DERIVATIVES

The Company utilizes derivative instruments to economically hedge a portion of its exposure to market risks, primarily interest rate risk. The principal instruments used to hedge these risks are interest rate swaps and Eurodollar futures. The objective of the Company's risk management strategy is to mitigate declines in book value resulting from fluctuations in the fair value of the Company's assets from changing interest rates and to protect the Company's earnings from rising interest rates. The Company seeks to limit its exposure to changes in interest rates but does not seek to eliminate this risk. Please refer to Note 1 for information related to the Company's accounting policy for its derivative instruments.

The table below summarizes information about the Company’s derivative instruments on its consolidated balance sheet as of the dates indicated:



			June 30, 2014					December 31, 2013
Type of Derivative Instrument	Accounting Designation	Balance Sheet Location:	Fair Value			Aggregate Notional Amount		Fair Value			Aggregate Notional Amount
Interest rate swaps	Non-hedging	Derivative assets	$	5,237		$	290,000	$	18,488		$	575,000

Interest rate swaps	Non-hedging		$	(2,835	)	$	410,000	$	(1,336	)	$	215,000
Eurodollar futures ⁽¹⁾	Non-hedging		(21,139		)	11,400,000		(5,345		)	9,000,000
		Derivative liabilities	$	(23,974	)	$	11,810,000	$	(6,681	)	$	9,215,000


(1)	The Eurodollar futures aggregate notional amount represents the total notional of the 3-month contracts with expiration dates from 2016 to 2020. The maximum notional outstanding for any future 3-month period did not exceed $1,275,000 as of June 30, 2014 and $1,175,000 as of December 31, 2013.

During the six months ended June 30, 2014, the Company added Eurodollar futures with a total notional of $2,400,000 and interest rate swaps with a total notional of $75,000. The Company also terminated a total notional of $165,000 in interest rate swaps. There were no interest rate swaps or Eurodollar futures that expired during the six months ended June 30, 2014. The following table summarizes the contractual maturities remaining for the Company’s outstanding interest rate swap agreements as of June 30, 2014:



Remaining Maturity	Notional Amount		Weighted-Average Fixed Rate Swapped
37-48 months	185,000		0.92	%
49-60 months	235,000		1.45	%
61-72 months	25,000		1.61	%
73-84 months	75,000		2.24	%
85-108 months	30,000		1.93	%
109-127 months	150,000		2.17	%
	$	700,000	1.57	%

The table below provides detail of the Company's "(loss) gain on derivative instruments, net" by type of interest rate derivative for the periods indicated:



	Three Months Ended					Six Months Ended
	June 30,					June 30,
Type of Derivative Instrument	2014			2013		2014			2013
Interest rate swaps	$	(11,694	)	$	11,353	$	(20,702	)	$	11,336
Eurodollar futures	(11,380		)	—		(15,794		)	—
(Loss) gain on derivative instruments, net	$	(23,074	)	$	11,353	$	(36,496	)	$	11,336

Effective June 30, 2013, the Company de-designated certain interest rate swap agreements as cash flow hedges under ASC Topic 815. There is a net unrealized loss of $5,468 remaining in AOCI on the Company's consolidated balance sheet as of June 30, 2014 which represents the activity related to these interest rate swap agreements while they were previously designated as cash flow hedges, and this amount will be recognized in the Company's net income as a portion of "interest expense" over the remaining contractual life of the agreements. All forecasted transactions associated with interest rate swap agreements previously designated as cash flow hedges are expected to occur. No amounts have been reclassified to net income in any period in connection with forecasted transactions that are no longer considered probable of occurring. The Company estimates the portion of existing net unrealized loss on discontinued cash flow hedges expected to be reclassified to net income within the next 12 months is $4,756. The Company reclassified $1,608 and $3,896 from AOCI to net loss for the three and six months ended June 30, 2014 related to amortization of the net unrealized loss remaining in AOCI at the time the Company discontinued its cash flow hedge accounting. For the three and six months June 30, 2013, the Company reclassified $4,693 and $8,796 from AOCI to net income related to recognition of interest expense from cash flow hedging transactions.

Many of the Company's interest rate swaps were entered into under bilateral agreements which contain various covenants related to the Company’s credit risk. Specifically, if the Company defaults on any of its indebtedness, including those circumstances whereby repayment of the indebtedness has not yet been accelerated by the lender, or is declared in default of any of its covenants with any counterparty, then the Company could also be declared in default under the bilateral agreement. Additionally, these agreements allow those counterparties to require settlement of its outstanding derivative transactions if the Company fails to earn GAAP net income excluding derivative gains and losses greater than one dollar as measured on a rolling two quarter basis. These interest rate agreements also contain provisions whereby, if the Company fails to maintain a minimum net amount of shareholders’ equity, then the Company may be declared in default on its derivative obligations. The Company was in compliance with all covenants under bilateral agreements on June 30, 2014.