Derivative Instruments and Hedging Activities

6 Months Ended

Dec. 31, 2018

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

14.     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 positons.

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 December 31, 2018 and June 30, 2018:

	December 31, 2018
	Asset Derivatives			Liability Derivatives
	Location	Fair Value		Location	Fair Value
	(In Thousands)
Derivatives designated as hedging    instruments:
Interest rate swaps	Other assets	$	22,109	Other liabilities	$	-
Total		$	22,109		$	-

	June 30, 2018
	Asset Derivatives			Liability Derivatives
	Location	Fair Value		Location	Fair Value
	(In Thousands)
Derivatives designated as hedging    instruments:
Interest rate swaps	Other assets	$	31,881	Other liabilities	$	-
Total		$	31,881		$	-

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 as part of its interest rate risk management strategy.  These interest rate products are designated as cash flow hedges.  As of December 31, 2018, the Company had a total of 12 interest rate swaps with a total notional amount of $900.0 million hedging certain FHLB advances.

For derivatives designated as cash flow hedges, the gain or loss on the derivative is recorded in other comprehensive income, 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 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 three and six months ended December 31, 2018, the Company had $1.5 million and $2.7 million, respectively, of reclassifications to interest expense.  During the next twelve months, the Company estimates that $8.3 million will be reclassified as a reduction in interest expense.

The tables below present the pre-tax effects of the Company’s derivative instruments on the Consolidated Statements of Income   and Comprehensive Income for the three and six months ended December 31, 2018 and 2017:

	Three Months Ended December 31, 2018
	Amount of Gain (Loss) Recognized in OCI on Derivatives			Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
	(In Thousands)
Derivatives in cash flow    hedging relationships:
Interest rate swaps	$	(10,155	)	Interest expense	$	1,460
Total	$	(10,155	)		$	1,460

	Six Months Ended December 31, 2018
	Amount of Gain (Loss) Recognized in OCI on Derivatives			Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
	(In Thousands)
Derivatives in cash flow    hedging relationships:
Interest rate swaps	$	(7,076	)	Interest expense	$	2,696
Total	$	(7,076	)		$	2,696

	Three Months Ended December 31, 2017
	Amount of Gain (Loss) Recognized in OCI on Derivatives		Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
	(In Thousands)
Derivatives in cash flow    hedging relationships:
Interest rate swaps	$	6,167	Interest expense	$	(997	)
Interest rate caps		40	Interest expense		(285	)
Total	$	6,207		$	(1,282	)

	Six Months Ended December 31, 2017
	Amount of Gain (Loss) Recognized in OCI on Derivatives		Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
	(In Thousands)
Derivatives in cash flow    hedging relationships:
Interest rate swaps	$	6,426	Interest expense	$	(2,122	)
Interest rate caps		26	Interest expense		(560	)
Total	$	6,452		$	(2,682	)

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 Statements of Financial Condition as of December 31, 2018 and June 30, 2018, 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 Statements of Financial Condition.

	December 31, 2018
								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 swaps	$	22,129	$	(20	)	$	22,109	$	-	$	(22,109	)	$	-
Total	$	22,129	$	(20	)	$	22,109	$	-	$	(22,109	)	$	-
								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 swaps	$	20	$	(20	)	$	-	$	-	$	-		$	-
Total	$	20	$	(20	)	$	-	$	-	$	-		$	-

	June 30, 2018
							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 swaps	$	31,881	$	-	$	31,881	$	-	$	(31,620	)	$	261
Total	$	31,881	$	-	$	31,881	$	-	$	(31,620	)	$	261
							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 swaps	$	-	$	-	$	-	$	-	$	-		$	-
Total	$	-	$	-	$	-	$	-	$	-		$	-

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 required under the enforceable master netting arrangement with its derivatives counterparties, at December 31, 2018, the Company received financial collateral of $22.1 million that was not included as an offsetting amount.  By comparison, at June 30, 2018, the Company received financial collateral of $31.6 million 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 December 31, 2018 and June 30, 2018, included $4.6 million and $10.8 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.