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Securities

9 Months Ended

Mar. 31, 2021

Note 3: Securities

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


	March 31, 2021
			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for		Fair
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Value

Investment and mortgage backed securities:
State and political subdivisions	$	42,065	$	1,332	$	(105)	$	—	$	43,292
Other securities		21,000		235		(398)		—		20,837
Mortgage-backed GSE residential		124,227		3,188		(1,135)		—		126,280
Total investments and mortgage-backed securities	$	187,292	$	4,755	$	(1,638)	$	—	$	190,409


	June 30, 2020
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value

Investment and mortgage backed securities:
State and political subdivisions	$	40,486	$	1,502	$	—	$	41,988
Other securities		7,919		48		(343)		7,624
Mortgage-backed GSE residential		122,375		4,576		(39)		126,912
Total investment and mortgage-backed securities	$	170,780	$	6,126	$	(382)	$	176,524

The amortized cost and estimated fair value of investment and mortgage-backed 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 penalties.


	March 31, 2021
	Amortized		Estimated
(dollars in thousands)	Cost		Fair Value
Within one year	$	2,003	$	2,025
After one year but less than five years		8,450		8,610
After five years but less than ten years		29,173		29,669
After ten years		23,439		23,825
Total investment securities		63,065		64,129
Mortgage-backed securities		124,227		126,280
Total investment and mortgage-backed securities	$	187,292	$	190,409

The carrying value of investment and mortgage-backed securities pledged as collateral to secure public deposits amounted to $162.5 million at March 31, 2021 and $156.1 million at June 30, 2020. The securities pledged consist of marketable securities, including $120.5 million and $123.9 million of Mortgage-backed Securities, $42.0 million and $32.0 million of State and Political Subdivisions Obligations, and $0 and $200,000 of Other Securities at March 31, 2021 and June 30, 2020, respectively.

The following tables 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 for which an ACL has not been recorded at March 31, 2021 and June 30, 2020:


	March 31, 2021
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
(dollars in thousands)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses

Obligations of state and political subdivisions	$	7,175	$	105	$	—	$	—	$	7,175	$	105
Other securities		10,723		157		735		241		11,458		398
Mortgage-backed securities		45,723		1,135		—		—		45,723		1,135
Total investment and mortgage-backed securities	$	63,621	$	1,397	$	735	$	241	$	64,356	$	1,638


	June 30, 2020
	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
(dollars in thousands)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses

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

Mortgage-backed securities. The unrealized losses on the Company’s investments in mortgage-backed securities include 20 individual securities which have been in an unrealized loss position for less than 12 months. The securities are performing and are of high credit quality. The unrealized losses were caused by variations in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it is likely that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

Obligations of state and political subdivisions. The unrealized losses on the Company’s investments in obligations of state and political subdivisions include 13 individual securities which have been in an unrealized loss position for less than 12 months. The securities are performing and are of high credit quality. The unrealized losses were caused by variations in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it is likely that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

Other securities. The unrealized losses on the Company’s investments in other securities include nine individual securities which have been in an unrealized loss position for less than 12 months. The securities are performing and are of high credit quality. The unrealized losses were caused by variations in market interest rates since purchase or acquisition. Because the Company does not intend to sell these securities and it likely that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

At March 31, 2021 there were two pooled trust preferred securities with an estimated fair value of $735,000 and unrealized losses of $241,000 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 March 31, 2021, 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 1.8 percent,

annually, annual defaults averaging 220 basis points over the next two years, and 68 basis points thereafter, and a recovery rate averaging seven percent of gross defaults, lagged two years.

One of these two securities has continued to receive cash interest payments in full since the Company’s 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. The Company's cash flow analysis indicates that cash interest payments are expected to continue for both securities. Because the Company does not intend to sell these securities and it is likely that the Company will not be required to sell these securities prior to recovery of their amortized cost basis, which may be maturity, the Company has not recorded an ACL on these securities.

The Company does not believe any other individual unrealized loss as of March 31, 2021, is the result of a credit loss. However, the Company could be required to recognize an ACL in future periods with respect to its available for sale investment securities portfolio.

Credit losses recognized on investments. There were no credit losses recognized in income and other losses or recorded in other comprehensive income for the three- and nine- month periods ended March 31, 2021 and 2020.