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Securities

9 Months Ended

Mar. 31, 2024

(3) Securities

The following tables summarize the amortized cost and fair value of securities available-for-sale by major type:

	At March 31, 2024
(In thousands)	Amortized cost⁽¹⁾		Unrealized gains		Unrealized losses		Fair value
U.S. government sponsored enterprises	$	13,045	$	-	$	2,095	$	10,950
U.S. Treasury securities		45,075		-		1,942		43,133
State and political subdivisions		170,252		725		1		170,976
Mortgage-backed securities-residential		33,277		30		3,929		29,378
Mortgage-backed securities-multi-family		90,692		-		18,175		72,517
Corporate debt securities		19,845		20		1,300		18,565
Total securities available-for-sale	$	372,186	$	775	$	27,442	$	345,519

	At June 30, 2023
(In thousands)	Amortized cost ⁽¹⁾		Unrealized gains		Unrealized losses		Fair value
U.S. government sponsored enterprises	$	13,054	$	-	$	2,231	$	10,823
U.S. Treasury securities		18,349		-		1,849		16,500
State and political subdivisions		137,343		670		2		138,011
Mortgage-backed securities-residential		29,586		-		3,985		25,601
Mortgage-backed securities-multi-family		91,016		-		18,930		72,086
Corporate debt securities		19,805		-		1,693		18,112
Total securities available-for-sale	$	309,153	$	670	$	28,690	$	281,133

(1)

Amortized cost excludes accrued interest receivable of $4.8 million and $2.9 million at March 31, 2024 and June 30, 2023, respectively, which is included in accrued interest receivable in the consolidated statements of financial condition.

There was no allowance for credit losses on securities available-for-sale at the quarter ended March 31, 2024.

The following tables summarize the amortized cost, fair value, and allowance for credit loss on securities held-to-maturity by major type:

	At March 31, 2024
(In thousands)	Amortized cost⁽¹⁾		Unrealized gains		Unrealized losses		Fair value		Allowance⁽²⁾		Net carrying value
U.S. Treasury securities	$	33,767	$	-	$	1,849	$	31,918	$	-	$	33,767
State and political subdivisions		462,643		6,518		34,182		434,979		45		462,598
Mortgage-backed securities-residential		33,947		-		3,319		30,628		-		33,947
Mortgage-backed securities-multi-family		145,234		-		17,981		127,253		-		145,234
Corporate debt securities		25,246		20		2,572		22,694		452		24,794
Other securities		32		-		-		32		1		31
Total securities held-to-maturity	$	700,869	$	6,538	$	59,903	$	647,504	$	498	$	700,371

	At June 30, 2023
(In thousands)	Amortized cost⁽¹⁾		Unrealized gains		Unrealized losses		Fair value		Allowance⁽²⁾		Net carrying value
U.S. Treasury securities	$	33,705	$	-	$	2,438	$	31,267	$	-	$	33,705
State and political subdivisions		478,756		5,178		30,662		453,272		-		478,756
Mortgage-backed securities-residential		37,186		-		3,625		33,561		-		37,186
Mortgage-backed securities-multi-family		155,046		-		20,324		134,722		-		155,046
Corporate debt securities		21,632		-		3,426		18,206		-		21,632
Other securities		38		-		-		38		-		38
Total securities held-to-maturity	$	726,363	$	5,178	$	60,475	$	671,066	$	-	$	726,363

(1)

Amortized cost excludes accrued interest receivable of $5.3 million and $3.9 million at March 31, 2024 and June 30, 2023, respectively, which is included in accrued interest receivable in the consolidated statements of financial condition.

(2)

The Company adopted ASU 2016-13 (CECL) on July 1, 2023. For periods subsequent to adoption, an allowance is calculated under the CECL methodology. The periods prior to adoption did not have an allowance for credit losses under applicable GAAP for those periods.

U.S. Treasury and mortgage-backed securities are issued by U.S. government entities and agencies. These securities are either explicitly and/or implicitly guaranteed by the U.S. government as to timely repayment of principal and interest, are highly rated by major rating agencies, and have a long history of zero credit losses. Therefore, the Company determined a zero credit loss assumption, and did not calculate or record an allowance for credit loss for these securities. An allowance for credit losses on investment securities held-to-maturity as of March 31, 2024 has been recorded for certain municipal securities issued by state and political subdivisions and corporate debt securities to account for expected lifetime credit loss using the CECL methodology.

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 March 31, 2024, 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 balance sheet interest rate swaps or caps.

The following table summarizes the activity in the allowance for credit losses on securities held-to-maturity:

(In thousands)	Three months ended March 31, 2024		Nine months ended March 31, 2024
Balance beginning of period	$	485	$	-
Adoption of ASU 2016-13 (CECL) on July 1, 2023		-		503
Provision (benefit) for credit losses		13		(5	)
Balance end of period	$	498	$	498

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, 2024.

	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	$	-	$	-		-	$	10,950	$	2,095		5	$	10,950	$	2,095		5
U.S. Treasury securities		27,318		313		4		15,815		1,629		6		43,133		1,942		10
State and political subdivisions		-		-		-		62		1		1		62		1		1
Mortgage-backed securities-residential		1,972		5		1		23,414		3,924		26		25,386		3,929		27
Mortgage-backed securities-multi-family		-		-		-		72,517		18,175		31		72,517		18,175		31
Corporate debt securities		-		-		-		16,637		1,300		16		16,637		1,300		16
Total securities available-for-sale		29,290		318		5		139,395		27,124		85		168,685		27,442		90
Securities held-to-maturity:
U.S. Treasury securities		-		-		-		31,918		1,849		8		31,918		1,849		8
State and political subdivisions		13,610		46		131		296,385		34,136		2,164		309,995		34,182		2,295
Mortgage-backed securities-residential		-		-		1		30,628		3,319		28		30,628		3,319		29
Mortgage-backed securities-multi-family		-		-		-		127,253		17,981		52		127,253		17,981		52
Corporate debt securities		-		-		-		19,265		2,572		18		19,265		2,572		18
Total securities held-to-maturity		13,610		46		132		505,449		59,857		2,270		519,059		59,903		2,402
Total securities	$	42,900	$	364		137	$	644,844	$	86,981		2,355	$	687,744	$	87,345		2,492

	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	$	-	$	-		-	$	10,823	$	2,231		5	$	10,823	$	2,231		5
U.S. Treasury securities		761		57		2		15,739		1,792		6		16,500		1,849		8
State and political subdivisions		-		-		-		82		2		1		82		2		1
Mortgage-backed securities-residential		476		29		7		25,125		3,956		21		25,601		3,985		28
Mortgage-backed securities-multi-family		2,679		182		1		69,407		18,748		30		72,086		18,930		31
Corporate debt securities		2,352		40		2		15,760		1,653		15		18,112		1,693		17
Total securities available-for-sale		6,268		308		12		136,936		28,382		78		143,204		28,690		90
Securities held-to-maturity:
U.S. Treasury securities		-		-		-		31,267		2,438		8		31,267		2,438		8
State and political subdivisions		40,412		520		448		295,479		30,142		2,018		335,891		30,662		2,466
Mortgage-backed securities-residential		1,982		120		12		31,579		3,505		18		33,561		3,625		30
Mortgage-backed securities-multi-family		5,362		245		2		129,360		20,079		54		134,722		20,324		56
Corporate debt securities		10,236		2,012		9		7,970		1,414		10		18,206		3,426		19
Total securities held-to-maturity		57,992		2,897		471		495,655		57,578		2,108		553,647		60,475		2,579
Total securities	$	64,260	$	3,205		483	$	632,591	$	85,960		2,186	$	696,851	$	89,165		2,669

There were no transfers of securities available-for-sale to held-to-maturity during the three and nine months ended March 31, 2024 and 2023, respectively. During the three and nine months ended March 31, 2024, there were no sales of securities and no gains or losses were recognized. During the three months ended March 31, 2023, there were no sales of securities and no gains or losses were recognized. During the nine months ended March 31, 2023, 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.

The estimated fair values of debt securities at March 31, 2024, 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)

Securities available-for-sale	Amortized cost		Fair value
Within one year	$	198,521	$	198,954
After one year through five years		39,286		36,160
After five years through ten years		8,910		7,273
After ten years		1,500		1,237
Total securities available-for-sale		248,217		243,624
Mortgage-backed and asset-backed securities		123,969		101,895
Total securities available-for-sale		372,186		345,519

Securities held-to-maturity
Within one year		63,451		62,980
After one year through five years		163,298		159,412
After five years through ten years		159,777		148,919
After ten years		135,162		118,312
Total securities held-to-maturity		521,688		489,623
Mortgage-backed securities		179,181		157,881
Total securities held-to-maturity		700,869		647,504
Total securities	$	1,073,055	$	993,023

At March 31, 2024 and June 30, 2023, securities with an aggregate fair value of $905.5 million and $904.8 million, respectively, were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with the Commercial Bank. At March 31, 2024 and June 30, 2023, securities with an aggregate fair value of $40.5 million and $20.8 million, respectively, were pledged as collateral for potential borrowings at the Federal Reserve Bank discount window and the Bank Term Funding Program. The Company did not participate in any securities lending programs during the three and nine months ended March 31, 2024 or 2023.

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. Estimated credit loss 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 credit loss was recorded during the three and nine months ended March 31, 2024 or 2023.