MARKET RISK AND DERIVATIVE INSTRUMENTS |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
| MARKET RISK AND DERIVATIVE INSTRUMENTS | NOTE 18 - MARKET RISK AND DERIVATIVE INSTRUMENTS The Company is affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company’s financial performance and are referred to as "market risks." When deemed appropriate, the Company may use derivatives as a risk management tool to mitigate the potential impact of certain market risks. The primary market risks managed by the Company through the use of derivative instruments were interest rate risk and market price risk. The Company historically managed its interest rate risk with interest rate swaps. Interest rate swaps are contracts between two parties to exchange cash flows based on specified underlying notional amounts, assets and/or indices. The Company seeks to manage the extent to which net income changes as a function of changes in interest rates by matching adjustable-rate assets with variable-rate borrowings. The Company classified its interest rate swap contracts as cash flow hedges, which are hedges that eliminate the risk of changes in the cash flows of a financial asset or liability. The Company terminated all of its interest rate swap positions associated with its financed CMBS portfolio in April 2020. At termination, the Company realized a loss of $11.8 million. At March 31, 2026 and December 31, 2025, the Company had losses of $1.3 million and $1.6 million, respectively, recorded in accumulated other comprehensive loss, which will be amortized into earnings over the remaining life of the debt. During the three months ended March 31, 2026 and 2025, the Company recorded amortization expense of $326,000 and $415,000, respectively, reported in interest expense on the consolidated statements of operations. For the three months ended March 31, 2025, the Company recorded accretion income, reported in interest expense on the consolidated statements of operations, of $23,000 to accrete the accumulated other comprehensive income on the terminated swap agreements. At December 31, 2025, the Company fully accreted the unrealized balance from the gain attributable to two terminated interest rate swaps, and therefore no accretion income was recorded for the three months ended March 31, 2026. The following table presents the effect of the derivative instruments on the consolidated statements of operations during the three months ended March 31, 2026 and 2025 (in thousands):
(1) Negative values indicate a decrease to the associated consolidated statements of operations line items. |
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