Derivatives and Hedging Activity

9 Months Ended

Sep. 30, 2023

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. Refer to Note 14 to the consolidated financial statements included in our Form 10-K for further discussion of our risk management objectives and policies.

Designated Hedges

The Company does not generally elect to apply the hedge accounting designation to its hedging instruments. As of September 30, 2023 and December 31, 2022, the Company did not have any designated hedges.

Non-designated Hedges and Derivatives

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;

•Credit instruments which hedge a portion of our exposure to the credit risk of our commercial loans held-for-sale; and

•Interest rate swap guarantees whereby we guarantee the interest rate swap obligations of certain Infrastructure Lending borrowers. Our interest rate swap guarantees were assumed in connection with the acquisition of the Infrastructure Lending Segment.

The following table summarizes our non-designated derivatives as of September 30, 2023 (notional amounts in thousands):

Type of Derivative	Number of Contracts	Aggregate Notional Amount	Notional Currency	Maturity
Fx contracts – Buy Euros (“EUR”)	11	45,627	EUR	October 2023 - April 2026
Fx contracts – Buy Pounds Sterling (“GBP”)	18	122,142	GBP	October 2023 - January 2027
Fx contracts – Buy Australian dollar (“AUD”)	5	379,571	AUD	October 2024 - January 2026
Fx contracts – Sell EUR	194	824,687	EUR	October 2023 - February 2027
Fx contracts – Sell GBP	205	648,549	GBP	October 2023 - April 2027
Fx contracts – Sell AUD	110	1,070,581	AUD	October 2023 - October 2026
Fx contracts – Sell Swiss Franc (“CHF”)	73	20,891	CHF	November 2023 - November 2025
Interest rate swaps – Paying fixed rates	56	4,385,516	USD	April 2024 - September 2033
Interest rate swaps – Receiving fixed rates	2	970,000	USD	March 2025 - January 2027
Interest rate caps	4	624,666	USD	November 2023 - April 2025
Interest rate caps	1	61,000	GBP	April 2024
Credit instruments	3	49,000	USD	September 2058 - August 2061
Interest rate swap guarantees	1	102,331	USD	June 2025
Total	683

The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022 (amounts in thousands):

	Fair Value of Derivatives in an Asset Position (1) as of				Fair Value of Derivatives in a Liability Position (2) as of
	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Interest rate contracts	$	12,070	$	10,756	$	69,756	$	69,776
Foreign exchange contracts	119,908		97,289		15,901		21,628
Credit instruments	1,038		576		—		—
Total derivatives	$	133,016	$	108,621	$	85,657	$	91,404

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(1)Classified as derivative assets in our condensed consolidated balance sheets.

(2)Classified as derivative liabilities in our condensed consolidated balance sheets.

The table below presents the effect of our derivative financial instruments on the condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022 (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 Three Months Ended September 30,				Amount of Gain (Loss) Recognized in Income for the Nine Months Ended September 30,
		2023		2022		2023		2022
Interest rate contracts	Gain on derivative financial instruments, net	$	46,255	$	78,508	$	99,788	$	218,698
Interest rate swap guarantees	Gain on derivative financial instruments, net	—		—		—		260
Foreign exchange contracts	Gain on derivative financial instruments, net	48,549		127,358		18,412		242,042
Credit instruments	Gain on derivative financial instruments, net	79		204		231		921
		$	94,883	$	206,070	$	118,431	$	461,921