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Investment Securities

3 Months Ended

Sep. 30, 2023

Investment Securities

Investment Securities

Note 4: Investment Securities

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


					Gross			Gross			Estimated
		Amortized			Unrealized			Unrealized			Fair			Carrying
September 30, 2023		Cost			Gains			(Losses)			Value			Value
(In Thousands)
Held to maturity
U.S. government sponsored enterprise MBS⁽¹⁾		$	143,070		$	1		$	(20,376)		$	122,695		$	143,070
U.S. government sponsored enterprise CMO⁽²⁾			3,870			—			(347)			3,523			3,870
U.S. SBA securities⁽³⁾			634			—			(1)			633			634
Total investment securities - held to maturity			147,574			1			(20,724)			126,851			147,574

Available for sale
U.S. government agency MBS			1,379			—			(39)			1,340			1,340
U.S. government sponsored enterprise MBS			662			—			(10)			652			652
Private issue CMO			101			—			(3)			98			98
Total investment securities - available for sale			2,142			—			(52)			2,090			2,090
Total investment securities		$	149,716		$	1		$	(20,776)		$	128,941		$	149,664

(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, 2023		Cost			Gains			(Losses)			Value			Value
(In Thousands)
Held to maturity
U.S. government sponsored enterprise MBS		$	149,803		$	—		$	(18,459)		$	131,344		$	149,803
U.S. government sponsored enterprise CMO			3,883			—			(336)			3,547			3,883
U.S. SBA securities			651			—			(1)			650			651
Total investment securities - held to maturity			154,337			—			(18,796)			135,541			154,337

Available for sale
U.S. government agency MBS			1,417			—			(47)			1,370			1,370
U.S. government sponsored enterprise MBS			697			—			(14)			683			683
Private issue CMO			103			—			(1)			102			102
Total investment securities - available for sale			2,217			—			(62)			2,155			2,155
Total investment securities		$	156,554		$	—		$	(18,858)		$	137,696		$	156,492

In the first quarters of fiscal 2024 and 2023, the Corporation received MBS principal payments of $6.7 million and $9.3 million, respectively, and there were no purchases or sales of investment securities during these periods.

The Corporation held investments with an unrealized loss position of $20.8 million at September 30, 2023 and $18.9 million at June 30, 2023.


As of September 30, 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		$	2,237		$	3		$	119,202		$	20,373		$	121,439		$	20,376
U.S. government sponsored enterprise CMO			—			—			3,523			347			3,523			347
U.S. SBA securities			—			—			633			1			633			1
Total investment securities - held to maturity			2,237			3			123,358			20,721			125,595			20,724

Available for sale
U.S government agency MBS			—			—			1,340			39			1,340			39
U.S. government sponsored enterprise MBS			62			1			558			9			620			10
Private issue CMO			—			—			98			3			98			3
Total investment securities - available for sale			62			1			1,996			51			2,058			52
Total investment securities		$	2,299		$	4			125,354		$	20,772		$	127,653		$	20,776


As of June 30, 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		$	10,839		$	253		$	120,506		$	18,206		$	131,345		$	18,459
U.S. government sponsored enterprise CMO			—			—			3,547			336			3,547			336
U.S. SBA securities			650			1			—			—			650			1
Total investment securities - held to maturity			11,489			254			124,053			18,542			135,542			18,796

Available for sale
U.S government agency MBS			696			20			673			27			1,369			47
U.S. government sponsored enterprise MBS			87			2			558			12			645			14
Private issue CMO			—			—			102			1			102			1
Total investment securities - available for sale			783			22			1,333			40			2,116			62
Total investment securities		$	12,272		$	276		$	125,386		$	18,582		$	137,658		$	18,858

The Corporation adopted ASC 326 on July 1, 2023. The Corporation evaluates individual investment securities quarterly for impairment. At September 30, 2023, predominately all of the $20.8 million of unrealized holding losses were in a loss position for 12 months or more; while at June 30, 2023, $18.6 million of the $18.9 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 that are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses. Therefore, the Corporation has determined that the unrealized losses are due to the fluctuating nature of interest rates, and not related to credit risks. 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. As a result, no ACL on investment securities was recorded at adoption and at September 30, 2023.

In order to maintain adequate liquidity, the Bank has established borrowing facilities with various counterparties. The Bank had a remaining borrowing capacity of $286.9 million as of September 30, 2023 at the FHLB of San Francisco. In addition, the Bank has secured an estimated $185.3 million discount window facility at the FRB of San Francisco collateralized by investment securities with total balance of $143.6 million and loans with total balance of $106.6 million as of September 30, 2023. As of September 30, 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 September 30, 2023.

At June 30, 2023, the Bank had a remaining borrowing capacity of $287.9 million at the FHLB of San Francisco. In addition, the Bank had secured an estimated $139.0 million discount window facility at the FRB of San Francisco collateralized by investment securities with a June 30, 2023 total balance of $150.3 million. As of June 30, 2023, 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, 2023.

At September 30, 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 ended September 30, 2023 and 2022.

Contractual maturities of investment securities as of September 30, 2023 and June 30, 2023 were as follows:


		September 30, 2023						June 30, 2023
					Estimated						Estimated
		Amortized			Fair			Amortized			Fair
(In Thousands)		Cost			Value			Cost			Value
Held to maturity
Due in one year or less		$	101		$	100		$	303		$	300
Due after one through five years			6,861			6,557			7,686			7,365
Due after five through ten years			57,770			51,267			61,043			54,686
Due after ten years			82,842			68,927			85,305			73,190
Total investment securities - held to maturity			147,574			126,851			154,337			135,541

Available for sale
Due in one year or less			—			—			—			—
Due after one through five years			—			—			—			—
Due after five through ten years			569			560			590			580
Due after ten years			1,573			1,530			1,627			1,575
Total investment securities - available for sale			2,142			2,090			2,217			2,155
Total investment securities		$	149,716		$	128,941		$	156,554		$	137,696