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Derivatives and Hedging Activity | 12 Months Ended
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Dec. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives and Hedging Activity | Derivatives and Hedging Activity Risk Management Objective of Using Derivatives We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, foreign exchange, liquidity and credit risk primarily by managing the amount, sources and duration of our debt funding and the use of derivative financial instruments. Specifically, we 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, credit spreads, and foreign exchange rates. Our derivative financial instruments are used to manage differences in the amount, timing and duration of the known or expected cash receipts and known or expected cash payments principally related to our investments, anticipated level of loan sales, and borrowings. Designated Hedges The Company does not generally elect to apply the hedge accounting designation to its hedging instruments. As of December 31, 2025 and 2024, the Company did not have any designated hedges. Non-designated Hedges and Derivatives Derivatives not designated as hedges are derivatives that do not meet the criteria for hedge accounting under GAAP or which we have not elected to designate as hedges. We do not use these derivatives for speculative purposes but instead they are used to manage our exposure to various risks such as foreign exchange rates, interest rate changes and certain credit spreads. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in gain (loss) on derivative financial instruments in our consolidated statements of operations. We have entered into the following types of non-designated hedges and derivatives: •Foreign exchange (“Fx”) forwards whereby we agree to buy or sell a specified amount of foreign currency for a specified amount of USD at a future date, economically fixing the USD amounts of foreign denominated cash flows we expect to receive or pay related to certain foreign denominated loan investments; •Interest rate contracts which hedge a portion of our exposure to changes in interest rates; and •Credit instruments which hedge a portion of our exposure to the credit risk of our commercial loans held-for-sale. The following table summarizes our non-designated derivatives as of December 31, 2025 (notional amounts in thousands):
Type of Derivative |  | Number of Contracts |  | Aggregate Notional Amount |  | Notional Currency |  | Maturity
Fx contracts – Buy Euros (“EUR”) |  | 13 |  | 255,758 |  |  | EUR |  | January 2026 - September 2027
Fx contracts – Buy Pounds Sterling (“GBP”) |  | 13 |  | 57,876 |  |  | GBP |  | March 2026 - April 2027
Fx contracts – Buy Australian dollar (“AUD”) |  | 9 |  | 751,857 |  |  | AUD |  | January 2026 - October 2029
Fx contracts – Buy Swiss Franc (“CHF”) |  | 1 |  | 5,584 |  |  | CHF |  | February 2026
Fx contracts – Sell EUR |  | 152 |  | 659,467 |  |  | EUR |  | January 2026 - December 2030
Fx contracts – Sell GBP |  | 256 |  | 485,539 |  |  | GBP |  | January 2026 - November 2029
Fx contracts – Sell AUD |  | 87 |  | 1,471,485 |  |  | AUD |  | January 2026 - October 2029
Fx contracts – Sell CHF |  | 7 |  | 17,326 |  |  | CHF |  | February 2026 - May 2027
Fx contracts – Sell Swedish Kronas (“SEK”) |  | 24 |  | 360,609 |  |  | SEK |  | February 2026 - February 2029
Interest rate swaps – Paying fixed rates |  | 33 |  | 2,497,198 |  |  | USD |  | March 2026 - December 2033
Interest rate swaps – Receiving fixed rates |  | 8 |  | 3,313,380 |  |  | USD |  | January 2027 - January 2031
Interest rate futures |  | 1 |  | 27,300 |  |  | USD |  | February 2026
Interest rate caps |  | 3 |  | 509,000 |  |  | USD |  | May 2026 - June 2030
Credit instruments |  | 2 |  | 90,000 |  |  | USD |  | July 2030 - December 2030
Total |  | 609 |  |  |  |  |  |
The above table excludes certain interest rate derivatives which serve as an economic hedge related to our residential loan portfolio. In 2024, we entered into a series of derivative transactions related to this loan portfolio in an effort to extend hedge duration. The current high interest rate environment has caused these loans to experience lower prepayment speeds than was originally anticipated at the time of their origination. In order to minimize volatility in future earnings and cash flows while minimizing the current cash outflow, we: (i) entered into a series of reverse swap trades to offset approximately 100% of the dollar duration of our existing interest rate swaps through the end of 2024 and approximately 80% between 2025 through their termination in the second quarter of 2027; and (ii) entered into a forward starting swap from June 2027 for four years which pays fixed and receives floating in order to replace the swaps reversed. Given the volume of these hedges and their sequential nature, the notional value of these new swaps is not representative of the notional value of our portfolio, and they were thus excluded from the table above. The notional value of the swaps described in (i) above that were effective and included as of December 31, 2025 totaled $2.3 billion. The notional value of the swaps described in (i) above that were not yet effective and not included as of December 31, 2025 totaled $4.8 billion. Because the reverse swaps and the forward starting swap are not specifically designated to assets or liabilities, changes in their respective fair values are recorded currently in earnings. The above table also excludes $3.1 billion notional amount of certain other interest rate swaps we entered into prior to December 31, 2025, but that were not yet effective. The table below presents the fair value of our derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2025 and 2024 (amounts in thousands):
| Fair Value of Derivatives in an Asset Position (1) as of December 31, |  | Fair Value of Derivatives in a Liability Position (2) as of December 31,
| 2025 |  | 2024 |  | 2025 |  | 2024
Foreign exchange contracts | $ | 26,770 |  |  | $ | 137,577 |  |  | $ | 72,351 |  |  | $ | 67,452 |
Interest rate contracts | 18,657 |  |  | 37,758 |  |  | 10,060 |  |  | 27,292 |
Credit instruments | 386 |  |  | 185 |  |  | 1,572 |  |  | 146 |
Total derivatives | $ | 45,813 |  |  | $ | 175,520 |  |  | $ | 83,983 |  |  | $ | 94,890 |
___________________________________________________ (1)Classified as derivative assets in our consolidated balance sheets. (2)Classified as derivative liabilities in our consolidated balance sheets. The table below presents the effect of our derivative financial instruments on the consolidated statements of operations for the years ended December 31, 2025, 2024 and 2023 (amounts in thousands):
Derivatives Not Designated as Hedging Instruments |  | Location of Gain (Loss) Recognized in Income |  | Amount of Gain (Loss) Recognized in Income for the Year Ended December 31,
|  | 2025 |  | 2024 |  | 2023
Foreign exchange contracts |  | (Loss) gain on derivative financial instruments, net |  | $ | (110,461) |  |  | $ | 95,110 |  |  | $ | (65,085) |
Interest rate contracts |  | (Loss) gain on derivative financial instruments, net |  | (16,303) |  |  | 64,036 |  |  | 27,293 |
Credit instruments |  | (Loss) gain on derivative financial instruments, net |  | (504) |  |  | (1,212) |  |  | (813) |
|  |  |  | $ | (127,268) |  |  | $ | 157,934 |  |  | $ | (38,605) |

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