DERIVATIVE FINANCIAL INSTRUMENTS

12 Months Ended

Sep. 30, 2023

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

(18)       DERIVATIVE FINANCIAL INSTRUMENTS

The Company enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (i.e., rate lock commitment). The Company also enters into forward mortgage loan commitments to sell to various investors to protect itself against exposure to various factors and to reduce sensitivity to interest rate movements. Both the interest rate lock commitments and the related forward mortgage loan sales contracts are considered derivatives and are recorded on the balance sheet at fair value in accordance with FASB ASC 815, Derivatives and Hedging, with changes in fair value recorded in mortgage banking income in the accompanying consolidated statements of income. All such derivatives are considered stand-alone derivatives and have not been formally designated as hedges by management.

(18 – continued)

Certain financial instruments, including derivatives, may be eligible for offset in the balance sheet when the “right of setoff” exists or when the instruments are subject to an enforceable master netting agreement, which includes the right of the non-defaulting party or non-affected party to offset recognized amounts, including collateral posted with the counterparty, to determine a net receivable or net payable upon early termination of the agreement. Certain of the Company’s derivative instruments are subject to master netting agreements. However, the Company has not elected to offset such financial instruments in the consolidated balance sheets.

The Company may be required to post margin collateral to derivative counterparties based on agreements with the dealers. At September 30, 2023 and 2022, the Company had cash collateral posted with certain derivative counterparties against its derivative obligations of $1.5 million and $2.4 million, respectively. Cash collateral related to derivative contracts is recorded in interest-bearing deposits with banks or other assets in the consolidated balance sheets.

The table below provides information on the Company’s derivative financial instruments as of September 30, 2023 and 2022.

September 30, 2023:	Notional		Asset		Liability
(In thousands)	Amount		Derivatives		Derivatives
Interest rate lock commitments	$	67,040	$	452	$	184
Forward mortgage loan sale contracts		66,000		471		12
	$	133,040	$	923	$	196

September 30, 2022:	Notional		Asset		Liability
(In thousands)	Amount		Derivatives		Derivatives
Interest rate lock commitments	$	48,952	$	158	$	396
Forward mortgage loan sale contracts		60,000		872		31
	$	108,952	$	1,030	$	427

Income (loss) related to derivative financial instruments included in mortgage banking income in the accompanying consolidated statements of income for the years ended September 30, 2023, 2022 and 2021, is as follows:

(In thousands)	2023		2022		2021
Interest rate lock commitments	$	505	$	(1,805)	$	(13,370)
Forward mortgage loan sale contracts		1,353		20,398		4,140
	$	1,858	$	18,593	$	(9,230)