v3.22.4
Derivative Instruments
 3 Months Ended
Dec. 31, 2022
Summary of Derivative Instruments [Abstract]  
Derivative Instruments DERIVATIVE INSTRUMENTS
The Company enters into interest rate swaps to add stability to interest expense and manage exposure to interest rate movements as part of an overall risk management strategy. For hedges of the Company's borrowing program, interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed payments. These derivatives are used to hedge the forecasted cash outflows associated with the Company's FHLB borrowings.
Cash flow hedges are initially assessed for effectiveness using regression analysis. Changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in OCI and are subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings. Quarterly, a qualitative analysis is performed to monitor the ongoing effectiveness of the hedging instrument. All derivative positions were initially and continue to be highly effective at December 31, 2022.
The Company enters into forward commitments for the sale of mortgage loans principally to protect against the risk of lost revenue from adverse interest rate movements on net income. The Company recognizes the fair value of such contracts when the characteristics of those contracts meet the definition of a derivative. These derivatives are not designated in a hedging relationship; therefore, gains and losses are recognized immediately in the CONSOLIDATED STATEMENTS OF INCOME.
In addition, the Company is party to derivative instruments when it enters into interest rate lock commitments to originate a portion of its loans, which when funded, are classified as held for sale. Such commitments are not designated in a hedging relationship; therefore, gains and losses are recognized immediately in the CONSOLIDATED STATEMENTS OF INCOME.
The following tables provide the notional values and fair values, and the locations of the fair values within the CONSOLIDATED STATEMENTS OF CONDITION, at the reporting dates, for all derivative instruments.
December 31, 2022
Weighted Average
Notional ValueFair ValueTerm (years)Fixed-Rate Payments
Derivatives designated as hedging instruments
Cash flow hedges: Interest rate swaps
Other Assets
LIBOR swaps (1)
$1,475,000 $— 2.61.87 %
SOFR swaps (2)
400,000 — 6.63.35 %
Other Liabilities
SOFR swaps (2)
75,000 $— 4.93.82 %
Total cash flow hedges: Interest rate swaps$1,950,000 $— 3.52.25 %

September 30, 2022
Weighted Average
Notional ValueFair ValueTerm (years)Fixed-Rate Payments
Cash flow hedges: Interest rate swaps
Other Assets
LIBOR swaps (1)
$1,550,000 $— 2.71.88 %
Total cash flow hedges: Interest rate swaps$1,550,000 $— 2.71.88 %
(1) LIBOR swap contracts that remain outstanding at July 2023 will transition to a SOFR-based rate.
(2) All swap contracts entered into after October 1st, 2022 are based on a SOFR-based rate.

December 31, 2022September 30, 2022
Notional ValueFair ValueNotional ValueFair Value
Derivatives not designated as hedging instruments
Interest rate lock commitments
Other Liabilities$4,385 $(29)$9,170 $(333)
Forward Commitments for the sale of mortgage loans
Other Assets4,397 — — — 
Total derivatives not designated as hedging instruments$8,782 $(29)$9,170 $(333)
The following tables present the net gains and losses recorded within the CONSOLIDATED STATEMENTS OF INCOME and the CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME relating to derivative instruments.
Three Months Ended
 Location of Gain or (Loss) December 31,
 Recognized in Income20222021
Cash flow hedges
Amount of gain/(loss) recognizedOther comprehensive income$9,104 $15,893 
Amount of gain/(loss) reclassified from AOCIInterest expense: Borrowed funds 6,624 (10,801)
Derivatives not designated as hedging instruments
Interest rate lock commitmentsOther non-interest income$304 $(278)
Forward commitments for the sale of mortgage loansNet gain/(loss) on the sale of loans— (22)
The Company estimates that $50,035 of the amounts reported in AOCI will be reclassified as a reduction to interest expense during the twelve months ending December 31, 2023.
Derivatives contain an element of credit risk which arises from the possibility that the Company will incur a loss because a counterparty fails to meet its contractual obligations. The Company's exposure is limited to the replacement value of the contracts rather than the notional or principal amounts. Credit risk is minimized through counterparty margin payments, transaction limits and monitoring procedures. All of the Company's swap transactions are cleared through a registered clearing broker to a central clearing organization. The clearing organization establishes daily cash and upfront cash or securities margin requirements to cover potential exposure in the event of default. This process shifts the risk away from the counterparty, since the clearing organization acts as the middleman on each cleared transaction. At December 31, 2022 and September 30, 2022, there was $36,202 and $26,045, respectively, included in other assets related to initial margin requirements held by the central clearing organization. For derivative transactions cleared through certain clearing parties, variation margin payments are recognized as settlements on a daily basis. The fair value of derivative instruments are presented on a gross basis, even when the derivative instruments are subject to master netting arrangements.