Note 11 - Collateralized Securities Transactions

12 Months Ended

Dec. 31, 2025

Notes to Financial Statements

Repurchase Agreements, Resale Agreements, Securities Borrowed, and Securities Loaned Disclosure [Text Block]

11. COLLATERALIZED SECURITIES TRANSACTIONS

Gestation Repo

Gestation repo involves entering into repo and reverse repo transactions 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.

Gestation trades can be structured in two ways:

On Balance Sheet: The Company executes a reverse repo with the borrower and a matching repo (with the same collateral and maturity date) with the lender. In this case, the Company is a principal to each trade and is borrowing from one counterparty and lending to another and earning net interest margin. These transactions are referred to by the Company as on balance sheet gestation repo trades.

Agency Repo: Similar to the on balance sheet repo, the Company first executes a reverse repo with the borrower and a matching repo (with the same collateral and maturity date) with the lender. However, in this case, all three parties (the borrower, the lender, and the Company) simultaneously enter into an assignment agreement. The effect of this assignment is to remove the Company as principal to the reverse repo and repo and have the lender and borrower directly face each other in a repo trade. The Company receives a fee for its role in arranging the financing. These transactions are referred to by the Company as agency gestation repo trades.

Other Repo Transactions

In addition to the Company’s gestation 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.

Concentration

In the gestation 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.

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, 2025 and 2024, the Company’s gestation reverse repos shown in the tables below represented balances from 2 and 7 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.

Repo Information

As of December 31, 2025 and 2024, the Company held reverse repos of $357,408 and $668,259, respectively, and the fair value of securities and cash received as collateral under reverse repos was $360,586 and $673,684, respectively.

As of December 31, 2025 and 2024, the Company had repos of $400,391 and $695,966, respectively, and the fair value of securities pledged as collateral under repos was $407,075 and $700,202, respectively. These amounts include collateral for reverse repos that were re-pledged as collateral for repos.

The total net revenue earned by the Company on its gestation repo business (net interest and fee revenue) was $19,213, $15,151, and $16,068, for the years ended December 31, 2025, 2024, and 2023, respectively.

ASC 210 provides the option to present reverse repo and repo on a net basis if certain netting conditions are met. The Company presents all repo and reverse repo transactions as well as counterparty cash collateral (see note 17) on a gross basis even if the underlying netting conditions are met. The amounts in the table below are presented on a gross basis.

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, 2025

		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
MBS (gestation repo)		$	-			$	357,322			$	-			$	-			$	357,322
SBA loans			43,069				-				-				-				43,069
		$	43,069			$	357,322			$	-			$	-			$	400,391

		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
MBS (gestation repo)		$	-			$	357,408			$	-			$	-			$	357,408

The weighted average interest rate of the repurchase agreements outstanding as of December 31, 2025 was 4.47%. The weighted average interest rate of the reverse repurchase agreements outstanding as of December 31, 2025 was 4.98%.

SECURED BORROWINGS

(Dollars in Thousands)

December 31, 2024

		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
MBS (gestation repo)		$	-			$	667,548			$	-			$	-			$	667,548
SBA loans			28,418				-				-				-				28,418
		$	28,418			$	667,548			$	-			$	-			$	695,966

		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
MBS (gestation repo)		$	-			$	668,259			$	-			$	-			$	668,259

The weighted average interest rate of the repurchase agreements outstanding as of December 31, 2024 was 5.18%. The weighted average interest rate of the reverse repurchase agreements outstanding as of December 31, 2024 was 5.81%.