Derivative Financial Instruments

3 Months Ended

Dec. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

11.

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.

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 tables below provide information on the Company’s derivative financial instruments as of December 31, 2018 and September 30, 2018.

(In thousands)	Notional Amount December 31, 2018		Asset Derivatives December 31, 2018		Liability Derivatives December 31, 2018

Interest rate lock commitments	$	28,049	$	658	$	-
Forward mortgage loan sale contracts		24,750		-		132

	$	52,799	$	658	$	132

(In thousands)	Notional Amount September 30, 2018		Asset Derivatives September 30, 2018		Liability Derivatives September 30, 2018

Interest rate lock commitments	$	16,634	$	380	$	-
Forward mortgage loan sale contracts		13,750		41		-

	$	30,384	$	421	$	-

Income (loss) related to derivative financial instruments included in mortgage banking income in the accompanying consolidated statements of income for the three-month periods ended December 31, 2018 and 2017 is as follows:

(In thousands)	2018			2017

Interest rate lock commitments	$	278		$	-
Forward mortgage loan sale contracts		(151	)		-

	$	127		$	-