XML 32 R21.htm IDEA: XBRL DOCUMENT v3.25.2
DERIVATIVES AND HEDGING ACTIVITY
 6 Months Ended
Jun. 30, 2025
DERIVATIVES AND HEDGING ACTIVITY  
DERIVATIVES AND HEDGING ACTIVITY

11. DERIVATIVES AND HEDGING ACTIVITY

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its debt funding and through the use of derivative financial instruments. Specifically, the Company may enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in Accumulated other comprehensive income/(loss), net on the Consolidated Balance Sheets and subsequently reclassified

into earnings in the period that the hedged forecasted transaction affects earnings. During the three and six months ended June 30, 2025 and 2024, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

Amounts reported in Accumulated other comprehensive income/(loss), net on the Consolidated Balance Sheets related to derivatives that will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Through June 30, 2026, the Company estimates that an additional $0.3 million will be reclassified as a decrease to Interest expense.

As of June 30, 2025, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollars in thousands):

​

​

​

​

​

​

​

    

Number of

    

​

Product

​

Instruments

​

Notional

Interest rate swaps and caps

​

3

​

$

183,977

​

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of GAAP. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. As of June 30, 2025, no derivatives not designated as hedges were held by the Company.

Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheets

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Asset Derivatives

​

Liability Derivatives

​

​

(included in Other assets)

​

(included in Other liabilities)

​

​

Fair Value at:

​

Fair Value at:

​

​

June 30, 

​

December 31, 

​

June 30, 

​

December 31, 

​

​

2025

​

2024

​

2025

​

2024

Derivatives designated as hedging instruments:

    

​

  

    

​

  

    

​

  

    

​

  

Interest rate products

​

$

16

​

$

3,227

​

$

—

​

$

—

​

Tabular Disclosure of the Effect of Derivative Instruments on the Consolidated Statements of Operations

The tables below present the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations for the three and six months ended June 30, 2025 and 2024 (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gain/(Loss) Recognized in

​

​

​

​

Gain/(Loss) Reclassified

​

Interest expense

​

​

Unrealized holding gain/(loss) 

​

from Accumulated OCI into

​

(Amount Excluded from

​

​

Recognized in OCI

​

Interest expense

​

Effectiveness Testing)

Derivatives in Cash Flow Hedging Relationships

    

2025

    

2024

    

2025

    

2024

    

2025

    

2024

Three Months Ended June 30, 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest rate products

​

$

(27)

​

$

567

​

$

1,379

​

$

1,991

​

$

—

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Six Months Ended June 30, 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest rate products

​

$

81

​

$

7,232

​

$

2,746

​

$

3,986

​

$

—

​

$

—

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

​

June 30, 

​

June 30, 

​

​

2025

​

2024

​

2025

​

2024

Total amount of Interest expense presented on the Consolidated Statements of Operations

​

$

48,665

​

$

47,811

​

$

96,366

​

$

95,873

​

Credit-risk-related Contingent Features

The Company has agreements with its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness.

The Company has certain agreements with some of its derivative counterparties that contain a provision where, in the event of default by the Company or the counterparty, the right of setoff may be exercised. Any amount payable to one party by the other party may be reduced by its setoff against any amounts payable by the other party. Events that give rise to default by either party may include, but are not limited to, the failure to pay or deliver payment under the derivative agreement, the failure to comply with or perform under the derivative agreement, bankruptcy, a merger without assumption of the derivative agreement, or in a merger, a surviving entity’s creditworthiness is materially weaker than the original party to the derivative agreement.

Tabular Disclosure of Offsetting Derivatives

The Company has elected not to offset derivative positions on the consolidated financial statements. The tables below present the effect on its financial position had the Company made the election to offset its derivative positions as of June 30, 2025 and December 31, 2024 (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

Gross

    

Net Amounts of

    

Gross Amounts Not Offset

​

​

​

​

​

​

​

​

Amounts

​

Assets

​

in the Consolidated

​

​

​

​

​

Gross

​

Offset in the

​

Presented in the

​

Balance Sheets

​

​

​

​

​

Amounts of

​

Consolidated

​

Consolidated

​

​

​

​

Cash

​

​

​

​

​

Recognized

​

Balance

​

Balance Sheets

​

Financial

​

Collateral

​

​

​

Offsetting of Derivative Assets

​

Assets

​

Sheets

​

(a)

​

Instruments

    

Received

    

Net Amount

June 30, 2025

​

$

16

​

$

—

​

$

16

​

$

—

​

$

—

​

$

16

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2024

​

$

3,227

​

$

—

​

$

3,227

​

$

—

​

$

—

​

$

3,227

(a)Amounts reconcile to the aggregate fair value of derivative assets in the “Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheets” located in this footnote.