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Note 4 - Derivatives | 6 Months Ended
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Jun. 30, 2018
Notes to Financial Statements |
Derivatives | NOTE 4 – DERIVATIVES The Company uses interest rate swap and cap instruments to manage interest rate risk related to the variability of interest payments due to changes in interest rates. The Company entered into interest rate caps on June 5, 2014 to hedge against the risk of rising interest rates on short-term liabilities. The short-term liabilities consist of $30.0 million of 1-month FHLB advances, and the benchmark rate hedged is 1-month LIBOR. The interest rate caps are designated as a cash flow hedge in accordance with ASC 815. An initial premium of $2.1 million was paid upfront for the two caps. The details of the interest rate caps are as follows:
|  |  |  |  |  | Balance Sheet |  |  |  |  | 1-Month LIBOR |  |  | Fair Value as of |
Hedged Instrument |  | Effective Date |  | Maturity Date |  | Location |  |  | Notional Amount |  | Strike Rate |  |  | June 30, 2018 |  |  | December 31, 2017 |
1-month FHLB Advance |  | 6/3/2014 |  | 6/5/2019 |  | Other Assets |  | $ | 15,000,000 |  | 1.00 | % |  | $ | 199,821 |  |  | $ | 190,085 |
1-month FHLB Advance |  | 6/5/2014 |  | 6/5/2021 |  | Other Assets |  |  | 15,000,000 |  | 1.50 | % |  |  | 506,470 |  |  |  | 316,615 |
|  |  |  |  |  |  |  | $ | 30,000,000 |  |  |  |  | $ | 706,291 |  |  | $ | 506,700 |
On June 21, 2018, the Company entered into interest rate swaps to hedge against the risk of rising rates on its variable rate trust preferred securities. The floating rate trust preferred securities are tied to 3-month LIBOR, and the interest rate swaps utilize 3-month LIBOR, so the hedge is effective. The interest rate swaps are designated as a cash flow hedge in accordance with ASC 815. The details of the interest rate swaps are as follows:
|  |  |  |  |  | Balance Sheet |  |  |  |  |  |  |  |  |  |  |  | Fair Value as of |
Hedged Instrument |  | Effective Date |  | Maturity Date |  | Location |  |  | Notional Amount |  | Receive Rate |  |  | Pay Rate |  | June 30, 2018 |  |
QCR Holdings Statutory Trust II |  | 9/30/2018 |  | 9/30/2028 |  | Other Liabilities |  | $ | 10,000,000 |  | 5.19 | % |  |  | 5.85 | % |  | $ | (94,210) |  |
QCR Holdings Statutory Trust III |  | 9/30/2018 |  | 9/30/2028 |  | Other Liabilities |  |  | 8,000,000 |  | 5.19 | % |  |  | 5.85 | % |  |  | (75,368) |  |
QCR Holdings Statutory Trust V |  | 7/7/2018 |  | 7/7/2028 |  | Other Liabilities |  |  | 10,000,000 |  | 3.90 | % |  |  | 4.54 | % |  |  | (97,961) |  |
Community National Statutory Trust II |  | 9/20/2018 |  | 9/20/2028 |  | Other Liabilities |  |  | 3,000,000 |  | 4.49 | % |  |  | 5.17 | % |  |  | (28,329) |  |
Community National Statutory Trust III |  | 9/15//2018 |  | 9/15/2028 |  | Other Liabilities |  |  | 3,500,000 |  | 4.09 | % |  |  | 4.75 | % |  |  | (33,330) |  |
Guaranty Bankshares Statutory Trust I |  | 9/15/2018 |  | 9/15/2028 |  | Other Liabilities |  |  | 4,500,000 |  | 4.09 | % |  |  | 4.75 | % |  |  | (42,852) |  |
|  |  |  |  |  |  |  | $ | 39,000,000 |  | 4.58 | % |  |  | 5.24 | % |  | $ | (372,050) |  |
Changes in fair values of derivatives designated as cash flow hedges are recorded in OCI to the extent the hedge is effective, and reclassified to earnings as the hedged transaction (interest payments on debt) impact earnings. The caps and swaps are valued by the transaction counterparty on a monthly basis and corroborated by a third party annually.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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