Quarterly report pursuant to Section 13 or 15(d)

Derivatives

v3.19.2
Derivatives
6 Months Ended
Jun. 30, 2019
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Derivatives

6. DERIVATIVES

The Company’s objective in using an interest rate derivative is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company uses an interest rate cap to manage interest rate risk. The Company carries the premium paid for the interest rate cap as an asset on the balance sheet at fair value. The change in the unrealized gain or loss of the premium is recorded as an increase or decrease to interest expense.

 

The following table summarizes the terms of the Company’s derivative financial instrument as of June 30, 2019:

 

 

 

 

Notional Amount

 

 

 

 

Effective

 

Maturity

Product

 

June 30, 2019

 

 

December 31, 2018

 

 

Strike

 

Date

 

Date

Cap Agreement

 

$

7,500,000

 

 

$

7,500,000

 

 

3.50 % - 4.00%

 

12/24/2018

 

12/20/2021

The counterparty to this arrangement is SMBC Capital Markets. The Company is potentially exposed to credit loss in the event of non-performance by the counterparty. The Company does not anticipate the counterparty to fail to meet its obligations as they become due.