XML 45 R25.htm IDEA: XBRL DOCUMENT v3.6.0.2
Note 16 - Derivative Financial Instruments
 12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
16.
DERIVATIVE FINANCIAL INSTRUMENTS
 
Derivatives Designated as Hedging Instruments
 
On
April
1,
2016,
the Bank entered into a forward interest rate swap contract on a variable rate FHLB advance (indexed to
three
-month LIBOR) with a total notional
amount of
$10.0
million. The interest rate swap contract was designated as a derivative instrument in a cash flow hedge under
ASC Topic
815,
Derivatives and Hedging,
with the objective of protecting the quarterly interest rate payments on the FHLB advance from the risk of variability of those payments resulting from changes in the
three
-month LIBOR interest rate throughout the
seven
-year period beginning on
April
5,
2016
and ending on
April
5,
2023.
Under the swap arrangement, which became effective on
April
5,
2016,
the Bank will pay a fixed interest rate of
1.46%
and receive a variable interest rate based on
three
-month LIBOR on the total notional amount of
$10.0
million, with quarterly net settlements.
 
No ineffectiveness related to the interest rate swap de
signated as a cash flow hedge was recognized in the consolidated statements of operations for the year ended
December
31,
2016.
The accumulated net after-tax gain related to the effective cash flow hedge included in accumulated other comprehensive income totaled
$0.2
million as of
December
31,
2016.
 
Derivatives Not Designated as Hedging Instruments
 
In
2014,
the Bank entered into
three
separate interest rate cap agreements to mit
igate risks associated with increases in interest rates on an aggregate notional amount of
$40
million. The interest rate caps qualify as derivatives but were not designated as hedging instruments. Accordingly, changes in the fair value of the instruments are included in results of operations. Under the
three
agreements, the Company paid an up-front premium totaling approximately
$0.1
million, in return for the ability to receive cash flows if interest rates rise above a strike rate indexed to
three
-month LIBOR. The agreements have contractual terms that mature at various dates in
2017.
As of
December
31,
2016,
the strike rate had not been achieved on any of the
three
agreements, and accordingly, the Company has received no cash flows associated with the agreements. Since the inception of the agreements, on a quarterly basis, the Company has recorded the current fair value of the derivatives within other assets on the Company’s consolidated balance sheet, with changes in the fair value included in interest expense on the Company’s consolidated statements of operations. As of
December
31,
2016,
the fair value of each of the
three
derivative agreements was
zero.