Note 6 - Derivatives and Hedging Activities

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 6.          Derivatives and Hedging Activities

During the second quarter of 2014, the Company executed and designated two interest rate cap derivatives (“caps”) as cash flow hedges of short-term fixed rate FHLB advances. The short-term FHLB advance rates fluctuate with rate movements; therefore the Company determined it was necessary to hedge against this increase in interest expense in a rising rate environment. The caps purchased will essentially set a ceiling on the rate paid on the FHLB advances, minimizing the risk associated with rate increases.

Below is a summary of the interest rate cap derivatives held by the Company as of December 31, 2014. An initial premium of $2.1 million was paid upfront for the two caps. The fair value of these instruments will fluctuate with market value changes, as well as amortization of the initial premium to interest expense.

Effective Date	Maturity Date	Balance Sheet Location	Notional Amount		Accounting Treatment	Fair Value
June 5, 2014	June 5, 2019	Other Assets	$	15,000,000	Cash Flow Hedging	$	608,189
June 5, 2014	June 5, 2021	Other Assets		15,000,000	Cash Flow Hedging		879,197
			$	30,000,000		$	1,487,386

Changes in the fair values of derivative financial instruments accounted for as cash flow hedges to the extent they are effective hedges, are recorded as a component of accumulated other comprehensive income. The following is a summary of how accumulated other comprehensive income was impacted during the reporting periods:

	Twelve Months Ended December, 2014
Unrealized loss at beginning of period, net of tax	$	-
Amount reclassified from accumulated other comprehensive income to noninterest income related to hedge ineffectiveness		(30,212	)
Amount reclassified from accumulated other comprehensive income to interest expense related to caplet amortization		65
Amount of loss recognized in other comprehensive income, net of tax		(369,220	)
Unrealized loss at end of period, net of tax	$	(399,367	)

Changes in the fair value related to the ineffective portion of cash flow hedges, are reported in noninterest income during the period of the change. As shown in the table above, $30,212 of the change in fair value year-to-date, was due to ineffectiveness.