Derivative Financial Instruments

3 Months Ended

Mar. 31, 2014

Derivative Financial Instruments

Derivative Financial Instruments

Note 11: Derivative Financial Instruments

During the quarter ended March 31, 2014, the Company entered into loan agreements that settled in non-U.S. dollar denominations.  The foreign loan balance, gross, translated into U.S. dollars as of March 31, 2014 was $1.8 million.

Foreign Currency Derivatives. The Company enters into foreign currency forward contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in foreign currency exchange rates on certain non-U.S. dollar denominated loans.  Due to the activity in the current quarter, the Company implemented a new accounting policy based on existing accounting standards. Because the foreign currency forward contracts do not meet hedge accounting requirements, gains and losses due to changes in their fair values are recognized in other income.

The notional amount and fair values of open foreign currency forward contracts were as follows:

	March 31, 2014		December 31, 2013
	(dollars in thousands)
Forward contracts — foreign exchange:
Notional amount	$	1,759	$	—
Other assets — estimated fair value	2		—
Other liabilities — estimated fair value	3		—

The amount of gains and losses relating to foreign currency forward contracts included in other income for the three months ended March 31, 2014 was insignificant.

Foreign currency forward contracts involve the risk of dealing with counterparties and their ability to meet contractual terms.  We believe the risk of incurring losses due to nonperformance by our counterparties is manageable.

As of March 31, 2014, the Company had no interest rate futures, forwards, swaps or option contracts, or other financial instruments with similar characteristics with the exception of rate lock commitments on mortgage loans to be held for sale.