Note 23 - Derivatives and Risk Management Activities

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

23. 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 twelve months ended December 31, 2020 and 2019. The following table summarizes the amounts recorded in Republic’s statement of financial condition for derivatives not designated as hedging instruments as of December 31, 2020 and December 31, 2019 (in thousands):

December 31, 2020	Balance Sheet Presentation	Fair Value		Notional Amount
Asset derivatives:
IRLC’s	Other Assets	$	1,580	$	48,223
Best efforts forward loan sales commitments	Other Assets		2		2,069
Mandatory forward loan sales commitments	Other Assets		-		-
Liability derivatives:
IRLC’s	Other Liabilities	$	-	$	-
Best efforts forward loan sales commitments	Other Liabilities		612		46,154
Mandatory forward loan sales commitments	Other Liabilities		800		48,373

December 31, 2019	Balance Sheet Presentation	Fair Value		Notional Amount
Asset derivatives:
IRLC’s	Other Assets	$	362	$	14,586
Best efforts forward loan sales commitments	Other Assets		4		875
Mandatory forward loan sales commitments	Other Assets		2		288
Liability derivatives:
IRLC’s	Other Liabilities	$	-	$	-
Best efforts forward loan sales commitments	Other Liabilities		133		13,711
Mandatory forward loan sales commitments	Other Liabilities		83		9,614

The following table summarizes the amounts recorded in Republic’s statement of income for derivative instruments not designated as hedging instruments for the twelve months ended December 31, 2020, 2019, and 2018 (in thousands):

Twelve Months Ended December 31, 2020	Income Statement Presentation	Gain/(Loss)
Asset derivatives:
IRLC’s	Mortgage banking income	$	1,218
Best efforts forward loan sales commitments	Mortgage banking income		(2	)
Mandatory forward loan sales commitments	Mortgage banking income		(2	)
Liability derivatives:
IRLC’s	Mortgage banking income	$	-
Best efforts forward loan sales commitments	Mortgage banking income		(479	)
Mandatory forward loan sales commitments	Mortgage banking income		(717	)

Twelve Months Ended December 31, 2019	Income Statement Presentation	Gain/(Loss)
Asset derivatives:
IRLC’s	Mortgage banking income	$	(48	)
Best efforts forward loan sales commitments	Mortgage banking income		(1	)
Mandatory forward loan sales commitments	Mortgage banking income		(8	)
Liability derivatives:
IRLC’s	Mortgage banking income	$	-
Best efforts forward loan sales commitments	Mortgage banking income		5
Mandatory forward loan sales commitments	Mortgage banking income		147

Twelve Months Ended December 31, 2018	Income Statement Presentation	Gain/(Loss)
Asset derivatives:
IRLC’s	Mortgage banking income	$	47
Best efforts forward loan sales commitments	Mortgage banking income		-
Mandatory forward loan sales commitments	Mortgage banking income		(9	)
Liability derivatives:
IRLC’s	Mortgage banking income	$	1
Best efforts forward loan sales commitments	Mortgage banking income		(45	)
Mandatory forward loan sales commitments	Mortgage banking income		(35	)

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.