Derivative Instruments and Hedging Activities

12 Months Ended

Jun. 30, 2022

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Note 12 – Derivative Instruments and Hedging Activities

Risk Management Objective of Using Derivatives

The Company uses various financial instruments, including derivatives, to manage its exposure to interest rate risk. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to specific wholesale funding positions.

Fair Values of Derivative Instruments on the Statement of Financial Condition

The tables below present the fair value of the Company’s derivative financial instruments as well as their classification on the Statement of Financial Condition as of June 30, 2022 and June 30, 2021:

	June 30, 2022
	Asset Derivatives			Liability Derivatives
	Location	Fair Value		Location	Fair Value
	(In Thousands)
Derivatives designated as hedging instruments:
Interest rate contracts	Other assets	$	41,223	Other liabilities	$	-
Total		$	41,223		$	-

	June 30, 2021
	Asset Derivatives			Liability Derivatives
	Location	Fair Value		Location	Fair Value
	(In Thousands)
Derivatives designated as hedging instruments:
Interest rate contracts	Other assets	$	1,832	Other liabilities	$	673
Total		$	1,832		$	673

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using derivatives are primarily to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company has entered into interest rate swaps and caps as part of its interest rate risk management strategy. These interest rate products are designated as cash flow hedges. As of June 30, 2022, the Company had a total of nine interest rate swaps and caps with a total notional amount of $750.0 million hedging specific wholesale funding positions.

For derivatives designated as cash flow hedges, the gain or loss on the derivatives is recorded in other comprehensive income (loss), net of tax, and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings.

Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable rate wholesale funding positions. During the year ended June 30, 2022, the Company reclassified $4.3 million as additional interest expense. During the next 12 months, the Company estimates that $11.6 million will be reclassified as a reduction in interest expense.

The table below presents the pre-tax effects of the Company’s derivative instruments on the Consolidated Statements of Income for the years ended June 30, 2022, 2021 and 2020:

	Year Ended June 30,
	2022			2021			2020
	(In Thousands)
Amount of gain (loss) recognized in other comprehensive income (loss)	$	35,844		$	10,825		$	(21,264	)
Amount of (loss) gain reclassified from accumulated other comprehensive income (loss)   to interest expense		(4,273	)		(8,281	)		1,870

Note 12 – Derivative Instruments and Hedging Activities (continued)

Offsetting Derivatives

The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives in the Consolidated Statement of Financial Condition as of June 30, 2022 and June 30, 2021, respectively. The net amounts presented for derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Consolidated Statement of Financial Condition.

	June 30, 2022
							Gross Amounts Not Offset
	Gross Amount Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments		Cash Collateral Received		Net Amount
	(In Thousands)
Assets:
Interest rate contracts	$	41,223	$	-	$	41,223	$	-	$	-	$	41,223
Total	$	41,223	$	-	$	41,223	$	-	$	-	$	41,223
							Gross Amounts Not Offset
	Gross Amount Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments		Cash Collateral Posted		Net Amount
	(In Thousands)
Liabilities:
Interest rate contracts	$	-	$	-	$	-	$	-	$	-	$	-
Total	$	-	$	-	$	-	$	-	$	-	$	-

	June 30, 2021
								Gross Amounts Not Offset
	Gross Amount Recognized		Gross Amounts Offset			Net Amounts Presented		Financial Instruments		Cash Collateral Received			Net Amount
	(In Thousands)
Assets:
Interest rate contracts	$	6,847	$	(5,015	)	$	1,832	$	-	$	-		$	1,832
Total	$	6,847	$	(5,015	)	$	1,832	$	-	$	-		$	1,832
								Gross Amounts Not Offset
	Gross Amount Recognized		Gross Amounts Offset			Net Amounts Presented		Financial Instruments		Cash Collateral Posted			Net Amount
	(In Thousands)
Liabilities:
Interest rate contracts	$	5,688	$	(5,015	)	$	673	$	-	$	(673	)	$	-
Total	$	5,688	$	(5,015	)	$	673	$	-	$	(673	)	$	-

Note 12 – Derivative Instruments and Hedging Activities (continued)

Credit Risk-Related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, then the Company could also be declared in default on its derivative obligations and could be required to terminate its derivative positions with the counterparty. The Company also has agreements with its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well-capitalized institution, then the Company could be required to terminate its derivative positions with the counterparty. As of June 30, 2022, none of the Company’s derivatives were in a net liability position.

As required under the enforceable master netting arrangement with its derivatives counterparties, at June 30, 2022, the Company was not required to post financial collateral. By comparison, at June 30, 2021, the Company posted financial collateral of $673,000 that was not included as an offsetting amount.

In addition to the derivative instruments noted above, the Company’s pipeline of loans held for sale at June 30, 2022 and June 30, 2021, included $20.3 million and $48.4 million, respectively, of in process loans whose terms included interest rate locks to borrowers, which are considered free-standing derivative instruments whose fair values are not material to our financial condition or results of operations.