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DERIVATIVE FINANCIAL INSTRUMENTS
 9 Months Ended
Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS DERIVATIVE FINANCIAL INSTRUMENTS
Risk Management Objective of Using Derivatives
We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of our debt funding and the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage exposures that arise from business activities that result in our receipt or payment of future cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash payments principally related to our borrowings.
Cash Flow Hedges of Interest Rate Risk
Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The change in the fair value of derivatives designated and that qualify as cash flow hedges is recorded on our consolidated balance sheet in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the nine months ended September 30, 2023 and 2022, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.
As of September 30, 2023, $350 million of our variable-rate debt is hedged by swaps with notional values totaling $350 million. As of December 31, 2022, $325 million of our variable-rate debt was hedged by swaps with notional values totaling $325 million.
During the nine months ended September 30, 2023, we entered into two interest rate swaps to hedge the interest rate variability associated with the term loan portion of our credit facility.
ProductFixed RateNotional Amount
($ in thousands)
IndexEffective DateMaturity Date
Swap2.19 %$100,000
Daily Simple SOFR + 10 bps
10/25/202211/09/2023
Swap1.88 %150,000
Daily Simple SOFR + 10 bps
11/09/202211/09/2024
Swap0.44 %50,000
Daily Simple SOFR + 10 bps
10/25/202211/09/2025
Swap2.70 %25,000
Daily Simple SOFR + 10 bps
11/09/202211/09/2025
Swap (1)
0.82 %50,000
Daily Simple SOFR + 10 bps
11/09/202311/09/2025
Swap4.12 %25,000
Daily Simple SOFR + 10 bps
03/09/202311/09/2026
Swap3.65 %25,000
Daily Simple SOFR + 10 bps
11/09/202311/09/2026
Swap2.25 %25,0001m Term SOFR11/10/202511/09/2028
Swap1.48 %50,000
Daily Simple SOFR + 10 bps
11/10/202511/09/2027
Swap1.54 %50,000
Daily Simple SOFR + 10 bps
11/10/202511/09/2027
Swap4.25 %25,000
Daily Simple SOFR + 10 bps
11/09/202311/09/2028
Swap1.49 %50,000
Daily Simple SOFR + 10 bps
11/10/202511/09/2028
Swap2.02 %50,000
Daily Simple SOFR + 10 bps
11/10/202511/09/2028
(1) In November 2024, the notional amount of the swap will increase to $150 million
The Company enters into forward-starting interest rate swap agreements to hedge against changes in future cash flows resulting from changes in interest rates from the trade date through the forecasted issuance date of debt. During the nine months ended September 30, 2023, the Company terminated four cash flow hedges in connection with the $100 million senior unsecured note offering that was entered into on June 5, 2023 and funded on July 12, 2023. These cash flow hedges had a total notional value of $100 million and were entered into at various dates ranging from February 2022 through April 2023 to hedge
the interest rate on the offering. The swaps were terminated on May 25, 2023 for approximately a $8.1 million gain which will be amortized over the next 10 years as a reduction to interest expense.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. We estimate that over the next twelve months an additional $11.8 million will be reclassified to earnings as a reduction to interest expense.
Non-designated Hedges
We do not use derivatives for trading or speculative purposes. During the nine months ended September 30, 2023 and 2022, we did not have any derivatives that were not designated as cash flow hedges for accounting purposes.
Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheets
The table below presents the fair value of our derivative financial instruments as well as their classification on the consolidated balance sheet as of September 30, 2023 and December 31, 2022.
Derivative AssetsDerivative Liabilities
Balance Sheet LocationFair Value atBalance Sheet LocationFair Value at
(Dollars in thousands)
September 30, 2023
December 31, 2022
September 30, 2023
December 31, 2022
Derivatives designated as hedging instruments:
Interest rate swapsDerivative assets$31,292 $35,276 Derivative liabilities$— $9 
Total$31,292 $35,276 $— $9 
Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statements of Comprehensive Income (Loss)
The table below presents the effect of our interest rate swaps on comprehensive income for the three and nine months ended September 30, 2023 and 2022.
(Dollars in thousands)Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)Total Amount of Interest Expense Presented in the Consolidated Statements of Income
Three months ended September 30, 2023
$6,609 Interest expense$(3,007)$(12,276)
Three months ended September 30, 2022
17,151 Interest expense(104)(9,177)
Nine months ended September 30, 2023
12,020 Interest expense(7,645)(32,245)
Nine months ended September 30, 2022
39,151 Interest expense2,700 (26,583)
Tabular Disclosure Offsetting Derivatives
The table below presents a gross presentation, the effects of offsetting, and a net presentation of our derivatives at September 30, 2023 and December 31, 2022. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheets.
Offsetting of Derivative Assets
Gross Amounts of Recognized AssetsGross Amounts Offset in the Consolidated Balance SheetNet Amounts of Assets Presented in the Consolidated Balance SheetGross Amounts Not Offset in the Consolidated Balance Sheet
(In thousands)Financial InstrumentsCash Collateral ReceivedNet Amount
September 30, 2023
$31,292 $— $31,292 $— $— $31,292 
December 31, 202235,276 — 35,276 (9)— 35,267 
Offsetting of Derivative Liabilities
Gross Amounts of Recognized LiabilitiesGross Amounts Offset in the Consolidated Balance SheetNet Amounts of Liabilities Presented in the Consolidated Balance SheetGross Amounts Not Offset in the Consolidated Balance Sheet
(In thousands)Financial InstrumentsCash Collateral PostedNet Amount
September 30, 2023
$— $— $— $— $— $— 
December 31, 20229 — 9 (9)— — 
Credit-risk-related Contingent Features
The agreement with our derivative counterparty provides that if we default on any of our indebtedness, including default for which repayment of the indebtedness has not been accelerated by the lender, then we could also be declared in default on our derivative obligations.
At September 30, 2023 the fair value of derivatives in a net asset position related to these agreements was $31.3 million and at December 31, 2022 the fair value of derivatives in a net asset position related to these agreements was $35.3 million. As of September 30, 2023, we have not posted any collateral related to these agreements. If we or our counterparty had breached any of these provisions at September 30, 2023, we would have been entitled to the termination value of approximately $31.3 million.