Derivatives and Hedging Activity

3 Months Ended

Mar. 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. 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 March 31, 2025 and December 31, 2024, 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 March 31, 2025 (notional amounts in thousands):

Type of Derivative	Number of Contracts	Aggregate Notional Amount	Notional Currency	Maturity
Fx contracts – Buy Euros (“EUR”)	26	466,138	EUR	April 2025 - September 2027
Fx contracts – Buy Pounds Sterling (“GBP”)	11	99,442	GBP	July 2025 - January 2027
Fx contracts – Buy Australian dollar (“AUD”)	2	742,152	AUD	January 2026 - October 2026
Fx contracts – Sell EUR	145	780,589	EUR	April 2025 - July 2028
Fx contracts – Sell GBP	169	622,555	GBP	April 2025 - September 2027
Fx contracts – Sell AUD	74	1,381,072	AUD	April 2025 - July 2027
Fx contracts – Sell Swiss Franc (“CHF”)	31	18,597	CHF	May 2025 - November 2025
Interest rate swaps – Paying fixed rates	36	3,132,242	USD	April 2025 - October 2033
Interest rate swaps – Receiving fixed rates	5	2,038,380	USD	January 2027 - July 2030
Interest rate futures	7	54,800	USD	May 2025
Interest rate caps	3	513,646	USD	April 2025 - May 2026
Credit instruments	2	45,000	USD	January 2030 - July 2034
Interest rate swap guarantees	1	88,496	USD	June 2025
Total	512

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 March 31, 2025 totaled $2.5 billion. The notional value of the swaps described in (i) above that were not yet effective and not included as of March 31, 2025 totaled $10.7 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 $3.0 billion notional amount of certain other interest rate swaps we entered into prior to March 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 condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024 (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
	March 31, 2025		December 31, 2024		March 31, 2025		December 31, 2024
Foreign exchange contracts	$	82,602	$	137,577	$	52,248	$	67,452
Interest rate contracts	2,370		37,758		20,087		27,292
Credit instruments	—		185		640		146
Total derivatives	$	84,972	$	175,520	$	72,975	$	94,890

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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 months ended March 31, 2025 and 2024 (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 March 31,
		2025		2024
Foreign exchange contracts	(Loss) gain on derivative financial instruments, net	$	(32,300)	$	48,123
Interest rate contracts	(Loss) gain on derivative financial instruments, net	(7,286)		54,298
Credit instruments	(Loss) gain on derivative financial instruments, net	(103)		(482)
		$	(39,689)	$	101,939