Derivatives and Hedging Activities

6 Months Ended

Mar. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

Derivatives and Hedging Activities

The Company periodically enters into certain commercial loan interest rate swap agreements in order to provide commercial loan customers the ability to convert from variable to fixed interest rate payments, while the bank 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 swap agreements with the clients and third parties are not designated as hedges under ASC 815, the Derivatives and Hedging topic; the instruments are marked to market in earnings.

The notional amount of open interest rate swap agreements at March 31, 2014 was $110,462,000 compared to $83,594,000 as of September 30, 2013. There was no impact to the statement of operations for the six-months ended March 31, 2014 as the asset and liability side of the swaps offset each other. The fee income related to swaps was $273,200 for the six months ended March 31, 2014.

The Company periodically enters into forward contracts to purchase mortgage-backed securities as part of its interest rate risk management program. The notional amount of commitments to purchase mortgage-backed securities at March 31, 2014 was $0 and at September 30, 2013 was $200,000,000. When there is a balance, the fair value of these contracts is included with the available-for-sale securities on the statement of financial condition.

The following table presents the fair value and balance sheet classification of derivatives not designated as hedging instruments at March 31, 2014 and September 30, 2013:

Asset Derivatives

Liability Derivatives

March 31, 2014

September 30, 2013

March 31, 2014

September 30, 2013

Balance Sheet

Balance Sheet

Balance Sheet

Balance Sheet

Location

Fair Value

Location

Fair Value

Location

Fair Value

Location

Fair Value

(In thousands)

Interest rate contracts

Other assets

$

322

Other assets

$

7

Other liabilities

$

322

Other liabilities

$

7

Commitments to purchase MBS

AFS securities

—

AFS securities

$

3,188

N/A

N/A

N/A

N/A