Note 9 - Mortgage Banking Derivatives

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 9. Mortgage Banking Derivatives

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors under the Bank's mandatory delivery program are considered derivatives. It is the Company's practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. At March 31, 2020 and December 31, 2019, the Company had approximately $16,667,000 and $10,307,000, respectively, of interest rate lock commitments and approximately $22,000,000 and $14,000,000, respectively, of forward commitments for the future delivery of residential mortgage loans. The fair value of these mortgage banking derivatives was reflected by derivative assets of $503,000 and $328,000 and derivative liabilities of $385,000 and $23,000, respectively, at March 31, 2020 and December 31, 2019. Changes in the fair values of these mortgage-banking derivatives are included in net gains on sale of loans.

The net gains (losses) relating to free-standing derivative instruments used for risk management is summarized below (in thousands):

	In Thousands
	March 31, 2020			March 31, 2019
Forward contracts related to mortgage loans held for sale and interest rate contracts	$	(362	)		(70	)
Interest rate contracts for customers		175			440

The following table reflects the amount and fair value of mortgage banking derivatives included in the consolidated balance sheet as of March 31, 2020 and December 31, 2019 (in thousands):

	In Thousands
	March 31, 2020					December 31, 2019
	Notional Amount		Fair Value			Notional Amount		Fair Value
Included in other assets (liabilities):
Interest rate contracts for customers	$	16,667		503			10,307		328
Forward contracts related to mortgage loans held-for-sale		22,000		(385	)		14,000		(23	)