-		-		43,224		6		34
Mortgage-backed securities-residential		22,885		214		8		-		-		-		22,885		214		8
Mortgage-backed securities-multi-family		82,027		2,505		32		12,613		698		5		94,640		3,203		37
Corporate debt securities		495		5		1		-		-		-		495		5		1
Total securities available-for-sale		172,311		2,944		84		17,410		901		6		189,721		3,845		90
Securities held-to-maturity:
U.S. treasury securities		10,826		117		4		-		-		-		10,826		117		4
State and political subdivisions		81,640		640		344		188		4		1		81,828		644		345
Mortgage-backed securities-residential		11,622		97		2		-		-		-		11,622		97		2
Mortgage-backed securities-multi-family		80,311		1,323		24		-		-		-		80,311		1,323		24
Corporate debt securities		2,735		51		3		488		12		1		3,223		63		4
Total securities held-to-maturity		187,134		2,228		377		676		16		2		187,810		2,244		379
Total securities	$	359,445	$	5,172		461	$	18,086	$	917		8	$	377,531	$	6,089		469

	Less Than 12 Months						More Than 12 Months						Total
(In thousands, except number of securities)	Fair Value		Unrealized Losses		Number of Securities		Fair Value		Unrealized Losses		Number of Securities		Fair Value		Unrealized Losses		Number of Securities
Securities available-for-sale:
U.S. government sponsored enterprises	$	6,787	$	212		2	$	-	$	-		-	$	6,787	$	212		2
U.S. treasury securities		1,970		1		1		-		-		-		1,970		1		1
Mortgage-backed securities-residential		19,071		167		4		-		-		-		19,071		167		4
Mortgage-backed securities-multi-family		59,176		933		21		2,469		61		1		61,645		994		22
Corporate debt securities		970		30		1		-		-		-		970		30		1
Total securities available-for-sale		87,974		1,343		29		2,469		61		1		90,443		1,404		30
Securities held-to-maturity:
U.S. treasury securities		1,991		2		1		-		-		-		1,991		2		1
State and political subdivisions		42,751		303		76		-		-		-		42,751		303		76
Mortgage-backed securities-residential		12,839		90		2		-		-		-		12,839		90		2
Mortgage-backed securities-multi-family		3,890		12		3		-		-		-		3,890		12		3
Corporate debt securities		2,506		36		2		471		29		1		2,977		65		3
Total securities held-to-maturity		63,977		443		84		471		29		1		64,448		472		85
Total securities	$	151,951	$	1,786		113	$	2,940	$	90		2	$	154,891	$	1,876		115

When the fair value of a held-to-maturity or available-for-sale security is less than its amortized cost basis, an assessment is made as to whether other-than-temporary impairment (“OTTI”) is present. The Company considers numerous factors when determining whether a potential OTTI exists and the period over which the debt security is expected to recover. The principal factors considered are (1) the length of time and the extent to which the fair value has been less than the amortized cost basis, (2) the financial condition of the issuer (and guarantor, if any) and adverse conditions specifically related to the security, industry or geographic area, (3) failure of the issuer of the security to make scheduled interest or principal payments, (4) any changes to the rating of the security by a rating agency, and (5) the presence of credit enhancements, if any, including the guarantee of the federal government or any of its agencies.

For debt securities, OTTI is considered to have occurred if (1) the Company intends to sell the security before recovery of its amortized cost basis, (2) it is more likely than not the Company will be required to sell the security before recovery of its amortized cost basis, or (3) if the present value of expected cash flows is not sufficient to recover the entire amortized cost basis. In determining the present value of expected cash flows, the Company discounts the expected cash flows at the effective interest rate implicit in the security at the date of acquisition. In estimating cash flows expected to be collected, the Company uses available information with respect to security prepayment speeds, default rates and severity. In determining whether OTTI has occurred for equity securities, the Company considers the applicable factors described above and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

For debt securities, credit-related OTTI is recognized in earnings while noncredit related OTTI on securities not expected to be sold is recognized in other comprehensive income/loss (“OCI”). Credit-related OTTI is measured as the difference between the present value of an impaired security’s expected cash flows and its amortized cost basis. Noncredit-related OTTI is measured as the difference between the fair value of the security and its amortized cost less any credit-related losses recognized. For securities classified as held-to-maturity, the amount of OTTI recognized in OCI is accreted to the credit-adjusted expected cash flow amounts of the securities over future periods. For equity securities, the entire amount of OTTI is recognized in earnings. Management evaluated securities considering the factors as outlined above, and based on this evaluation the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2021.

There were no transfers of securities available-for-sale to held-to-maturity during the three and six months ended December 31, 2021 or 2020. During the three and six months ended December 31, 2021 and 2020, there were no sales of securities and no gains or losses were recognized. There was no other-than-temporary impairment loss recognized during the three and six months ended December 31, 2021 and 2020.

The estimated fair values of debt securities at December 31, 2021, by contractual maturity are shown below. Expected maturities may differ from contractual maturities, because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

(In thousands)

Available-for-sale debt securities	Amortized Cost		Fair Value
Within one year	$	219,655	$	219,736
After one year through five years		8,787		8,776
After five years through ten years		25,517		25,219
After ten years		1,500		1,500
Total available-for-sale debt securities		255,459		255,231
Mortgage-backed securities		149,201		146,393
Total available-for-sale securities		404,660		401,624

Held-to-maturity debt securities
Within one year		62,888		63,591
After one year through five years		127,936		132,369
After five years through ten years		111,457		116,387
After ten years		171,453		177,050
Total held-to-maturity debt securities		473,734		489,397
Mortgage-backed securities		192,560		194,858
Total held-to-maturity securities		666,294		684,255
Total debt securities	$	1,070,954	$	1,085,879

At December 31, 2021 and June 30, 2021, respectively, securities with an aggregate fair value of $875.8 million and $892.1 million were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with Greene County Commercial Bank. At December 31, 2021 and June 30, 2021, securities with an aggregate fair value of $3.9 million, were pledged as collateral for potential borrowings at the Federal Reserve Bank discount window. Greene County Bancorp, Inc. did not participate in any securities lending programs during the three and six months ended December 31, 2021 or 2020, respectively.

Federal Home Loan Bank Stock

Federal law requires a member institution of the Federal Home Loan Bank (“FHLB”) system to hold stock of its district FHLB according to a predetermined formula. This stock is restricted in that it can only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par. As a result of these restrictions, FHLB stock is carried at cost. FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value. Impairment of this investment is evaluated quarterly and is a matter of judgment that reflects management’s view of the FHLB’s long-term performance, which includes factors such as the following: its operating performance; the severity and duration of declines in the fair value of its net assets related to its capital stock amount; its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance; the impact of legislative and regulatory changes on the FHLB, and accordingly, on the members of the FHLB; and its liquidity and funding position. After evaluating these considerations, Greene County Bancorp, Inc. concluded that the par value of its investment in FHLB stock will be recovered and, therefore, no other-than-temporary impairment charge was recorded during the three and six months ended December 31, 2021 or 2020.