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Derivative Instruments and Hedging Activities
 3 Months Ended
Mar. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities
10. Derivative Instruments

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company enters into derivative financial instruments in connection with its risk management activities. These derivative instruments may include interest rate swaps, interest rate caps, credit default swaps, futures and options contracts such as options on credit default swap indices, equity index options, swaptions and options on futures. The Company may also pursue forward-settling purchases or sales of Agency RMBS where the underlying pools of mortgage loans are “To-Be-Announced,” or TBAs, purchase options on U.S. Treasury futures or invest in other types of mortgage derivative securities. The Company elected not to apply hedge accounting for its derivative instruments.
The following table summarizes the Company's derivative instruments as of March 31, 2025 and December 31, 2024, respectively (dollar amounts in thousands):
Fair Value
Type of Derivative InstrumentConsolidated Balance Sheet LocationMarch 31, 2025December 31, 2024
Interest rate caps
Other assets$346 $56 
OptionsOther assets3,184 — 
Interest rate swapsOther assets— — 
U.S. Treasury futures
Other assets— — 
Total derivative assets (1)
$3,530 $56 
U.S. Treasury futures
Other liabilities$— $— 
Credit default swaps
Other liabilities— — 
Interest rate swapsOther liabilities— — 
Total derivative liabilities
$— $— 
(1)Excludes interest rate cap contracts held by certain Consolidated Real Estate VIEs included in other assets in disposal group held for sale (see Note 9).
The Company elects to net the fair value of its derivative contracts by counterparty when appropriate and accounts for the receipt or payment of variation margin as a direct reduction of or increase in the carrying value of the related asset or liability.
The following tables present a reconciliation of gross derivative assets and liabilities to net amounts presented in the accompanying condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024, respectively (dollar amounts in thousands):
March 31, 2025
Gross Amount of Recognized Assets (Liabilities)Gross Amounts Offset in Balance SheetsVariation MarginNet Amounts of Assets (Liabilities) Presented in Balance Sheets
Derivative assets
Interest rate caps$346 $— $— $346 
Options3,184 — — 3,184 
Interest rate swaps10,293 (10,293)— — 
Total derivative assets$13,823 $(10,293)$— $3,530 
Derivative liabilities
Credit default swaps
$(7,870)$— $7,870 $— 
Interest rate swaps(30,422)10,293 20,129 — 
U.S. Treasury futures
(967)— 967 — 
Total derivative liabilities$(39,259)$10,293 $28,966 $— 

December 31, 2024
Gross Amount of Recognized Assets (Liabilities)Gross Amounts Offset in Balance SheetsVariation MarginNet Amounts of Assets (Liabilities) Presented in Balance Sheets
Derivative assets
Interest rate caps$56 $— $— $56 
Interest rate swaps63,942 (10,134)(53,808)— 
U.S. Treasury futures
952 (658)(294)— 
Total derivative assets$64,950 $(10,792)$(54,102)$56 
Derivative liabilities
Credit default swaps
$(9,120)$— $9,120 $— 
Interest rate swaps(10,134)10,134 — — 
U.S. Treasury futures
(658)658 — — 
Total derivative liabilities$(19,912)$10,792 $9,120 $— 

The use of derivatives exposes the Company to counterparty credit risks in the event of a default by a counterparty. If a counterparty defaults under the applicable derivative agreement, the Company may be unable to collect payments to which it is entitled under its derivative agreements and may have difficulty collecting the assets it pledged as collateral against such derivatives.
The Company is required to post an initial margin amount for its interest rate swaps, credit default swaps and U.S. Treasury futures determined by the respective central clearing houses, which is generally intended to be set at a level sufficient to protect the exchange from the derivative financial instrument’s maximum estimated single-day price movement. The following table summarizes assets pledged as initial margin as of March 31, 2025 and December 31, 2024, respectively (dollar amounts in thousands):


Initial Margin Collateral
Consolidated Balance Sheet Location
March 31, 2025December 31, 2024
Agency RMBS
Investment securities available for sale, at fair value
$50,122 $33,399 
Restricted cash
Other assets
38,860 68,253 
Total initial margin collateral
$88,982 $101,652 

Margin excess related to settlement of variation margin in the amount of approximately $8.1 million and $11.1 million as of March 31, 2025 and December 31, 2024, respectively, is included in other assets on the accompanying condensed consolidated balance sheets. Margin deficit related to settlement of variation margin in the amount of approximately $8.6 million and $8.1 million as of March 31, 2025 and December 31, 2024, respectively, is included in other liabilities on the accompanying condensed consolidated balance sheets.

The tables below summarize the activity of derivative instruments for the three months ended March 31, 2025 and 2024, respectively (dollar amounts in thousands):

Notional Amount For the Three Months Ended March 31, 2025
Type of Derivative InstrumentDecember 31, 2024AdditionsTerminationsMarch 31, 2025
Interest rate caps$45,142 $45,142 $(45,142)$45,142 
Options— 160 — 160 
Interest rate swaps4,134,267 1,584,169 (1,224,060)4,494,376 
Credit default swaps
400,000 — — 400,000 
U.S. Treasury futures
406,100 112,500 (406,100)112,500 

Notional Amount For the Three Months Ended March 31, 2024
Type of Derivative InstrumentDecember 31, 2023
Additions/Transfers In (1)
Terminations
March 31, 2024
Interest rate caps$550,025 $148,044 $(161,165)$536,904 
Options— 202 (102)100 
Interest rate swaps2,778,015 904,180 (305,450)3,376,745 
Credit default swaps
— 400,000 — 400,000 
U.S. Treasury futures
— 280,750 (255,450)25,300 

(1)Includes a transfer from disposal group held for sale with respect to an interest rate cap held in a certain Consolidated Real Estate VIE (see Note 9).
The following table presents the components of realized gains (losses), net and unrealized gains (losses), net related to our derivative instruments, which are included in (losses) gains on derivative instruments, net in our condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024, respectively (dollar amounts in thousands):

For the Three Months Ended March 31,
20252024
Type of Derivative InstrumentRealized Gains (Losses)Unrealized Gains (Losses)Realized Gains (Losses)Unrealized Gains (Losses)
Interest rate caps (1)
$— $(15)$— $2,806 
Options— 2,690 (211)(509)
Interest rate swaps26,336 (73,938)5,230 43,709 
Credit default swaps
(1,000)1,246 (1,011)(995)
U.S. Treasury futures
(860)(1,261)169 23 
Total$24,476 $(71,278)$4,177 $45,034 
(1)Includes interest rate caps held by certain Consolidated Real Estate VIEs included in other assets in disposal group held for sale (see Note 9).

The following tables present information about an interest rate cap contract related to a variable-rate mortgage payable on real estate that is not included in disposal group held for sale as of March 31, 2025 and December 31, 2024, respectively (dollar amounts in thousands):

March 31, 2025
Financing Type
SOFR Strike Price
Notional Amount
Expiration Date
Mortgage payable on real estate
3.22%
45,142 
January 1, 2026

December 31, 2024
Financing Type
SOFR Strike Price
Notional Amount
Expiration Date
Mortgage payable on real estate
3.22%
45,142 
January 1, 2025
The following tables present information about our interest rate swaps whereby we receive floating rate payments in exchange for fixed rate payments as of March 31, 2025 and December 31, 2024, respectively (dollar amounts in thousands):

March 31, 2025
Swap MaturitiesNotional AmountWeighted Average Fixed Interest RateWeighted Average Variable Interest Rate
2025$1,321,550 4.54 %4.71 %
202630,660 4.37 %4.43 %
2027672,503 3.98 %4.52 %
2028923,857 3.96 %4.55 %
2029270,275 3.91 %4.55 %
2030554,947 3.98 %4.34 %
2033199,590 3.73 %4.67 %
2034178,224 3.86 %4.55 %
2035289,720 4.01 %4.34 %
Total$4,441,326 4.13 %4.56 %

December 31, 2024
Swap MaturitiesNotional AmountWeighted Average Fixed Interest RateWeighted Average Variable Interest Rate
2025$1,377,250 4.53 %4.89 %
2026159,120 4.10 %4.53 %
2027622,123 3.98 %4.75 %
2028510,325 3.90 %4.93 %
2029614,585 3.86 %4.71 %
2033319,590 4.00 %4.83 %
2034178,224 3.86 %4.83 %
2044300,000 3.34 %4.80 %
Total$4,081,217 4.09 %4.82 %
The following tables present information about our interest rate swaps whereby we receive fixed rate payments in exchange for floating rate payments as of March 31, 2025 and December 31, 2024, respectively (dollar amounts in thousands):

March 31, 2025
Swap MaturitiesNotional AmountWeighted Average Fixed Interest RateWeighted Average Variable Interest Rate
2028$9,550 3.48 %4.98 %
203343,500 3.64 %4.84 %
Total$53,050 3.61 %4.87 %

December 31, 2024
Swap MaturitiesNotional AmountWeighted Average Fixed Interest RateWeighted Average Variable Interest Rate
2028$9,550 3.48 %5.15 %
203343,500 3.64 %5.01 %
Total$53,050 3.61 %5.04 %
Certain of the Company’s derivative contracts are subject to International Swaps and Derivatives Association Master Agreements or other similar agreements which may contain provisions that grant counterparties certain rights with respect to the applicable agreement upon the occurrence of certain events, including a decline in the Company's stockholders’ equity (as defined in the respective agreements) in excess of specified thresholds or dollar amounts over set periods of time, the Company’s failure to maintain its REIT status, the Company’s failure to comply with limits on the amount of leverage and the Company’s stock being delisted from Nasdaq.