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Note 11 - Collateralized Securities Transactions | 12 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Repurchase Agreements, Resale Agreements, Securities Borrowed, and Securities Loaned Disclosure [Text Block] | 11. COLLATERALIZED SECURITIES TRANSACTIONS ﻿ Matched Book Repo Business ﻿ The Company enters into repos and reverse repos as part of its matched book repo business. In general, the Company will lend money to a counterparty after obtaining collateral securities from that counterparty pursuant to a reverse repo. The Company will borrow money from another counterparty using the same collateral securities pursuant to a repo. The Company seeks to earn net interest income on these transactions. Currently, the Company categorizes its matched book repo business into two major groups: gestation repo and GCF repo. ﻿ Gestation Repo ﻿ Gestation repo involves entering into repo and reverse repo where the underlying collateral security represents a pool of newly issued mortgage loans. The borrowers (the reverse repo counterparties) are generally mortgage originators. The lenders (the repo counterparties) are a diverse group of the counterparties comprised of banks, insurance companies, and other financial institutions. The Company self-clears its gestation repo transactions. ﻿ GCF Repo ﻿ In October 2017, the Company became a full netting member of the FICC's Government Securities Division. As a full netting member of the FICC, the Company has access to the FICC's GCF repo service that provides netting and settlement services for repo transactions where the underlying security is general collateral (primarily U.S. Treasuries and U.S. Agency securities). The Company began entering into matched book GCF repo transactions in November 2017. The borrowers (the reverse repo counterparties) are a diverse group of financial institutions including hedge funds, registered investment funds, REITs, and other similar counterparties. The lenders (the repo counterparties) are the FICC and other large financial institutions. The Company uses Bank of New York (“BONY”) as its settlement agent for its GCF repo matched book transactions. The Company is considered self-clearing for this business. In connection with the Company's full netting membership of the FICC, the Company agreed to establish and maintain a committed line of credit in a minimum amount of $25,000, which it entered into with Fifth Third Financial Bank, N.A. (FT Financial) on April 25, 2018. This line of credit was subsequently amended. On October 28, 2020, the Company entered into a replacement credit facility with Byline Bank. See note 20. ﻿ Other Repo Transactions ﻿ In addition to the Company's matched book repo business, the Company may also enter into reverse repos to acquire securities, to cover short positions or as an investment. Additionally, the Company may enter into repos to finance the Company's securities positions held in inventory. These repo and reverse repo agreements are generally cleared on a bilateral or triparty basis; no clearing broker is involved. These transactions are not matched. ﻿ Repo Information ﻿ At December 31, 2020 and 2019 , the Company held reverse repos of $5,716,343 and $7,500,002 , respectively, and the fair value of securities and cash received as collateral under reverse repos was $5,885,656 and $7,769,693, respectively. As of December 31, 2020 , and 2019 , the reverse repo balance was comprised of receivables collateralized by 38 and 41 counterparties, respectively. ﻿ At December 31, 2020 and 2019 , the Company had repos of $5,713,212 and $7,534,443 , respectively, and the fair value of securities and cash collateral pledged as collateral under repos was $5,768,018 and $7,561,978, respectively. These amounts include collateral for reverse repos that were re-pledged as collateral for repos. Intraday and Overnight Lending Facility In conjunction with the Company's GCF repo business, on October 19, 2018, the Company and BONY entered into an intraday lending facility. The lending facility allows for BONY to advance funds to JVB in order to facilitate the settlement of GCF repo transactions. The total committed amount at December 31, 2020 was $75,000. The current termination date of this facility is October 15, 2021. It is expected that this facility will be renewed for successive 364 -day periods provided that the Company continues its GCF matched book repo business. ﻿ The BONY lending facility is structured so that advances are generally repaid before the end of each business day. However, if an advance is not repaid by the end of any business day, the advance is converted to an overnight loan. Intraday loans accrue interest at an annual rate of 0.12%. Interest is charged based on the number of minutes in a day the advance is outstanding. Overnight loans are charged interest at the base rate plus 3% on a daily basis. The base rate is the higher of the federal funds rate plus 0.50% or the prime rate in effect at that time. During the year ended December 31, 2020, the Company received no advances under the intraday lending facility. During the year ended December 31, 2019, advances of $32,818 were made under this facility. This draw plus accrued interest of $2, or $32,820, was outstanding as of December 31, 2019 and was included as a component of payable to brokers, dealers, and clearing agencies in the statement of financial condition. This amount was repaid in full in January 2020. ﻿ Concentration ﻿ In the matched book repo business, the demand for borrowed funds is generated by the reverse repo counterparty and the supply of funds is provided by the repo counterparty. ﻿ On the demand side, the Company does not consider its GCF repo business to be concentrated because the Company's reverse repo counterparties are comprised of a diverse group of financial institutions. ﻿ On the supply side, the Company obtains a significant amount of its funds from the FICC. If the FICC were to reduce its repo lending activities or make significant adverse changes to the cost of such lending, the Company may not be able to replace the FICC funding, or if the Company does so, it may be at a higher cost of funding. Therefore, the Company considers its GCF repo business to be concentrated from the supply side of the business. ﻿ The gestation repo business has been and continues to be concentrated as to reverse repo counterparties. The Company conducts this business with a limited number of reverse repo counterparties. As of December 31, 2020 , and 2019 , the Company's gestation reverse repos shown in the tables below represented balances from eleven and seven counterparties, respectively. The Company also has a limited number of repo counterparties in the gestation repo business. However, this is primarily a function of the limited number of reverse repo counterparties with whom the Company conducts this business rather than a reflection of a limited supply of funds. Therefore, the Company considers the gestation repo business to be concentrated on the demand side. ﻿ The total net revenue earned by the Company on its matched book repo business (both gestation and GCF repo) was $33,980 , $12,011, and $4,624 for the years ended December 31, 2020 , 2019 , and 2018 , respectively. ﻿ Detail Effective June 1, 2019, the Company changed its accounting policy regarding the netting of reverse repo and repo transactions. ASC 210 provides the option to present reverse repo and repo on a net basis if certain netting conditions are met. Prior to this date, the Company utilized this option and presented repo and reverse repo on a net basis when these conditions were met. As of June 1, 2019, the Company changed its policy to present all repo and reverse repo transactions on a gross basis even if the underlying netting conditions are met. The Company believes that the newly adopted accounting principle is preferable in the circumstances because it provides consistency for the accounting of all repo and reverse repos, as well as more information on the face of the financial statements. The amounts in the table below are presented on a gross basis. ﻿ As of December 31, 2020 , the Company had outstanding reverse repos of $5,716,343 and repos of $5,713,212 . Included in these amounts are outstanding reverse repos of $99,750 and repos of $2,155,850 where the FICC was the Company's counterparty to the transaction and which were subject to a master netting arrangement. As of December 31, 2019 , the Company had outstanding reverse repos of $7,500,002 and repos of $7,534,443. Included in these amounts are outstanding reverse repos of $371,025 and repos of $5,138,712, where the FICC was the Company's counterparty to the transaction and which were subject to a master netting arrangement. The following tables summarize the remaining contractual maturity of the gross obligations under repos accounted for as secured borrowings segregated by the underlying collateral pledged as of each date shown. All amounts as well as counterparty cash collateral (see notes 7 and 17 ) are subject to master netting arrangements. ﻿ ﻿ ﻿
Secured Borrowings
(Dollars in Thousands)
December 31, 2020
|  | Repurchase Agreements |
|  | Remaining Contractual Maturity of the Agreements |
Collateral Type: |  | Overnight and Continuous |  |  | Up to 30 days |  |  | 30 - 90 days |  |  | Greater than 90 days |  |  | Total |
U.S. treasury and government agency MBS (GCF repo) |  | $ | 1,946,890 |  |  | $ | 1,070,094 |  |  | $ | - |  |  | $ | - |  |  | $ | 3,016,984 |
MBS (gestation repo) |  |  | 638,057 |  |  |  | 2,004,451 |  |  |  | 51,530 |  |  |  | - |  |  |  | 2,694,038 |
SBA loans |  |  | 2,190 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2,190 |
|  | $ | 2,587,137 |  |  | $ | 3,074,545 |  |  | $ | 51,530 |  |  | $ | - |  |  | $ | 5,713,212 |
|  | Reverse Repurchase Agreements |
|  | Remaining Contractual Maturity of the Agreements |
Collateral Type: |  | Overnight and Continuous |  |  | Up to 30 days |  |  | 30 - 90 days |  |  | Greater than 90 days |  |  | Total |
U.S. treasury and government agency MBS (GCF repo) |  | $ | 871,805 |  |  | $ | 1,016,446 |  |  | $ | 1,091,609 |  |  | $ | 39,816 |  |  | $ | 3,019,676 |
MBS (gestation repo) |  |  | 641,619 |  |  |  | 2,003,514 |  |  |  | 51,534 |  |  |  | - |  |  |  | 2,696,667 |
|  | $ | 1,513,424 |  |  | $ | 3,019,960 |  |  | $ | 1,143,143 |  |  | $ | 39,816 |  |  | $ | 5,716,343 |
﻿ ﻿ ﻿ ﻿ ﻿ ﻿
SECURED BORROWINGS
(Dollars in Thousands)
December 31, 2019
|  | Repurchase Agreements |
|  | Remaining Contractual Maturity of the Agreements |
Collateral Type: |  | Overnight and Continuous |  |  | Up to 30 days |  |  | 30 - 90 days |  |  | Greater than 90 days |  |  | Total |
U.S. treasury and government agency MBS (GCF repo) |  | $ | 5,117,811 |  |  | $ | 1,546,510 |  |  | $ | - |  |  | $ | - |  |  | $ | 6,664,321 |
MBS (gestation repo) |  |  | - |  |  |  | 742,035 |  |  |  | 100,403 |  |  |  | - |  |  |  | 842,438 |
SBA loans |  |  | 27,684 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 27,684 |
|  | $ | 5,145,495 |  |  | $ | 2,288,545 |  |  | $ | 100,403 |  |  | $ | - |  |  | $ | 7,534,443 |
|  | Reverse Repurchase Agreements |
|  | Remaining Contractual Maturity of the Agreements |
U.S. treasury and government agency MBS (GCF repo) |  | $ | 1,231,027 |  |  | $ | 2,525,188 |  |  | $ | 2,319,079 |  |  | $ | 575,058 |  |  | $ | 6,650,352 |
MBS (gestation repo) |  |  | - |  |  |  | 747,692 |  |  |  | 101,958 |  |  |  | - |  |  |  | 849,650 |
|  | $ | 1,231,027 |  |  | $ | 3,272,880 |  |  | $ | 2,421,037 |  |  | $ | 575,058 |  |  | $ | 7,500,002 |

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- Definition The entire disclosure for repurchase agreements (also known as repos), resale agreements (also known as reverse repurchase agreements or reverse repos), securities borrowed transactions, and securities loaned transactions. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -URI http://asc.fasb.org/topic&trid=2197590 + Details
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