v3.25.2
Derivative Instruments
 9 Months Ended
Jun. 30, 2025
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 and deposit 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 and brokered certificates of deposit. Cash flows from derivatives used to manage interest rate
risks are classified as operating activities in the cash flow statement. The Company classifies both the earnings and cash flow
impact from these derivatives consistent with the underlying hedged item.
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. Derivatives qualifying as cash flow hedges are settled daily, bringing their fair value to $0. Quarterly, a quantitative analysis is performed to monitor the ongoing effectiveness of the hedging instrument. All derivative positions continue to be highly effective as of June 30, 2025.
The Company enters into forward commitments for the sale of mortgage loans primarily 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 or acquire 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 locations within the CONSOLIDATED STATEMENTS OF CONDITION for fair values of derivative instruments at the reporting dates and their related notional values.
June 30, 2025September 30, 2024
Weighted AverageWeighted Average
Notional ValueTerm (years)Fixed-Rate PaymentsNotional ValueTerm (years)Fixed-Rate Payments
Derivatives designated as hedging instruments
Cash flow hedges: Interest rate swaps
Other Assets$2,125,000 2.22.93 %$2,075,000 2.32.68 %
Other Liabilities1,525,000 3.33.72 1,575,000 4.13.67 
Total cash flow hedges: Interest rate swaps
$3,650,000 2.73.26 %$3,650,000 3.13.10 %


June 30, 2025September 30, 2024
Notional ValueFair ValueNotional ValueFair Value
Derivatives not designated as hedging instruments
Interest rate lock commitments
Other Assets$35,917 $597 $11,467 $395 
Forward Commitments for the sale of mortgage loans
Other Liabilities49,820 (160)17,411 (72)
Total derivatives not designated as hedging instruments$85,737 $437 $28,878 $323 
The following tables present the net gains and losses recorded within the CONSOLIDATED STATEMENTS OF INCOME and the CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME relating to derivative instruments.
Three Months EndedNine Months Ended
 Location of Gain or (Loss) June 30, June 30,
 Recognized in Income2025202420252024
Cash flow hedges
Amount of gain/(loss) recognizedOther comprehensive income$(15,454)$21,433 $32,090 $(858)
Amount of gain reclassified from AOCI
Interest expense: Borrowed funds and Deposits
10,114 21,369 36,087 67,152 
Derivatives not designated as hedging instruments
Interest rate lock commitmentsOther non-interest income$279 $154 $202 $513 
Forward commitments for the sale of mortgage loansNet gain/(loss) on the sale of loans(139)132 (88)(19)
The Company estimates that $17,562 of the amounts reported in AOCI will be reclassified as a reduction to interest expense during the twelve months ending June 30, 2026.
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 an intermediary on each cleared transaction. At June 30, 2025 and September 30, 2024, there was $5,977 and $7,844, respectively, of cash collateral included in other assets, and $50,111 and $68,932, respectively, included in investment securities related to initial margin requirements that are 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.