
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Allowance for Credit Losses ("ACL")
December 31, 2023
Held to Maturity
U.S. Treasury and U.S. government agency securities	$	169,869	$	—	$	(7,468)	$	162,401	$	—
Mortgage-backed securities ("MBS"):
U.S. government agencies	53,185		3		(2,604)		50,584		—
Private label residential	40,662		356		(1,934)		39,084		73
Municipal securities	1,878		—		(30)		1,848		—
Bank issued trust preferred securities	491		—		(47)		444		9
Total held to maturity	266,085		$	359	$	(12,083)	$	254,361	$	82


December 31, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for Sale
MBS:
U.S. government agencies	$	41,492	$	—	$	(1,046)	$	40,446

Total	$	41,492	$	—	$	(1,046)	$	40,446


September 30, 2023
Held to Maturity
U.S. treasury and U.S. government agency securities	$	171,626	$	—	$	(10,088)	$	161,538
MBS:
U.S. government agencies	52,294		—		(3,950)		48,344
Private label residential	44,011		295		(2,611)		41,695
Municipal securities	1,787		—		(47)		1,740
Bank issues trust preferred securities	500		—		(51)		449
Total	$	270,218	$	295	$	(16,747)	$	253,766

Available for Sale
MBS: U.S. government agencies	$	43,132	$	—	$	(1,361)	$	41,771
	$	43,132	$	—	$	(1,361)	$	41,771


	Less Than 12 Months					12 Months or Longer					Total
	Estimated Fair Value		Gross Unrealized Losses		Quantity	Estimated Fair Value		Gross Unrealized Losses		Quantity	Estimated Fair Value		Gross Unrealized Losses
Held to maturity
U.S. Treasury and U.S. government agency securities	$	9,614	$	(12)	1	$	152,786	$	(7,456)	25	$	162,400	$	(7,468)
MBS:
U.S. government agencies	18,442		(136)		9	31,972		(2,468)		52	50,414		(2,604)
Private label residential	—		—		—	35,585		(1,934)		30	35,585		(1,934)
Municipal securities	—		—		—	1,748		(30)		1	1,748		(30)
Bank issued trust preferred securities	—		—		—	453		(47)		1	453		(47)
Total	$	28,056	$	(148)	10	$	222,544	$	(11,935)	109	$	250,600	$	(12,083)

Available for sale
MBS: U.S. government agencies	$	11,953	$	(134)	4	$	28,179	$	(912)	26	$	40,132	$	(1,046)
Total	$	11,953	$	(134)	4	$	28,179	$	(912)	26	$	40,132	$	(1,046)


	Less Than 12 Months					12 Months or Longer					Total
	Estimated Fair Value		Gross Unrealized Losses		Quantity	Estimated Fair Value		Gross Unrealized Losses		Quantity	Estimated Fair Value		Gross Unrealized Losses
Held to maturity
U.S. Treasury and U.S. government agency securities	$	9,455	$	(129)	1	$	152,082	$	(9,959)	26	$	161,537	$	(10,088)
MBS:
U.S. government agencies	16,432		(549)		13	31,703		(3,401)		51	48,135		(3,950)
Private label residential	1,288		(2)		1	38,205		(2,609)		32	39,493		(2,611)
Municipal securities	—		—		—	1,740		(47)		1	1,740		(47)
Bank issued trust preferred securities	—		—		—	449		(51)		1	449		(51)
Total	$	27,175	$	(680)	15	$	224,179	$	(16,067)	111	$	251,354	$	(16,747)

Available for sale
MBS: U.S. government agencies	$	10,635	$	(308)	3	$	30,809	$	(1,053)	27	$	41,444	$	(1,361)

Total	$	10,635	$	(308)	3	$	30,809	$	(1,053)	27	$	41,444	$	(1,361)

During the three months ended December 31, 2023, the Company recorded a $1,000 net realized loss on 13 held to maturity investment securities all of which had been recognized previously as credit loss. During the three months ended December 31, 2022, the Company recorded a $7,000 net realized loss on 14 held to maturity investment securities all of which had been recognized previously as credit loss.

The recorded amount of investment securities pledged as collateral for public fund deposits, federal treasury tax and loan deposits, FHLB collateral and other non-profit organization deposits totaled $204.13 million and $201.82 million at December 31, 2023 and September 30, 2023, respectively.

The contractual maturities of debt securities at December 31, 2023 were as follows (dollars in thousands). Expected maturities may differ from scheduled maturities due to the prepayment of principal or call provisions.


	Held to Maturity				Available for Sale
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due within one year	$	94,888	$	93,677	$	387	$	385
Due after one year to five years	91,471		85,469		2,568		2,553
Due after five years to ten years	8,932		8,140		5,793		5,758
Due after ten years	70,794		67,075		32,744		31,750
Total	$	266,085	$	254,361	$	41,492	$	40,446

The Company assesses each available for sale investment security that is in an unrealized loss position to determine whether the decline in fair value below the amortized cost basis results from a credit loss or other factors. The Company did not record an ACL on any available for sale debt securities at December 31, 2023 or upon adoption of ASU 2016-13 on October 1, 2023. As of both dates, the Company considered the unrealized losses across the classes of major security-type to be related to fluctuations in market conditions, primarily interest rates, and not reflective of a deterioration in credit value. The Company expects the fair value of these securities to recover as the securities approach their maturity dates or sooner if market yields for such securities decline. The Company does not believe that these securities are other than temporarily impaired because of their credit quality or related to any issuer or industry specific event. The Company has the ability and intent to hold the investments until the fair value recovers.

The Company measures expected credit losses on held to maturity investment securities, which are comprised of U.S. government agency and U.S. government mortgage-backed securities, private label mortgage-backed securities, municipal, and other bonds. The Company’s agency and mortgage-backed securities that are issued by U.S. government entities and agencies are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. As such, no ACL has been established for these securities. The ACL on the private label mortgage-backed securities, municipal, and other bonds within the held to maturity securities portfolio is calculated using the probability of default/loss given default ("PD/LGD") method. The calculation is completed on a quarterly basis using the default studies provided by an industry leading source. At December 31, 2023, the allowance for credit losses on the held to maturity securities portfolio totaled $82,000.


	Three Months Ended December 31, 2023
Held to Maturity	Beginning Allowance		Impact of Adopting CECL (ASU 2016-13)		Provision for (Recapture of) Credit Losses		Ending Allowance

MBS:

Private label residential	$	—	$	82	$	(9)	$	73

Bank issued trust preferred securities	—		10		(1)		9
Total	$	—	$	92	$	(10)	$	82

The ACL on held to maturity investment securities is included within investment securities held to maturity on the consolidated balance sheets. Changes in the ACL are recorded within provision for (recapture of) credit losses on the consolidated income statement.


	Credit Ratings
As of December 31, 2023	AAA/AA/A		BBB/BB/B		Unrated		Total
Held to Maturity
U.S. Treasury and U.S. government agency securities	$	169,869	$	—	$	—	$	169,869
Mortgage-backed securities ("MBS"):
U.S. government agencies	53,185		—		—		53,185
Private label residential	19,324		—		21,338		40,662
Municipal securities	1,778		—		100		1,878
Bank issued trust preferred securities	—		—		491		491
Total held to maturity	$	244,156	$	—	$	21,929	$	266,085

Prior to adopting ASU 2016-13, the Company bifurcated OTTI into (1) amounts related to credit losses which are recognized through earnings and (2) amounts related to all other factors which are recognized as a component of other comprehensive income (loss). To determine the component of the gross OTTI related to credit losses, the Company compared the amortized cost basis of the OTTI security to the present value of its revised expected cash flows, discounted using its pre-impairment yield. The revised expected cash flow estimates for individual securities are based primarily on an analysis of default rates, prepayment speeds and third-party analytic reports. Significant judgment by management was required in this analysis that included, but not limited to, assumptions regarding the collectability of principal and interest, net of related expenses, on the underlying loans. The amounts written off due to credit loss remain and continue to be recovered on a cash basis.

The following table presents a roll forward of the credit loss component of held to maturity debt securities that have been written down for OTTI with the credit loss component recognized in earnings for the three months ended December 31, 2023 and 2022 (dollars in thousands):


	Three Months Ended December 31,
	2023		2022
Beginning balance of credit loss	$	816	$	836



Subtractions:
Net realized loss previously recorded as credit losses	(1)		(7)
Recapture of prior credit loss	(4)		(3)
Ending balance of credit loss	$	811	$	826