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Securities

12 Months Ended

Jun. 30, 2024

Note 3.

Securities

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 June 30, 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 tables summarizes the amortized cost and fair value of securities available-for-sale by major type:

	At June 30, 2024
(In thousands)	Amortized cost⁽¹⁾		Unrealized gains		Unrealized losses		Fair value
U.S. Treasury securities	$	43,024	$	-	$	1,829	$	41,195
U.S. government sponsored enterprises		13,042		-		2,068		10,974
State and political subdivisions		169,842		828		1		170,669
Mortgage-backed securities-residential		40,402		67		3,894		36,575
Mortgage-backed securities-multi-family		90,261		-		17,961		72,300
Corporate debt securities		19,608		15		1,335		18,288
Total securities available-for-sale	$	376,179	$	910	$	27,088	$	350,001

	At June 30, 2023
(In thousands)	Amortized cost⁽¹⁾		Unrealized gains		Unrealized losses		Fair value
U.S. Treasury securities	$	18,349	$	-	$	1,849	$	16,500
U.S. government sponsored enterprises		13,054		-		2,231		10,823
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 $4.0 million and $2.9 million at June 30, 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 year ended June 30, 2024.

The following table summarizes the amortized cost, fair value, and the allowance for credit losses on securities held-to-maturity by major type:

	At June 30, 2024
(In thousands)	Amortized cost⁽¹⁾		Unrealized gains		Unrealized losses		Fair value		Allowance⁽²⁾		Net carrying value
Securities held-to-maturity:
U.S. Treasury securities	$	23,785	$	-	$	1,749	$	22,036	$	-	$	23,785
State and political subdivisions		450,343		4,541		40,235		414,649		44		450,299
Mortgage-backed securities-residential		48,033		51		3,314		44,770		-		48,033
Mortgage-backed securities-multi-family		143,363		-		17,397		125,966		-		143,363
Corporate debt securities		25,282		12		2,505		22,789		438		24,844
Other securities		31		-		-		31		1		30
Total securities held-to-maturity	$	690,837	$	4,604	$	65,200	$	630,241	$	483	$	690,354

	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 $4.1 million and $3.9 million at June 30, 2024 and June 30, 2023, respectively, which is included in accrued interest receivable in the consolidated statements of financial condition.

⁽²⁾

Effective July 1, 2023, the allowance calculation is based upon the CECL methodology. Prior to July 1, 2023, the allowance calculation was based upon the incurred loss methodology.

The Company adopted ASU 2016-13 (CECL) as of July 1, 2023. For periods subsequent to adoption, the allowance for credit losses (ACL) is calculated under the CECL methodology and the resulting provision for credit losses includes expected credit losses on securities held-to-maturity. The periods prior to adoption did not have an allowance for credit losses under applicable Generally Accepted Accounting Principles (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 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.

Management assesses the change in fair value of investment securities on a regular basis. Unrealized losses may occur from current market conditions, increases in interest rates since the time of purchase and deterioration in credit quality of issuers. Management assesses both qualitative and quantitative factors to determine whether any credit-related allowance is required. There was no allowance for credit losses on securities available-for-sale at the year ended June 30, 2024, as the securities in the portfolio are investment grade, current as to principal and interest and their price changes are consistent with interest and credit spreads when adjusting for convexity, rating, and industry differences.

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

(In thousands)	Year ended June 30, 2024
Balance beginning of period	$	-
Adoption of ASU 2016-13 (CECL) on July 1, 2023		503
Provision (benefit) for credit losses		(20	)
Balance end of period	$	483

The Company adopted CECL on July 1, 2023. There was no allowance for credit losses recorded on held-to-maturity securities as of the year ended June 30, 2023.

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 June 30, 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. Treasury securities	$	24,574	$	215		1	$	16,621	$	1,614		8	$	41,195	$	1,829		9
U.S. government sponsored enterprises		-		-		-		10,974		2,068		5		10,974		2,068		5
State and political subdivisions		-		-		-		62		1		1		62		1		1
Mortgage-backed securities-residential		1,913		8		2		22,700		3,886		23		24,613		3,894		25
Mortgage-backed securities-multi-family		-		-		-		72,300		17,961		31		72,300		17,961		31
Corporate debt securities		-		-		-		16,360		1,335		16		16,360		1,335		16
Total securities available-for-sale		26,487		223		3		139,017		26,865		84		165,504		27,088		87
Securities held-to-maturity:
U.S. Treasury securities		-		-		-		22,036		1,749		7		22,036		1,749		7
State and political subdivisions		32,215		474		294		278,521		39,761		2,025		310,736		40,235		2,319
Mortgage-backed securities-residential		-		-		-		29,510		3,314		28		29,510		3,314		28
Mortgage-backed securities-multi-family		-		-		-		125,966		17,397		47		125,966		17,397		47
Corporate debt securities		-		-		-		20,276		2,505		41		20,276		2,505		41
Total securities held-to-maturity		32,215		474		294		476,309		64,726		2,148		508,524		65,200		2,442
Total securities	$	58,702	$	697		297	$	615,326	$	91,591		2,232	$	674,028	$	92,288		2,529

	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. Treasury securities	$	761	$	57		2	$	15,739	$	1,792		6	$	16,500	$	1,849		8
U.S. government sponsored enterprises		-		-		-		10,823		2,231		5		10,823		2,231		5
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 year ended June 30, 2024 or 2023. During the year ended June 30, 2024, there were no sales of securities and no gains or losses recognized. During the year ended June 30, 2023, a loss of $251,000 was recognized from a sale of one security available-for-sale. The proceeds were used to fund higher-yielding loans.

The estimated fair values of debt securities at June 30, 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	$	195,839	$	196,431
After one year through five years		39,264		36,207
After five years through ten years		8,913		7,295
After ten years		1,500		1,193
Total securities available-for-sale		245,516		241,126
Mortgage-backed and asset-backed securities		130,663		108,875
Total securities available-for-sale		376,179		350,001

Securities held-to-maturity
Within one year		56,992		56,196
After one year through five years		156,431		151,325
After five years through ten years		171,167		153,881
After ten years		114,851		98,103
Total securities held-to-maturity		499,441		459,505
Mortgage-backed securities		191,396		170,736
Total securities held-to-maturity		690,837		630,241
Total securities	$	1,067,016	$	980,242

As of June 30, 2024 and 2023, respectively, securities with an aggregate fair value of $894.5 million and $904.8 million were pledged as collateral for deposits in excess of FDIC insurance limits for various municipalities placing deposits with the Commercial Bank. As of June 30, 2024 and 2023, securities with an aggregate fair value of $40.0 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 years ended June 30, 2024 or 2023.