12.	DERIVATIVE FINANCIAL INSTRUMENTS

Derivatives Designated as Hedging Instruments

April

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

2016

and ending on

April

2023.

Under the swap arrangement, which became effective on

April

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 designated as a cash flow hedge was recognized in the consolidated statements of operations for the

three

months ended

March

31,

2017.

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 both

March

31,

2017

and

December

31,

2016.

Derivatives Not Designated as Hedging Instruments

2014,

the Bank entered into

three

separate interest rate cap agreements to mitigate 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

March

31,

2017,

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 both

March

31,

2017

and

December

31,

2016,

the fair value of each of the

three

derivative agreements was

zero.