12.	DERIVATIVE FINANCIAL INSTRUMENTS

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of certain balance sheet assets and liabilities. In the normal course of business, the Company also uses derivative financial instruments to add stability to interest income or expense and to manage its exposure to movements in interest rates. The Company does

not

use derivatives for trading or speculative purposes and only enters into transactions that have a qualifying hedging relationship. The Company's hedging strategies involving interest rate derivatives are classified as either Fair Value Hedges or Cash Flow Hedges, depending upon the rate characteristic of the hedged item.

Effective

April 5, 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 FHLB advance will be renewed at least every

months and will remain outstanding until

April 5, 2023.

The interest rate swap was designated as a derivative instrument in a cash flow hedge 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, the Bank will pay a fixed interest rate of

1.46%

and receive a variable interest rate based on

three

-month LIBOR on the notional amount of

$10.0

million, with quarterly net settlements.

October 18, 2017,

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 FHLB advance will be renewed on at least a semi-annual basis and will remain outstanding until

October 18, 2024.

three

-month LIBOR interest rate throughout the

seven

-year period beginning on

October 18, 2017

and ending on

October 18, 2024.

Under the swap arrangement, which became effective on

October 18, 2017,

the Bank will pay a fixed interest rate of

2.16%

and receive a variable interest rate based on

three

-month LIBOR on the notional amount of

$10.0

million, with quarterly net settlements.

ineffectiveness related to the interest rate swaps designated as cash flow hedges was recognized in the consolidated statements of operations for the

three

months ended

March 31, 2018.

The accumulated net after-tax gain related to the effective cash flow hedge included in accumulated other comprehensive income totaled

$0.7

million and

$0.3

million as of

March 31, 2018

and

December 31, 2017,

respectively.