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DERIVATIVE INSTRUMENTS

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

7. DERIVATIVE INSTRUMENTS

The Company primarily uses derivative instruments to economically manage the fair value variability of fixed rate assets caused by interest rate fluctuations and overall portfolio market risk. The following is a breakdown of the derivatives outstanding as of March 31, 2023 and December 31, 2022 ($ in thousands):

March 31, 2023

												Fair Value												Remaining Maturity (years)
Contract Type						Notional						Asset(1)						Liability(1)
Caps
1 Month Term SOFR						$	808					$	1,470					$	—					1.38
Futures
5-year Treasury-Note Futures						44,200						$	—					$	20					0.25
10-year Treasury-Note Futures						61,400						—						29						0.25
Total futures						105,600						—						49
Total derivatives						$	106,408					$	1,470					$	49

(1)Shown as derivative instruments in the accompanying consolidated balance sheets.

December 31, 2022

												Fair Value												Remaining Maturity (years)
Contract Type						Notional						Asset(1)						Liability(1)
Caps
1 Month Term SOFR						$	90,000					$	1,804					$	—					1.68
Futures
5-year Treasury-Note Futures						44,200						51						—						0.25
10-year Treasury-Note Futures						61,400						71						—						0.25
Total futures						105,600						122						—
Options
Options						9,100						112						—						0.20
Total derivatives						$	204,700					$	2,038					$	—

(1)Shown as derivative instruments in the accompanying consolidated balance sheets.

The following table indicates the net realized gains (losses) and unrealized appreciation (depreciation) on derivatives, by primary underlying risk exposure, as included in net result from derivatives transactions in the consolidated statements of income for the three months ended March 31, 2023 and 2022 ($ in thousands):

															Three Months Ended March 31, 2023
Contract Type																																							Unrealized Gain/(Loss)						Realized Gain/(Loss)						Net Result from Derivative Transactions
Caps																																							$	(334)					$	237					$	(97)
Futures																																							(171)						(1,861)						(2,032)
Options																																							131						(244)						(113)
Total																																							$	(374)					$	(1,868)					$	(2,242)

															Three Months Ended March 31, 2022
Contract Type																																							Unrealized Gain/(Loss)						Realized Gain/(Loss)						Net Result from Derivative Transactions
Caps																																							$	(6)					$	—					$	(6)
Futures																																							(162)						3,303						3,141
Total																																							$	(168)					$	3,303					$	3,135

Futures

Collateral posted with our futures counterparties is segregated in the Company’s books and records. Interest rate futures are centrally cleared by the Chicago Mercantile Exchange (“CME”) through a futures commission merchant. Interest rate futures that are governed by an International Swaps and Derivatives Association (“ISDA”) agreement provide for bilateral collateral pledging based on the counterparties’ market value. The counterparties have the right to re-pledge the collateral posted but have the obligation to return the pledged collateral, or substantially the same collateral, if agreed to by us, as the market value of the interest rate futures change.

The Company is required to post initial margin and daily variation margin for our interest rate futures that are centrally cleared by CME. CME determines the fair value of our centrally cleared futures, including daily variation margin. Variation margin pledged on the Company’s centrally cleared interest rate futures is settled against the realized results of these futures. The Company’s counterparties held $2.7 million and $2.5 million of cash margin as collateral for derivatives as of March 31, 2023 and December 31, 2022, respectively, which is included in restricted cash in the consolidated balance sheets.

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- References

No definition available.

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- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-URI https://asc.fasb.org/topic&trid=2229140

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 40
-Section 50
-Paragraph 5
-Subparagraph (f)
-URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008

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