Note 12 - Derivatives and Risk Management Activities

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 12: 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, 2022 and the nine months ended September 30, 2021. The following table summarizes the amounts recorded in the Company’s statement of financial condition for derivatives not designated as hedging instruments as of September 30, 2022 and December 31, 2021 (in thousands):

September 30, 2022	Balance Sheet Presentation	Fair Value		Notional Amount
Asset derivatives:
IRLC’s	Other Assets	$	38	$	2,464
Best efforts forward loan sales commitments	Other Assets		114		5,930
Mandatory forward loan sales commitments	Other Assets		94		5,187
Liability derivatives:
IRLC’s	Other Liabilities	$	60	$	3,945
Best efforts forward loan sales commitments	Other Liabilities		6		479
Mandatory forward loan sales commitments	Other Liabilities		5		804

December 31, 2021	Balance Sheet Presentation	Fair Value		Notional Amount
Asset derivatives:
IRLC’s	Other Assets	$	378	$	14,419
Best efforts forward loan sales commitments	Other Assets		5		3,222
Mandatory forward loan sales commitments	Other Assets		5		1,667
Liability derivatives:
IRLC’s	Other Liabilities	$	-	$	-
Best efforts forward loan sales commitments	Other Liabilities		96		11,197
Mandatory forward loan sales commitments	Other Liabilities		44		6,460

The following tables summarize the amounts recorded in Republic’s statement of income for derivative instruments not designated as hedging instruments for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Statement of Income Presentation		Three Months Ended September 30, 2022 Gain/(Loss)			Nine Months Ended September 30, 2022 Gain/(Loss)
Asset derivatives:
IRLCs	Mortgage banking income	$	(126	)	$	(340	)
Best efforts forward loan sales commitments	Mortgage banking income		68			109
Mandatory forward loan sales commitments	Mortgage banking income		51			89
Liability derivatives:
IRLCs	Mortgage banking income	$	(39	)	$	(60	)
Best efforts forward loan sales commitments	Mortgage banking income		31			90
Mandatory forward loan sales commitments	Mortgage banking income		1			39

	Statement of Income Presentation		Three Months Ended September 30, 2021 Gain/(Loss)			Nine Months Ended September 30, 2021 Gain/(Loss)
Asset derivatives:
IRLCs	Mortgage banking income	$	(211	)	$	(987	)
Best efforts forward loan sales commitments	Mortgage banking income		65			65
Mandatory forward loan sales commitments	Mortgage banking income		41			43
Liability derivatives:
IRLCs	Mortgage banking income	$	-		$	-
Best efforts forward loan sales commitments	Mortgage banking income		158			503
Mandatory forward loan sales commitments	Mortgage banking income		79			767

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.