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Securities

9 Months Ended

Mar. 31, 2022

(4) Securities

Securities at March 31, 2022 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	$	13,070	$	-	$	1,133	$	11,937
U.S. treasury securities		20,186		-		1,205		18,981
State and political subdivisions		231,733		442		158		232,017
Mortgage-backed securities-residential		34,606		10		2,132		32,484
Mortgage-backed securities-multi-family		110,287		33		11,731		98,589
Corporate debt securities		17,876		8		450		17,434
Total securities available-for-sale		427,758		493		16,809		411,442
Securities held-to-maturity:
U.S. treasury securities		28,621		-		994		27,627
State and political subdivisions		472,018		28,246		17,380		482,884
Mortgage-backed securities-residential		24,171		48		1,131		23,088
Mortgage-backed securities-multi-family		186,971		386		8,567		178,790
Corporate debt securities		17,904		23		417		17,510
Other securities		54		-		-		54
Total securities held-to-maturity		729,739		28,703		28,489		729,953
Total securities	$	1,157,497	$	29,196	$	45,298	$	1,141,395

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 March 31, 2022, 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 March 31, 2022.

	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	$	11,937	$	1,133		4	$	-	$	-		-	$	11,937	$	1,133		4
U.S. treasury securities		18,982		1,205		8		-		-		-		18,982		1,205		8
State and political subdivisions		75,135		158		70		-		-		-		75,135		158		70
Mortgage-backed securities-residential		31,687		2,132		17		-		-		-		31,687		2,132		17
Mortgage-backed securities-multi-family		76,914		9,958		29		10,558		1,773		4		87,472		11,731		33
Corporate debt securities		15,921		450		13		-		-		-		15,921		450		13
Total securities available-for-sale		230,576		15,036		141		10,558		1,773		4		241,134		16,809		145
Securities held-to-maturity:
U.S. treasury securities		27,627		994		8		-		-		-		27,627		994		8
State and political subdivisions		151,743		17,245		900		784		135		5		152,527		17,380		905
Mortgage-backed securities-residential		20,122		1,131		13		-		-		-		20,122		1,131		13
Mortgage-backed securities-multi-family		128,056		8,567		47		-		-		-		128,056		8,567		47
Corporate debt securities		8,389		417		14		-		-		-		8,389		417		14
Total securities held-to-maturity		335,937		28,354		982		784		135		5		336,721		28,489		987
Total securities	$	566,513	$	43,390		1,123	$	11,342	$	1,908		9	$	577,855	$	45,298		1,132

	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. During the quarter ended March 31, 2022, interest rates have increased, causing the unrealized loss on debt securities to increase, which does not indicate OTTI. Management also evaluated securities considering the other factors as outlined above, and based on this evaluation the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2022.

There were no transfers of securities available-for-sale to held-to-maturity during the three and nine months ended March 31, 2022 or 2021. During the three and nine months ended March 31, 2022 and 2021, 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 nine months ended March 31, 2022 and 2021.

The estimated fair values of debt securities at March 31, 2022, 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	$	231,649	$	231,933
After one year through five years		17,721		17,038
After five years through ten years		31,995		29,982
After ten years		1,500		1,416
Total available-for-sale debt securities		282,865		280,369
Mortgage-backed securities		144,893		131,073
Total available-for-sale securities		427,758		411,442

Held-to-maturity debt securities
Within one year		68,557		69,573
After one year through five years		150,823		156,939
After five years through ten years		121,481		128,808
After ten years		177,736		172,755
Total held-to-maturity debt securities		518,597		528,075
Mortgage-backed securities		211,142		201,878
Total held-to-maturity securities		729,739		729,953
Total debt securities	$	1,157,497	$	1,141,395

At March 31, 2022 and June 30, 2021, respectively, securities with an aggregate fair value of $1.0 billion 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 March 31, 2022 and June 30, 2021, securities with an aggregate fair value of $18.2 million and $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 nine months ended March 31, 2022 or 2021, 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 nine months ended March 31, 2022 or 2021.