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Derivative Financial Instruments
 3 Months Ended
Mar. 31, 2017
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments

NOTE 5: Derivative Financial Instruments

We may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with our borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions.  While these instruments may impact our periodic cash flows, they benefit us by minimizing the risks and/or costs previously described.  

Interest Rate Swaps and Caps

We have entered into an interest rate cap contract and an interest rate swap contract to hedge interest rate exposure on floating rate indebtedness.          

On June 24, 2016, we entered into an interest rate swap contract with a notional value of $150 million, a strike rate of 1.145% and a maturity date of June 17, 2021.  We designated this interest rate swap as a cash flow hedge at inception and determined that the hedge is highly effective in offsetting interest rate fluctuations associated with the identified indebtedness. We concluded that this hedging relationship was and will continue to be highly effective, and using the hypothetical derivative method, did not recognize any ineffectiveness. Our interest rate cap is not designated as a cash flow hedge.  

The following table summarizes the aggregate notional amount and estimated net fair value of our derivative instruments as of March 31, 2017 and December 31, 2016:

 

 

 

As of March 31, 2017

 

 

As of December 31, 2016

 

 

 

Notional

 

 

Fair Value of

Assets

 

 

Fair Value of

Liabilities

 

 

Notional

 

 

Fair Value of

Assets

 

 

Fair Value of

Liabilities

 

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap

 

$

150,000

 

 

$

4,292

 

 

$

—

 

 

$

150,000

 

 

$

3,867

 

 

$

—

 

Freestanding derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate cap

 

 

200,000

 

 

 

—

 

 

 

—

 

 

 

200,000

 

 

 

—

 

 

 

—

 

Net fair value

 

$

350,000

 

 

$

4,292

 

 

$

—

 

 

$

350,000

 

 

$

3,867

 

 

$

—

 

 

Effective interest rate swaps and caps are reported in accumulated other comprehensive income and the fair value of these hedge agreements is included in other assets or other liabilities.

For our interest rate swap that is considered a highly effective hedge, we reclassified realized losses of $132 to earnings within interest expense for the three months ended March 31, 2017, and we expect $111 to be reclassified out of accumulated other comprehensive income to earnings over the next 12 months.