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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
 3 Months Ended
Dec. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

NOTE N - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

 

The Company may use derivative financial instruments, such as interest rate swaps and interest rate floors and caps, 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 December 31, 2022, 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 Company executes with a third-party financial institution, such that the Company 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 was not required to pledge any collateral for its interest rate swaps with financial institutions at December 31, 2022 and September 30, 2022.

 

The following table presents summary information regarding these derivatives as of December 31, 2022 and September 30, 2022.

 

   Notional
Amount		   Average
Maturiy
(Years)		   Weighted
Average
Fixed Rate		   Weighted Average
Variable Rate		  Fair Value 
   (Dollars in thousands) 
December 31, 2022                   
Classified in Other Assets:                       
Customer interest rate swaps  $36,833    4.9    4.95%    1 Mo. BSBY + 2.44  $2,471 
                        
Classified in Other Liabilities:                       
3rd Party interest rate swaps  $36,833    4.9    4.95%    1 Mo. BSBY + 2.44  $2,471 
                        
                        
September 30, 2022                       
Classified in Other Assets:                       
Customer interest rate swaps  $19,512    5.9    3.63%    1 Mo. LIBOR + 2.50  $2,275 
   $6,940    4.6    6.13%    1 Mo. BSBY + 3.00  $212 
Total  $26,452    5.2    4.88%      $2,487 
                        
Classified in Other Liabilities:                       
3rd Party interest rate swaps  $19,512    5.9    3.63%    1 Mo. LIBOR + 2.50  $2,275 
   $6,940    4.6    6.13%    1 Mo. BSBY + 3.00  $212 
Total  $26,452    5.2    4.88%      $2,487 

 

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments are commitments to extend credit and are summarized in the below table. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

   December 31,   September 30, 
   2022   2022 
   (In thousands) 
         
Financial instruments whose contract amounts          
represent credit risk (in thousands)          
Letters of credit  $740   $740 
Unused lines of credit   85,702    73,825 
Fixed rate loan commitments   13    2,550 
Variable rate loan commitments   15,482    49,913 
Totals  $101,937   $127,028