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Derivative Financial Instruments
 12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
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 is recognized in the income statement in other income and fees. The Company is required to hold cash as collateral for the swaps, which is recorded in other assets on the consolidated statement of financial condition. Total cash held as collateral for swaps was $8.9 million at December 31, 2019 and $8.9 million at December 31, 2018.
At December 31, 2019 and 2018, interest rate swaps related to the Company’s loan hedging program that were outstanding is presented in the following table:
 
 
December 31, 2019
 
December 31, 2018
 
 
(Dollars in thousands)
Interest rate swaps on loans with correspondent banks
(included in other assets)
 
 
 
 
Notional amount
 
$
137,890

 
$
237,916

Weighted average remaining term (years)
 
7.2

 
6.8

Pay fixed rate (weighted average)
 
3.62
%
 
4.36
%
Received variable rate (weighted average)
 
3.83
%
 
4.69
%
Estimated fair value
 
$
739

 
$
6,191

 
 
 
 
 
Interest rate swaps on loans with correspondent banks
(included in other liabilities)
 
 
 
 
Notional amount
 
$
282,326

 
$
36,972

Weighted average remaining term (years)
 
6.9

 
6.4

Pay fixed rate (weighted average)
 
4.48
%
 
5.12
%
Received variable rate (weighted average)
 
3.98
%
 
4.56
%
Estimated fair value
 
$
(9,614
)
 
$
(868
)
 
 
 
 
 
Back to back interest rate swaps with loan customers
(included in other liabilities)
 
 
 
 
Notional amount
 
$
137,890

 
$
237,916

Weighted average remaining term (years)
 
7.2

 
6.8

Received fixed rate (weighted average)
 
3.62
%
 
4.36
%
Pay variable rate (weighted average)
 
3.83
%
 
4.69
%
Estimated fair value
 
$
(739
)
 
$
(6,191
)
 
 
 
 
 
Back to back interest rate swaps with loan customers
(included in other assets)
 
 
 
 
Notional amount
 
$
282,326

 
$
36,972

Weighted average remaining term (years)
 
6.9

 
6.4

Received fixed rate (weighted average)
 
4.48
%
 
5.12
%
Pay variable rate (weighted average)
 
3.98
%
 
4.56
%
Estimated fair value
 
$
9,614

 
$
868



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, 2019 and December 31, 2018, the Company had approximately $10.5 million and $874 thousand in interest rate lock commitments, respectively, and $10.5 million and $874 thousand, 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 as of the dates indicated:
 
December 31, 2019
 
December 31, 2018
 
Notional Amount
 
Fair Value
 
Notional Amount
 
Fair Value
 
(Dollars in thousands)
Assets:
 
 
 
 
 
 
 
Interest rate lock commitments
$
10,540

 
$
84

 
$
874

 
$
10

Forward sale contracts related to mortgage banking
$
4,532

 
$
11

 
$
—

 
$
—

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Interest rate lock commitments
$
—

 
$
—

 
$
—

 
$
—

Forward sale contracts related to mortgage banking
$
6,008

 
$
(16
)
 
$
874

 
$
3