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Derivative Instruments
 9 Months Ended
Sep. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments

Note 17 — Derivative Instruments

In September 2023, the Company began utilizing derivative instruments designated as cash flow hedges to manage the exposure to interest rate volatility related to its forecasted issuances of fixed-rate debt through its securitization process. The derivative instruments include forward starting interest rate swaps or interest rate payer and receiver swaptions. The Company’s risk management objective is to hedge the risk of variability in its interest payment cash flows attributable to changes in the benchmark SOFR between the time the fixed rate mortgages are originated and the fixed rate debt is issued. As of September 30, 2025, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed four years.

The gains or losses on derivative instruments that are designated and qualify as cash flow hedges are reported as a component of AOCI. Beginning in the period in which the forecasted debt is issued and the related derivative instruments are terminated, the accumulated gains or losses associated with the terminated derivatives are then reclassified into interest expense as a yield adjustment over the term of the related debt. For the quarters ended September 30, 2025 and 2024, $192 thousand of after-tax net loss, and $92 thousand of after-tax net gain, respectively, on terminated derivative instruments were reclassified from AOCI to interest expense. For the nine months ended September 30, 2025 and 2024, $459 thousand of after-tax net loss and $83 thousand of after-tax net gain, respectively, on terminated derivative instruments were reclassified from AOCI to interest expense. As of September 30, 2025 and 2024, the Company had $2.9 million and $2.7 million of after-tax net unrealized loss, respectively, associated with cash flow hedging instruments recorded in AOCI. As of September 30, 2025, the Company expects to reclassify an estimated $0.7 million of after-tax net unrealized loss on derivative instruments designated as cash flow hedges from AOCI into earnings over the next 12 months.

The following tables present the fair value of the Company’s derivative financial instruments on a gross basis, as well as its classification on the Company’s Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024:

 

 

 

 

September 30, 2025

 

Derivatives designated as hedging instruments:

 

Balance Sheet Location

 

Notional Amount

 

 

Fair Value (1)

 

Cash flow hedges:

 

 

 

(In thousands)

 

Interest rate payer and receiver swaptions

 

Derivative asset

 

$

226,000

 

 

$

18

 

 

 

 

 

 

December 31, 2024

 

Derivatives designated as hedging instruments:

 

Balance Sheet Location

 

Notional Amount

 

 

Fair Value (1)

 

Cash flow hedges:

 

 

 

(In thousands)

 

Forward starting payer interest rate swaps

 

Derivative liability

 

$

—

 

 

$

—

 
(1)
Fair value reported is exclusive of collateral held and pledged, related to derivative exposure between the Company and its derivative counterparty. As of September 30, 2025, collateral pledged to its derivative counterparty was $0.6 million. As of December 31, 2024, no collateral was pledged to its derivative counterparty. These amounts were included in “Other receivables” on the Consolidated Balance Sheets.

The counterparty to the financial derivatives that the Company enters into is a major institution. The Company is exposed to credit-related losses in the event of non-performance by the counterparty. This credit risk is generally limited to the unrealized gains in such contracts, less collateral held, should the counterparty fail to perform as contracted.