Borrowed Funds

9 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Borrowed Funds

BORROWED FUNDS

FHLB Borrowings and Interest Rate Swaps - At June 30, 2020 and September 30, 2019, the Bank had entered into interest rate swap agreements with a total notional amount of $640.0 million in order to hedge the variable cash flows associated with $640.0 million of adjustable-rate FHLB advances. At June 30, 2020 and September 30, 2019, the interest rate swap agreements had an average remaining term to maturity of 3.8 years and 4.5 years, respectively. The interest rate swaps were designated as cash flow hedges and involve the receipt of variable amounts from a counterparty in exchange for the Bank making fixed-rate payments over the life of the interest rate swap agreements. At June 30, 2020 and September 30, 2019, the interest rate swaps were in a loss position with a total fair value of $57.1 million and $33.1 million, respectively, which was reported in accounts payable and accrued expenses on the consolidated balance sheet. During the three and nine months ended June 30, 2020, $1.7 million and $3.4 million, respectively, was reclassified from AOCI as an increase to interest expense. During the three and nine months ended June 30, 2019, $55 thousand and $106 thousand, respectively, was reclassified from AOCI as an increase to interest expense. At June 30, 2020, the Company estimated that $15.4 million of interest expense associated with the interest rate swaps will be reclassified from AOCI as an increase to interest expense on FHLB borrowings during the next 12 months. The Bank has minimum collateral posting thresholds with its derivative counterparties and posts collateral on a daily basis. The Bank posted cash collateral of $58.0 million at June 30, 2020 and $33.3 million at September 30, 2019.

During the current nine month period, the Bank prepaid fixed-rate FHLB advances totaling $350.0 million with a weighted average contractual interest rate of 2.42% and a weighted average remaining term of 1.0 years, and replaced these advances with $350.0 million of fixed-rate FHLB advances with a weighted average contractual interest rate of 1.43% and a weighted average term of 4.7 years. The Bank paid penalties totaling $4.2 million to FHLB as a result of prepaying the FHLB advances. The prepayment penalties are being recognized in interest expense over the life of the new FHLB advances.