v3.26.1
Derivative Instruments
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
9. Derivative Instruments

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company enters into derivative instruments in connection with its risk management activities. These derivative instruments may include interest rate swaps, interest rate caps, TBAs, credit default swaps, U.S. Treasury and commodity futures and options contracts such as options on credit default swap indices, equity index options, swaptions and options on futures. The Company may also purchase options on U.S. Treasury futures or invest in other types of mortgage derivative securities. Additionally, Constructive may enter into IRLCs related to the origination of business purpose loans. The Company elected not to apply hedge accounting for its derivative instruments.
The following table summarizes the Company's derivative instruments as of March 31, 2026 and December 31, 2025, respectively (dollar amounts in thousands):
Fair Value
Type of Derivative InstrumentConsolidated Balance Sheet LocationMarch 31, 2026December 31, 2025
Interest rate caps
Other assets$684 $31 
IRLCs
Other assets1,155 691 
U.S. Treasury futures
Other assets— — 
Commodity futures
Other assets— — 
Total derivative assets
$1,839 $722 
TBAs
Other liabilities$(1,523)$— 
Credit default swaps
Other liabilities— — 
Interest rate swapsOther liabilities— — 
Total derivative liabilities
$(1,523)$— 
The Company elects to net the fair value of its derivative contracts by counterparty when appropriate and accounts for the receipt or payment of variation margin as a direct reduction of or increase in the carrying value of the related asset or liability.
The following tables present a reconciliation of gross derivative assets and liabilities to net amounts presented in the accompanying condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025, respectively (dollar amounts in thousands):
March 31, 2026
Gross Amount of Recognized Assets (Liabilities)Gross Amounts Offset in Balance SheetsVariation MarginNet Amounts of Assets (Liabilities) Presented in Balance Sheets
Derivative assets
Interest rate caps$684 $— $— $684 
IRLCs
1,155 — — 1,155 
Interest rate swaps20,825 (20,825)— — 
U.S. Treasury futures
26,253 (942)(25,311)— 
Total derivative assets$48,917 $(21,767)$(25,311)$1,839 
Derivative liabilities
Credit default swaps
$(2,637)$— $2,637 $— 
TBAs
(1,523)— — (1,523)
Interest rate swaps(23,004)20,825 2,179 — 
U.S. Treasury futures
(942)942 — — 
Total derivative liabilities$(28,106)$21,767 $4,816 $(1,523)

December 31, 2025
Gross Amount of Recognized Assets (Liabilities)Gross Amounts Offset in Balance SheetsVariation MarginNet Amounts of Assets (Liabilities) Presented in Balance Sheets
Derivative assets
Interest rate caps$31 $— $— $31 
IRLCs
691 — — 691 
Interest rate swaps8,769 (8,769)— — 
U.S. Treasury futures
4,759 (148)(4,611)— 
Commodity futures
9,748 (1,733)(8,015)— 
Total derivative assets$23,998 $(10,650)$(12,626)$722 
Derivative liabilities
Credit default swaps
$(9,890)$— $9,890 $— 
Interest rate swaps(47,638)8,769 38,869 — 
U.S. Treasury futures
(148)148 — — 
Commodity futures
(1,733)1,733 — — 
Total derivative liabilities$(59,409)$10,650 $48,759 $— 
The use of derivatives exposes the Company to counterparty credit risks in the event of a default by a counterparty. If a counterparty defaults under the applicable derivative agreement, the Company may be unable to collect payments to which it is entitled under its derivative agreements and may have difficulty collecting the assets it pledged as collateral against such derivatives.

The Company is required to post an initial margin amount for its interest rate swaps, credit default swaps and U.S. Treasury and commodity futures determined by the respective central clearing houses, which is generally intended to be set at a level sufficient to protect the exchange from the derivative instrument’s maximum estimated single-day price movement. The following table summarizes assets pledged as initial margin as of March 31, 2026 and December 31, 2025, respectively (dollar amounts in thousands):
Initial Margin Collateral
Consolidated Balance Sheet Location
March 31, 2026December 31, 2025
Agency RMBS
Investment securities available for sale, at fair value
$63,072 $68,458 
Restricted cash
Other assets
74,419 82,222 
Total initial margin collateral
$137,491 $150,680 

Margin excess related to settlement of variation margin in the amount of approximately $9.8 million and $16.2 million as of March 31, 2026 and December 31, 2025, respectively, is included in other assets on the accompanying condensed consolidated balance sheets. Margin deficit related to settlement of variation margin in the amount of approximately $20.6 million and $24.3 million as of March 31, 2026 and December 31, 2025, respectively, is included in other liabilities on the accompanying condensed consolidated balance sheets.

The tables below summarize the notional activity of derivative instruments for the three months ended March 31, 2026 and 2025, respectively (dollar amounts in thousands):

Notional Amount For the Three Months Ended March 31, 2026
Type of Derivative InstrumentDecember 31, 2025Additions
Terminations/Pair-Offs
March 31, 2026
Interest rate caps$45,142 $45,142 $(45,142)$45,142 
Options— 190 (190)— 
TBAs
— 450,000 (300,000)150,000 
Interest rate swaps4,919,398 340,635 (507,940)4,752,093 
Credit default swaps
475,000 150,000 (475,000)150,000 
U.S. Treasury futures
901,200 2,984,000 (2,073,000)1,812,200 
Commodity futures
199,676 635,411 (835,087)— 

Notional Amount For the Three Months Ended March 31, 2025
Type of Derivative InstrumentDecember 31, 2024
Additions
Terminations
March 31, 2025
Interest rate caps$45,142 $45,142 $(45,142)$45,142 
Options— 160 — 160 
Interest rate swaps4,134,267 1,584,169 (1,224,060)4,494,376 
Credit default swaps
400,000 — — 400,000 
U.S. Treasury futures
406,100 112,500 (406,100)112,500 

The following table presents the components of realized gains (losses), net and unrealized gains (losses), net related to derivative instruments, which are included in gains (losses) on derivative instruments, net and mortgage banking activities, net in the condensed consolidated statements of operations for the three months ended March 31, 2026 and 2025, respectively (dollar amounts in thousands):
For the Three Months Ended March 31,
20262025
Type of Derivative InstrumentRealized Gains (Losses)Unrealized Gains (Losses)Realized Gains (Losses)Unrealized Gains (Losses)
Interest rate caps
$— $(41)$— $(15)
Options(752)— — 2,690 
IRLCs
— 464 — — 
TBAs
(100)(1,523)— — 
Interest rate swaps(3,177)36,689 26,336 (73,938)
Credit default swaps
(270)971 (1,000)1,246 
U.S. Treasury futures
(5,663)20,699 (860)(1,261)
Commodity futures
48,557 (8,015)— — 
Total$38,595 $49,244 $24,476 $(71,278)

The following tables present information about an interest rate cap contract related to a variable-rate mortgage payable on real estate as of March 31, 2026 and December 31, 2025, respectively (dollar amounts in thousands):

March 31, 2026
Financing Type
SOFR Strike Price
Notional Amount
Expiration Date
Mortgage payable on real estate
2.50%
45,142 
January 1, 2028

December 31, 2025
Financing Type
SOFR Strike Price
Notional Amount
Expiration Date
Mortgage payable on real estate
3.22%
45,142 January 1, 2026

The following table presents information about the Company's TBA purchase and sale contracts as of March 31, 2026 (dollar amounts in thousands). The Company did not own TBAs as of December 31, 2025.

Notional Amount (1)
Cost Basis (2)
Fair Value (3)
Net Carrying Value (4)
Purchase contracts
$150,000 $149,413 $147,890 $(1,523)
Total TBAs$150,000 $149,413 $147,890 $(1,523)

(1)Notional amount represents the par value (or principal balance) of the underlying Agency RMBS.
(2)Cost basis represents the forward price to be paid for the underlying Agency RMBS.
(3)Fair value represents the current fair value of the TBA (or of the underlying Agency RMBS) as of period end.
(4)Net carrying value represents the difference between the fair value and the cost basis as of period end.
The following tables present information about the Company's interest rate swaps whereby it receives floating rate payments in exchange for fixed rate payments as of March 31, 2026 and December 31, 2025, respectively (dollar amounts in thousands):

March 31, 2026
Swap MaturitiesNotional AmountWeighted Average Fixed Interest RateWeighted Average Variable Interest Rate
2026$30,660 4.37 %3.74 %
2027622,123 3.98 %3.82 %
20281,785,006 3.73 %3.91 %
2029424,297 3.71 %3.77 %
20301,199,972 3.73 %3.85 %
203154,612 3.54 %3.67 %
2033136,799 3.61 %3.93 %
203474,177 3.71 %3.75 %
203548,386 3.88 %3.65 %
2043106,207 4.04 %3.63 %
2045191,010 3.99 %4.01 %
204618,920 4.19 %3.63 %
Total$4,692,169 3.78 %3.86 %

December 31, 2025
Swap MaturitiesNotional AmountWeighted Average Fixed Interest RateWeighted Average Variable Interest Rate
2026$30,660 4.37 %3.85 %
2027688,633 3.94 %4.01 %
20281,785,006 3.73 %4.18 %
2029270,275 3.91 %4.07 %
20301,222,072 3.73 %4.22 %
2033199,590 3.73 %4.16 %
2034178,224 3.86 %4.03 %
2035300,878 4.00 %4.30 %
2045191,010 3.99 %4.13 %
Total$4,866,348 3.80 %4.16 %
The following tables present information about the Company's interest rate swaps whereby it receives fixed rate payments in exchange for floating rate payments as of March 31, 2026 and December 31, 2025, respectively (dollar amounts in thousands):

March 31, 2026
Swap MaturitiesNotional AmountWeighted Average Fixed Interest RateWeighted Average Variable Interest Rate
2028$9,550 3.48 %3.69 %
20316,874 3.23 %3.65 %
203343,500 3.64 %3.85 %
Total$59,924 3.57 %3.80 %

December 31, 2025
Swap MaturitiesNotional AmountWeighted Average Fixed Interest RateWeighted Average Variable Interest Rate
2028$9,550 3.48 %4.26 %
203343,500 3.64 %4.19 %
Total$53,050 3.61 %4.21 %
Certain of the Company’s derivative contracts are subject to International Swaps and Derivatives Association Master Agreements or other similar agreements which may contain provisions that grant counterparties certain rights with respect to the applicable agreement upon the occurrence of certain events, including a decline in the Company's stockholders’ equity (as defined in the respective agreements) in excess of specified thresholds or dollar amounts over set periods of time, the Company’s failure to maintain its REIT status, the Company’s failure to comply with limits on the amount of leverage and the Company’s stock being delisted from Nasdaq.