DERIVATIVE FINANCIAL INSTRUMENTS

The Company offers a loan hedging program to certain loan customers. Through this program, the Company originates a variable rate loan with the customer. The Company and the customer will then enter into a fixed interest rate swap. Lastly, an identical offsetting swap is entered into by the Company with a correspondent bank. These “back-to-back” swap arrangements are intended to offset each other and allow the Company to book a variable rate loan, while providing the customer with a contract for fixed interest payments. In these arrangements, the Company’s net cash flow is equal to the interest income received from the variable rate loan originated with the customer. These customer swaps are not designated as hedging instruments and are recorded at fair value in other assets and other liabilities. The changes in fair value are recognized in the income statement in other income and fees.

At December 31, 2018 and 2017, the following interest rate swaps related to the Company’s loan hedging program were outstanding:



	December 31, 2018			December 31, 2017
	(Dollars in thousands)
Interest rate swaps on loans with correspondent banks (included in other assets)
Notional amount	$	36,972		$	103,363
Weighted average remaining term (years)	6.4			8.2
Received fixed rate (weighted average)	5.12		%	4.57		%
Pay variable rate (weighted average)	4.56		%	3.63		%
Estimated fair value	$	868		$	834

Interest rate swaps on loans with correspondent banks (included in other liabilities)
Notional amount	$	237,916		$	170,794
Weighted average remaining term (years)	6.8			6.7
Received variable rate (weighted average)	4.36		%	4.20		%
Pay fixed rate (weighted average)	4.69		%	3.80		%
Estimated fair value	$	6,191		$	3,672

Back to back interest rate swaps with loan customers (included in other liabilities)
Notional amount	$	36,972		$	103,363
Weighted average remaining term (years)	6.4			8.2
Received fixed rate (weighted average)	4.56		%	3.63		%
Pay variable rate (weighted average)	5.12		%	4.57		%
Estimated fair value	$	868		$	834

Back to back interest rate swaps with loan customers (included in other assets)
Notional amount	$	237,916		$	170,794
Weighted average remaining term (years)	6.8			6.7
Received variable rate (weighted average)	4.69		%	3.80		%
Pay fixed rate (weighted average)	4.36		%	4.20		%
Estimated fair value	$	6,191		$	3,672

The Company enters into various stand-alone mortgage-banking derivatives in order to hedge the risk associated with the fluctuation of interest rates. Changes in fair value are recorded as mortgage banking revenue. Residential mortgage loans funded with interest rate lock commitments and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. At December 31, 2018 and December 31, 2017, the Company had approximately $874 thousand and $4.8 million in interest rate lock commitments, respectively, and $874 thousand and $4.8 million, respectively, in total forward sales commitments for the future delivery of residential mortgage loans.

The following table reflects the notional amount and fair value of mortgage banking derivatives for the dates indicated:



	December 31, 2018				December 31, 2017
	Notional Amount		Fair Value		Notional Amount		Fair Value
	(Dollars in thousands)
Assets:
Interest rate lock commitments	$	874	$	10	$	4,795	$	25
Forward sale contracts related to mortgage banking:	$	—	$	—	$	2,452	$	8

Liabilities:
Interest rate lock commitments	$	—	$	—	$	—	$	—
Forward sale contracts related to mortgage banking:	$	874	$	3	$	2,343	$	5