The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheet as of September 30, 2022 and 2021, (in thousands).

			Fair Values of Derivative Instruments
			Asset Derivatives
			As of September 30, 2022					As of September 30, 2021
Hedged Item	Notional Amount		Balance Sheet Location	Fair Value		Notional Amount		Balance Sheet Location	Fair Value
Brokered Deposits	$	-	Derivative and hedging assets	$	-	$	175,000	Derivative and hedging assets	$	1,247
FHLB Advances		225,000	Derivative and hedging assets		15,310		-	Derivative and hedging assets		-
Commercial Loans		79,602	Derivative and hedging assets		9,171		71,326	Derivative and hedging assets		1,307
Total derivatives designated as hedging instruments	$	304,602		$	24,481	$	246,326		$	2,554

			Fair Values of Derivative Instruments
			Liability Derivatives
			As of September 30, 2022					As of September 30, 2021
Hedged Item	Notional Amount		Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value

Brokered Deposits	$	-	Derivative and hedging liabilities	$	-	$	60,000	Derivative and hedging liabilities	$	452
Commercial Loans		111,668	Derivative and hedging liabilities		9,176		103,831	Derivative and hedging liabilities		1,304
Total derivatives designated as hedging instruments	$	111,668		$	9,176	$	163,831		$	1,756

The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company has entered into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed payments. As of September 30, 2022, the Company had ten interest rate swaps with a notional of $225 million associated with the Company’s cash outflows associated with various FHLB advances and $191 million associated with commercial loans. As of September 30, 2021, the Company had eleven interest rate swaps with a notional of $235 million associated with the Company’s cash outflows associated with various brokered deposits and $175 million associated with commercial loans.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings), net of tax, and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. The Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions. The Company did not recognize any hedge ineffectiveness in earnings during the periods ended September 30, 2022 and 2021.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest income/expense as interest payments are made/received on the Company’s variable-rate assets/liabilities. During the 12 months ended September 30, 2022 and 2021, the Company had $823,000 in gains and $2.0 million in losses classified to interest expense, respectively. During the next twelve months, the Company estimates that $8.2 million will be reclassified as a decrease in interest expense.

The table below presents the effect of the Company’s cash flow hedge accounting on Accumulated Other Comprehensive Income for the periods ended September 30, 2022 and 2021 (in thousands).

The Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income
Derivatives in Hedging Relationships	Amount of Gain Recognized in OCI on Derivative					Amount of Gain (Loss) Reclassified from Accumulated OCI into Income
	Year Ended September 30,		Year Ended September 30,		Location of Gain Reclassified from	Year Ended September 30,		Year Ended September 30,
	2022		2021		Accumulated OCI into Income	2022		2021
Derivatives in Cash Flow Hedging Relationships
Interest Rate Products	$	14,507	$	5,592	Interest Expense	$	823	$	(2,001	)
Total	$	14,507	$	5,592		$	823	$	(2,001	)

The Company has agreements with its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

The Company also has agreements with certain of its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well / adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

As of September 30, 2022 the Company had derivatives in a net asset position and was not required to post collateral against its obligations under these agreements. As of September 30, 2021 the Company had derivatives in a net liability position and was required to post $640,000 in collateral against its obligations under these agreements. If the Company had breached any of these provisions at September 30, 2022 and 2021, it could have been required to settle its obligations under the agreements at the termination value.