| DERIVATIVES |
9. DERIVATIVES
Newcastle's derivative instruments are comprised of interest rate swaps, linked transactions and TBAs. The table below presents the fair value of the derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2014 and 2013:
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Fair Value
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December 31,
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Balance sheet location
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2014
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2013
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Derivative Assets
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Linked transaction at fair value
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Receivables and other assets
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$
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—
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$
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43,662
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$
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—
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$
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43,662
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Derivative Liabilities
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Interest rate swaps, designated as hedges
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Accounts payable, accrued expenses and other liabilities
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$
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1,963
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$
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6,203
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Interest rate swaps, not designated as hedges
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Accounts payable, accrued expenses and other liabilities
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334
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7,592
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TBAs, not designated as hedges
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Accounts payable, accrued expenses and other liabilities
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2,031
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—
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$
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4,328
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$
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13,795
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The following table summarizes gains (losses) recorded in relation to derivatives:
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Income Statement Location
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Year Ended December 31,
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Cash flow hedges
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2014
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2013
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2012
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Gain (loss) on the ineffective portion
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Other income (loss)
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$
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—
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$
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—
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$
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483
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Loss immediately recognized at de-designation
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Gain (loss) on sale of
investments, Other income (loss)
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—
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—
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(7,036
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)
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Deferred hedge gain (loss) reclassified from AOCI into earnings
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Interest expense
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27
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(99
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)
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1,249
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Amount of loss reclassified from AOCI into income (effective portion)
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Interest expense
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(4,379
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)
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(6,128
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)
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(30,631
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)
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Amount of unrealized gain (loss) recognized in OCI on derivatives (effective portion)
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None
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(177
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)
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(195
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)
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(11,825
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)
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Non-hedge derivatives
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Gain recognized related to interest rate swaps
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Other income
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7,131
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10,577
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9,101
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Gain recognized related to linked transactions
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Other income
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12,498
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1,168
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—
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Gain (loss) recognized related to linked transactions
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Interest expense
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(211
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)
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(236
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)
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—
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Gain (loss) recognized related to TBAs
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Other income (loss)
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(2,030
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)
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—
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—
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The following table presents additional information about cash flow hedge transactions:
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December 31,
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2014
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2013
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Cash flow hedges
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Expected reclassification of deferred hedges from accumulated other comprehensive income (“AOCI”) into earnings over the next 12 months
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$
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78
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$
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53
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Expected reclassification of current hedges from AOCI into earnings over the next 12 months
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(1,730
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)
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(3,915
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)
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The following table presents both gross and net information about linked transactions:
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As of December 31,
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2014
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2013
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Real estate securities-available for sale (A)
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$
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—
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$
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104,308
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Repurchase agreements (B)
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—
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(60,646
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)
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Net assets recognized as linked transactions
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$
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—
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$
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43,662
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(A)
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Represents the fair value of the securities accounted for as part of linked transactions.
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(B)
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Represents the carrying value, which approximates fair value, of the repurchase agreements accounted for as part of linked transactions.
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