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Derivative Financial Instruments | 3 Months Ended
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Mar. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | Derivative Financial Instruments Risk Management Objective of Using Derivatives The Company’s use of derivative instruments is limited to the utilization of interest rate swaps to manage interest rate risk exposure on existing and future liabilities and not for speculative purposes. The principal objective of such arrangements is to minimize the risks and related costs associated with the Company’s operating and financial structure. The following table summarizes the Company’s outstanding interest rate swaps as of March 31, 2022. All of the Company’s interest rate swaps are designated as qualifying cash flow hedges.
Interest Rate Derivative Counterparty |  | Trade Date |  | Effective Date |  | Notional Amount (in thousands) |  | Fair Value (in thousands) |  | Pay Fixed Interest Rate |  | Receive Variable Interest Rate |  | Maturity Date
Wells Fargo Bank, N.A. |  | Jan-08-2015 |  | Mar-20-2015 |  | $ | 25,000 |  |  | $ | — |  |  | 1.8280 | % |  | One-month L |  | Mar-31-2022
The Toronto-Dominion Bank |  | Jan-08-2015 |  | Feb-14-2020 |  | $ | 25,000 |  |  | $ | — |  |  | 2.4535 | % |  | One-month L |  | Mar-31-2022
Regions Bank |  | Jan-08-2015 |  | Feb-14-2020 |  | $ | 50,000 |  |  | $ | — |  |  | 2.4750 | % |  | One-month L |  | Mar-31-2022
Capital One, N.A. |  | Jan-08-2015 |  | Feb-14-2020 |  | $ | 50,000 |  |  | $ | — |  |  | 2.5300 | % |  | One-month L |  | Mar-31-2022
The Toronto-Dominion Bank |  | Jul-20-2017 |  | Oct-30-2017 |  | $ | 25,000 |  |  | $ | (64) |  |  | 1.8485 | % |  | One-month L |  | Jan-04-2023
Royal Bank of Canada |  | Jul-20-2017 |  | Oct-30-2017 |  | $ | 25,000 |  |  | $ | (63) |  |  | 1.8505 | % |  | One-month L |  | Jan-04-2023
Wells Fargo Bank, N.A. |  | Jul-20-2017 |  | Oct-30-2017 |  | $ | 25,000 |  |  | $ | (63) |  |  | 1.8505 | % |  | One-month L |  | Jan-04-2023
PNC Bank, N.A. |  | Jul-20-2017 |  | Oct-30-2017 |  | $ | 25,000 |  |  | $ | (63) |  |  | 1.8485 | % |  | One-month L |  | Jan-04-2023
PNC Bank, N.A. |  | Jul-20-2017 |  | Oct-30-2017 |  | $ | 50,000 |  |  | $ | (126) |  |  | 1.8475 | % |  | One-month L |  | Jan-04-2023
The Toronto-Dominion Bank |  | Apr-20-2020 |  | Sep-29-2020 |  | $ | 75,000 |  |  | $ | 1,223 |  |  | 0.2750 | % |  | One-month L |  | Apr-18-2023
Wells Fargo Bank, N.A. |  | Apr-20-2020 |  | Sep-29-2020 |  | $ | 75,000 |  |  | $ | 1,219 |  |  | 0.2790 | % |  | One-month L |  | Apr-18-2023
The Toronto-Dominion Bank |  | Apr-20-2020 |  | Mar-19-2021 |  | $ | 75,000 |  |  | $ | 1,223 |  |  | 0.2750 | % |  | One-month L |  | Apr-18-2023
Wells Fargo Bank, N.A. |  | Apr-20-2020 |  | Mar-19-2021 |  | $ | 75,000 |  |  | $ | 1,218 |  |  | 0.2800 | % |  | One-month L |  | Apr-18-2023
The Toronto-Dominion Bank |  | Jul-24-2018 |  | Jul-26-2019 |  | $ | 50,000 |  |  | $ | (548) |  |  | 2.9180 | % |  | One-month L |  | Jan-12-2024
PNC Bank, N.A. |  | Jul-24-2018 |  | Jul-26-2019 |  | $ | 50,000 |  |  | $ | (549) |  |  | 2.9190 | % |  | One-month L |  | Jan-12-2024
Bank of Montreal |  | Jul-24-2018 |  | Jul-26-2019 |  | $ | 50,000 |  |  | $ | (548) |  |  | 2.9190 | % |  | One-month L |  | Jan-12-2024
U.S. Bank, N.A. |  | Jul-24-2018 |  | Jul-26-2019 |  | $ | 25,000 |  |  | $ | (274) |  |  | 2.9190 | % |  | One-month L |  | Jan-12-2024
Wells Fargo Bank, N.A. |  | May-02-2019 |  | Jul-15-2020 |  | $ | 50,000 |  |  | $ | 280 |  |  | 2.2460 | % |  | One-month L |  | Jan-15-2025
U.S. Bank, N.A. |  | May-02-2019 |  | Jul-15-2020 |  | $ | 50,000 |  |  | $ | 284 |  |  | 2.2459 | % |  | One-month L |  | Jan-15-2025
Regions Bank |  | May-02-2019 |  | Jul-15-2020 |  | $ | 50,000 |  |  | $ | 280 |  |  | 2.2459 | % |  | One-month L |  | Jan-15-2025
Bank of Montreal |  | Jul-16-2019 |  | Jul-15-2020 |  | $ | 50,000 |  |  | $ | 1,008 |  |  | 1.7165 | % |  | One-month L |  | Jan-15-2025
U.S. Bank, N.A. |  | Feb-17-2021 |  | Apr-18-2023 |  | $ | 150,000 |  |  | $ | 6,853 |  |  | 0.9385 | % |  | One-month L |  | Feb-5-2026
Wells Fargo Bank, N.A. |  | Feb-17-2021 |  | Apr-18-2023 |  | $ | 75,000 |  |  | $ | 3,409 |  |  | 0.9365 | % |  | One-month L |  | Feb-5-2026
The Toronto-Dominion Bank |  | Feb-17-2021 |  | Apr-18-2023 |  | $ | 75,000 |  |  | $ | 3,419 |  |  | 0.9360 | % |  | One-month L |  | Feb-5-2026
Regions Bank |  | Oct-26-2021 |  | Apr-01-2022 |  | $ | 50,000 |  |  | $ | 2,419 |  |  | 1.3045 | % |  | One-month L |  | Mar-15-2027
Bank of Montreal |  | Oct-26-2021 |  | Apr-01-2022 |  | $ | 50,000 |  |  | $ | 2,438 |  |  | 1.3045 | % |  | One-month L |  | Mar-15-2027
PNC Bank, N.A. |  | Oct-26-2021 |  | Apr-01-2022 |  | $ | 50,000 |  |  | $ | 2,423 |  |  | 1.3045 | % |  | One-month L |  | Mar-15-2027
The following table summarizes the fair value of the interest rate swaps outstanding as of March 31, 2022 and December 31, 2021.
Balance Sheet Line Item (in thousands) |  | Notional Amount March 31, 2022 |  | Fair Value March 31, 2022 |  | Notional Amount December 31, 2021 |  | Fair Value December 31, 2021
Interest rate swaps-Asset |  | $ | 950,000 |  |  | $ | 27,696 |  |  | $ | 600,000 |  |  | $ | 5,220 |
Interest rate swaps-Liability |  | $ | 325,000 |  |  | $ | (2,298) |  |  | $ | 825,000 |  |  | $ | (17,052) |
Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate swaps are to add stability to interest expense and to manage its exposure to interest rate movements. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income (loss) and subsequently reclassified to interest expense in the same periods during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income (loss) related to derivatives designated as qualifying cash flow hedges will be reclassified to interest expense as interest payments are made on the Company’s variable rate debt. The Company estimates that approximately $2.2 million will be reclassified from accumulated other comprehensive income (loss) as a decrease to interest expense over the next 12 months. The following table summarizes the effect of cash flow hedge accounting and the location of amounts related to Company’s derivatives in the consolidated financial statements for the three months ended March 31, 2022 and 2021.
|  | Three months ended March 31, |  |
Effect of Cash Flow Hedge Accounting (in thousands) |  | 2022 |  | 2021 |  |  |  |
Income recognized in accumulated other comprehensive income (loss) on interest rate swaps |  | $ | 33,506 |  |  | $ | 7,750 |  |  |  |  |
Loss reclassified from accumulated other comprehensive income (loss) into income as interest expense |  | $ | 3,731 |  |  | $ | 4,400 |  |  |  |  |
Total interest expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded |  | $ | 17,259 |  |  | $ | 15,358 |  |  |  |  |
Credit-risk-related Contingent Features The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness. As of March 31, 2022, the Company had not breached the provisions of these agreements and had not posted any collateral related to these agreements. If the Company had breached any of these provisions at March 31, 2022, it could have been required to settle its obligations under the agreements for any interest rate swaps in a net liability position by counterparty, plus accrued interest of approximately $0.1 million. Fair Value of Interest Rate Swaps The Company’s valuation of the interest rate swaps is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs including interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company or its counterparties. However, as of March 31, 2022 and December 31, 2021, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. The following table summarizes the Company’s financial instruments that were recorded at fair value on a recurring basis as of March 31, 2022 and December 31, 2021.
|  |  |  | Fair Value Measurements as of March 31, 2022 Using
Balance Sheet Line Item (in thousands) |  | Fair Value March 31, 2022 |  | Level 1 |  | Level 2 |  | Level 3
Interest rate swaps-Asset |  | $ | 27,696 |  |  | $ | — |  |  | $ | 27,696 |  |  | $ | — |
Interest rate swaps-Liability |  | $ | (2,298) |  |  | $ | — |  |  | $ | (2,298) |  |  | $ | — |
|  |  |  | Fair Value Measurements as of December 31, 2021 Using
Balance Sheet Line Item (in thousands) |  | Fair Value December 31, 2021 |  | Level 1 |  | Level 2 |  | Level 3
Interest rate swaps-Asset |  | $ | 5,220 |  |  | $ | — |  |  | $ | 5,220 |  |  | $ | — |
Interest rate swaps-Liability |  | $ | (17,052) |  |  | $ | — |  |  | $ | (17,052) |  |  | $ | — |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI https://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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