Derivative Financial Instruments

The following table summarizes the terms and fair values of the Company's derivative financial instruments, as well as their classification on the Consolidated Balance Sheets, as of June 30, 2014 and December 31, 2013 (in thousands):



								Fair Value
								Assets ⁽³⁾			Liabilities ⁽³⁾
Effective Date	Maturity Date	Early Termination Date ⁽¹⁾		Notional Amount	Bank Pays Variable Rate of	Regency Pays Fixed Rate of		2014	2013		2014		2013
10/1/11	9/1/14	N/A	$	9,000	1 Month LIBOR	0.760%	$	—	—	$	(10	)	(34	)
10/16/13	10/16/20	N/A		28,100	1 Month LIBOR	2.196%		—	82		(589	)	—
4/15/14	4/15/24	10/15/14	⁽²⁾	35,000	3 Month LIBOR	2.873%		—	1,036		—		—
4/15/14	4/15/24	10/15/14	⁽²⁾	60,000	3 Month LIBOR	2.864%		—	1,821		—		—
4/15/14	4/15/24	10/15/14	⁽²⁾	75,000	3 Month LIBOR	2.087%		—	7,476		—		—
4/15/14	4/15/24	10/15/14	⁽²⁾	50,000	3 Month LIBOR	2.088%		—	4,978		—		—
8/1/15	8/1/25	2/1/16		75,000	3 Month LIBOR	2.479%		3,484	8,516		—		—
8/1/15	8/1/25	2/1/16		50,000	3 Month LIBOR	2.479%		2,322	5,670		—		—
8/1/15	8/1/25	2/1/16		50,000	3 Month LIBOR	2.479%		2,320	5,658		—		—
8/1/15	8/1/25	2/1/16		45,000	3 Month LIBOR	3.412%		—	—		(1,609	)	—
Total derivative financial instruments							$	8,126	35,237		(2,208	)	(34	)

⁽¹⁾ Represents the date specified in the agreement for either optional or mandatory early termination which will result in cash settlement.

⁽²⁾ The Company issued $250 million of new 3.75%, fixed rate ten year unsecured bonds in May 2014. Prior to issuing the bonds, the Company locked in the ten year treasury rate using forward starting interest rate swaps to mitigate the risk of interest rates rising. In connection with the issuance of the new bonds, the Company terminated and settled these swaps, resulting in net cash proceeds of $4.6 million. These proceeds will offset bond interest expense over the life of the bonds, resulting in a lower effective interest rate of 3.59%.

⁽³⁾Derivatives in an asset position are included within Other Assets in the accompanying Consolidated Balance Sheets, while those in a liability position are included within Accounts Payable and Other Liabilities.

These derivative financial instruments are all interest rate swaps, which are designated and qualify as cash flow hedges. The Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges. The Company has master netting agreements, however the Company does not have multiple derivatives subject to a single master netting agreement with the same counterparties. Therefore, none are offset in the accompanying Consolidated Balance Sheet.

The Company expects to issue new debt in 2015. In order to mitigate the risk of interest rates rising before new borrowings are obtained, the Company has $220 million of forward starting interest rate swaps to partially hedge the new debt expected to be issued in 2015. These interest rate swaps lock in the 10-year treasury rate and swap spread at a weighted average fixed rate of 2.67%. A current market based credit spread applicable to Regency will be added to the locked in fixed rate at time of issuance that will determine the final bond yield.

The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges is recorded in accumulated other comprehensive income (loss) and subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings within interest expense.

The following table represents the effect of the derivative financial instruments on the accompanying consolidated financial statements (in thousands):



Derivatives in FASB ASC Topic 815 Cash Flow Hedging Relationships:	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)				Location and Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)						Location and Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	Three months ended June 30,					Three months ended June 30,						Three months ended June 30,
	2014			2013		2014			2013			2014		2013
Interest rate swaps	$	(11,153	)	18,332	Interest expense	$	(2,275	)	(2,366	)	Other expenses	$	—	—



Derivatives in FASB ASC Topic 815 Cash Flow Hedging Relationships:	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)				Location and Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)						Location and Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	Six months ended June 30,					Six months ended June 30,						Six months ended June 30,
	2014			2013		2014			2013			2014		2013
Interest rate swaps	$	(24,953	)	21,704	Interest expense	$	(4,749	)	(4,732	)	Other expenses	$	—	(3	)

As of June 30, 2014, the Company expects $9.0 million of net deferred losses on derivative instruments accumulated in other comprehensive income to be reclassified into earnings during the next 12 months, of which $8.4 million is related to previously settled swaps.