The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative

financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

As of December 31, 2021, the Company had fourteen outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk for notional amounts totaling $250.0 million, including four forward-starting interest rate swaps for notional amounts totaling $50.0 million, which will not become effective until March 31, 2022.

The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of December 31, 2021 and 2020.


	Asset Derivatives Fair Value at December 31,					Liability Derivatives Fair Value at December 31,
(in thousands)	2021		2020		Balance Sheet Classification	2021		2020		Balance Sheet Classification
Interest rate swaps	$	343	$	—	Other assets, net	$	5,324	$	11,846	Other liabilities, net

The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive (loss) income ("AOCI") and are subsequently reclassified to interest expense in the period that the hedged forecasted transaction affects earnings.

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s Term Loans. During the next twelve months, the Company estimates that an additional $3.4 million will be reclassified from AOCI as an increase to interest expense.

The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the for the years ended December 31, 2021 and 2020.


	For the Year Ended December 31,
(Dollars in thousands)	2021		2020
Amount of unrealized gain (loss) recognized in OCI on derivative	$	2,410	$	(9,945)
Amount of loss reclassified from AOCI into interest expense	$	4,456	$	2,907
Total interest expense presented in the Consolidated Statements of Income in which the effects of the cash flow hedges are recorded	$	10,542	$	8,620

The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company's derivatives as of December 31, 2021 and December 31, 2020. 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 (as of December 31, 2021)
							Gross Amounts Not Offset in the Consolidated Balance Sheets
(in thousands)	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets in the Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	343	$	—	$	343	$	(247)	$	—	$	96


Offsetting of Derivative Liabilities (as of December 31, 2021)
							Gross Amounts Not Offset in the Consolidated Balance Sheets
(in thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities in the Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	(5,324)	$	—	$	(5,324)	$	247	$	—	$	(5,077)

Offsetting of Derivative Assets (as of December 31, 2020)

Gross Amounts Not Offset in the Consolidated Balance Sheets

(in thousands)

Gross Amounts of Recognized Assets

Gross Amounts Offset in the Consolidated Balance Sheet

Net Amounts of Assets in the Consolidated Balance Sheets

Financial Instruments

Cash Collateral Received

Net Amount

Derivatives

—


Offsetting of Derivative Liabilities (as of December 31, 2020)
							Gross Amounts Not Offset in the Consolidated Balance Sheets
(in thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities in the Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	(11,846)	$	—	$	(11,846)	$	—	$	—	$	(11,846)

As of December 31, 2021, the fair value of derivatives in a net liability position, including accrued interest, but excluding any adjustment for nonperformance risk related to these agreements, was $5.3 million. As of December 31, 2021, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company terminated these interest rate swaps, it would pay or receive the approximate aggregate termination value of the swaps at the time of the termination, which was approximately $5.3 million at December 31, 2021.