Note 7 - Derivatives and Hedging Activities

12 Months Ended

Dec. 31, 2017

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,

2017

and

2016.

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, 2017 Fair Value		December 31, 2016 Fair Value
June 5, 2014	June 5, 2019	Other Assets	$	15,000,000	Cash Flow Hedging	$	190,085	$	179,939
June 5, 2014	June 5, 2021	Other Assets		15,000,000	Cash Flow Hedging		316,615		396,588
			$	30,000,000		$	506,700	$	576,527

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, 2017			December 31, 2016
Unrealized loss at beginning of period, net of tax	$	(932,156	)	$	(799,421	)
Amount reclassified from accumulated other comprehensive income to noninterest income related to hedge ineffectiveness		-			(76,797	)
Amount reclassified from accumulated other comprehensive income to noninterest expense related to hedge ineffectiveness		79,757			-
Amount reclassified from accumulated other comprehensive income to interest expense related to caplet amortization		405,134			152,087
Amount of loss recognized in other comprehensive income, net of tax		(357,762	)		(208,025	)
Unrealized loss at end of period, net of tax	$	(805,027	)	$	(932,156	)

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,

$79,757

of expense and

$76,797

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

December 31, 2017

and

2016,

respectively, was due to ineffectiveness.