Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

The Company had no outstanding derivatives as of December 31, 2021 and 2020, respectively. The Company may enter into derivative instruments in connection with its risk management activities. These derivative instruments may include interest rate swaps, swaptions, futures and options on futures. The Company may also purchase or sell “To-Be-Announced,” or TBAs, purchase options on U.S. Treasury futures or invest in other types of mortgage derivative securities.

Derivatives Not Designated as Hedging Instruments

The table below summarizes the activity of derivative instruments not designated as hedging instruments for the year ended December 31, 2020 (dollar amounts in thousands):


	Notional Amount For the Year Ended December 31, 2020
Type of Derivative Instrument	December 31, 2019		Additions		Terminations		December 31, 2020
Interest rate swaps	$	495,500	$	—	$	(495,500)	$	—

The following table presents the components of realized gains (losses), net and unrealized gains (losses), net related to our derivative instruments that were not designated as hedging instruments, which are included in non-interest income (loss) in our consolidated statements of operations for the years ended December 31, 2020 and 2019, respectively (dollar amounts in thousands):


		For the Years Ended December 31,
	2020			2019
		Realized Gains (Losses)		Unrealized Gains (Losses)		Realized Gains (Losses)		Unrealized Gains (Losses)
Interest rate swaps		$	(73,078)	$	28,967	$	—	$	(30,722)

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. All of the Company’s interest rate swaps were cleared through CME Group Inc. (“CME Clearing”) which is the parent company of the Chicago Mercantile Exchange Inc. CME Clearing serves as the counterparty to every cleared transaction, becoming the buyer to each seller and the seller to each buyer, limiting the credit risk by guaranteeing the financial performance of both parties and netting down exposures.