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FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK | 12 Months Ended
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Sep. 30, 2021
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK [Abstract] |
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK | NOTE Q - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK The Company may use derivative financial instruments, such as interest rate floors and collars, as part of its interest rate risk management. Interest rate caps and floors are agreements whereby one party agrees to pay or receive a floating rate of interest on a notional principal amount for a predetermined period of time if certain market interest rate thresholds are met. The Company considers the credit risk inherent in these contracts to be negligible. As of September 30, 2021 and 2020, the Company did not hold any interest rate floors or collars. The Company is a party to interest rate derivatives that are not designated as hedging instruments. Under a program, the Company executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that the Bank executes with a third-party financial institution, such that the Bank minimizes its net risk exposure resulting from such transactions. Because the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. The changes in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined by taking into consideration the risk rating, probability of default and loss given default for all counterparties. The company had $300,000 in cash pledged for collateral on its interest rate swaps with financial institutions at September 30, 2021. The following table presents summary information regarding these derivatives for September 30, 2021. There were no derivatives as of September 30, 2020.
|  | Notional Amount |  | Average Maturity (Years) |  | Weighted Average Fixed Rate |  | Weighted Average Variable Rate |  | Fair Value
|  | (Dollars in thousands)
September 30, 2021 |  |  |  |  |  |  |  |  |  |  |
Classified in Other Assets: |  |  |  |  |  |  |  |  |  |  |
Customer interest rate swaps |  | $ | 20,111 |  | 6.9 |  | 3.61% |  | 1 Mo. LIBOR + 2.50 | $ | 183
Classified in Other Liabilities: |  |  |  |  |  |  |  |  |  |  |
3rd Party interest rate swaps |  | $ | 20,111 |  | 6.9 |  | 3.61% |  | 1 Mo. LIBOR + 2.50 | $ | 183
At September 30, 2021 and 2020, the Company had outstanding commitments (substantially all of which expire within one year) to originate one-to four-family residential loans, construction loans, commercial real estate loans, commercial business loans and consumer loans. These commitments were comprised of fixed and variable rate loans. 83 Table of Contents
MAGYAR BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
September 30, 2021 and 2020
|  | September 30, |
|  | 2021 |  |  | 2020 |
|  |  | (In thousands) |
Financial instruments whose contract amounts represent credit risk |  |  |  |  |  |  |  |
Letters of credit |  | $ | 2,901 |  |  | $ | 1,041 |
Unused lines of credit |  |  | 63,798 |  |  |  | 78,632 |
Fixed rate loan commitments |  |  | 9,156 |  |  |  | 5,240 |
Variable rate loan commitments |  |  | 14,558 |  |  |  | 15,864 |
Total |  | $ | 90,413 |  |  | $ | 100,777 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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