Available for Sale Securities

12 Months Ended

Jun. 30, 2020

Available-for-Sale Securities.

Available-for-Sale Securities

NOTE 2: Available for Sale Securities

The amortized cost, gross unrealized gains, gross unrealized losses and approximate fair value of securities available for sale consisted of the following:

	June 30, 2020
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value
Debt and equity securities:
Obligations of states and political subdivisions	$	40,486	$	1,502	$	—	$	41,988
Other securities		7,919		48		(343)		7,624
TOTAL DEBT AND EQUITY SECURITIES		48,405		1,550		(343)		49,612
Mortgage-backed securities:
FHLMC certificates		29,970		756		(2)		30,724
GNMA certificates		7,546		72		—		7,618
FNMA certificates		42,265		2,402		(5)		44,662
CMOs issues by government agencies		42,594		1,346		(32)		43,908
TOTAL MORTGAGE-BACKED SECURITIES		122,375		4,576		(39)		126,912
TOTAL	$	170,780	$	6,126	$	(382)	$	176,524

	June 30, 2019
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value
Debt and equity securities:
U.S. government and Federal agency obligations	$	7,284	$	1	$	(15)	$	7,270
Obligations of states and political subdivisions		42,123		728		(68)		42,783
Other securities		5,176		75		(198)		5,053
TOTAL DEBT AND EQUITY SECURITIES		54,583		804		(281)		55,106
Mortgage-backed securities:
FHLMC certificates		16,373		64		(65)		16,372
GNMA certificates		35		—		—		35
FNMA certificates		34,943		610		(95)		35,458
CMOs issues by government agencies		57,946		775		(157)		58,564
TOTAL MORTGAGE-BACKED SECURITIES		109,297		1,449		(317)		110,429
TOTAL	$	163,880	$	2,253	$	(598)	$	165,535

The amortized cost and fair value of available-for-sale securities, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2020
	Amortized		Estimated
(dollars in thousands)	Cost		Fair Value
Within one year	$	862	$	868
After one year but less than five years		9,875		10,089
After five years but less than ten years		15,812		16,174
After ten years		21,856		22,481
Total investment securities		48,405		49,612
Mortgage-backed securities		122,375		126,912
Total investments and mortgage-backed securities	$	170,780	$	176,524

The carrying value of investment and mortgage-backed securities pledged as collateral to secure public deposits and securities sold under agreements to repurchase amounted to $156.1 million and $143.7 million at June 30, 2020 and 2019, respectively. The securities pledged consist of marketable securities, including $0 and $5.6 million of U.S. Government and Federal Agency Obligations, $82.0 million and $47.3 million of Mortgage-Backed Securities, $41.9 million and $55.7 million of Collateralized Mortgage Obligations, $32.0 million and $34.9 million of State and Political Subdivisions Obligations, and $200,000 and $300,000 of Other Securities at June 30, 2020 and 2019, respectively.

There were no gains or losses recognized from sales of available-for-sale securities in fiscal 2020. Gains of $265,450 and losses of $21,576 were recognized from sales of available-for-sale securities in fiscal 2019.

The Company did not hold any securities of a single issuer, payable from and secured by the same source of revenue or taxing authority, the book value of which exceeded 10% of stockholders’ equity at June 30, 2020.

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost. Total fair value of these investments at June 30, 2020, was $10.7 million, which is approximately 6.0% of the Company’s available for sale investment portfolio, as compared to $51.8 million or approximately 31.3% of the Company’s available for sale investment portfolio at June 30, 2019. Except as discussed below, management believes the declines in fair value for these securities to be temporary.

The tables below show the Company’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2020 and 2019.

	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
For the year ended June 30, 2020	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(dollars in thousands)
Other securities	$	995	$	5	$	643	$	338	$	1,638	$	343
Mortgage-backed securities		9,037		39		—		—		9,037		39
Total investments and mortgage-backed securities	$	10,032	$	44	$	643	$	338	$	10,675	$	382

	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
For the year ended June 30, 2019	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(dollars in thousands)
U.S. government-sponsored enterprises (GSEs)	$	—	$	—	$	6,969	$	15	$	6,969	$	15
Obligations of state and political subdivisions		—		—		8,531		68		8,531		68
Other securities		—		—		985		198		985		198
Mortgage-backed securities		1,175		1		34,148		316		35,323		317
Total investments and mortgage-backed securities	$	1,175	$	1	$	50,633	$	597	$	51,808	$	598

The unrealized losses on the Company’s investments in mortgage-backed securities were caused by increases in market interest rates. The contractual terms of these instruments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2020.

Other securities. At June 30, 2020, there were two pooled trust preferred securities with an estimated fair value of $643,000 and unrealized losses of $333,000 in a continuous unrealized loss position for twelve months or more. These unrealized losses were primarily due to the long-term nature of the pooled trust preferred securities and a reduced demand for these securities, and concerns regarding the financial institutions that issued the underlying trust preferred securities.

The June 30, 2020, cash flow analysis for these two securities indicated it is probable the Company will receive all contracted principal and related interest projected. The cash flow analysis used in making this determination was based on anticipated default, recovery, and prepayment rates, and the resulting cash flows were discounted based on the yield spread anticipated at the time the securities were purchased. Other inputs include the actual collateral attributes, which include credit ratings and other performance indicators of the underlying financial institutions, including profitability, capital ratios, and asset quality. Assumptions for these two securities included prepayments averaging 1.6 percent, annually, annual defaults averaging 50 basis points, and a recovery rate averaging 10 percent of gross defaults, lagged two years.

One of these two securities has continued to receive cash interest payments in full since initial purchase; the other security received principal-in-kind (PIK), in lieu of cash interest, for a period of time following the recession and financial crisis which began in 2008, but resumed cash interest payments during fiscal 2014. Our cash flow analysis indicates that cash interest payments are expected to continue for the securities. Because the Company does not intend to sell these securities and it is not more-likely-than-not that the Company will be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2020.

The Company does not believe any other individual unrealized loss as of June 30, 2020, represents OTTI. However, the Company could be required to recognize OTTI losses in future periods with respect to its available for sale investment securities portfolio. The amount and timing of any required OTTI will depend on the decline in the underlying cash flows of the securities. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in the period the OTTI is identified.

Credit losses recognized on investments. During fiscal 2009, the Company adopted ASC 820, formerly FASB Staff Position 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” There were no trust preferred securities for which only a credit loss was recognized in income and other losses are recorded in other comprehensive income (loss) for the years ended June 30, 2020 and 2019.