Held to maturity and available for sale investment securities have been classified according to management’s intent and were as follows as of June 30, 2024 and September 30, 2023 (dollars in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Allowance for Credit Losses ("ACL")
June 30, 2024
Held to Maturity
U.S. Treasury and U.S. government agency securities	$	92,233	$	—	$	(6,349)	$	85,884	$	—
Mortgage-backed securities ("MBS"):
U.S. government agencies	50,727		2		(2,440)		48,289		—
Private label residential	31,996		238		(1,438)		30,796		66
Municipal securities	1,337		—		(10)		1,327		—
Bank issued trust preferred securities	494		—		(29)		465		6
Total held to maturity	$	176,787	$	240	$	(10,266)	$	166,761	$	72


June 30, 2024	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for Sale
U.S. Treasury and U.S. government agency securities	$	8,924	$	—	$	(14)	$	8,910
MBS:
U.S. government agencies	66,280		137		(812)		65,605

Total	$	75,204	$	137	$	(826)	$	74,515


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 issued 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	$	—	$	—	—	$	85,884	$	(6,349)	18	$	85,884	$	(6,349)
MBS:
U.S. government agencies	10,633		(88)		8	37,477		(2,352)		49	48,110		(2,440)
Private label residential	—		—		—	26,476		(1,438)		25	26,476		(1,438)
Municipal securities	—		—		—	1,226		(10)		1	1,226		(10)
Bank issued trust preferred securities	—		—		—	465		(29)		1	465		(29)
Total	$	10,633	$	(88)	8	$	151,528	$	(10,178)	94	$	162,161	$	(10,266)

Available for sale
U.S. Treasury and U.S. government agency securities	$	8,910	$	(14)	3			$	—		$	8,910	$	(14)
MBS:
U.S. government agencies	11,018		(33)		3	33,578		(779)		28	44,596		(812)
Total	$	19,928	$	(47)	6	$	33,578	$	(779)	28	$	53,506	$	(826)


	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 nine months ended June 30, 2024, the Company recorded a $1,000 net realized losses on 14 held to maturity investment securities. During the nine months ended June 30, 2023, the Company recorded a $10,000 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 $212.16 million and $201.82 million at June 30, 2024 and September 30, 2023, respectively.

The contractual maturities of debt securities at June 30, 2024 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	$	27,648	$	27,156	$	8,961	$	8,946
Due after one year to five years	79,040		73,530		2,497		2,496
Due after five years to ten years	6,345		5,675		5,653		5,640
Due after ten years	63,754		60,400		58,093		57,433
Total	$	176,787	$	166,761	$	75,204	$	74,515

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 June 30, 2024 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 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 June 30, 2024, the ACL on the held to maturity securities portfolio totaled $72,000.


	Three Months Ended June 30, 2024
Held to Maturity	Beginning Allowance		Impact of Adopting CECL (ASU 2016-13)		Provision for (Recapture of) Credit Losses			Ending Allowance

MBS:

Private label residential	$	77	$	—	$	(11)		$	66

Bank issued trust preferred securities	8		—		(2)			6
Total	$	85	$	—	$	(13)	(1)	$	72


	Nine Months Ended June 30, 2024
	Beginning Allowance		Impact of Adopting CECL (ASU 2016-13)		Provision for (Recapture of) Credit Losses		Ending Allowance
Held to Maturity

MBS:

Private label residential	—		82		(16)		66

Bank issued trust preferred securities	—		10		(4)		6
Total	$	—	$	92	$	(20)	$	72

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 through the provision for (recapture of) credit losses on the consolidated income statement.


	Credit Ratings
As of June 30, 2024	AAA/AA/A		BBB/BB/B		Unrated		Total
Held to Maturity
U.S. Treasury and U.S. government agency securities	$	92,233	$	—	$	—	$	92,233
MBS:
U.S. government agencies	50,727		—		—		50,727
Private label residential	17,000		—		14,996		31,996
Municipal securities	1,237		—		100		1,337
Bank issued trust preferred securities	—		—		494		494
Total held to maturity	$	161,197	$	—	$	15,590	$	176,787

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 nine months ended June 30, 2024 and 2023 (dollars in thousands):


	Nine Months Ended June 30,
	2024		2023
Beginning balance of credit loss	$	816	$	836



Subtractions:
Net realized loss previously recorded as credit losses	(1)		(10)
Recapture of prior credit loss	(9)		(7)
Ending balance of credit loss	$	806	$	819