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Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2012
Derivative Financial Instruments  
Derivative Financial Instruments

Note 13 - Derivative Financial Instruments

 

As of June 30, 2012, the Company had the following outstanding interest rate derivatives, all of which were designated as cash flow hedges of interest rate risk (dollars in thousands):

 

Interest Rate Derivative

 

Notional Amount

 

Fixed Interest
Rate

 

Maturity Date

 

Interest Rate Swap

 

$

9,140

 

6.50

%

December 2014

 

Interest Rate Swap

 

4,368

 

5.75

 

November 2020

 

Interest Rate Swap

 

3,930

 

4.75

 

August 2016

 

Interest Rate Swap

 

5,820

 

4.63

 

February 2019

 

Interest Rate Swap

 

2,180

 

4.50

 

April 2016

 

Interest Rate Swap

 

3,936

 

4.50

 

March 2017

 

 

The following table presents the fair value of the Company’s derivatives designated as hedging instruments as of June 30, 2012 and December 31, 2011 (dollars in thousands):

 

Asset Derivatives as of

 

Liability Derivatives as of

 

June 30, 2012

 

December 31, 2011

 

June 30, 2012

 

December 31, 2011

 

Balance
Sheet
Location

 

Fair
Value

 

Balance
Sheet
Location

 

Fair
Value

 

Balance
Sheet
Location

 

Fair
Value

 

Balance
Sheet
Location

 

Fair
Value

 

Other Assets

 

$

0

 

Other Assets

 

$

0

 

Other Liabilities

 

$

1,335

 

Other Liabilities

 

$

923

 

 

The following table presents the effect of the Company’s derivative financial instruments on the consolidated statements of income for the periods presented (dollars in thousands):

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Amount of (loss) recognized on derivatives in Other Comprehensive Income

 

$

(533

)

$

(342

)

$

(650

)

$

(290

)

Amount of (loss) reclassified from Accumulated Other Comprehensive Income into Interest Expense

 

$

(132

)

$

(80

)

$

(238

)

$

(162

)

 

No gain or loss was recognized with respect to hedge ineffectiveness or to amounts excluded from effectiveness testing on the Company’s cash flow hedges for the three and six months ended June 30, 2012 and 2011.  During the twelve months ending June 30, 2013, the Company estimates an additional $501,000 will be reclassified from other comprehensive income as an increase to interest expense.

 

The derivative agreements in effect at June 30, 2012 provide that if the wholly-owned subsidiary of the Company which is a party to the agreement defaults or is capable of being declared in default on any of its indebtedness, then a default can be declared on such subsidiary’s derivative obligation. In addition, the Company is a party to one of the derivative agreements and if the subsidiary defaults on the loan subject to the derivative agreement to which the Company is a party and if these are swap breakage losses on account of the derivative being terminated early, the Company could be held liable for interest rate swap breakage losses, if any.

 

As of June 30, 2012, the fair value of the derivatives including accrued interest but excluding any adjustments for nonperformance risk was approximately $1,448,000.  If the Company breaches any of the contractual provisions of the derivative contracts, it would be required to settle its obligations thereunder at their termination liability value of $1,448,000.

 

Two of the Company’s unconsolidated joint ventures, in which a wholly owned subsidiary of the Company is a 50% partner, had a $3,915,000 interest rate derivative outstanding at June 30, 2012. The interest rate derivative has an interest rate of 5.81% and matures in April 2018. The following table presents the Company’s 50% share of such derivative financial instrument (dollars in thousands):

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Amount of (loss) recognized on derivative in Other Comprehensive Income

 

$

(49

)

$

(63

)

$

(52

)

$

(87

)

Amount of (loss) reclassified from Accumulated Other Comprehensive Income into Interest Expense

 

$

(14

)

$

(14

)

$

(28

)

$

(14

)