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Derivatives and Hedging Activities | 12 Months Ended
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Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives and Hedging Activities | DERIVATIVES AND HEDGING ACTIVITIES The following tables present the fair value, notional amount and balance sheet classification of derivative assets and liabilities at September 30, 2022 and September 30, 2021.
September 30, 2022 | Derivative Assets |  | Derivative Liabilities
Interest rate contract purpose | Balance Sheet Location | Notional | Fair Value |  | Balance Sheet Location | Notional | Fair Value
| (In thousands) |  | (In thousands)
Client swap program hedges | Other assets | $ | 588,676 |  | $ | 67,260 |  |  | Other liabilities | $ | 588,676 |  | $ | 67,260 |
Commercial loan fair value hedges | Other assets | 42,209 |  | 2,517 |  |  | Other liabilities | — |  | — |
Mortgage loan fair value hedges | Other assets | 470,000 |  | 36,765 |  |  | Other liabilities | — |  | — |
Borrowings cash flow hedges | Other assets | 1,000,000 |  | 179,945 |  |  | Other liabilities | — |  | — |
|  | $ | 2,100,885 |  | $ | 286,487 |  |  |  | $ | 588,676 |  | $ | 67,260 |
September 30, 2021 | Derivative Assets |  | Derivative Liabilities
Interest rate contract purpose | Balance Sheet Location | Notional | Fair Value |  | Balance Sheet Location | Notional | Fair Value
| (In thousands) |  | (In thousands)
Client swap program hedges | Other assets | $ | 644,355 |  | $ | 10,983 |  |  | Other liabilities | $ | 644,355 |  | $ | 10,983 |
Commercial loan fair value hedges | Other assets | — |  | — |  |  | Other liabilities | 44,678 |  | 2,177 |
Mortgage loan fair value hedges | Other assets | — |  | — |  |  | Other liabilities | 470,000 |  | 1,641 |
Borrowings cash flow hedges | Other assets | 1,000,000 |  | 42,442 |  |  | Other liabilities | — |  | — |
|  | $ | 1,644,355 |  | $ | 53,425 |  |  |  | $ | 1,159,033 |  | $ | 14,801 |
The Company enters into interest rate swaps to hedge interest rate risk. These arrangements include hedges of individual fixed rate commercial loans and also hedges of a specified portion of pools of prepayable fixed rate mortgage loans under the "last of layer" method. These relationships qualify as fair value hedges under FASB ASC 815, Derivatives and Hedging ("ASC 815"), which provides for offsetting of the recognition of gains and losses of the respective interest rate swap and the hedged items. Gains and losses on interest rate swaps designated in these hedge relationships, along with the offsetting gains and losses on the hedged items attributable to the hedged risk, are recognized in current earnings within the same income statement line item. Upon electing to apply ASC 815 fair value hedge accounting, the carrying value of the hedged items are adjusted to reflect the cumulative impact of changes in fair value attributable to the hedged risk. The hedge basis adjustment remains with each hedged item until the hedged item is de-recognized from the balance sheet. The following tables presents the impact of fair value hedge accounting on the carrying value of the hedged items at September 30, 2022 and September 30, 2021.
(In thousands) | September 30, 2022
Balance sheet line item in which hedged item is recorded | Carrying value of hedged items | Cumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged items
Loans receivable (1) (2) | $ | 1,159,496 |  | $ | (39,090) |
| $ | 1,159,496 |  | $ | (39,090) |
(1) Includes the amortized cost basis of the closed mortgage loan portfolios used to designate the hedging relationships in which the hedged items are the last layer expected to be remaining at the end of the hedging relationships. At September 30, 2022, the amortized cost basis of the closed loan portfolios used in the hedging relationships was $1,119,975,000, the cumulative basis adjustment associated with the hedging relationships was $(36,458,000), and the amount of the designated hedged items was $470,000,000. (2) Includes the amortized cost basis of commercial loans designated in fair value hedging relationships. At September 30, 2022, the amortized cost basis of the hedged commercial loans was $39,521,000 and the cumulative basis adjustment associated with the hedging relationships was $(2,632,000).
(In thousands) | September 30, 2021
Balance sheet line item in which hedged item is recorded | Carrying value of hedged items | Cumulative gain (loss) fair value hedge adjustment included in carrying amount of hedged items
Loans receivable (1) (2) | $ | 1,515,487 |  | $ | 4,215 |
| $ | 1,515,487 |  | $ | 4,215 |
(1) Includes the amortized cost basis of the closed mortgage loan portfolios used to designate the hedging relationships in which the hedged items are the last layer expected to be remaining at the end of the hedging relationships. At September 30, 2021, the amortized cost basis of the closed loan portfolios used in the hedging relationships was $1,468,517,000, the cumulative basis adjustment associated with the hedging relationships was $1,864,000, and the amount of the designated hedged items was 470,000,000. During the year ended September 30, 2021, hedge accounting was discontinued on $30,000,000 (30%) of a $100,000,000 last of layer hedge. The $1,238,000 unamortized discount associated with the terminated portion of the hedge is being amortized over the remaining life of the associated pool of loans. (2) Includes the amortized cost basis of commercial loans designated in fair value hedging relationships. At September 30, 2021, the amortized cost basis of the hedged commercial loans was $46,970,000 and the cumulative basis adjustment associated with the hedging relationships was $2,351,000. During the year ended September 30, 2021, hedge accounting was discontinued on a $46,240,000 commercial loan hedge. The Company has entered into interest rate swaps to convert certain short-term borrowings to fixed rate payments. The primary purpose of these hedges is to mitigate the risk of changes in future cash flows resulting from increasing interest rates. For qualifying cash flow hedges under ASC 815, gains and losses on the interest rate swaps are recorded in accumulated other comprehensive income ("AOCI") and then reclassified into earnings in the same period the hedged cash flows affect earnings and within the same income statement line item as the hedged cash flows. As of September 30, 2022, the maturities for hedges of adjustable rate borrowings ranged from less than two years to eight years, with the weighted average being 6.5 years. The following table presents the impact of derivative instruments (cash flow hedges on borrowings) on AOCI for the periods presented.
(In thousands) | Twelve Months Ended September 30,
Amount of gain/(loss) recognized in AOCI on derivatives in cash flow hedging relationships | 2022 | 2021
Interest rate contracts: |  |
Pay fixed/receive floating swaps on cash flow hedges of borrowings | $ | 137,502 |  | $ | 59,817 |
Total pre-tax gain/(loss) recognized in AOCI | $ | 137,502 |  | $ | 59,817 |
The following table presents the gains/(losses) on derivative instruments in fair value and cash flow accounting hedging relationships under ASC 815 for the period presented.
| Twelve Months Ended September 30, 2022 | Twelve Months Ended September 30, 2021
| Interest income on loans receivable | Interest expense on FHLB advances | Interest income on loans receivable | Interest expense on FHLB advances
| (In thousands) | (In thousands)
Interest income/(expense), including the effects of fair value and cash flow hedges | $ | 601,592 |  | $ | (28,729) |  | $ | 537,660 |  | $ | (44,188) |
Gain/(loss) on fair value hedging relationships: |  |  |  |
Interest rate contracts |  |  |  |
Amounts related to interest settlements on derivatives | $ | (1,782) |  |  | $ | (6,320) |  |
Recognized on derivatives | 43,100 |  |  | 20,736 |  |
Recognized on hedged items | (43,305) |  |  | (20,449) |  |
Net income/(expense) recognized on fair value hedges | $ | (1,987) |  |  | $ | (6,033) |  |
Gain/(loss) on cash flow hedging relationships: |  |  |  |
Interest rate contracts |  |  |  |
Amounts related to interest settlements on derivatives |  | $ | (408) |  |  | $ | 10,846 |
Amount of derivative gain/(loss) reclassified from AOCI into interest income/expense |  | — |  |  | 14,110 |
Net income/(expense) recognized on cash flow hedges |  | $ | (408) |  |  | $ | 24,956 |
The Company periodically enters into certain interest rate swap agreements in order to provide commercial loan customers the ability to convert from variable to fixed interest rate payments, while the Company retains a variable rate loan. Under these agreements, the Company enters into a variable rate loan agreement and a swap agreement with the client. The swap agreement effectively converts the client’s variable rate loan into a fixed rate. The Company enters into a corresponding swap agreement with a third party in order to offset its exposure on the variable and fixed components of the client's swap agreement. The interest rate swaps are derivatives under ASC 815, with changes in fair value recorded in earnings. There was no net impact to the statement of operations for the years ended September 30, 2022 and 2021 as the changes in fair value of the receive fixed swap and pay fixed swap offset each other. As of September 30, 2022, none of the outstanding notional balance is associated with related party loans. The following table presents the impact of derivative instruments (client swap program) that are not designated in accounting hedges under ASC 815 for the periods presented.
(In thousands) |  | Twelve Months Ended September 30,
Derivative instruments | Classification of gain/(loss) recognized in income on derivative instrument | 2022 | 2021
Interest rate contracts: |  |  |
Pay fixed/receive floating swap | Other noninterest income | $ | 78,244 |  | $ | 37,218 |
Receive fixed/pay floating swap | Other noninterest income | (78,244) |  | (37,218) |
|  | $ | — |  | $ | — |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI https://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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