Note 11 - Derivatives and Risk Management Activities

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 11: Derivatives and Risk Management Activities

Republic did not have any derivative instruments designated as hedging instruments, or subject to master netting and collateral agreements for the nine months ended September 30, 2016. The following table summarizes the amounts recorded in Republic’s statement of financial condition for derivatives not designated as hedging instruments as of September 30, 2016 (in thousands):

September 30, 201 6	Balance Sheet Presentation	Fair Value		Notional Amount
Asset derivatives:
IRLC’s	Other Assets	$	1,027	$	36,090
Best efforts forward loan sales commitments	Other Assets		-		546
Mandatory forward loan sales commitments	Other Assets		-		164
Liability derivatives:
IRLC’s	Other Liabilities	$	9	$	1,502
Best efforts forward loan sales commitments	Other Liabilities		377		37,046
Mandatory forward loan sales commitments	Other Liabilities		294		25,525

The following table summarizes the amounts recorded in Republic’s statement of income for derivative instruments not designated as hedging instruments for the nine months ended September 30, 2016 (in thousands):

Nine Months Ended September 30, 2016	Income Statement Presentation	Gain/(Loss)
Asset derivatives:
IRLC’s	Loan advisory and servicing fees	$	(454	)
Best efforts forward loan sales commitments	Loan advisory and servicing fees		(26	)
Mandatory forward loan sales commitments	Loan advisory and servicing fees		-
Liability derivatives:
IRLC’s	Other operating expense	$	14
Best efforts forward loan sales commitments	Other operating expense		11
Mandatory forward loan sales commitments	Other operating expense		(294	)

The fair value of Republic’s IRLCs, best efforts forward loan sales commitments, and mandatory forward loan sales commitments are based upon the estimated value of the underlying mortgage loan (determined consistent with “Loans Held for Sale”), adjusted for (1) estimated costs to complete and originate the loan, and (2) the estimated percentage of IRLCs that will result in a closed mortgage loan. The valuation of the IRLCs issued by Republic includes the value of the servicing released premium. Republic sells loans servicing released, and the servicing released premium is included in the market price.