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Deposits and Borrowed Funds
 12 Months Ended
Sep. 30, 2024
Deposits and Borrowed Funds [Abstract]  
Deposits and Borrowed Funds DEPOSITS AND BORROWED FUNDS
Deposits - Non-interest-bearing deposits totaled $549.6 million and $558.3 million as of September 30, 2024 and 2023, respectively. Certificates of deposit with a minimum denomination of $250 thousand were $516.3 million and $521.0 million as of September 30, 2024 and 2023, respectively. Deposits in excess of $250 thousand may not be fully insured by the Federal Deposit Insurance Corporation.

Borrowings - Borrowings at September 30, 2024 consisted of $2.18 billion in FHLB advances, of which $1.98 billion were fixed-rate advances and $200.0 million were variable-rate advances, and $1.1 million in finance leases. Borrowings at September 30, 2023 consisted of $2.38 billion in FHLB advances, of which $2.02 billion were fixed-rate advances and $365.0 million were variable-rate advances, and $500.0 million of borrowings from the Federal Reserve's Bank Term Funding Program ("BTFP"). There were no borrowings against the variable-rate FHLB line of credit at September 30, 2024 or 2023. Additionally, the Bank is authorized to borrow from the FRB of Kansas City's "discount window" but there were no such borrowings at September 30, 2024 or 2023.

FHLB advances and BTFP borrowings at September 30, 2024 and 2023 were comprised of the following:
20242023
(Dollars in thousands)
FHLB advances$2,180,656 $2,382,828 
BTFP borrowings— 500,000 
Deferred prepayment penalty - FHLB advances(2,173)(3,703)
$2,178,483 $2,879,125 
Weighted average contractual interest rate on FHLB advances3.41 %3.41 %
Weighted average effective interest rate on FHLB advances(1)
3.29 3.06 
Weighted average contractual interest rate on BTFP borrowings— 4.70 

(1)The effective interest rate includes the net impact of deferred amounts and interest rate swaps related to the adjustable-rate FHLB advances.

FHLB borrowings are secured by certain qualifying loans pursuant to a blanket collateral agreement with FHLB and certain securities, when necessary. Per FHLB's lending guidelines, total FHLB borrowings cannot exceed 40% of a borrowing institution's regulatory total assets without the pre-approval of FHLB senior management. The Bank's borrowing limit approved by FHLB senior management was 50% as of September 30, 2024 and became 45% starting November 1, 2024. At September 30, 2024, the ratio of the par value of the Bank's FHLB borrowings to the Bank's Call Report total assets was 23%.
The amount that could be borrowed under the BTFP was based upon the par value of securities pledged as collateral, the term could be up to one year in length, and the borrowings could be prepaid without penalty. Advances could be requested under the BTFP until March 11, 2024. Subsequent to September 30, 2023, the Bank repaid the $500.0 million of BTFP borrowings and did not enter into any additional BTFP borrowings after that point in time.
At September 30, 2024 and 2023, the Bank had entered into interest rate swap agreements with a total notional amount of $200.0 million and $365.0 million, respectively, in order to hedge the variable cash flows associated with $200.0 million and $365.0 million, respectively, of adjustable-rate FHLB advances. At September 30, 2024 and 2023, the interest rate swap agreements had an average remaining term to maturity of 2.3 years and 2.1 years, respectively. The interest rate swaps were designated as cash flow hedges and involved 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 September 30, 2024 and September 30, 2023, the interest rate swaps were in a gain position with a total fair value of $2.1 million and $13.0 million, respectively, which was reported in other assets on the consolidated balance sheet. During fiscal year 2024 and 2023, $6.1 million and $5.6 million, respectively, was reclassified from AOCI as a decrease to interest expense. At September 30, 2024, the Company estimated that $1.8 million of interest expense associated with the interest rate swaps would be reclassified from AOCI as a decrease 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 held cash collateral of $2.1 million at September 30, 2024 and $14.0 million at September 30, 2023.
Periodically, management has utilized a leverage strategy to increase earnings which entails entering into short-term FHLB borrowings and depositing the proceeds from these FHLB borrowings, net of the cost to purchase FHLB stock to meet FHLB stock holding requirements, at the FRB of Kansas City ("leverage strategy"). The leverage strategy is not a core operating business for the Company. It provides the Company the ability to utilize excess capital to generate earnings. Additionally, it is a strategy that can be exited quickly without additional costs. Leverage strategy borrowings are repaid prior to each quarter end. The leverage strategy was not in place during the current year due to the strategy being unprofitable, but it was in place at points during the prior year. When the leverage strategy is in place, it reduces the net interest margin due to the amount of earnings from the transaction in comparison to the size of the transaction. Management continues to monitor the net interest rate spread and overall profitability of the leverage strategy.
Scheduled Repayment of Borrowed Funds and Maturity of Certificates of Deposit - The following table presents the scheduled repayment of term borrowings, at par, and the maturity of certificates of deposit as of September 30, 2024. With the exception of amortizing FHLB advances, FHLB advances are payable at maturity. Amortizing FHLB advances are presented based on their maturity dates versus their quarterly scheduled repayment dates. At September 30, 2024, the Bank's FHLB advances had maturities ranging from October 2024 to August 2029.
Certificates
of Deposit
BorrowingsAmount
(Dollars in thousands)
2025650,000 2,204,587 
2026575,000 515,572 
2027477,500 138,893 
2028310,656 94,600 
2029167,500 11,455 
Thereafter— 203 
$2,180,656 $2,965,310