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Securities

9 Months Ended

Mar. 31, 2023

(4) Securities

Securities at March 31, 2023 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	$	13,058	$	-	$	2,054	$	11,004
U.S. treasury securities		18,377		-		1,712		16,665
State and political subdivisions		171,980		635		22		172,593
Mortgage-backed securities-residential		30,335		-		3,801		26,534
Mortgage-backed securities-multi-family		91,113		-		17,500		73,613
Corporate debt securities		17,906		-		1,451		16,455
Total securities available-for-sale		342,769		635		26,540		316,864
Securities held-to-maturity:
U.S. treasury securities		33,684		-		2,071		31,613
State and political subdivisions		484,093		4,081		29,051		459,123
Mortgage-backed securities-residential		38,417		-		3,089		35,328
Mortgage-backed securities-multi-family		159,113		-		18,286		140,827
Corporate debt securities		21,637		-		2,674		18,963
Other securities		39		-		-		39
Total securities held-to-maturity		736,983		4,081		55,171		685,893
Total securities	$	1,079,752	$	4,716	$	81,711	$	1,002,757

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 March 31, 2023, 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, 2023.

	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	$	-	$	-		-	$	11,004	$	2,054		5	$	11,004	$	2,054		5
U.S. treasury securities		229		1		1		16,436		1,711		7		16,665		1,712		8
State and political subdivisions		24,618		20		8		82		2		1		24,700		22		9
Mortgage-backed securities-residential		521		25		10		26,013		3,776		19		26,534		3,801		29
Mortgage-backed securities-multi-family		2,731		142		1		70,882		17,358		30		73,613		17,500		31
Corporate debt securities		487		14		1		15,968		1,437		15		16,455		1,451		16
Total securities available-for-sale		28,586		202		21		140,385		26,338		77		168,971		26,540		98
Securities held-to-maturity:
U.S. treasury securities		-		-		-		31,613		2,071		8		31,613		2,071		8
State and political subdivisions		216,800		9,556		3,113		132,787		19,495		809		349,587		29,051		3,922
Mortgage-backed securities-residential		2,094		90		11		33,223		2,999		18		35,317		3,089		29
Mortgage-backed securities-multi-family		18,176		712		9		122,651		17,574		49		140,827		18,286		58
Corporate debt securities		11,230		1,618		9		7,733		1,056		9		18,963		2,674		18
Total securities held-to-maturity		248,300		11,976		3,142		328,007		43,195		893		576,307		55,171		4,035
Total securities	$	276,886	$	12,178		3,163	$	468,392	$	69,533		970	$	745,278	$	81,711		4,133

	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 nine months ended March 31, 2023, 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 March 31, 2023. Unrealized losses on securities improved as of March 31, 2023 compared to December 31, 2022, due to bond yields decreasing, providing a favorable impact to securities valuations as of quarter end.

There were no transfers of securities available-for-sale to held-to-maturity during the three and nine months ended March 31, 2023 or 2022. During the three months ended March 31, 2023 and 2022 and nine months ended March 31, 2022, 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. There was no other-than-temporary impairment loss recognized during the three and nine months ended March 31, 2023 and 2022.

The estimated fair values of debt securities at March 31, 2023, 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	$	171,917	$	172,531
After one year through five years		29,280		27,014
After five years through ten years		18,624		15,995
After ten years		1,500		1,177
Total		221,321		216,717
Mortgage-backed securities		121,448		100,147
Total available-for-sale securities		342,769		316,864

Held-to-maturity debt securities
Within one year		56,489		56,054
After one year through five years		169,883		165,722
After five years through ten years		142,164		134,575
After ten years		170,917		153,387
Total		539,453		509,738
Mortgage-backed securities		197,530		176,155
Total held-to-maturity securities		736,983		685,893
Total debt securities	$	1,079,752	$	1,002,757

At March 31, 2023 and June 30, 2022, securities with an aggregate fair value of $920.1 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 March 31, 2023 and June 30, 2022, securities with an aggregate fair value of $17.2 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 nine months ended March 31, 2023 or 2022.

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 nine months ended March 31, 2023 or 2022.