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Securities

6 Months Ended

Dec. 31, 2022

(4) Securities

Securities at December 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	$	13,061	$	-	$	2,332	$	10,729
U.S. treasury securities		18,176		-		2,070		16,106
State and political subdivisions		193,612		546		261		193,897
Mortgage-backed securities-residential		31,025		-		4,329		26,696
Mortgage-backed securities-multi-family		91,243		-		19,612		71,631
Corporate debt securities		17,899		-		1,840		16,059
Total securities available-for-sale		365,016		546		30,444		335,118
Securities held-to-maturity:
U.S. treasury securities		33,664		-		2,566		31,098
State and political subdivisions		487,495		3,479		35,181		455,793
Mortgage-backed securities-residential		39,530		-		3,721		35,809
Mortgage-backed securities-multi-family		160,100		-		20,795		139,305
Corporate debt securities		21,641		2		1,478		20,165
Other securities		40		-		-		40
Total securities held-to-maturity		742,470		3,481		63,741		682,210
Total securities	$	1,107,486	$	4,027	$	94,185	$	1,017,328

Securities at June 30, 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	$	13,066	$	-	$	1,747	$	11,319
U.S. treasury securities		20,158		-		1,731		18,427
State and political subdivisions		247,978		374		276		248,076
Mortgage-backed securities-residential		33,186		-		3,289		29,897
Mortgage-backed securities-multi-family		99,353		-		15,644		83,709
Corporate debt securities		17,884		-		1,250		16,634
Total securities available-for-sale		431,625		374		23,937		408,062
Securities held-to-maturity:
U.S. treasury securities		33,623		-		1,643		31,980
State and political subdivisions		493,897		2,760		35,747		460,910
Mortgage-backed securities-residential		42,461		1		2,242		40,220
Mortgage-backed securities-multi-family		171,921		2		13,895		158,028
Corporate debt securities		19,900		16		651		19,265
Other securities		50		-		-		50
Total securities held-to-maturity		761,852		2,779		54,178		710,453
Total securities	$	1,193,477	$	3,153	$	78,115	$	1,118,515

The Company’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. As of December 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 December 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	$	-	$	-		-	$	10,729	$	2,332		5	$	10,729	$	2,332		5
U.S. treasury securities		535		53		1		15,571		2,017		6		16,106		2,070		7
State and political subdivisions		110,058		261		69		-		-		-		110,058		261		69
Mortgage-backed securities-residential		7,537		687		21		19,159		3,642		9		26,696		4,329		30
Mortgage-backed securities-multi-family		7,920		1,118		4		63,711		18,494		27		71,631		19,612		31
Corporate debt securities		14,903		1,497		13		1,157		343		2		16,060		1,840		15
Total securities available-for-sale		140,953		3,616		108		110,327		26,828		49		251,280		30,444		157
Securities held-to-maturity:
U.S. treasury securities		21,508		1,202		5		9,590		1,364		4		31,098		2,566		9
State and political subdivisions		255,862		12,094		3,457		105,314		23,087		604		361,176		35,181		4,061
Mortgage-backed securities-residential		24,620		1,808		30		11,189		1,913		3		35,809		3,721		33
Mortgage-backed securities-multi-family		75,500		6,316		40		63,806		14,479		22		139,306		20,795		62
Corporate debt securities		5,998		602		5		6,417		876		8		12,415		1,478		13
Total securities held-to-maturity		383,488		22,022		3,537		196,316		41,719		641		579,804		63,741		4,178
Total securities	$	524,441	$	25,638		3,645	$	306,643	$	68,547		690	$	831,084	$	94,185		4,335

	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	$	11,319	$	1,747		5	$	-	$	-		-	$	11,319	$	1,747		5
U.S. treasury securities		18,427		1,731		8		-		-		-		18,427		1,731		8
State and political subdivisions		140,324		276		148		-		-		-		140,324		276		148
Mortgage-backed securities-residential		29,872		3,289		27		-		-		-		29,872		3,289		27
Mortgage-backed securities-multi-family		71,631		12,868		29		12,078		2,776		5		83,709		15,644		34
Corporate debt securities		16,634		1,250		16		-		-		-		16,634		1,250		16
Total securities available-for-sale		288,207		21,161		233		12,078		2,776		5		300,285		23,937		238
Securities held-to-maturity:
U.S. treasury securities		31,980		1,643		9		-		-		-		31,980		1,643		9
State and political subdivisions		353,837		35,564		2,362		735		183		5		354,572		35,747		2,367
Mortgage-backed securities-residential		39,865		2,242		27		-		-		-		39,865		2,242		27
Mortgage-backed securities-multi-family		155,726		13,895		68		-		-		-		155,726		13,895		68
Corporate debt securities		10,751		651		11		-		-		-		10,751		651		11
Total securities held-to-maturity		592,159		53,995		2,477		735		183		5		592,894		54,178		2,482
Total securities	$	880,366	$	75,156		2,710	$	12,813	$	2,959		10	$	893,179	$	78,115		2,720

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.

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.

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. During the six months ended December 31, 2022, interest rates have increased, causing the unrealized loss on debt securities to increase, which does not indicate OTTI. Management has 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 December 31, 2022.

There were no transfers of securities available-for-sale to held-to-maturity during the three and six months ended December 31, 2022 or 2021. During the three and six months ended December 31, 2022, a loss of $251,000 was recognized from one sale of an available-for-sale security. The proceeds were used to fund higher yielding loans. During the three and six months ended December 31, 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 six months ended December 31, 2022 and 2021.

The estimated fair values of debt securities at December 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	$	193,528	$	193,814
After one year through five years		27,017		24,345
After five years through ten years		20,703		17,475
After ten years		1,500		1,157
Total		242,748		236,791
Mortgage-backed securities		122,268		98,327
Total available-for-sale securities		365,016		335,118

Held-to-maturity debt securities
Within one year		59,578		59,044
After one year through five years		167,831		163,465
After five years through ten years		141,455		133,712
After ten years		173,976		150,875
Total		542,840		507,096
Mortgage-backed securities		199,630		175,114
Total held-to-maturity securities		742,470		682,210
Total debt securities	$	1,107,486	$	1,017,328

At December 31, 2022 and June 30, 2022, securities with an aggregate fair value of $843.3 million and $892.9 million, respectively, were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with the Commercial Bank. At December 31, 2022 and June 30, 2022, securities with an aggregate fair value of $16.8 million and $17.4 million, respectively, were pledged as collateral for potential borrowings at the Federal Reserve Bank discount window. The Company did not participate in any securities lending programs during the three and six months ended December 31, 2022 or 2021.

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, the Company concluded that the par value of its investment in FHLB stock will be recovered and, therefore, no impairment charge was recorded during the three and six months ended December 31, 2022 or 2021.