DERIVATIVES

The Company utilizes derivative instruments to economically hedge a portion of its exposure to market risks, primarily interest rate risk. The Company primarily uses pay-fixed interest rate swaps and Eurodollar contracts to hedge its exposure to changes in interest rates and uses receive-fixed interest rate swaps to offset a portion of its pay-fixed interest rate swaps in order to manage its overall hedge position. 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. 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 treated as trading instruments on its consolidated balance sheet as of the dates indicated:



	December 31, 2014
	Derivative Assets				Derivative Liabilities
Trading Instruments	Fair Value		Notional		Fair Value			Notional
Interest rate swaps	$	5,727	$	440,000	$	(3,002	)	$	485,000
Eurodollar futures ⁽¹⁾	—		—		(32,896		)	16,600,000
Total	$	5,727	$	440,000	$	(35,898	)	$	17,085,000



	December 31, 2013
	Derivative Assets				Derivative Liabilities
Trading Instruments	Fair Value		Notional		Fair Value			Notional
Interest rate swaps	$	18,488	$	575,000	$	(1,336	)	$	215,000
Eurodollar futures ⁽¹⁾	—		—		(5,345		)	9,000,000
Total	$	18,488	$	575,000	$	(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 2015 to 2020. The maximum notional outstanding for any future 3-month period did not exceed $1,300,000 as of December 31, 2014 and $1,175,000 as of December 31, 2013.

The following table summarizes the contractual maturities remaining for the Company’s outstanding interest rate swap agreements as of December 31, 2014:



Remaining Maturity	Pay-Fixed Interest Rate Swaps		Pay-Fixed Weighted-Average Rate⁽¹⁾		Receive Fixed Interest Rate Swaps		Receive-Fixed Weighted-Average Rate
37-48 months	$	185,000	0.92	%	$	—	—	%
49-60 months	235,000		1.45	%	250,000		1.91	%
61-72 months	25,000		1.61	%	—		—	%
73-84 months	25,000		2.19	%	—		—	%
85-96 months	—		—	%	—		—	%
97-108 months	30,000		1.93	%	—		—	%
109-120 months	150,000		2.17	%	25,000		2.71	%

The following table summarizes the volume of activity related to derivative instruments for the periods indicated:



For the year ended December 31, 2014:	Beginning of Period Notional Amount		Additions		Settlement, Termination, Expiration or Exercise			End of Period Notional Amount
Receive-fixed interest rate swaps	$	—	$	275,000	$	—		$	275,000
Pay-fixed interest rate swaps	790,000		75,000		(215,000		)	650,000
Eurodollar futures	9,000,000		7,600,000		—			16,600,000
	$	9,790,000	$	7,950,000	$	(215,000	)	$	17,525,000

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



	Year Ended
	December 31,
Type of Derivative Instrument	2014			2013			2012
Receive-fixed interest rate swaps	$	4,912		$	—		$	—
Pay-fixed interest rate swaps	(30,754		)	9,315			(908		)
Eurodollar futures	(27,551		)	(19,391		)	—
Gain (loss) on derivative instruments, net	$	(53,393	)	$	(10,076	)	$	(908	)

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 $2,577 remaining in AOCI on the Company's consolidated balance sheet as of December 31, 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. Because of differing market values and maturities at the time of cash flow hedge de-designation, the balance remaining in AOCI is comprised of both unrealized gains and unrealized losses which will not be recognized in net income equally over time. 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 $3,460.

The table below describes the components of the reclassification adjustments out of AOCI related to certain interest rate swaps that were formerly designated as cash flow hedges and recognized as a portion of "interest expense" on the Company statements of comprehensive income for the periods indicated:



	Year Ended
	December 31,
	2014		2013		2012
Reclassification adjustment due to amortization of de-designated cash flow hedges	$	6,788	$	5,193	$	—
Reclassification adjustment due to recognition of interest expense from cash flow hedges	—		8,796		14,448
Total reclassification adjustment related to cash flow hedges	$	6,788	$	13,989	$	14,448

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 December 31, 2014.

Please see Note 7 for the Company's disclosures related to offsetting assets and liabilities.