Derivative Financial Instruments

3 Months Ended

Sep. 30, 2024

Derivative Financial Instruments

Derivative Financial Instruments

Note 13: Derivative Financial Instruments

The Company enters into derivative financial instruments, primarily interest rate swaps, to convert certain long term fixed rate loans to floating rates to manage interest rate risk, facilitate asset/liability management strategies and manage other exposures. The fair value of derivative positions outstanding is included in other assets and other liabilities in the accompanying consolidated balance sheets and in the net change in each of these line items in the operating section of the accompanying consolidated statements of cash flows. The unrealized gains and losses, representing the change in fair value of the derivative, are being recorded in interest income in the consolidated statements of income. The ineffective portions of the unrealized gains or losses, if any, are recorded in interest income and interest expense in the consolidated statements of income.

The Company executed one interest rate swap, with an original notional amount of $10.0 million, during the first quarter of fiscal 2025, and executed two interest rate swaps, with original notional amounts of $20.0 million each, during the fourth quarter of fiscal 2024, for a total of $50.0 million, designated as fair value hedges, to convert certain long-term fixed rate 1-4 family loans to floating rates to hedge interest rate risk exposure. The portfolio layer method is being used, which allows the Company to designate a stated amount of the assets that are not expected to be affected by prepayments, defaults or other factors that could affect the timing and amount of the cash flow, as the hedged item. The effect of the swaps on loan interest income in the income statement during the three-month period ended September 30, 2024, totaled $178,000, and none in the same period of the prior year.

The notional amounts and estimated fair values of the Company’s interest rate swaps at September 30, 2024 and June 30, 2024 are presented in the tables below:

	September 30, 2024
			Fair Value
		Notional	Other		Other
(dollars in thousands)		Amount	Assets		Liabilities
1-4 Family interest rate swaps	$	50,000	$	1,320	$	1,294

	June 30, 2024
			Fair Value
		Notional	Other		Other
(dollars in thousands)		Amount	Assets		Liabilities
1-4 Family interest rate swaps	$	40,000	$	20	$	15

The carrying amount of the hedged assets, located in loans receivable, net and cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets at September 30, 2024 and June 30, 2024 are presented in the tables below:

	September 30, 2024
	Carrying		Cumulative Amount of Fair Value
	Amount of		Hedging Adj Included in
(dollars in thousands)	Hedged Assets		Carrying Amount of Hedged assets
1-4 Family interest rate swaps	$	532,785	$	26

	June 30, 2024
	Carrying		Cumulative Amount of Fair Value
	Amount of		Hedging Adj Included in
(dollars in thousands)	Hedged Assets		Carrying Amount of Hedged assets
1-4 Family interest rate swaps	$	553,307	$	5