Note 16 - Derivative Financial Instruments

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

16. DERIVATIVE FINANCIAL INSTRUMENTS

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

18

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

.

On

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.

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

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

No

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

December 31, 2017.

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

$0.3

million and

$0.2

million as of

December 31, 2017

and

2016,

respectively.