v3.26.1
Derivative Instruments
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments Note 15. Derivative Instruments
The Company is exposed to changing interest rates and market conditions, which affect cash flows associated with
borrowings. The Company uses derivative instruments to manage interest rate risk and conditions in the commercial
mortgage market and, as such, views them as economic hedges. Interest rate swaps are used to mitigate the exposure to
changes in interest rates and involve the receipt of variable-rate interest amounts from a counterparty in exchange for
making payments based on a fixed interest rate over the life of the swap contract.
For derivative instruments where the Company has not elected hedge accounting, fair value adjustments are recorded in
earnings. The fair value adjustments for interest rate swaps, along with the related interest income, interest expense and
gains (losses) on termination of such instruments, are reported as a net realized gain on financial instruments in the
consolidated statements of operations.
As described in Note 3, for qualifying cash flow hedges, the change in the fair value of derivatives is recorded in OCI
and not recognized in the consolidated statements of operations. Derivative movements impacting earnings are
recognized on a consistent basis with the classification of the hedged item, primarily interest expense. The ineffective
portions of the cash flow hedges are immediately recognized in earnings.
The table below presents average notional derivative amounts, as this is the most relevant measure of volume, and
derivative assets and liabilities by type. Refer to Note 22 for further details on derivative assets and liabilities by product
type.
June 30, 2026
December 31, 2025
(in thousands)
Primary Underlying Risk
Notional
Amount
Derivative
Asset
Derivative
Liability
Notional
Amount
Derivative
Asset
Derivative
Liability
Interest Rate Swaps - not designated as hedges
Interest rate risk
$26,300
$2,710
$—
$26,300
$2,085
$—
Interest Rate Swaps - designated as hedges
Interest rate risk
113,693
9,012
—
391,693
17,322
(224)
FX forwards
Foreign exchange rate risk
19,855
340
(60)
20,731
340
(1,208)
Total
$159,848
$12,062
$(60)
$438,724
$19,747
$(1,432)
The table below presents gains and losses on derivatives.
(in thousands)
Net Realized
Gain (Loss)
Net Unrealized
Gain (Loss)
Three Months Ended June 30, 2026
Interest rate swaps
$(9,494)
$7,970
Total
$(9,494)
$7,970
Three Months Ended June 30, 2025
Interest rate swaps
$2,019
$(397)
Total
$2,019
$(397)
Six Months Ended June 30, 2026
Interest rate swaps
$(9,576)
$9,490
Total
$(9,576)
$9,490
Six Months Ended June 30, 2025
Interest rate swaps
$3,965
$(912)
Total
$3,965
$(912)
In the table above:
•Gains (losses) on interest rate swaps are recorded in net unrealized gain (loss) on financial instruments or net
realized gain (loss) on financial instruments in the consolidated statements of operations.
•For qualifying hedges of interest rate risk on interest rate swaps, the effective portion relating to the unrealized
gain (loss) on derivatives are recorded in AOCI.
The table below summarizes the gains and losses on derivatives which have qualified for hedge accounting.
(in thousands)
Derivatives - effective portion
reclassified from AOCI to income
Derivatives - effective portion
recorded in OCI
Total change in OCI for period
Interest rate swaps
Three Months Ended June 30, 2026
$(206)
$3,145
$3,351
Three Months Ended June 30, 2025
$(244)
$(3,585)
$(3,341)
Six Months Ended June 30, 2026
$(424)
$3,033
$3,457
Six Months Ended June 30, 2025
$(496)
$(7,781)
$(7,285)
In the table above:
•Forecasted transactions on interest rates consists of benchmark interest rate hedges of SOFR indexed floating-
rate liabilities.
•Hedge ineffectiveness is the amount by which the cumulative gain or loss on the designated derivative
instrument exceeds the present value of the cumulative expected change in cash flows on the hedged item
attributable to the hedged risk.
•Amounts recorded in OCI for the period represents after tax amounts.