Note 7 - Derivatives and Hedging Activities

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note

7.

Derivatives and Hedging Activities

Below is a summary of the interest rate cap derivatives held by the Company as of

December

31,

2016

and

2015.

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	December 31, 2016 Fair Value		December 31, 2015 Fair Value
June 5, 2014	June 5, 2019	Other Assets	$	15,000,000	Cash Flow Hedging	$	179,939	$	321,112
June 5, 2014	June 5, 2021	Other Assets		15,000,000	Cash Flow Hedging		396,588		534,912
			$	30,000,000		$	576,527	$	856,024

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 AOCI was impacted during the reporting periods:

	Year Ended
	December 31, 2016			December 31, 2015
Unrealized loss at beginning of period, net of tax	$	(799,421	)	$	(399,367	)
Amount reclassified from accumulated other comprehensive income to noninterest income related to hedge ineffectiveness		(76,797	)		(156	)
Amount reclassified from accumulated other comprehensive income to interest expense related to caplet amortization		152,087			16,051
Amount of loss recognized in other comprehensive income, net of tax		(208,025	)		(415,949	)
Unrealized loss at end of period, net of tax	$	(932,156	)	$	(799,421	)

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,

$76,797

and

$156

of income from the change in fair value for the years ending

December

31,

2016

and

2015,

respectively, was due to ineffectiveness.