Available for Sale Securities

12 Months Ended

Jun. 30, 2021

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, 2021
			Gross		Gross		Allowance		Estimated
	Amortized		Unrealized		Unrealized		for		Fair
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Value
Debt and equity securities:
Obligations of states and political subdivisions	$	46,257	$	1,479	$	(40)	$	—	$	47,696
Corporate obligations		20,356		290		(335)		—		20,311
Other securities		647		25		—		—		672
TOTAL DEBT AND EQUITY SECURITIES		67,260		1,794		(375)		—		68,679
Mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs):
Residential MBS issued by governmental sponsored enterprises (GSEs)		64,400		932		(379)		—		64,953
Commercial MBS issued by GSEs		35,425		1,394		(338)		—		36,481
CMOs issued by GSEs		36,201		755		(49)		—		36,907
TOTAL MBS and CMOs		136,026		3,081		(766)		—		138,341
TOTAL	$	203,286	$	4,875	$	(1,141)	$	—	$	207,020

	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
Corporate obligations		6,970		27		(338)		6,659
Other securities		949		21		(5)		965
TOTAL DEBT AND EQUITY SECURITIES		48,405		1,550		(343)		49,612
Mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs):
Residential MBS issued by GSEs		62,315		1,646		(7)		63,954
Commercial MBS issued by GSEs		17,466		1,585		—		19,051
CMOs issued by GSEs		42,594		1,345		(32)		43,907
TOTAL MBS and CMOs		122,375		4,576		(39)		126,912
TOTAL	$	170,780	$	6,126	$	(382)	$	176,524

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, 2021
	Amortized		Estimated
(dollars in thousands)	Cost		Fair Value
Within one year	$	1,873	$	1,887
After one year but less than five years		9,564		9,720
After five years but less than ten years		30,386		31,033
After ten years		25,437		26,039
Total investment securities		67,260		68,679
MBS and CMOs		136,026		138,341
Total AFS securities	$	203,286	$	207,020

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 $155.6 million and $156.1 million at June 30, 2021 and 2020, respectively. The securities pledged consist of marketable securities, including $95.4 million and $82.0 million of Mortgage-Backed Securities, $18.8 million and $41.9 million of Collateralized Mortgage Obligations, $41.4 million and $32.0 million of State and Political Subdivisions Obligations, and $0 and $200,000 of Other Securities at June 30, 2021 and 2020, respectively.

Gains of $138,000 and losses of $48,000 were recognized from sales of available-for-sale securities in fiscal 2021. 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 securities 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, 2021.

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, 2021, was $67.2 million, which is approximately 32.5% of the Company’s available for sale investment portfolio, as compared to $10.7 million or approximately 6.0% of the Company’s available for sale investment portfolio at June 30, 2020. 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, 2021 and 2020.

	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
For the year ended June 30, 2021	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
(dollars in thousands)
Obligations of state and political subdivisions	$	3,177	$	40	$	—	$	—	$	3,177	$	40
Corporate obligations		9,331		79		720		256		10,051		335
MBS and CMOs		53,893		764		70		2		53,963		766
Total AFS securities	$	66,401	$	883	$	790	$	258	$	67,191	$	1,141

	June 30, 2020
	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
Corporate obligations		995		5		454		333		1,449		338
Other securities		—		—		189		5		189		5
MBS and CMOs		9,037		39		—		—		9,037		39
Total AFS 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 22 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 seven 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.

Corporate Obligations. The unrealized losses on the Company’s investments in corporate obligations include seven 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 June 30, 2021 there were two pooled trust preferred securities with an estimated fair value of $720,000 and unrealized losses of $257,000 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, 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 80 basis points thereafter, and a recovery rate averaging ten 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 June 30, 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 periods ended June 30, 2021 and 2020.