DERIVATIVE INSTRUMENTS

12 Months Ended

Dec. 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 December 31, 2023 and December 31, 2022 ($ in thousands):

December 31, 2023

				Fair Value				Remaining Maturity (years)
Contract Type	Notional			Asset(1)		Liability(1)
Caps
1 Month Term SOFR	$	90,000		$	908	$	—	0.62
Futures
5-year Treasury-Note Futures	18,800			98		—		0.25
10-year Treasury-Note Futures	86,100			447		—		0.25
Total futures	104,900			545		—
Options
Options	N/A		(2)	1		—		0.05
Total derivatives	$	194,900		$	1,454	$	—

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

(2)The Company held 104 options contracts as of December 31, 2023.

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 summarizes the net realized gains (losses) and unrealized gains (losses) on derivatives, by primary underlying risk exposure, as included in net result from derivatives transactions in the consolidated statements of income for the years ended December 31, 2023, 2022, and 2021 ($ in thousands):

	Year Ended December 31, 2023
Contract Type	Unrealized Gain/(Loss)		Realized Gain/(Loss)		Net Result from Derivative Transactions
Caps	$	(895)	$	1,378	$	483
Futures	423		834		1,257
Options	82		(341)		(259)
Total	$	(390)	$	1,871	$	1,481

	Year Ended December 31, 2022
Contract Type	Unrealized Gain/(Loss)		Realized Gain/(Loss)		Net Result from Derivative Transactions
Caps	$	984	$	648	$	1,632
Futures	(219)		11,078		10,859
Options	(131)		—		(131)
Total	$	634	$	11,726	$	12,360

	Year Ended December 31, 2021
Contract Type	Unrealized Gain/(Loss)		Realized Gain/(Loss)		Net Result from Derivative Transactions
Caps	$	(8)	$	—	$	(8)
Futures	42		1,715		1,757
Total	$	34	$	1,715	$	1,749

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 $2.8 million, $2.5 million, and $0.5 million of cash margin as collateral for derivatives as of December 31, 2023, 2022, and 2021, respectively, which is included in restricted cash in the consolidated balance sheets.