NOTE 17 - DERIVATIVES

The Company regularly enters into commitments to originate and sell loans held for sale. The Company has established a hedging strategy to protect itself against the risk of loss associated with interest rate movements on loan commitments. The Company enters into contracts to sell forward TBA mortgage-backed securities. These commitments and contracts are considered derivatives but have not been designated as hedging instruments for reporting purposes under U.S. GAAP. Rather, they are accounted for as free-standing derivatives, or economic hedges, with changes in the fair value of the derivatives reported in noninterest income. The Company recognizes all derivative instruments as either other assets or other liabilities on the Consolidated Balance Sheets and measures those instruments at fair value.

The following tables summarize the Company’s derivative instruments at the dates indicated:


	December 31, 2017
			Fair Value
	Notional		Asset		Liability
Fallout adjusted interest rate lock commitments with customers	$	31,951	$	726	$	—
Mandatory and best effort forward commitments with investors		12,505		51		—
Forward TBA mortgage-backed securities		66,500		—		65
TBA mortgage-backed securities forward sales paired off with investors		36,500		53		—


	December 31, 2016
			Fair Value
	Notional		Asset		Liability
Fallout adjusted interest rate lock commitments with customers	$	33,289	$	818	$	—
Mandatory and best effort forward commitments with investors		23,536		177		—
Forward TBA mortgage-backed securities		53,000		495		—
TBA mortgage-backed securities forward sales paired off with investors		44,000		747		—

At December 31, 2017 and 2016, the Company had $66.5 million and $53.0 million of TBA trades with counterparties that required margin collateral of $75,000 and none, respectively. This collateral is included in interest-bearing deposits at other financial institutions on the Consolidated Balance Sheets.

Changes in the fair value of the derivatives recognized in other noninterest income on the Consolidated Statements of Income and included in gain on sale of loans resulted in a net gain of $2.3 million and $3.1 million for the years ended December 31, 2017 and 2016, respectively.