Note H - Interest Rate Swaps

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note

H

-

Interest Rate Swaps

The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities.

  The Company utilizes interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk position.  As part of this strategy, the Company provides its customer with a fixed-rate loan while creating a variable-rate asset for the Company by the customer entering into an interest rate swap with the Company on terms that match the loan.  The Company offsets its risk exposure by entering into an offsetting interest rate swap with an unaffiliated institution.  These interest rate swaps do

not

qualify as designated hedges; therefore, each swap is accounted for as a standalone derivative.  At

December 31, 2017,

the Company had interest rate swaps associated with commercial loans with a notional value of

$7,234

and a fair value of

$57.

  This is compared to interest rate swaps with a notional value of

$9,725

and a fair value of

$22

at

December 31, 2016.  

The notional amount of the interest rate swaps does

not

represent amounts exchanged by the parties.  The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreement. To further offset the risk exposure related to market value fluctuations of its interest rate swaps, the Company maintains collateral deposits on hand with a

third

-party correspondent, which totaled

$350

at

December 31, 2017

and

December 31, 2016.