Note 7—Derivative Instruments

The Company uses derivative instruments for various purposes. Pay-fixed interest rate swaps, interest rate basis swaps and interest rate caps are used to manage interest rate risk. Foreign currency forward exchange agreements are used to manage currency risk associated with the financing of our SAWHF equity investment. TRS agreements were used by the Company to obtain, or retain, the economic risks and rewards associated with tax exempt municipal bonds. During the second quarter of 2019, the Company terminated all remaining TRS agreements.

Derivative instruments that are recognized in the Consolidated Balance Sheets are measured on a fair value basis. Because the Company does not designate any of its derivative instruments as fair value or cash flow hedges, changes in fair value of these instruments are recognized in the Consolidated Statements of Operations as a component of “Net losses on derivatives.” Derivative assets are presented in the Consolidated Balance Sheets as a component of “Other assets” and derivative liabilities are presented in the Consolidated Balance Sheets as a component of “Other liabilities.”

The following table provides information about the carrying value of the Company’s derivative instruments:


	Fair Value
	At				At
	March 31, 2020				December 31, 2019
(in thousands)	Assets		Liabilities		Assets		Liabilities
Basis swaps	$	─	$	750	$	318	$	─
Interest rate caps		91		─		227		─
Interest rate swaps		─		1,562		52		─
Foreign currency forward exchange		833		─		─		117
Total carrying value of derivative instruments	$	924	$	2,312	$	597	$	117

The following table provides information about the notional amounts of the Company’s derivative instruments:


	Notional Amounts
	At		At
	March 31,		December 31,
(in thousands)	2020		2019
Basis swaps	$	35,000	$	35,000
Interest rate caps		35,000		35,000
Interest rate swaps		35,000		35,000
Foreign currency forward exchange		3,677		4,685
Total notional amount of derivative instruments	$	108,677	$	109,685

The following table provides information about the net losses that were recognized by the Company in connection with its derivative instruments:


	For the three months ended
	March 31,
(in thousands)	2020		2019
Total return swaps (1)	$	─	$	(4)
Basis swaps (2)		(1,079)		(73)
Interest rate caps		(136)		(477)
Interest rate swaps (3)		(1,578)		(881)
Foreign currency forward exchange		1,082		(7)
Total net losses of derivative instruments	$	(1,711)	$	(1,442)

⁽¹⁾

The accrual of net interest payments that are made in connection with TRS agreements that are reported as derivative instruments are classified as a component of “Net losses on derivatives” on the Consolidated Statements of Operations. Net cash received was $0.2 million for the three months ended March 31, 2019.

⁽²⁾

The accrual of net interest payments that are made in connection with basis swaps is classified as a component of “Net losses on derivatives” on the Consolidated Statements of Operations. The net cash received was de minimis for the three months ended March 31, 2020 and March 31, 2019.

⁽³⁾

The accrual of net interest payments that are made in connection with interest rate swaps is classified as a component of “Net losses on derivatives” on the Consolidated Statements of Operations. Net cash paid was de minimis for the three months ended March 31, 2020, while the net cash received was $0.1 million for the three months ended March 31, 2019, respectively.