DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

9 Months Ended

Sep. 30, 2015

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

NOTE 11 - DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

Information about our derivative financial instruments at September 30, 2015 and December 31, 2014 is as follows (dollars in thousands):

	September 30, 2015						December 31, 2014
	Number of Instruments	Notional Amount		Fair Value			Number of Instruments	Notional Amount		Fair Value
Interest rate swaps (asset)	—	$	—	$	—		3	$	28,002	$	66
Interest rate swaps (liability)	4	102,034		(2,930		)	1	75,000		(1,957		)
	4	$	102,034	$	(2,930	)	4	$	103,002	$	(1,891	)

All of our interest rate swaps have been designated as cash flow hedges and are valued using a market approach, which is a Level 2 valuation technique. At September 30, 2015, all of our interest rate swaps were in a liability position.  At December 31, 2014, three of our interest rate swaps were in an asset position and one was in a liability position. We have not posted any collateral related to these agreements and are not in breach of any financial provisions of the agreements. If we had breached any agreement provisions at September 30, 2015, we could have been required to settle our obligation under the agreements that were in a liability position at their termination value of $3.1 million.

The table below details the location in the financial statements of the gain or loss recognized on derivative financial instruments designated as cash flow hedges (in thousands).

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Loss recognized in accumulated other comprehensive income on derivative financial instruments (effective portion)	$	(1,168	)	$	414		$	(2,314	)	$	(1,192	)
Loss reclassified from accumulated other comprehensive income to interest expense (effective portion)	$	(426	)	$	(441	)	$	(1,276	)	$	(1,303	)
Income (loss) recognized in loss on derivative financial instruments (ineffective portion)	$	—		$	1		$	(1	)	$	—

Amounts reported in accumulated other comprehensive income related to derivative financial instruments will be reclassified to interest expense as interest payments are made on the hedged variable-rate debt.

Upon completion of the First Closing, we repaid mortgages on certain properties sold to ARCH and executed the early settlement of three interest rate swaps related to those mortgages for a nominal amount.