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Investment Securities

9 Months Ended

Mar. 31, 2023

Investment Securities

Investment Securities

Note 4: Investment Securities

The amortized cost and estimated fair value of investment securities as of March 31, 2023 and June 30, 2022 were as follows:


					Gross			Gross			Estimated
		Amortized			Unrealized			Unrealized			Fair			Carrying
March 31, 2023		Cost			Gains			(Losses)			Value			Value
(In Thousands)
Held to maturity
U.S. government sponsored enterprise MBS⁽¹⁾		$	156,785		$	1		$	(17,189)		$	139,597		$	156,785
U.S. government sponsored enterprise CMO⁽²⁾			3,895			—			(278)			3,617			3,895
U.S. SBA securities⁽³⁾			656			—			—			656			656
Total investment securities - held to maturity			161,336			1			(17,467)			143,870			161,336

Available for sale
U.S. government agency MBS			1,463			—			(23)			1,440			1,440
U.S. government sponsored enterprise MBS			725			—			(12)			713			713
Private issue CMO			107			—			(9)			98			98
Total investment securities - available for sale			2,295			—			(44)			2,251			2,251
Total investment securities		$	163,631		$	1		$	(17,511)		$	146,121		$	163,587

(1)Mortgage-Backed Securities (“MBS”).

(2)Collateralized Mortgage Obligations (“CMO”).

(3)Small Business Administration (“SBA”).


					Gross			Gross			Estimated
		Amortized			Unrealized			Unrealized			Fair			Carrying
June 30, 2022		Cost			Gains			(Losses)			Value			Value
(In Thousands)
Held to maturity
U.S. government sponsored enterprise MBS		$	180,492		$	63		$	(13,945)		$	166,610		$	180,492
U.S. government sponsored enterprise CMO			3,913			—			(150)			3,763			3,913
U.S. SBA securities			940			11			—			951			940
Certificate of deposits			400			—			—			400			400
Total investment securities - held to maturity			185,745			74			(14,095)			171,724			185,745

Available for sale
U.S. government agency MBS			1,698			6			(6)			1,698			1,698
U.S. government sponsored enterprise MBS			865			4			(4)			865			865
Private issue CMO			118			—			(5)			113			113
Total investment securities - available for sale			2,681			10			(15)			2,676			2,676
Total investment securities		$	188,426		$	84		$	(14,110)		$	174,400		$	188,421

In the third quarters of fiscal 2023 and 2022, the Corporation received MBS principal payments of $6.9 million and $12.3 million, respectively, and there were no sales of investment securities during these periods. The Corporation did not purchase any investment securities in the third quarter of fiscal 2023; while in the third quarter of fiscal 2022, the Corporation purchased $3.0 million of U.S. government sponsored enterprise CMO to be held to maturity.

For the first nine months of fiscal 2023 and 2022, the Corporation received MBS principal payments of $23.8 million and $44.8 million, respectively, and there were no sales of investment securities during these periods. The Corporation did not purchase any investment securities in the first nine months of fiscal 2023, while in the first nine months of fiscal 2022, the Corporation purchased $15.2 million of U.S. government sponsored enterprise MBS to be held to maturity and $3.0 million of U.S. government sponsored enterprise CMO to be held to maturity.

The Corporation held investments with an unrealized loss position of $17.5 million at March 31, 2023 and $14.1 million at June 30, 2022.


As of March 31, 2023		Unrealized Holding Losses						Unrealized Holding Losses						Unrealized Holding Losses
(In Thousands)		Less Than 12 Months						12 Months or More						Total
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
Description of Securities		Value			Losses			Value			Losses			Value			Losses
Held to maturity
U.S. government sponsored enterprise MBS		$	10,921		$	180		$	127,749		$	17,009		$	138,670		$	17,189
U.S. government sponsored enterprise CMO			—			—			3,617			278			3,617			278
U.S. SBA securities			656		$	—			—			—			656			—
Total investment securities - held to maturity			11,577			180			131,366			17,287			142,943			17,467

Available for sale
U.S government agency MBS			1,440			23			—			—			1,440			23
U.S. government sponsored enterprise MBS			315			5			352			7			667			12
Private issue CMO			—			—			98			9			98			9
Total investment securities - available for sale			1,755			28			450			16			2,205			44
Total investment securities		$	13,332		$	208			131,816		$	17,303		$	145,148		$	17,511


As of June 30, 2022		Unrealized Holding Losses						Unrealized Holding Losses						Unrealized Holding Losses
(In Thousands)		Less Than 12 Months						12 Months or More						Total
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
Description of Securities		Value			Losses			Value			Losses			Value			Losses
Held to maturity
U.S. government sponsored enterprise MBS		$	121,844		$	9,018		$	35,528		$	4,927		$	157,372		$	13,945
U.S. government sponsored enterprise CMO			3,764			150			—			—			3,764			150
Total investment securities - held to maturity			125,608			9,168			35,528			4,927			161,136			14,095

Available for sale
U.S government agency MBS			826			6			—			—			826			6
U.S. government sponsored enterprise MBS			671			4			—			—			671			4
Private issue CMO			113			5			—			—			113			5
Total investment securities - available for sale			1,610			15			—			—			1,610			15
Total investment securities		$	127,218		$	9,183		$	35,528		$	4,927		$	162,746		$	14,110

The Corporation evaluates individual investment securities quarterly for other-than-temporary impairment. At March 31, 2023, $17.3 million of the $17.5 million of unrealized holding losses were in a loss position for 12 months or more; while at June 30, 2022, $4.9 million of the $14.1 million of unrealized holding losses were in a loss position for 12 months or more. The unrealized losses on investment securities were attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities; which are

predominately U.S. government sponsored enterprise (GSE) securities. Therefore, the Corporation has determined that the unrealized losses are temporary in nature due to the fluctuating nature of interest rates, as well as the Corporation’s intent and ability to hold these investments until maturity. As a part of the Corporation’s monthly risk assessment, the Corporation runs a number of stressed liquidity scenarios. These liquidity scenarios support the Corporation’s assessment that the Corporation has the ability to hold these securities until maturity and does not need to liquidate these investment securities in order to maintain adequate liquidity.

In order to maintain adequate liquidity, the Bank has established borrowing facilities with various counterparties. The Bank had a remaining borrowing capacity of $228.6 million as of March 31, 2023 at the Federal Home Loan Bank of San Francisco. In addition, the Bank has secured an estimated $146.8 million discount window facility at the Federal Reserve Bank of San Francisco collateralized by investment securities with March 31, 2023 balances of $157.1 million. As of March 31, 2023, the Bank also has a borrowing arrangement in the form of a federal funds facility with its correspondent bank for $50.0 million. The Bank had no advances under the Federal Reserve discount window or correspondent bank facility as of March 31, 2023.

At June 30, 2022, the Bank had a remaining borrowing capacity of $310.3 million at the Federal Home Loan Bank of San Francisco. In addition, the Bank had secured an estimated $168.4 million discount window facility at the Federal Reserve Bank of San Francisco collateralized by investment securities with June 30, 2022 balances of $191.1 million. As of June 30, 2022, the Bank also had a borrowing arrangement in the form of a federal funds facility with its correspondent bank for $50.0 million. The Bank had no advances under the Federal Reserve discount window or correspondent bank facility as of June 30, 2022.

At March 31, 2023 and 2022, the Corporation did not hold any investment securities with the intent to sell and determined it had the ability to hold these investment securities until maturity. It also determined that it was more likely than not that the Corporation would not be required to sell the securities prior to recovery of the amortized cost basis; therefore, no impairment losses were recorded for the quarters and nine months ended March 31, 2023 and 2022.

Contractual maturities of investment securities as of March 31, 2023 and June 30, 2022 were as follows:


		March 31, 2023						June 30, 2022
					Estimated						Estimated
		Amortized			Fair			Amortized			Fair
(In Thousands)		Cost			Value			Cost			Value
Held to maturity
Due in one year or less		$	662		$	656		$	1,427		$	1,425
Due after one through five years			8,665			8,406			10,908			10,805
Due after five through ten years			64,372			58,501			77,167			72,625
Due after ten years			87,637			76,307			96,243			86,869
Total investment securities - held to maturity			161,336			143,870			185,745			171,724

Available for sale
Due in one year or less			—			—			—			—
Due after one through five years			—			—			—			—
Due after five through ten years			390			381			98			98
Due after ten years			1,905			1,870			2,583			2,578
Total investment securities - available for sale			2,295			2,251			2,681			2,676
Total investment securities		$	163,631		$	146,121		$	188,426		$	174,400