Note 5. Cash Flow Hedge

6 Months Ended

Jun. 30, 2013

Notes

Note 5. Cash Flow Hedge

Note 5.                        Cash Flow Hedge

In connection with its outstanding amortizing term loan, a subsidiary of IHC entered into an interest rate swap on July 1, 2011 with the commercial bank lender, for a notional amount equal to the debt principal amount ( $8,000,000 June 30, 2013 and December 31, 2012), under which the Company receives a variable rate equal to the rate on the debt and pays a fixed rate ( 1.60%) in order to manage the risk in overall changes in cash flows attributable to forecasted interest payments. As a result of the interest rate swap, interest payments on this debt are fixed at 4.95%. There was no hedge ineffectiveness on this interest rate swap which was accounted for as a cash flow hedge. At June 30, 2013 and December 31, 2012, the fair value of interest rate swap was $318,000 and $363,000, respectively, which is included in other liabilities on the accompanying Consolidated Balance Sheets. See Note 6 for further discussion on the valuation techniques utilized to determine the fair value of the interest rate swap.