NOTE 14. DERIVATIVE INSTRUMENTS

The table below presents the fair value of our derivative instruments as well as their classification in our consolidated balance sheets as of June 30, 2017 and December 31, 2016:


		June 30,		December 31,
Derivative Instruments	Balance Sheet Location	2017		2016
		(in thousands)
De-designated interest rate swaps	Derivative Assets	$	7,273	$	7,668
Eurodollar Futures Contracts	Derivative Assets		—		524
		$	7,273	$	8,192
De-designated interest rate swaps	Derivative Liabilities	$	20,793	$	20,976
TBA Agency MBS	Derivative Liabilities		2,811		13,103
Eurodollar Futures Contracts	Derivative Liabilities		—		223
		$	23,604	$	34,302

Interest Rate Swap Agreements

At June 30, 2017, we were a counterparty to interest rate swaps, which are derivative instruments as defined by ASC 815‑10, with an aggregate notional amount of $1.84 billion and a weighted average maturity of approximately 37 months. We utilize interest rate swaps to manage interest rate risk relating to our repurchase agreements and do not anticipate entering into derivative transactions for speculative or trading purposes. In accordance with the swap agreements, we will pay a fixed-rate of interest during the term of the swap agreements (ranging from 0.7615% to 3.06%) and receive a payment that varies with the three-month LIBOR rate.

During the three months ended June 30, 2017, we added five new interest rate swap agreements for a total notional amount of $340 million. During the three months ended June 30, 2017, four interest rate swaps with an aggregate notional amount of $175 million matured.

At June 30, 2017, the amount in AOCI relating to interest rate swaps was approximately $16.6 million. The estimated net amount of the existing losses that were reported in AOCI at June 30, 2017 that is expected to be reclassified into earnings within the next twelve months is approximately $3 million.

At June 30, 2017 and June 30, 2016, we had a loss of approximately $6.0 million and a loss of $16.1 million, respectively, on interest rate swaps.

At June 30, 2017 and December 31, 2016, our interest rate swaps had the following notional amounts (dollar amounts in thousands), weighted average fixed rates, and remaining terms:


	June 30, 2017					December 31, 2016
			Weighted					Weighted
			Average		Remaining			Average		Remaining
	Notional		Fixed		Term in	Notional		Fixed		Term in
Maturity	Amount		Rate		Months	Amount		Rate		Months
Less than 1 year	$	535,000	0.91	%	6	$	500,000	0.79	%	6
1 year to 2 years		100,000	1.00		16		410,000	0.96		16
2 years to 3 years		366,000	1.48		30		150,000	1.29		34
3 years to 4 years		150,000	1.44		41		166,000	1.45		46
4 years to 5 years		165,000	2.29		51		125,000	2.44		57
5 years to 7 years		420,000	2.73		69		420,000	2.73		75
7 years to 10 years		100,000	2.00		86		—	—		—
	$	1,836,000	1.67	%	37	$	1,771,000	1.51	%	34

Swap Agreements by Counterparty


	June 30,		December 31,
	2017		2016
	(in thousands)
Central clearing houses(1)	$	1,026,000	$	786,000
JPMorgan Securities		350,000		425,000
Deutsche Bank Securities		225,000		325,000
RBS Greenwich Capital		115,000		115,000
Nomura Securities International		100,000		100,000
Bank of New York		20,000		20,000
	$	1,836,000	$	1,771,000

(1)

For all interest rate swap agreements entered into after September 9, 2013, the counterparty will be central clearing houses, such as the CME or LCH, regardless of who the trading party is. See the section entitled “Derivative Financial Instruments – Interest Rate Risk Management” in Note 1 for additional details.

Eurodollar Futures Contracts

Each Eurodollar Futures Contract embodies $1 million of notional value and is effective for a term of approximately three months. We do not designate these contracts as hedges for accounting purposes. As a result, realized and unrealized changes in fair value are recognized in earnings in the period in which the changes occur.

At June 30, 2017, we did not have any Eurodollar Futures Contracts. For the three months ended June 30, 2017, we had a loss on Eurodollar Futures Contracts of approximately $14 thousand. For the six months ended June 30, 2017, we had a gain on Eurodollar Futures Contracts of approximately $0.3 million. For the three months ended June 30, 2016, we had a loss on Eurodollar Futures Contracts of approximately $1.4 million. For the six months ended June 30, 2016, we had a loss on Eurodollar Futures Contracts of approximately $1.3 million. At December 31, 2016, we had 1,250 Eurodollar Futures Contracts representing $1.25 billion in notional amount.

TBA Agency MBS

We also enter into TBA contracts and will recognize a gain or loss on the sale of the contracts or dollar roll income. See the section in Note 1 on “Derivative Financial Instruments – TBA Agency MBS” for more information on TBA Agency MBS. During the three months ended June 30, 2017, we recognized a gain on derivatives-TBA Agency MBS (including derivative income) of approximately $1.6 million. During the six months ended June 30, 2017, we recognized a gain on derivatives-TBA Agency MBS (including derivative income) of approximately $3.2 million. During the three months ended June 30, 2016, we recognized a gain on derivatives-TBA Agency MBS (including derivative income) of approximately $8.1 million. During the six months ended June 30, 2016, we recognized a gain on derivatives-TBA Agency MBS (including derivative income) of approximately $23.4 million. The types of securities involved in these TBA contracts are Fannie Mae and Freddie Mac 15-year fixed-rate securities with coupons ranging from 2.5% to 3.0%. At June 30, 2017, the net notional amount of the TBA Agency MBS was approximately $755 million.

For more information on our accounting policies, the objectives and risk exposures relating to derivatives and hedging agreements, see the section on “Derivative Financial Instruments” in Note 1. For more information on the fair value of our swap agreements, see Note 8.