What changed in this filing

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Item 1. Financial Statements

2020-08-07 compared with 2020-05-08 · 609 added, 1274 removed, 1267 unchanged (60% of the section changed)

FINANCIAL STATEMENTS.

ITEM 1.FINANCIAL STATEMENTS.

COHEN & COMPANY INC.

1 unchanged sentence

(Dollars in Thousands)

March 31, 2020

June 30, 2020

December 31, 2019

6 unchanged sentences

Receivables under resale agreements

Investment in equity method affiliates

Investments in equity method affiliates

Right-of-use asset - operating leases

10 unchanged sentences

Stockholders' Equity:

Voting Non-Convertible Preferred Stock, $0.001 par value per share, 60,000,000 shares authorized, 27,413,098 and 4,983,557 shares issued and o utstanding, respectively

Voting Non-Convertible Preferred Stock, $0.001 par value per share, 60,000,000 shares authorized, 27,413,098 shares issued and outstanding, respectively

Common Stock, $0.01 par value per share, 100,000,000 shares authorized, 1,246,710 and 1,193,624 shares issued and outstanding, respectively, including 86,566 and 73,715 unvested or restricted share awards, respectively

9 unchanged sentences

(Dollars in Thousands, except share or per share information)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Asset management

39 unchanged sentences

Cohen & Company Inc.

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

Preferred Stock

Additional Paid-In Capital

Retained Earnings (Accumulated Deficit)

Accumulated Other Comprehensive Income (Loss)

Total Stockholders' Equity

Paid-In Capital

(Accumulated Deficit)

Comprehensive Income (Loss)

Stockholders' Equity

Non-controlling Interest

December 31, 2019

Other comprehensive income

Other comprehensive income / (loss)

Acquisition / (surrender) of additional units of consolidated subsidiary, net

3 unchanged sentences

March 31, 2020

Other comprehensive income / (loss)

Equity-based compensation and vesting of shares

June 30, 2020

Cohen & Company Inc.

Three Months Ended March 31, 2019

Six Months Ended June 30, 2019

Preferred Stock

Additional Paid-In Capital

Retained Earnings (Accumulated Deficit)

Accumulated Other Comprehensive Income (Loss)

Total Stockholders' Equity

Paid-In Capital

(Accumulated Deficit)

Comprehensive Income (Loss)

Stockholders' Equity

Non-controlling Interest

9 unchanged sentences

March 31, 2019

Other comprehensive income

Equity-based compensation and vesting of shares

Dividends/Distributions

June 30, 2019

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

(Dollars in Thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

4 unchanged sentences

Realized loss (gain) on other investments, at fair value

(Income) / loss from equity method affiliates

Change in unrealized (gain) loss on other investments, at fair value

(Income) / loss from equity method affiliates

Depreciation and amortization

3 unchanged sentences

Change in operating assets and liabilities, net:

Change in receivables from / payables to brokers, dealers, and clearing agencies

Change in receivables from / payables to related parties, net

(Increase) decrease in other receivables

(Increase) decrease in investments-trading

(Increase) decrease in other assets

(Increase) decrease in receivables under resale agreement

Change in receivables from / payables to related parties, net

Increase (decrease) in accrued compensation

(Increase) decrease in other assets

Increase (decrease) in accounts payable and other liabilities

Increase (decrease) in accrued compensation

Increase (decrease) in trading securities sold, not yet purchased

Change in receivables from / payables to brokers, dealers, and clearing agencies

Increase (decrease) in securities sold under agreements to repurchase

(Increase) decrease in securities sold under agreement to repurchase

Net cash provided by (used in) operating activities

Investing activities

Purchase of investments-other investments, at fair value

Purchase of other investments, at fair value

Sales and returns of principal-other investments, at fair value

4 unchanged sentences

Proceeds from draws on revolving credit facility

Proceeds from PPP loan

Proceeds from non-convertible debt

4 unchanged sentences

Proceeds from non-controlling interest investment

Non-controlling interest distributions

Cohen & Company Inc.

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Organizational History

Cohen Brothers, LLC (“Cohen Brothers”) was formed on October 7, 2004 by Cohen Bros.

Financial, LLC (“CBF”).

Cohen Brothers was established to acquire the net assets of CBF’s subsidiaries (the “Formation Transaction ”):

Cohen Brothers, LLC (“Cohen Brothers”) was formed on October 7, 2004 by Cohen Bros.

Financial, LLC (“CBF”).

Cohen Brothers was established to acquire the net assets of CBF’s subsidiaries (the “Formation Transaction”):

& Company, Inc.;

Cohen Frères SAS;

Dekania Investors, LLC;

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From its formation until December 16, 2009, Cohen Brothers operated as a privately-owned limited liability company.

On December 16, 2009, Cohen Brothers completed its merger (the “Merger”) with a subsidiary of Alesco Financial Inc.

(“AFN”), a publicly traded real estate investment trust.

As a result of the Merger, AFN contributed substantially all of its assets into Cohen Brothers in exchange for newly issued units of membership interests directly from Cohen Brothers.

On December 16, 2009, Cohen Brothers completed its merger (the “AFN Merger”) with a subsidiary of Alesco Financial Inc.

(“AFN”), a publicly traded real estate investment trust.

As a result of the AFN Merger, AFN contributed substantially all of its assets into Cohen Brothers in exchange for newly issued units of membership interests directly from Cohen Brothers.

In addition, AFN received additional Cohen Brothers membership interests directly from its members in exchange for AFN common stock.

In accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”), the Merger was accounted for as a reverse acquisition, and Cohen Brothers was deemed to be the accounting acquirer.

As a result, all of AFN’s assets and liabilities were required to be revalued at fair value as of the acquisition date.

In accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”), the AFN Merger was accounted for as a reverse acquisition, and Cohen Brothers was deemed to be the accounting acquirer.

As a result, all of AFN’s assets and liabilities were required to be revalued at fair value as of the acquisition date.

The remaining units of membership interests of Cohen Brothers that were not held by AFN were included as a component of non-controlling interest in the consolidated balance sheets.

Subsequent to the Merger, AFN was renamed Cohen & Company Inc.

Subsequent to the AFN Merger, AFN was renamed Cohen & Company Inc.

In January 2011, it was renamed again as Institutional Financial Markets, Inc.

(“IFMI”) and on September 1, 2017 it was renamed again as Cohen & Company Inc.

Effective January 1, 2010, the Company ceased to qualify as a REIT.

The Company is a financial services company specializing in fixed income markets.

As of March 31, 2020 , the Company had $2.65 billion in assets under management (“AUM”) of which 79.0% , or $2.10 billion, was in collateralized debt obligations (“CDOs”).

As of June 30, 2020 , the Company had $2.63 billion in assets under management (“AUM”) of which 78.2% , or $2.06 billion, was in collateralized debt obligations (“CDOs”).

The remaining portion of AUM is from a diversified mix of Investment Vehicles (as defined herein).

In these financial statements, the “Company”

refers to Cohen & Company Inc.

In these financial statements, the “Company” refers to Cohen & Company Inc.

and its subsidiaries on a consolidated basis.

Cohen & Company, LLC or the “Operating LLC”

refers to the main operating subsidiary of the Company.

“Cohen Brothers”

refers to the pre-Merger Cohen Brothers, LLC and its subsidiaries.

“AFN”

refers to the pre-merger Alesco Financial Inc.

Cohen & Company, LLC or the “Operating LLC” refers to the main operating subsidiary of the Company.

“Cohen Brothers” refers to the pre-Merger Cohen Brothers, LLC and its subsidiaries.

“AFN” refers to the pre-merger Alesco Financial Inc.

and its subsidiaries.

When the term “Cohen & Company Inc.”

is used, it is referring to the parent company itself.

“JVB Holdings”

refers to J.V.B.

When the term “Cohen & Company Inc.” is used, it is referring to the parent company itself.

“JVB Holdings” refers to J.V.B.

Financial Holdings, LLC;

“JVB”

refers to J.V.B.

“JVB” refers to J.V.B.

Financial Group LLC, a broker-dealer subsidiary;

“CCFL”

refers to Cohen & Company Financial Limited (formerly known as EuroDekania Management LTD), a subsidiary regulated by the Financial Conduct Authority (formerly known as Financial Services Authority) in the United Kingdom;

“CCFEL”

refers to Cohen & Company Financial (Europe) Limited, a subsidiary regulated by the Central Bank of Ireland in Ireland;

and “EuroDekania”

refers to EuroDekania (Cayman) Ltd., a Cayman Islands exempted company that is externally managed by CCFL.

The Company’s business is organized into the following three business segments.

“CCFL” refers to Cohen & Company Financial Limited (formerly known as EuroDekania Management LTD), a subsidiary regulated by the Financial Conduct Authority (formerly known as Financial Services Authority) in the United Kingdom;

“CCFEL” refers to Cohen & Company Financial (Europe) Limited, a subsidiary regulated by the Central Bank of Ireland in Ireland;

and “EuroDekania” refers to EuroDekania (Cayman) Ltd., a Cayman Islands exempted company that is externally managed by CCFL.

The Company’s business is organized into the following three business segments.

Capital Markets :

The Company’s Capital Markets business segment consists primarily of fixed income sales, trading, matched book repurchase agreement (“repo”) financing, new issue placements in corporate and securitized products, and advisory services.

The Company’s fixed income sales and trading group provides trade execution to corporate investors, institutional investors, mortgage originators, and other smaller broker-dealers.

The Company specializes in a variety of products, including but not limited to:

corporate bonds, asset backed securities (“ABS”), mortgage backed securities (“MBS”), residential mortgage backed securities (“RMBS”), CDOs, collateralized loan obligations (“CLOs”), collateralized bond obligations (“CBOs”), collateralized mortgage obligations (“CMOs”), municipal securities, to-be-announced securities (“TBAs”) and other forward agency MBS contracts, Small Business Administration (“SBA”) loans, U.S.

government bonds, U.S.

government agency securities, brokered deposits and certificates of deposit (“CDs”) for small banks, and hybrid capital of financial institutions including trust preferred securities (“TruPS”), whole loans, residential transition loans, (“RTLs”) , and other structured financial instruments.

The Company also offers execution and brokerage services for equity products.

2 unchanged sentences

Asset Management :

The Company’s Asset Management business segment manages assets within CDOs, managed accounts, joint ventures, and investment funds (collectively referred to as “Investment Vehicles”).

A CDO is a form of secured borrowing.

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In the event of default, the lenders will have recourse only to the assets securing the loan.

The Company’s Asset Management business segment includes its fee-based asset management operations, which include ongoing base and incentive management fees.

Principal Investing :

The Company’s Principal Investing business segment is comprised of investments that the Company has made for the purpose of earning an investment return rather than investments made to support the Company’s trading, matched book repo, or other Capital Markets business segment activities.

These investments are included in the Company’s other investments, at fair value and investment s in equity method affiliates in the Company’s consolidated balance sheets.

These investments are included in the Company’s other investments, at fair value and investments in equity method affiliates in the Company’s consolidated balance sheets.

The Company generates its revenue by business segment primarily through the following activities.

1 unchanged sentence

Trading activities of the Company, which include execution and brokerage services, riskless trading activities as well as gains and losses (unrealized and realized) and income and expense earned on securities and derivatives classified as trading;

Net interest income on the Company’s matched book repo financing activities;

New issue and advisory revenue comprised primarily of (i) new issue revenue associated with originating, arranging, or placing newly created financial instruments and (ii) revenue from advisory services.

Asset Management

Asset management fees for the Company’s on-going asset management services provided to certain Investment Vehicles, which may include fees both senior and subordinate to the securities in the Investment Vehicle, and incentive management fees earned based on the performance of the various Investment Vehicles.

Principal Investing

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All intercompany accounts and transactions have been eliminated in consolidation.

The results for the three months ended March 31, 2020 and 2019 are not necessarily indicative of the results for the entire year or any subsequent interim period.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 .

The results for the six months ended June 30, 2020 and 2019 are not necessarily indicative of the results for the entire year or any subsequent interim period.

Capitalized terms used herein without definition have the meanings ascribed to them in the Annual Report on Form 10-K for the year ended December 31, 2019 .

Effective June 1, 2019, the Company changed its accounting policy regarding the netting of reverse repurchase agreement and repurchase agreement transactions and update d prior periods ’

balances to be consistent with this new accounting policy .

Effective June 1, 2019, the Company changed its accounting policy regarding the netting of reverse repurchase agreement and repurchase agreement transactions and updated prior periods’ balances to be consistent with this new accounting policy.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Adoption of New Accounting Standards

I n February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) .

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) .

Under the new guidance (subsequently updated with ASU 2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20, and ASU 2019-01), lessees will be required to recognize the following for all leases with the exception of short-term leases:

(i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Lessor accounting is largely unchanged.

2 unchanged sentences

(a) a right of use asset of $8,416, (b) a lease commitment liability of $8,860, (c) a reduction in retained earnings from cumulative effect of adoption of $20, (d) an increase in other receivables of $18, and (e) a reduction in other liabilities of $406.

See note 1 3 .

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

3 unchanged sentences

In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

The Company’s adoption of the provisions of ASU 2016- 1 3, effective January 1, 2020 did not have a material effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles –

Goodwill and Other (Topic 350):

The Company’s adoption of the provisions of ASU 2016-13, effective January 1, 2020 did not have a material effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment .

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The annual or interim goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount.

An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value;

however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

The Company adopted the provisions of ASU 2017-04, effective January 1, 2020.

The Company recorded an impairment of goodwill for the three months ended March 31, 2020.

The Company recorded an impairment of goodwill for the six months ended June 30, 2020 .

This impairment charge was not the result of the adoption of ASU 2017-04.

In June 2018, the FASB issued ASU 2018-07, Compensation –

Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting .

The amendments in this ASU expand the scope of Topic 718, which previously only included share-based payments to employees, to include share-based payments issued to nonemployees for goods or services.

Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned.

The Company’s adoption of the provisions of ASU 2018-07, effective January 1, 2019 did not have an effect on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08, Receivables –

Nonrefundable Fees and Other Costs, Premium Amortization on Purchased Callable Debt Securities (Sub-Topic 310-20 ).

In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs, Premium Amortization on Purchased Callable Debt Securities (Sub-Topic 310-20 ).

The amendments in this ASU shorten the amortization period for certain callable debt securities held at a premium.

2 unchanged sentences

the discount continues to be amortized to maturity.

The Company’s adoption of the provisions of ASU 2017-08 , effective January 1, 2019 did not have an effect on the Company’s consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivative and Hedging –

Targeted Improvements to Accounting for Hedging Activities (Topic 815 ).

The Company’s adoption of the provisions of ASU 2017-08, effective January 1, 2019 did not have an effect on the Company’s consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivative and Hedging – Targeted Improvements to Accounting for Hedging Activities (Topic 815 ).

The amendments in this ASU refine and expand hedge accounting for both financial and commodity risks and contain provisions to create more transparency and clarify how economic results are presented.

The Company’s adoption of the provisions of ASU 2017-12 , effective January 1, 2019 did not have an effect on the Company’s consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement –

Reporting Comprehensive Income (Topic 220 ):

The Company’s adoption of the provisions of ASU 2017-12, effective January 1, 2019 did not have an effect on the Company’s consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220 ):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income .

The amendments in this ASU provide the option to reclassify stranded tax effects within accumulated other comprehensive income (“AOCI”) to retained earnings in each period in which the effect of the change in the U.S.

federal corporate income tax rate in the Tax Act (or portion thereof) is recorded.

The Company’s adoption of the provisions of ASU 2018-02 , effective January 1, 2019 did not have an effect on the Company’s consolidated financial statements.

The Company’s adoption of the provisions of ASU 2018-02, effective January 1, 2019 did not have an effect on the Company’s consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting .

Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned.

The Company’s adoption of the provisions of ASU 2018-07, effective January 1, 2019 did not have an effect on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework –

Changes to the Disclosure Requirements for Fair Value Measurement.

included in other comprehensive income for recurring level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop level 3 fair value measurements.

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.

The ASU modifies the disclosure requirements in Topic 820, by removing certain disclosure requirements related to the valuation hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop level 3 fair value measurements.

This ASU is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019.

The Company’s adoption of the provisions of ASU 2018-13, effective January 1, 2020 did not have an effect on the Company’s consolidated financial statements.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810):

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The guidance is effective in annual periods beginning after December 15, 2019 and interim periods within those fiscal years.

The Company’s adoption of the provisions of ASU 2018-17, effective January 1, 2020 did not have an effect on the Company’s consolidated financial statements.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808):

3 unchanged sentences

The parts of the collaborative arrangement that are not in the scope of the revenue recognition standard should be presented separately from revenue accounted for under the revenue recognition.

The Company’s adoption of the provisions of ASU 2018-18, effective January 1, 2020 did not have an effect on the Company’s consolidated financial statements.

In November 2019, the FASB issued ASU 2019-08, Compensation –

Stock Compensation (Topic (718) and Revenue from Contracts with Customers (Topic 606):

Codification Improvements–

Share-Based Consideration Payable to a Customer.

This ASU requires companies to measure and classify (on the balance sheet) share-based payments to customers by applying the guidance in Topic 718, Compensation—Stock Compensation .

The Company’s adoption of the provisions of ASU 2018-18, effective January 1, 2020 did not have an effect on the Company’s consolidated financial statements.

In November 2019, the FASB issued ASU 2019-08, Compensation – Stock Compensation (Topic (718) and Revenue from Contracts with Customers (Topic 606):

Codification Improvements– Share-Based Consideration Payable to a Customer.

This ASU requires companies to measure and classify (on the balance sheet) share-based payments to customers by applying the guidance in Topic 718, Compensation—Stock Compensation .

As a result, the amount recorded as a reduction in revenue would be measured based on the grant-date fair value of the share-based payment.

The Company’s adoption of the provisions of ASU 2018-18, effective January 1, 2020 did not have an effect on the Company’s consolidated financial statements.

The Company’s adoption of the provisions of ASU 2019-08, effective January 1, 2020 did not have an effect on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04 , Reference Rate Reform (Topic 848):

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The ASU is intended to help stakeholders during the global market wide reference rate transition period and will be in effect for a limited time through December 31, 2022.

The Company’s adoption of the provisions of ASU 2020-04, effective March 12, 2020 did not have an effect on the Company’s consolidated financial statements.

Recent Accounting Developments

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This ASU is effective for fiscal years beginning after December 15, 2020 and interim period with those fiscal years The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements.

In January 2020 , the FASB issued ASU 2 020-01 , Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 .

In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 .

This ASU clarifies certain accounting certain topics impacted by Topic 321 Investments-Equity Securities.

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These determinations were based on available market information and appropriate valuation methodologies.

Considerable judgment is required to interpret market data to develop the estimates and, therefore, these estimates may not necessarily be indicative of the

amount the Company could realize in a current market exchange.

Considerable judgment is required to interpret market data to develop the estimates and, therefore, these estimates may not necessarily be indicative of the amount the Company could realize in a current market exchange.

The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

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These amounts are carried at outstanding principal less unamortized discount and deferred financing costs.

However, a substantial portion of the debt was assumed in the Merger and recorded at fair value as of that date.

As of March 31, 2020, and December 31, 2019 , the fair value of the Company’s debt was estimated to be $61,501 and $58,635 , respectively.

The estimated fair value measurements of the debt are generally based on discounted cash flow models prepared by the Company’s management primarily using discount rates for similar instruments issued to companies with similar credit risks to the Company and are generally classified within level 3 of the value hierarchy.

However, a substantial portion of the debt was assumed in the AFN Merger and recorded at fair value as of that date.

As of June 30, 2020 , and December 31, 2019 , the fair value of the Company’s debt was estimated to be $67,571 and $58,635 , respectively.

Derivatives :

3 unchanged sentences

and other investments, at fair value.

See notes 8 and 9 .

The fair value is generally based on quoted market prices on an exchange that is deemed to be active for derivative instruments such as foreign currency forward contracts and Eurodollar futures.

1 unchanged sentence

OTHER RECENT BUSINESS TRANSACTIONS OR EVENTS

Insurance Acquisition Corporation ("Insurance SPAC")

The Company is the sponsor of Insurance Acquisition Corporation (Nasdaq:

INSU) (“Insurance SPAC”), a blank check company that is seeking to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (each, a “Business Combination”).

On March 22, 2019, Insurance SPAC completed the sale of 15,065,000 units (the “SPAC Units”) in its initial public offering (the “IPO”), including the underwriters’ over-allotment option.

Each SPAC Unit consists of one share of Insurance SPAC’s Class A common stock, par value $0.0001 per share (“IAC Common Stock”), and one-half of one warrant (each, a “SPAC Warrant”), where each whole SPAC Warrant entitles the holder to purchase one share of IAC Common Stock for $11.50 per share.

The SPAC Units were sold in the IPO at an offering price of $10.00 per SPAC Unit, for gross proceeds of $150.7 million (before underwriting discounts and commissions and offering expenses).

Pursuant to the underwriting agreement in the IPO, Insurance SPAC granted the underwriters in the IPO (the “Underwriters”) a 45-day option to purchase up to 1,965,000 additional SPAC Units solely to cover over-allotments, if any (the “Over-Allotment Option”).

On March 22, 2019, the Underwriters exercised the Over-Allotment Option in full.

Immediately following the completion of the IPO, there were an aggregate of 20,653,333 shares of IAC Common Stock issued and outstanding.

If Insurance SPAC fails to consummate a Business Combination within the first 18 months following the IPO, its corporate existence will cease except for the purposes of winding up its affairs and liquidating its assets unless an extension is approved by its shareholders.

The Operating LLC is the manager and a member of each of two entities:

Insurance Acquisition Sponsor, LLC and Dioptra Advisors, LLC (together, the “Sponsor Entities”).

Insurance Acquisition Sponsor, LLC purchased 375,000 of Insurance SPAC’s placement units in a private placement that occurred simultaneously with the IPO for an aggregate purchase price of $3,750, or $10.00 per placement unit.

Each placement unit consists of one share of IAC Common Stock and one-half of one warrant (the “Placement Warrant”).

The placement units are identical to the SPAC Units sold in the IPO except (i) the shares of IAC Common Stock issued as part of the placement units and the Placement Warrants will not be redeemable by Insurance SPAC, (ii) the Placement Warrants may be exercised by the holders on a cashless basis, (iii) the shares of IAC Common Stock issued as part of the placement units, together with the Placement Warrants, are entitled to certain registration rights, and (iv) for so long as they are held by the IPO underwriter, the placement units will not be exercisable more than five years following the effective date of the registration statement filed by Insurance SPAC in connection with the IPO.

Subject to certain limited exceptions, the placement units (including the underlying Placement Warrants and IAC Common Stock and the shares of IAC Common Stock issuable upon exercise of the Placement Warrants) will not be transferable, assignable, or salable until 30 days after the completion of the Business Combination.

Of the $3,750 invested by Insurance Acquisition Sponsor, LLC in consideration for the above described placement units of Insurance SPAC, the Sponsor Entities raised $2,550 from investors other than the Company and the remaining investment in the private placement was made by the Company.

The $2,550 raised from investors other than the Company is treated as non-controlling interest.

Certain of the non-controlling interests are key employees, related parties, or affiliates of the Company.

The Company consolidates the Sponsor Entities and treats its investment in Insurance SPAC as an equity method investment.

The proceeds from the placement units were added to the net proceeds from the IPO to be held in a trust account.

If Insurance SPAC does not complete a Business Combination within the first 18 months following the IPO or obtain shareholder approval for an extension, the proceeds from the sale of the Placement Units will be used to fund the redemption of the IAC Common Stock sold as part of the SPAC Units in the IPO (subject to the requirements of applicable law) and the Placement Warrants will expire worthless.

Upon the IPO closing the Sponsor Entities initially collectively held 5,103,333 founder shares of Insurance SPAC.

Subject to certain limited exceptions, placement units held by the Sponsor Entities will not be transferable or salable until 30 days following a Business Combination, and founder shares held by the Sponsor Entities will not be transferable or salable except (a) with respect to 20% of such shares, until consummation of a Business Combination, and (b) with respect to additional 20% tranches of such shares, when the closing price of the Common Stock exceeds $12.00, $13.50, $15.00, and $17.00, respectively, for 20 out of any 30 consecutive trading days following the consummation of a Business Combination, in each case subject to certain limited exceptions.

On June 29, 2020, Insurance SPAC entered into an Agreement and Plan of Merger (the “Merger Agreement”) with IAC Merger Sub, Inc., a Delaware corporation and direct wholly owned subsidiary of Insurance SPAC (“Merger Sub”), and Shift Technologies, Inc., a Delaware corporation (“Shift”).

The Merger Agreement provides for, among other things, the acquisition of Shift by Insurance SPAC pursuant to the proposed merger of Merger Sub with and into Shift with Shift continuing as the surviving entity and a direct wholly owned subsidiary of Insurance SPAC (the “Merger”).

Consummation of the transactions contemplated by the Merger Agreement is subject to customary conditions of the respective parties, including, among others, that (i) the Merger be approved by the Insurance SPAC's stockholders and the Shift Stockholders;

(ii) there has been no material adverse effect that is continuing with respect to Shift or the Insurance SPAC since the date of the Merger Agreement;

(iii) the filings of the Insurance SPAC and Shift pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, if any, shall have been made and the applicable waiting period and any extension thereof will have expired or been terminated;

and (iv) Insurance SPAC will have at least $5,000 of net tangible assets immediately following the closing (after giving effect to the redemption of public shares by IAC’s public stockholders, the PIPE investment (see below) and the other transactions contemplated to occur upon the closing).

The Merger Agreement also provides that, upon consummation of the Merger, Insurance SPAC will enter into a letter agreement with subsidiaries of the Company (“Sponsor”) providing for certain board observer rights in favor of Sponsor.

Concurrently with the execution and delivery of the Merger Agreement, certain institutional accredited investors (the “PIPE Investors”), including a subsidiary of the Company, entered into subscription agreements (the “PIPE Subscription Agreements”) pursuant to which the PIPE Investors have committed to subscribe for and purchase up to 18,500,000 shares of Insurance SPAC Class A Common Stock (the “IAC Common Stock”) at a purchase price per share of $10.00.

The purchase of IAC Common Stock by the PIPE Investors will be consummated concurrently with the closing of the Merger, subject to certain additional closing conditions that are customary for transactions of this nature.

The PIPE Subscription Agreement with the Company’s subsidiary, dated June 29, 2020 (the “Subsidiary Subscription Agreement”), provides for the purchase of 200,000 shares of Insurance SPAC Common Stock by the Company’s subsidiary, which number of shares may be increased by up to 1,300,000 shares of Insurance SPAC Common Stock at the election of the Company’s subsidiary, subject to certain limitations.

The Subsidiary Subscription Agreement also contains provisions regarding registration rights that, among other matters, requires Insurance SPAC to file with the Securities and Exchange Commission, within 15 days following the closing, a registration statement relating to the resale of the IAC Common Stock purchased by the Company’s subsidiary pursuant to the Subsidiary Subscription Agreement.

Upon closing of the Merger, the Company currently expects the Sponsor Entities to collectively retain 375,000 placement units and between 4,000,000 and 4,500,000 founder shares (collectively, the “Sponsor Shares”) of Insurance SPAC.

As noted, the Company currently consolidates the Sponsor Entities and treats its investment in Insurance SPAC as an equity method investment.

Also, upon closing of the Merger, the Company will reclassify its equity method investment in Insurance SPAC to other investments, at fair value and adopt fair value accounting for the investment in Insurance SPAC, resulting in an amount of principal transaction revenue derived from the (i) the final amount of Sponsor Shares retained by the Sponsor Entities;

(ii) the trading share price of IAC Common Stock;

(iii) fair value discounts related to the share sale restrictions on the Sponsor Shares outlined above;

and (iv) the valuation of the warrants included with the placement units.

Upon recognition of the principal transaction revenue described above, the Company will record a non-controlling interest expense or compensation expense related to the amount of Sponsor Shares distributable to the non-controlling interests.

If the non controlling interest holder is an employee of the Company, the expense will be recorded as compensation.

Otherwise, the expense will be non-controlling interest expenses.

The Company currently expects 253,000 placement units and between 2,200,000 and 2,500,000 founders shares to be distributable to the non-controlling interests.

Shortly after the merger is completed, these non-controlling interest Sponsor Shares will be distributed to the non-controlling interest holders.

All of the Sponsor Shares and the shares purchased pursuant to the Subsidiary Subscription Agreement will be subject to restrictions on resale under applicable securities laws until the resale of such shares is either registered under the Securities Act of 1933 or otherwise exempt from registration.

Further, subject to certain limited exceptions, the initial placement shares and founders shares will not be transferable or salable except in accordance with the conditions set forth above.

There can be no assurance that the merger with Shift will be completed.

If it is not, and no other Business Combination is completed by the Insurance SPAC, the Sponsor Entities will likely write off their equity method investment and the Company will likely write off advances it has made to the Insurance SPAC.

See notes 11, 24, and 25.

Further, even if the merger with Shift is completed, there can be no assurance that the amount of Sponsor Shares expected to be retained, as mentioned above, will not change significantly.

The transaction is expected to close in 2020 and in connection with the closing of the transaction, Insurance SPAC intends to change its name to Shift Technologies, Inc.

ViaNova Capital Group LLC

In 2018, the Company formed a wholly-owned subsidiary, ViaNova Capital Group LLC (“ViaNova”), for the purpose of building a residential transition loan (“RTL”) business.

RTLs are small balance commercial loans that are secured by first lien mortgages used by professional investors and real estate developers to finance the purchase and rehabilitation of residential properties.

On November 20, 2018, ViaNova entered into a Warehousing Credit and Security Agreement with LegacyTexas Bank (the “LegacyTexas Credit Facility”

) with an effective date of November 16, 2018 .

On November 20, 2018, ViaNova entered into a Warehousing Credit and Security Agreement with LegacyTexas Bank (the “LegacyTexas Credit Facility”) with an effective date of November 16, 2018.

The LegacyTexas Credit Facility was amended on May 4, 2019 and again on September 25, 2019 and October 28, 2019.

The LegacyTexas Credit Facility support ed the buying, aggregating , and distributing of RTLs performed by the business of ViaNova.

On March 19, 2020, ViaNova received a notice of default from LegacyTexas Bank regarding the LegacyTexas Credit Facility, stating that ViaNova’s unrestricted cash balance was less than the amount required.

Also, on March 19, 2020, ViaNova received notice from LegacyTexas Bank that the Bank had suspended funding all “Alternative”

loans for all of their clients, including the RTL loans that are the subject of the LegacyTexas Credit Facility with LegacyTexas Bank.

The LegacyTexas Credit Facility supported the buying, aggregating, and distributing of RTLs performed by the business of ViaNova.

Also, on March 19, 2020, ViaNova received notice from LegacyTexas Bank that the Bank had suspended funding all “Alternative” loans for all of their clients, including the RTL loans that are the subject of the LegacyTexas Credit Facility with LegacyTexas Bank.

Since March 19, 2020 ViaNova has repaid all outstanding indebtedness under the LegacyTexas Credit Facility.

ViaNova stopped acquiring new RTLs and does not intend to

acquire any new RTLs in the future.

As of March 31, 2020, the Company had four RTL s and several interest strips representing a par value of $3,034 and a fair value of $2,956 , including the fair value of interest strips held.

ViaNova stopped acquiring new RTLs and does not intend to acquire any new RTLs in the future.

As of June 30, 2020 , the Company had two RTLs and several interest strips representing a par value of $2,363 and a fair value of $2,322, including the fair value of interest strips held.

These RTLs and interest strips are included as a component of investments-trading (see note 7).

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While the Company cannot fully assess the impact COVID-19 will have on all of its operations at this time, there are certain impacts that the Company has identified:

The unprecedented volatility of the financial markets experienced in March 2020, has caused the Company to operate JVB at a lower level of leverage than prior to the pandemic.

The unprecedented volatility of the financial markets experienced since March 2020, has caused the Company to operate JVB at a lower level of leverage than prior to the pandemic.

Specifically, JVB has reduced the size of its GCF repo operations and the volume of its TBA trading.

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The Company determined that the fair value of JVB was less than the carrying value (including the goodwill).

As a result, the Company recorded an impairment loss of $7,883 in the three months ended March 31, 2020.

The Company expects that its asset management segment will also be adversely impacted by the pandemic.

As a result, the Company recorded an impairment loss of $7,883 in the six months ended June 30, 2020 .

The Company expects that its asset management segment may also be adversely impacted by the pandemic.

While it is difficult to determine the extent of the impact at this time, the Company expects that raising capital for new funds may become more challenging.

In addition, lower returns earned by funds will adversely impact the Company’s asset management fees and investors’

need for liquidity may result in reductions in AUM.

JVB’s mortgage group’s operations are centered on serving the financial needs of mortgage originators and institutions that invest in mortgage backed securities.

Prolonged high unemployment will most likely impact mortgage originations and demand for and supply of mortgage backed securities, which may have a significant unfavorable impact on the revenue earned by JVB’s mortgage group.

Nevertheless, in July 2020, the Company was able to successfully close the PriDe III Fund with total investor commitments in excess of €375,000.

In addition, lower returns earned by funds may adversely impact the Company’s asset management fees and investors’ need for liquidity may result in reductions in AUM.

JVB’s mortgage group’s operations are centered on serving the financial needs of mortgage originators and institutions that invest in mortgage backed securities.

The Company will likely be impacted by the pandemic in other ways which the Company cannot yet determine.

The Company will continue to monitor market conditions and respond accordingly.

Subsequent to March 31, t he Company has applied for and received a $2.2 million loan under the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The Company applied for and received a $2,166 loan under the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The Company carefully considered the eligibility requirements for PPP loans as well as supplemental guidance regarding the PPP beyond the applicable statute issued from time to time by government agencies and certain government officials.

The Company was eligible for a PPP loan because it has fewer than 500 employees.

Further, although the Company is public and listed on the NYSE American stock exchange, the Company’s market capitalization is small, and the Company believes that it does not have access to the public capital markets at this time.

In part due to the PPP loan, the Company does not anticipate any significant workforce reduction or reductions in compensation levels in the near future.

However, the Company will continue to carefully monitor revenue levels to assess whether compensatory or other cost-cutting measures might be necessary.

The 2020 Senior Notes

On January 31, 2020, the Operating LLC entered into a Note Purchase Agreement with JKD Capital Partners I LTD, a New York corporation (“JKD Investor”), and RN Capital Solutions LLC, a Delaware limited liability company (“RNCS”).

The JKD Investor is owned by Jack DiMaio, the vice chairman of the Company’s board of directors and the Operating LLC’s board of managers, and his spouse.

On January 31, 2020, the Operating LLC entered into a note purchase agreement with JKD Capital Partners I LTD, a New York corporation (“JKD Investor”), and RN Capital Solutions LLC, a Delaware limited liability company (“RNCS”).

The JKD Investor is owned by Jack DiMaio, the vice chairman of the Company’s board of directors and his spouse.

Pursuant to the note purchase agreement, JKD Investor and RNCS each purchased a senior promissory note in the principal amount of $2,250 (for an aggregate investment of $4,500).

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On February 3, 2020, pursuant to the note purchase agreement, the Operating LLC used the proceeds received from the issuance of the senior promissory notes to repay in full all amounts outstanding under the senior promissory note, dated September 25, 2019, issued by the Company to Pensco Trust Company, Custodian fbo Edward E.

Cohen IRA in the principal amount of $4,386 (the “Cohen IRA Note”).

The Cohen IRA Note is included as a portion of the 2019 Senior Notes outstanding as of December 31, 2019 .

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Three Months Ended

March 31, 2020

March 31, 2019

Six Months Ended

Net realized gains (losses) - trading inventory

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Effective January 1, 2020, in connection with the adoption of ASC 326, the Company began accounting for RTLs at fair value and including them as a component of investments-trading.

Therefore, income earned on RTLs is included in interest income-trading inventory in the table above effective January 1, 2020.

Also, s ee note 1 0 for discussion of receivables under resale agreements and securities sold under agreements to repurchase.

Therefore, also effective January 1, 2020, income earned on RTLs is included in interest income-trading inventory in the table above.

Also, see note 10 for discussion of receivables under resale agreements and securities sold under agreements to repurchase.

See note 6 for discussion of margin payable.

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(Dollars in Thousands)

March 31, 2020

June 30, 2020

December 31, 2019

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(Dollars in Thousands)

March 31, 2020

June 30, 2020

December 31, 2019

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Securities transactions that settle in the regular way are recorded on the trade date, as if they had settled.

The related amounts receivable and payable for unsettled securities transactions are recorded net in receivables from or payables to brokers, dealers, and clearing agencies on the Company’s consolidated balance sheets.

Receivables from clearing agencies are primarily comprised of ( i ) cash received by the Company upon execution of short trades that is restricted from withdrawal by the clearing agent and ( ii ) cash deposited with the FICC to support the Company’s General Collateral Funding (“GCF”) matched book repo business.

Margin payable represents amounts borrowed from Pershing, LLC to finance the Company’s trading portfolio.

Substantially all of the Company’s investments-trading and deposits with clearing agencies serve as collateral for the margin payable.

Receivables from clearing agencies are primarily comprised of (i) cash received by the Company upon execution of short trades that is restricted from withdrawal by the clearing agent and (ii) cash deposited with the FICC to support the Company’s General Collateral Funding (“GCF”) matched book repo business.

Margin payable represents amounts borrowed from Pershing, LLC to finance the Company’s trading portfolio.

Substantially all of the Company’s investments-trading and deposits with clearing agencies serve as collateral for the margin payable.

See note 5 for interest expense incurred on margin payable.

Due to clearing agent represents amounts due to Bank of New York under the Company’s intra-day and overnight lending facility supporting the GCF matched repo business.

FINANCIAL INSTRUMENTS

Investments—Trading

Investments-trading consisted of the following.

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(Dollars in Thousands)

March 31, 2020

June 30, 2020

December 31, 2019

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(Dollars in Thousands)

March 31, 2020

June 30, 2020

December 31, 2019

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(Dollars in Thousands)

March 31, 2020

Amortized Cost

Carrying Value

Unrealized Gain / (Loss)

June 30, 2020

Gain / (Loss)

Equity securities

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December 31, 2019

Amortized Cost

Carrying Value

Unrealized Gain / (Loss)

Gain / (Loss)

Equity securities

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The Company has elected to account for certain of its other financial assets at fair value under the fair value option provisions of FASB ASC 825.

The primary reason for electing the fair value option was to reduce the burden of monitoring the differences between the cost and the fair value of the Company’s investments, previously classified as available for sale securities, including the assessment as to whether the declines are temporary in nature and to further remove an element of management judgment.

Such financial assets accounted for at fair value include:

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All of the investments for which the Company has elected the fair value option are included as a component of other investments, at fair value in the consolidated balance sheets.

The Company recognized net gains (losses) related to changes in fair value of investments that are included as a component of other investments, at fair value during the three months ended March 31, 2020 and 201 9 of $(2,695) and $249 respectively

The Company recognized net gains (losses) related to changes in fair value of investments that are included as a component of other investments, at fair value during the three months ended June 30, 2020 and 2019 of $ 2,240 and $ 490 respectively.

The Company recognized net gains (losses) related to changes in fair value of investments that are included as a component of other investments, at fair value during the six months ended June 30, 2020 and 2019 of $ (455) and $ 739 respectively.

Fair Value Measurements

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Level 3 Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.

These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the valuation hierarchy.

In such cases, the level in the valuation hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the level 3 category.

As a result, the unrealized gains and losses for assets and liabilities within the level 3 categ ory presented in the tables below may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

The following tables present information about the Company’s assets and liabilities measured at fair value as of March 31, 2020 and December 31, 2019 and indicate s the valuation hierarchy of the valuation techniques utilized by the Company to determine such fair value.

As a result, the unrealized gains and losses for assets and liabilities within the level 3 category presented in the tables below may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

The following tables present information about the Company’s assets and liabilities measured at fair value as of June 30, 2020 and December 31, 2019 and indicates the valuation hierarchy of the valuation techniques utilized by the Company to determine such fair value.

FAIR VALUE MEASUREMENTS ON A RECURRING BASIS

March 31, 2020

June 30, 2020

(Dollars in Thousands)

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Insurance JV and the SPAC Fund.

Insurance JV invests in debt issued by small and medium sized U.S.

and Bermuda insurance and reinsurance companies.

Insurance JV invests in USD denominated debt issued by small insurance and reinsurance companies.

The SPAC Fund invests in equity securities of SPACs.

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Insurance JV and the SPAC Fund.

Insurance JV invests in debt issued by small and medium sized U.S.

and Bermuda insurance and reinsurance companies.

Insurance JV invests in USD denominated debt issued by small and medium size insurance and reinsurance companies.

The SPAC Fund invests in equity securities of SPACs.

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In the absence of two broker-dealer market quotations, a single broker-dealer market quotation may be used without corroboration of the quote in which case the Company generally classifies the fair value within level 3 of the valuation hierarchy.

If quotations are unavailable, prices observed by the Company for recently executed market transactions or valuation models prepared by the Company’s management may be used, which are based on an income approach.

These models prepared by the Company’s management include estimates, and the valuations derived from them could differ materially from amounts realizable in an open market exchange.

Each CLO and CDO position is evaluated independently taking into consideration available comparable market levels, underlying collateral performance and pricing, deal structures, and liquidity.

Fair values based on internal valuation models prepared by the Company’s management are generally classified within level 3 of the valuation hierarchy.

Establishing fair value is inherently subjective (given the volatile and sometimes illiquid markets for certain interests in securitizations) and requires management to make a number of assumptions, including assumptions about the future of interest rates, discount rates, and the timing of cash flows.

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These models include estimates, and the valuations derived from them could differ materially from amounts realizable in an open market exchange.

Fair values based on internal valuation models prepared by the Company’s management are generally classified within level 3 of the valuation hierarchy.

Equity Securities :

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The Company may own an option or warrant where the underlying security is publicly traded but the option or warrant is not.

In those cases, the Company may determine fair value using a Black-Scholes model and will generally classify th eir fair value within level 2 within the valuation hierarchy.

In those cases, the Company may determine fair value using a Black-Scholes model and will generally classify their fair value within level 2 within the valuation hierarchy.

The Company may own an equity investment in a publicly traded company that is restricted as to resale.

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government agency MBS and CMOs include TBAs and other forward agency MBS contracts.

Unrealized gains on TBAs and other forward agency MBS contracts are included in investments-trading on the Company’s consolidated balance sheets and unrealized losses on TBAs and other forward agency MBS contracts are included in trading securities sold, not yet purchased on the Company’s consolidated balance sheets.

Other Extended Settlement Trades

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LEVEL 3 ROLLFORWARD

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Beginning of period

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Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

The following tables provide the quantitative information about level 3 fair value measurements as of March 31, 2020 and December 31, 2019 .

The following tables provide the quantitative information about level 3 fair value measurements as of June 30, 2020 and December 31, 2019 .

QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS

(Dollars in Thousands)

March 31, 2020

June 30, 2020

Investments - trading

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Discounted Cash Flow Model

Other investments, at fair value

Discounted Cash Flow Model

20.8% - 20.9%

Duration-years

QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS

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For recurring fair value measurements categorized within level 3 of the valuation hierarchy, the sensitivity of the fair value measurement to changes in significant unobservable inputs and interrelationships between those unobservable inputs (if any) are described below.

The Company uses a discounted cash flow model to determine the fair value of its investments in CLOs.

Changes in the yield, duration, and default rate assumptions would impact the fair value determined.

The longer the duration, the lower the fair value of the investment.

The higher the yield, the lower the fair value of the investment.

The higher the default rate, the lower the fair value of the investment.

The Company uses a discounted cash flow model to determine the fair value of its investments in RTLs.

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The higher the default rate, the lower the fair value of the investment.

The Company uses a discounted cash flow model to determine the fair value of its investments in CLOs.

Changes in the yield, duration, and default rate assumptions would impact the fair value determined.

The longer the duration, the lower the fair value of the investment.

The higher the yield, the lower the fair value of the investment.

The higher the default rate, the lower the fair value of the investment.

Investments in Certain Entities that Calculate NAV Per Share (or its Equivalent)

The following table presents additional information about investments in certain entities that calculate NAV per share (regardless of whether the “practical expedient”

provisions of FASB ASC 820 have been applied), which are measured at fair value on a recurring basis at March 31, 2020 and December 31, 2019 .

The following table presents additional information about investments in certain entities that calculate NAV per share (regardless of whether the “practical expedient” provisions of FASB ASC 820 have been applied), which are measured at fair value on a recurring basis at June 30, 2020 and December 31, 2019 .

FAIR VALUE MEASUREMENTS OF INVESTMENTS IN CERTAIN ENTITIES

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(Dollars in Thousands)

Fair Value March 31, 2020

Unfunded Commitments

Redemption Frequency

Redemption Notice Period

June 30, 2020

Notice Period

Other investments, at fair value

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Quarterly after 1 year lock up

Fair Value December 31, 2019

Unfunded Commitments

Redemption Frequency

Redemption Notice Period

December 31, 2019

Notice Period

Other investments, at fair value

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Quarterly after 1 year lock up

N/A Not applicable.

Insurance JV invests in debt issued by small and medium sized U.S.

and Bermuda insurance and reinsurance companies.

Insurance JV invests in USD denominated debt issued by small and medium size insurance and reinsurance companies.

The SPAC Fund invests in equity interests of SPACs.

DERIVATIVE FINANCIAL INSTRUMENTS

FASB ASC 815, Derivatives and Hedging (“FASB ASC 815”) , provides for optional hedge accounting.

FASB ASC 815, Derivatives and Hedging (“FASB ASC 815”), provides for optional hedge accounting.

When a derivative is deemed to be a hedge and certain documentation and effectiveness testing requirements are met, reporting entities can record all or a portion of the change in the fair value of a designated hedge as an adjustment to OCI rather than as a gain or loss in the statements of operations.

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All of the derivatives that the Company enters into contain master netting arrangements.

If certain requirements are met, the offsetting provisions included in FASB ASC 210, Balance Sheet (“ASC 210”), allow (but do not require) the reporting entity to net the asset and liability on the consolidated balance sheets.

It is the Company’s policy to present the derivative assets and liabilities on a

net basis if the conditions of ASC 210 are met.

It is the Company’s policy to present the derivative assets and liabilities on a net basis if the conditions of ASC 210 are met.

However, in general the Company does not enter in offsetting derivatives with the same counterparties.

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Derivative financial instruments are recorded at fair value.

If the derivative was entered into as part of the Company’s broker-dealer operations, it will be included as a component of investments-trading or trading securities sold, not yet purchased.

If it is entered into as a hedge for another financial instrument included in other investments, at fair value then the derivative will be included as a component of other investments, at fair value.

The Company may, from time to time, enter into derivatives to manage its risk exposures arising from (i) fluctuations in foreign currency rates with respect to the Company’s investments in foreign currency denominated investments;

(ii) the Company’s investments in interest sensitive investments;

and (iii) the Company’s facilitation of mortgage-backed trading.

(ii) the Company’s investments in interest sensitive investments;

and (iii) the Company’s facilitation of mortgage-backed trading.

Derivatives entered into by the Company, from time to time, may include (a) foreign currency forward contracts;

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and (c) other extended settlement trades.

TBAs are forward contracts to purchase or sell MBS whose collateral remain “to be announced”

until just prior to the trade settlement date.

TBAs are forward contracts to purchase or sell MBS whose collateral remain “to be announced” until just prior to the trade settlement date.

In addition to TBAs, the Company sometimes enters into forward purchases or sales of agency MBS where the underlying collateral has been identified.

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TBAs and other forward agency MBS contracts are accounted for as derivatives by the Company under ASC 815.

The settlement of these transactions is not expected to have a material effect on the Company’s consolidated financial statements.

In addition to TBAs and other forward agency MBS contracts as part of the Company’s broker-dealer operations, the Company may from time to time enter into other securities or loan trades that do not settle within the normal securities settlement period.

The settlement of these transactions is not expected to have a material effect on the Company’s consolidated financial statements.

In those cases, the purchase or sale of the security or loan is not recorded until the settlement date.

However, from the trade date until the settlement date, the Company’s interest in the security is accounted for as a derivative as either a forward purchase commitment or forward sale commitment.

The Company will classify the related derivative either within investments-trading or other investments, at fair value depending on where it intends to classify the investment once the trade settles.

Derivatives involve varying degrees of off-balance sheet risk, whereby changes in the level or volatility of interest rates or market values of the underlying financial instruments may result in changes in the value of a particular financial instrument in excess of its carrying amount.

Depending on the Company’s investment strategy, realized and unrealized gains and losses are recognized in principal transactions and other income or in net trading in the Company’s consolidated statements of operations on a trade date basis.

The Company may, from time to time, enter into the following derivative instruments.

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The Company invests in foreign currency denominated investments that expose it to fluctuations in foreign currency rates, and, therefore, the Company may, from time to time, hedge such exposure by using foreign currency forward contracts.

The Company carries foreign currency forward contracts at fair value and includes them as a component of other investments, at fair value in the Company’s consolidated balance sheets.

As of March 31, 2020 and December 31, 2019 , the Company had no outstanding foreign currency forward contracts.

The Company carries foreign currency forward contracts at fair value and includes them as a component of other investments, at fair value in the Company’s consolidated balance sheets.

As of June 30, 2020 and December 31, 2019 , the Company had no outstanding foreign currency forward contracts.

TBAs and Other Forward Agency MBS Contracts

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Finally, the Company may enter into TBAs and other forward agency MBS contracts on a speculative basis.

The Company carries the TBAs and other forward agency MBS contracts at fair value and includes them as a component of investments-trading or trading securities sold, not yet purchased in the Company’s consolidated balance sheets.

At March 31, 2020 , the Company had open TBA and other forward MBS purchase agreements in the notional amount of $ 2,090,750 and open TBA and other forward MBS sale agreements in the notional amount of $ 2,212,275 .

At June 30, 2020 , the Company had open TBA and other forward MBS purchase agreements in the notional amount of $1,487,750 and open TBA and other forward MBS sale agreements in the notional amount of $1,572,100 .

At December 31, 2019 , the Company had open TBA and other forward agency MBS purchase agreements in the notional amount of $1,773,000 and open TBA and other forward agency MBS sale agreements in the notional amount of $1,874,194.

During March and continuing subsequent to March 31, 2020, the Company reduced its TBA trading activity as a response to the financial market volatility associated with the COVID-19 pandemic.

As of April 30, 2020, the Company had open TBA and other forward MBS purchase agreements in the notional amount of approximately $1,134,419 and open TBA and other forward MBS sale agreements in the notional amount of approximately $1,252,919 .

Other Extended Settlement Trades

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The Company will record an unrealized gain or unrealized loss on the derivative for the difference between the fair value of the underlying financial instrument as of the reporting date and the agreed upon transaction price.

At March 31, 2020 , the Company had open forward purchase commitments of $1,725 and open forward sale commitments of $0 .

At June 30, 2020 , the Company had open forward purchase commitments of $1,697 and open forward sale commitments of $9,000 .

At December 31, 2019 , the Company had open forward purchase commitments of $1,526 and open forward sale commitments of $0.

The following table presents the Company’s derivative financial instruments and the amount and location of the fair value (unrealized gain / (loss)) recognized in the consolidated balance sheets as of March 31, 2020 and December 31, 2019 .

DERIVATIVE FINANCIAL INSTRUMENTS-BALANCE SHEET INFORMATION

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Balance Sheet Classification

March 31, 2020

June 30, 2020

December 31, 2019

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Trading securities sold, not yet purchased

The following table presents the Company’s derivative financial instruments and the amount and location of the net gain (loss) recognized in the consolidated statements of operations.

The following tables present the Company’s derivative financial instruments and the amount and location of the net gain (loss) recognized in the consolidated statements of operations.

DERIVATIVE FINANCIAL INSTRUMENTS-STATEMENT OF OPERATIONS INFORMATION

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Income Statement Classification

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

Six Months Ended June 30, 2020

Six Months Ended June 30, 2019

Foreign currency forward contracts

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Revenue-net trading

Derivative Financial Instruments Not Designated as Hedging Instruments Under FASB ASC 815

Income Statement Classification

Three Months Ended June 30, 2020

Three Months Ended June 30, 2019

Foreign currency forward contracts

Revenue-principal transactions and other income

Other extended settlement trades

Revenue-net trading

TBAs and other forward agency MBS

Revenue-net trading

COLLATERALIZED SECURITIES TRANSACTIONS

Matched Book Repo Business

The Company enters into rep o s and reverse rep os 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 rep o .

The Company will borrow money from another counterparty using th e same collateral securities pursuant to a rep o .

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.

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Gestation Repo

Gestation repo involves entering into rep o and reverse rep o where the underlying collateral security represents a pool of newly issued mortgage loans.

The borrowers (the reverse rep o counterparties) are generally mortgage originators.

The lenders (the rep o counterparties) are a diverse group of the counterparties comprised of banks, insurance companies, and other financial institutions.

The Company self-clear s its gestation repo transactions.

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 rep o transactions where the underlying security is general collateral (primarily U.S.

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.

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.

1 unchanged sentence

The Company began entering into matched book GCF repo transactions in November 2017.

The borrowers (the reverse rep o counterparties) are a diverse group of financial institutions including hedge funds, registered investment funds, REITs, and other similar counterparties.

The lender s (the rep o counterpart ies ) 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 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.

Th is line of credit arrangement was subsequently amended.

See note 17 .

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 arrangement was subsequently amended.

Other Repo Transactions

In addition to the Company’s matched book repo business, the Company may also enter into reverse rep os to acquire securities to cover short positions or as an investment.

Additionally, the Company may enter into rep os to finance the Company’s securities positions held in inventory.

These rep o and reverse rep o agreements are generally cleared on a bilateral or triparty basis;

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.

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Repo Information

At March 31, 2020 and December 31, 2019 , the Company held reverse repo s of $ 6,014,438 and $7,500 , 002 , respectively, and the fair value of collateral received under reverse repo s was $ 6,167 , 233 and $7,769,693 , respectively.

As of March 31, 2020 and December 31, 201 9 , the reverse repo balance was comprised of receivables collateralized by securities wit h 30 and 41 counterparties , respectively.

At March 31, 2020 and December 31, 2019 , the Company held repo s of $ 6,066,372 and $7,534,443, respectively, and the fair value of securities and cash pledged as collateral under repo s was $ 6,035,939 and $7, 561,978 , respectively.

These amounts include collateral for reverse repo s that were re-pledged as collateral for repo s.

At June 30, 2020 and December 31, 2019 , the Company held reverse repos of $5,504,667 and $7,500,002, respectively, and the fair value of collateral received under reverse repos was $5,668,109 and $7,769,693, respectively.

As of June 30, 2020 and December 31, 2019 , the reverse repo balance was comprised of receivables collateralized by securities with 37 and 41 counterparties, respectively.

At June 30, 2020 and December 31, 2019 , the Company held repos of $5,524,758 and $7,534,443, respectively, and the fair value of securities and cash pledged as collateral under repos was $5,355,394 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 1 9 , 201 8 , the Company and BONY entered into an intraday lending facility.

Th e 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 March 31, 2020 was $75,000 .

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 June 30, 2020 was $75,000.

The current termination date of this facility is October 16, 2020.

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The base rate is the higher of the federal funds rate plus 0.50% or the prime rate in effect at that time.

For the three months ended March 31, 2020 , the Company received no advances under the intraday lending facility .

For the six months ended June 30, 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.

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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, t he Company does not consider it s GCF repo business to be concentrated because the Company’s reverse repo counterparties are comprised of a diverse group of financial institutions.

O n the supply side, the Company obtains a significant amount of its funds from the FICC.

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.

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The Company conducts this business with a limited number of reverse repo counterparties.

As of March 31, 2020 and December 31, 201 9 , the Company’s gestation reverse rep os shown in the tables below represented balances from s even counterparties.

Th e Company also has a limited number of rep o counterparties in the gestation repo business .

H owever, this is primarily a function of the limited number of reverse re po agreement counterparties with whom the Company conducts this business rather than a reflection of a limited supply of funds.

As of June 30, 2020 and December 31, 2019 , the Company’s gestation reverse repos shown in the tables below represented balances from nine 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 agreement 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 repo and GCF repo) was $ 6 , 868 and $ 1,294 for the three months ended Ma r ch 31, 2020 and 2019, respectively .

The total net revenue earned by the Company on its matched book repo business (both gestation repo and GCF repo) was $7,927 and $14,795 for the three and six months ended June 30, 2020 , respectively.

The total net revenue earned by the Company on its matched book repo business (both gestation repo and GCF repo) was $2,343 and $3,636 for the three and six months ended June 30, 2019 , respectively.

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 utilize d this option and present ed repo and reverse repo on a net basis when these conditions were met.

As of June 1, 2019, t he 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 repurchase and reverse repo s, as well as more information on the face of the financial statements.

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 repurchase and reverse repos, as well as more information on the face of the financial statements.

The amounts in the table below (including periods prior to June 1, 2019) are presented on a gross basis.

As March 31, 2020 , the Company had outstanding reverse rep os of $6,014,438 and rep os of $6,066,372 .

Included in these amounts are outstanding reverse re pos of $ 1,473,033 and rep os of $ 4 ,570,581 , where the FICC was the Company’s counterparty to the transaction and which were subject to a master netting arrangement.

As of December 31, 201 9 , the Company had outstanding reverse rep os of $7, 50 0 ,002 and rep os of $7, 534,443 .

Included in these amounts are outstanding reverse rep os of $ 371,025 and rep os 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 repo s accounted for as secured borrowings segregated by the underlying collateral pledged as of each date shown.

As of June 30, 2020 , the Company had outstanding reverse repos of $5,504,667 and repos of $5,524,758 .

Included in these amounts are outstanding reverse repos of $1,118,530 and repos of $3,357,445, 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 note 14) are subject to master netting arrangements.

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(Dollars in Thousands)

March 31, 2020

June 30, 2020

Repurchase Agreements

Remaining Contractual Maturity of the Agreements

Overnight and

Collateral Type:

Overnight and Continuous

Up to 30 days

Greater than 90 days

government agency MBS (GCF repo)

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Remaining Contractual Maturity of the Agreements

Overnight and

Collateral Type:

Overnight and Continuous

Up to 30 days

Greater than 90 days

government agency MBS (GCF repo)

5 unchanged sentences

Remaining Contractual Maturity of the Agreements

Overnight and

Collateral Type:

Overnight and Continuous

Up to 30 days

Greater than 90 days

government agency MBS (GCF repo)

2 unchanged sentences

Remaining Contractual Maturity of the Agreements

Overnight and

Collateral Type:

Overnight and Continuous

Up to 30 days

Greater than 90 days

government agency MBS (GCF repo)

MBS (gestation repo)

INVESTMENT IN EQUITY METHOD AFFILIATE

Equity method accounting requires that the Company record its investment in equity method affiliates on the consolidated balance sheets and recognize its share of the equity method affiliates’

net income as earnings each reporting period.

INVESTMENTS IN EQUITY METHOD AFFILIATES

Equity method accounting requires that the Company record its investments in equity method affiliates on the consolidated balance sheets and recognize its share of the equity method affiliates’ net income as earnings each reporting period.

The Company has certain equity method affiliates for which it has elected the fair value option.

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All gains and losses (unrealized and realized) from securities classified as other investments, at fair value in the consolidated balance sheets are recorded as a component of principal transactions and other income in the consolidated statement of operations.

See note 2 4 .

The following table summarizes the activity and earnings in the Company’s investment that is accounted for under the equity method.

INVESTMENTS IN EQUITY METHOD AFFILIATES

5 unchanged sentences

Earnings / (loss) realized

March 31, 2020

June 30, 2020

Goodwill consisted of the following.

(Dollars in Thousands)

March 31, 2020

June 30, 2020

December 31, 2019

The Company measures its goodwill impairment on an annual basis or when events indicate that goodwill may be impaired.

The Company performs its annual impairment test s of AFN goodwill on October 1 of each year ;

The Company performs its annual impairment tests of AFN goodwill on October 1 of each year;

and JVB goodwill on January 1 of each year.

In the first quarter of 2020, the Company determined that the financial market volatility that resulted from the COVID-19 pandemic was a triggering event that required a reassessment of the goodwill related to JVB.

The Company concluded the re was no triggering event for the goodwill related to AFN.

The Company performed a valuation of JVB as of March 31, 2020 by applying equal weighting to both the income approach and the market approach.

Under the guidance of FASB ASC 350 , t he Company determined that the fair value of JVB was less than the carrying value (including the goodwill).

As a result, the Company recognized an impairment loss of $7,883 in the three months ended March 31, 2020.

The Company concluded there was no triggering event for the goodwill related to AFN.

The Company performed a valuation of JVB as of June 30, 2020 by applying equal weighting to both the income approach and the market approach.

Under the guidance of FASB ASC 350, the Company determined that the fair value of JVB was less than the carrying value (including the goodwill).

As a result, the Company recognized an impairment loss of $7,883 in the six months ended June 30, 2020 .

The impairment loss is included in the consolidated statements of operations as impairment of goodwill and is reflected as a component of operating expense.

The Company leases office space and certain computer and related equipment under noncancelable operating leases.

The C ompany determines if an arrangement is a lease at the inception date of the contract.

The Company measures operating lease liabilities using an estimated incremental borrowing rate as there is no rate implicit in the Company’s operating lease arrangements.

The Company determines if an arrangement is a lease at the inception date of the contract.

The Company measures operating lease liabilities using an estimated incremental borrowing rate as there is no rate implicit in the Company’s operating lease arrangements.

An incremental borrowing rate was calculated for each operating lease based on the term of the lease, the U.S.

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Rent expense is recognized on a straight-line basis over the lease term and is in included business development, occupancy, and equipment expense.

As of March 31, 2020 , all of the leases to which the Company was a party were operating leases.

As of June 30, 2020 , all of the leases to which the Company was a party were operating leases.

The weighted average remaining term of the leases was 8.1 years.

3 unchanged sentences

(Dollars in Thousands)

As of March 31, 2020

As of June 30, 2020

2020 - remaining

1 unchanged sentence

Lease obligation

During the three months ended March 31, 2020 , total cash payments of $403 were recorded as a reduction in the operating lease obligation.

During the six months ended June 30, 2020 and 2019 , total cash payments of $800 and $709, respectively, were recorded as a reduction in the operating lease obligation.

No cash payments were made to acquire right of use assets.

For the three months ended March 31, 2020 and 2019, rent expense, net of sublease income of $79 and $65, was $378 and $390 , respectively .

For the three and six months ended June 30, 2020 rent expense, net of sublease income of $77 and $156, was $385 and $763, respectively.

For the three and six months ended June 30, 2019 rent expense, net of sublease income of $65 and $130, was $397 and $787, respectively.

OTHER RECEIVABLES, OTHER ASSETS, ACCOUNTS PAYABLE AND OTHER LIABILITIES

2 unchanged sentences

(Dollars in Thousands)

March 31, 2020

June 30, 2020

December 31, 2019

6 unchanged sentences

When the Company enters into a reverse repo, it obtains collateral in excess of the principal amount of the reverse repo.

The Company accepts c ollateral in the form of liquid securities or cash.

If the value of the securities the Company receives as collateral increases, the Company’s reverse repo counterparties may request a return of their collateral with a value equal to such increase .

The Company accepts collateral in the form of liquid securities or cash.

If the value of the securities the Company receives as collateral increases, the Company’s reverse repo counterparties may request a return of their collateral with a value equal to such increase.

In some cases, the Company will return to such reverse repo counterparties cash instead of securities.

In that case, the Company includes the cash returned as a component of other receivables (see above).

When the Company enters into repo transactions, the Company provides collateral to the Company’s repo counterparties in excess of the principal balance of the repo.

The Company’s counterparties accept collateral in the form of liquid securities or cash.

When the Company enters into repo transactions, the Company provides collateral to the Company’s repo counterparties in excess of the principal balance of the repo.

The Company’s counterparties accept collateral in the form of liquid securities or cash.

To the extent the Company provides the collateral in cash, the Company includes it as a component of other receivables (see above).

1 unchanged sentence

These amounts are generally accrued monthly and paid on a monthly or quarterly basis.

Accrued interest and dividends receivable represent interest and dividends accrued on the Company’s investment securities included as a component of investments-trading or other investments, at fair value.

Interest payable on securities sold, not yet purchased is included as a component of accounts payable and other liabilities in the table entitled Accounts Payable and Other Liabilities below.

Revenue share receivable represents the amount due to the Company for the Company’s share of revenue arrangements generated from various ent ities in which the Company receives a share of the entity’s revenue.

Revenue share receivable represents the amount due to the Company for the Company’s share of revenue arrangements generated from various entities in which the Company receives a share of the entity’s revenue.

Other receivables represent other miscellaneous receivables that are of a short-term nature.

1 unchanged sentence

(Dollars in Thousands)

March 31, 2020

June 30, 2020

December 31, 2019

1 unchanged sentence

Prepaid expenses

Prepaid income taxes

Miscellaneous other assets

7 unchanged sentences

Effective January 1, 2020, in connection with the adoption of ASC 326, the Company began accounting for RTLs at fair value and including them as a component of investments-trading.

See note 1 6 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2019 for further discussion of the firm’s furniture, equipment, and leasehold improvements.

See note 16 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2019 for further discussion of the firm’s furniture, equipment, and leasehold improvements.

Intangible assets represent the carrying value of the JVB broker-dealer license.

2 unchanged sentences

(Dollars in Thousands)

March 31, 2020

June 30, 2020

December 31, 2019

11 unchanged sentences

To the extent the Company receives cash collateral, the Company includes it as a component of other liabilities (counterparty cash collateral) in the table above.

When the Company enters into repo transactions, the Company provides collateral to the Company’s repo counterparty in excess of the principal balance of the repo.

If the value of the securities the Company provides as collateral increases, the Company may request a return of its collateral with a value equal to such increase.

2 unchanged sentences

VARIABLE INTEREST ENTITIES

As a general matter, a reporting entity must consolidate a variable interest entity (“VIE”) when it is deemed to be the primary beneficiary.

The primary beneficiary is the entity that has both (a) the power to direct the matters that most significantly impact the VIE’s financial performance and (b) a significant variable interest in the VIE.

The Company’s Principal Investing Portfolio

As a general matter, a reporting entity must consolidate a variable interest entity (“VIE”) when it is deemed to be the primary beneficiary.

The Company’s Principal Investing Portfolio

Included in other investments, at fair value in the consolidated balance sheets are investments in several VIEs.

1 unchanged sentence

The maximum potential financial statement loss the Company would incur if the VIEs were to default on all their obligations would be the loss of the carrying value of these investments as well as any future investments the Company were to make.

As of March 31, 2020 , there were $ 817 of unfunded commitments to VIEs that the Company has invested in.

Other than its investment in these entities, the Company did not provide financial support to these VIEs during the three months ended March 31, 2020 and 2019 and had no liabilities, contingent liabilities, or guarantees (implicit or explicit) related to these VIEs at March 31, 2020 and December 31, 2019.

As of June 30, 2020 , there were $817 of unfunded commitments to VIEs that the Company has invested in.

Other than its investment in these entities, the Company did not provide financial support to these VIEs during the three and six months ended June 30, 2020 and 2019 and had no liabilities, contingent liabilities, or guarantees (implicit or explicit) related to these VIEs at June 30, 2020 and December 31, 2019 .

See table below.

4 unchanged sentences

Therefore, the Company is not the primary beneficiary of any VIEs that it manages.

The Company’s Trading Portfolio

From time to time, the Company may acquire an interest in a VIE through the investments it makes as part of its trading operations, which are included as investments-trading or securities sold, not yet purchased in the consolidated balance sheets.

1 unchanged sentence

Even if the Company were to obtain a variable interest in a VIE through its trading portfolio, the Company would not be deemed to be the primary beneficiary for two main reasons:

(a) the Company does not usually obtain the power to direct activities that most significantly impact any investee’s financial performance and (b) a scope exception exists within the consolidation guidance for cases where the reporting entity is a broker-dealer and any control (either as the primary beneficiary of a VIE or through a controlling interest in a voting interest entity) was deemed to be temporary.

In the unlikely case that the Company obtained the power to direct activities and obtained a significant variable interest in an investee in its trading portfolio that was a VIE, any such control would be deemed to be temporary due to the rapid turnover of the Company’s trading portfolio.

The following table presents the carrying amounts of the assets in the Company’s consolidated balance sheets related to the Company’s variable interests in identified VIEs with the exception of (i) the two trust VIEs that hold the Company’s junior subordinated notes (see note 1 7 ) and (ii) any security that represents an interest in a VIE that is included in investments-trading or securities sold, not yet purchased in the Company’s consolidated balance sheets.

The table below shows the Company’s maximum exposure to loss associated with these identified nonconsolidated VIEs in which it holds variable interests at March 31, 2020 and December 31, 2019 .

The following table presents the carrying amounts of the assets in the Company’s consolidated balance sheets related to the Company’s variable interests in identified VIEs with the exception of (i) the two trust VIEs that hold the Company’s junior subordinated notes (see note 17) and (ii) any security that represents an interest in a VIE that is included in investments-trading or securities sold, not yet purchased in the Company’s consolidated balance sheets.

The table below shows the Company’s maximum exposure to loss associated with these identified nonconsolidated VIEs in which it holds variable interests at June 30, 2020 and December 31, 2019 .

CARRYING VALUE OF VARIABLE INTERESTS IN NON-CONSOLIDATED VARIABLE INTEREST ENTITIES

(Dollars in Thousands)

As of March 31, 2020

As of June 30, 2020

As of December 31, 2019

5 unchanged sentences

(Dollars in Thousands)

As of March 31, 2020

As of June 30, 2020

As of December 31, 2019

3 unchanged sentences

JKD Capital Partners I LTD Amendment

On October 3, 2016, the Operating LLC entered into an investment agreement (the “JKD Investment Agreement”), by and between Operating LLC and the JKD Investor, pursuant to which the JKD Investor agreed to invest up to $12,000 in the Operating LLC (the “JKD Investment”), $6,000 of which was invested upon the execution of the JKD Investment Agreement, an additional $1,000 was invested in January 2017, and an additional $1,268 was invested on January 9, 2019.

The JKD Investor is owned by Jack DiMaio, the vice chairman of the Company’s board of directors and the Operating LLC’s board of managers, and his spouse.

In exchange for the JKD Investment, the Operating LLC agreed to pay to JKD Investor during the term of the JKD Investment Agreement an amount (“JKD Investment Return”) equal to 50% of the difference between (i) the revenues generated during a quarter by the activities of the Institutional Corporate Trading Business of JVB (as defined in the JKD Investment A greement, as amended) and (ii) certain expenses incurred by such Institutional Corporate Trading Business (the “Institutional Corporate Trading Business Net Revenue”).

The JKD Investor is owned by Jack DiMaio, the vice chairman of the Company’s board of directors and the Operating LLC’s board of managers, and his spouse.

In exchange for the JKD Investment, the Operating LLC agreed to pay to JKD Investor during the term of the JKD Investment Agreement an amount (“JKD Investment Return”) equal to 50% of the difference between (i) the revenues generated during a quarter by the activities of the Institutional Corporate Trading Business of JVB (as defined in the JKD Investment Agreement, as amended) and (ii) certain expenses incurred by such Institutional Corporate Trading Business (the “Institutional Corporate Trading Business Net Revenue”).

This JKD Investment Return is recorded monthly as interest expense or (interest income) with the related accrued interest recorded in accounts payable and other accrued liabilities.

If the return is negative i n an individual quarter, it will reduce the balance of the JKD Investment.

If the return is negative in an individual quarter, it will reduce the balance of the JKD Investment.

Payments of the JKD Investment Return are made on a quarterly basis.

The term of the JKD Investment Agreement commenced on October 3, 2016 and will continue until a redemption (as described below) occurs, unless the JKD Investment Agreement is earlier terminated.

On March 6, 2019, the JKD Investor and the Operating LLC entered into an amendment to the JKD Investment Agreement (the “JKD Investment Agreement Amendment”), pursuant to which the term “JKD Investment Return”

under the JKD Investment Agreement was amended as follows:

during the fourth quarter of 2018, an amount equal to 42% of the Institutional Corporate Trading Business Net Revenue and

commencing on January 1, 2019 and for each quarter during the remainder of the term of the JKD Investment Agreement, an amount equal to a percentage of the Institutional Corporate Trading Business Net Revenue, which percentage is based on the JKD Investor’s investment under the JKD Investment Agreement as a percentage of the total capital allocated to the Institutional Corporate Trading Business of JVB.

The JKD Investor may terminate the JKD Investment Agreement (i) upon 90 days’

prior written notice to the Operating LLC if the Operating LLC or its affiliates modify any of their policies or procedures governing the operation of their businesses or change the way they operate their business and such modification has a material adverse effect on the amounts payable to the JKD Investor pursuant to the JKD Investment Agreement or (ii) upon 60 days’

prior written notice to the Operating LLC if the employment of Lester Brafman, the Company’s chief executive officer, is terminated.

The Operating LLC may terminate the JKD Investment Agreement, as amended, upon 60 days’

prior written notice to the JKD Investor if Mr.

The JKD Investor may terminate the JKD Investment Agreement (i) upon 90 days’ prior written notice to the Operating LLC if the Operating LLC or its affiliates modify any of their policies or procedures governing the operation of their businesses or change the way they operate their business and such modification has a material adverse effect on the amounts payable to the JKD Investor pursuant to the JKD Investment Agreement or (ii) upon 60 days’ prior written notice to the Operating LLC if the employment of Lester Brafman, the Company’s chief executive officer, is terminated.

The Operating LLC may terminate the JKD Investment Agreement, as amended, upon 60 days’ prior written notice to the JKD Investor if Mr.

DiMaio ceases to control the day-to-day operations of the JKD Investor.

Upon a termination of the JKD Investment Agreement, as amended, the Operating LLC will pay to the JKD Investor an amount equal to the “Investment Balance”

(as such term is defined in the JKD Investment Agreement, as amended) as of the day prior to such termination.

At any time following October 3, 2019, the JKD Investor or the Operating LLC may, upon two months’

notice to the other party, cause the Operating LLC to pay a redemption to the JKD Investor in an amount equal to the Investment Balance (as such term is defined in the JKD Investment Agreement, as amended) as of the day prior to such redemption.

If the Operating LLC or JVB sells JVB’s Institutional Corporate Trading Business to any unaffiliated third party, and such sale is not part of a larger sale of all or substantially all of the assets or equity securities of the Operating LLC or JVB, the Operating LLC will pay to the JKD Investor an amount equal to 25% of the net consideration paid to the Operating LLC in connection with such sale, after deducting certain amounts and certain expenses incurred by the Operating LLC or JVB in connection with such sale.

DGC Trust/ CBF Amendment s

Upon a termination of the JKD Investment Agreement, as amended, the Operating LLC will pay to the JKD Investor an amount equal to the “Investment Balance” (as such term is defined in the JKD Investment Agreement, as amended) as of the day prior to such termination.

At any time following October 3, 2019, the JKD Investor or the Operating LLC may, upon two months’ notice to the other party, cause the Operating LLC to pay a redemption to the JKD Investor in an amount equal to the Investment Balance (as such term is defined in the JKD Investment Agreement, as amended) as of the day prior to such redemption.

DGC Trust/ CBF Amendments

Prior to September 30, 2019, the DGC Trust / CBF redeemable financial instruments were comprised of two separate agreements:

one with CBF pursuant to which CBF invested $8,000 into the Operating LLC (the “CBF Investment Agreement”) , and one with the DGC Trust pursuant to which the DGC Trust invested $2,000 into the Operating LLC (the “DGC Trust Investment Agreement”).

The CBF Investment Agreement and the DGC Trust Investment A greement were both amended on September 25, 2019, and again on December 4, 2019, with each amendment becoming effective October 1, 2019.

one with CBF pursuant to which CBF invested $8,000 into the Operating LLC (the “CBF Investment Agreement”), and one with the DGC Trust pursuant to which the DGC Trust invested $2,000 into the Operating LLC (the “DGC Trust Investment Agreement”).

The CBF Investment Agreement and the DGC Trust Investment Agreement were both amended on September 25, 2019, and again on December 4, 2019, with each amendment becoming effective October 1, 2019.

The amendments included the following amendments to each of the CBF Investment Agreement and the DGC Trust Investment Agreement:

T he term “Investment Amount ”

under the CBF Investment Agreement was reduced from $8,000 to $ 6,500 in exchange for a one-time payment of $1,500 from the Operating LLC to CBF;

T he term “Investment Return ”

under the CBF Investment Agreement was amended to mean an annual return equal to:

for the Annual P eriod ending on September 29, 2020, 3.75% of the Investment Amount, plus (x) 11.47% of any revenue of the GCF repo business (the “Revenue of the Business”) during such period between zero and $11,777 plus (y) 7.65% of any Revenue of the Business during such period in excess of $11,777 .

Prior to the second amendment, the Investment Return was with respect to any twelve-month period ending on September 29, 2020 (each an “Annual Period”) was 3.75% of the Investment Amount plus (x) 11.47% of the Revenue of the Business for any Annual Period in which the Revenue of the Business was greater than zero but less than or equal to $5,333, (y) $612 for any Annual Period in which the Revenue of the Business is greater than $5,333 but less than or equal to $8,000 , or (z) 7.65% of the Revenue of the Business for any Annual Period in which the Revenue of the Business is greater than $8,000 , and

The term “Investment Amount” under the CBF Investment Agreement was reduced from $8,000 to $6,500 in exchange for a one-time payment of $1,500 from the Operating LLC to CBF;

The term “Investment Return” under the CBF Investment Agreement was amended to mean an annual return equal to:

for the Annual Period ending on September 29, 2020, 3.75% of the Investment Amount, plus (x) 11.47% of any revenue of the GCF repo business (the “Revenue of the Business”) during such period between zero and $11,777 plus (y) 7.65% of any Revenue of the Business during such period in excess of $11,777.

Prior to the second amendment, the Investment Return was with respect to any twelve-month period ending on September 29, 2020 (each an “Annual Period”) was 3.75% of the Investment Amount plus (x) 11.47% of the Revenue of the Business for any Annual Period in which the Revenue of the Business was greater than zero but less than or equal to $5,333, (y) $612 for any Annual Period in which the Revenue of the Business is greater than $5,333 but less than or equal to $8,000, or (z) 7.65% of the Revenue of the Business for any Annual Period in which the Revenue of the Business is greater than $8,000, and

for any Annual Period following September 29, 2020, (x) for any Annual Period in which the Revenue of the Business is greater than zero, the greater of 20% of the Investment Amount or 15.29% of the Revenue of the Business, or (y) for any Annual Period in which the Revenue of the Business is zero or less than zero, 3.75% of the Investment Amount.

T he term “Investment Return ”

under the DGC Trust Investment Agreement was amended to mean an annual return equal to:

The term “Investment Return” under the DGC Trust Investment Agreement was amended to mean an annual return equal to:

for the twelve-month period ending on September 29, 2020, 3.75% of the Investment Amount plus (x) 3.53% of any Revenue of the Business, during such period between zero and $11,177 plus (y) 2.35% of any Revenue of the Business during such period in excess of $11,177.

Prior to the second amendment, the Investment Return was 3.75% of the Investment Amount, as defined in the DGC Trust Investment Agreement , plus (x) 3.53% of the Revenue of the Business, for any Annual Period in which the Revenue of the Business is greater than zero but less than or equal to $5,333 (y) $188 for any Annual Period in which the Revenue of the Business is greater than $5,333 , b ut less than or equal to $8,000 , o r (z) 2.35% of the Revenue of the Business for any Annual Period in which the Revenue of the Business is greater than $8,000 and

Prior to the second amendment, the Investment Return was 3.75% of the Investment Amount, as defined in the DGC Trust Investment Agreement , plus (x) 3.53% of the Revenue of the Business, for any Annual Period in which the Revenue of the Business is greater than zero but less than or equal to $5,333 (y) $188 for any Annual Period in which the Revenue of the Business is greater than $5,333, but less than or equal to $8,000, or (z) 2.35% of the Revenue of the Business for any Annual Period in which the Revenue of the Business is greater than $8,000 and

for any Annual Period following September 29, 2020, (x) for any Annual Period in which the Revenue of the Business is greater than zero, the greater of 20% of the Investment Amount or 4.71% of the Revenue of the Business, or (y) for any Annual Period in which the Revenue of the Business is zero or less than zero, 3.75% of the Investment Amount.

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The payment of $1,500 was made by the Operating LLC to CBF in October 2019, which reduced the redeemable financial instrument balance under the CBF Investment Agreement.

The Company has given notice to the DGC Trust that it intends to redeem its $2,000 investment on September 30, 2020.

ViaNova Capital Group LLC

On November 16, 2018, and effective as of November 19, 2018, the Operating LLC entered into an investment agreement (the “ViaNova Investment Agreement”) by and among Hancock Funding, LLC (“Hancock”), New Avenue Investments LLC (“New Avenue”), JVB, ViaNova, and the Operating LLC.

Pursuant to the ViaNova Investment Agreement, Hancock, New Avenue, the Operating LLC, and JVB agreed to invest $500 , $250 , $500, and $2,750 , respectively, into ViaNova (collectively, the “ViaNova Investment”).

Pursuant to the ViaNova Investment Agreement, Hancock, New Avenue, the Operating LLC, and JVB agreed to invest $500, $250, $500, and $2,750, respectively, into ViaNova (collectively, the “ViaNova Investment”).

Pursuant to the ViaNova Investment Agreement, Hancock, the Operating LLC, and JVB invested their respective portions of the ViaNova Investment into ViaNova prior to the effective date of the ViaNova Investment Agreement.

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Hancock and New Avenue are owned by employees of the Company.

Pursuant to the ViaNova Investment Agreement, in consideration of the ViaNova Investment, once the Operating LLC is repaid $693 of funded operating costs from net revenue (as defined in the ViaNova Investment Agreement) generated directly by the activities of ViaNova’s RTL business, each party to the ViaNova Investment Agreement is entitled to receive a quarterly payment equal to the net revenue (to the extent positive) generated directly by the activities of ViaNova’s RTL business during such quarter, multiplied by a fraction, the numerator of which is equal to such party’s portion of the ViaNova Investment and the denominator is equal to the entire ViaNova Investment.

During the first quarter of 2020, the Company ceased acquiring new RTLs and began an orderly wind down of its RTL business.

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(Dollars in Thousands)

As of March 31, 2020

As of December 31, 2019

Interest Rate Terms

June 30, 2020

December 31, 2019

Non-convertible debt:

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(ii) the conversion feature in the 2013 Convertible Notes was removed;

(iii) the interest rate changed from 8% per annum ( 9% in the event of certain

events of default) to 12% per annum ( 13% in the event of certain events of default);

(iii) the interest rate changed from 8% per annum (9% in the event of certain events of default) to 12% per annum (13% in the event of certain events of default);

and (iv) the restrictions regarding the prepayment were removed.

The post amendment notes are referred to herein as the “2019 Senior Notes”

and the pre-amendment notes are referred to herein as the “2013 Convertible Notes .

The post amendment notes are referred to herein as the “2019 Senior Notes” and the pre-amendment notes are referred to herein as the “2013 Convertible Notes.”

The holder of the 2017 Convertible Note may convert all or any part of the outstanding principal amount at any time prior to maturity into units of membership interests of the Operating LLC at a conversion price of $1.45 per unit, subject to customary anti-dilution adjustments.

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may, with certain restrictions, be redeemed and exchanged into shares of the Cohen & Company Inc.

common stock, par value $0.01 per share (“Common Stock”) on a ten-for-one basis.

Therefore, the 2017 Convertible Note can be converted into Operating LLC units of membership interests and then redeemed and exchanged into Common Stock at an effective conversion price of $14.50.

See note 20 to our Annual Report on Form 10-K for the year ended December 31, 2019.

See note 20 to the Annual Report on Form 10-K for the year ended December 31, 2019 .

The junior subordinated notes listed represent debt the Company owes to the two trusts noted above.

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The junior subordinated notes are recorded at a discount to par.

When factoring in the discount, the yield to maturity of the junior subordinated notes as of March 31, 2020 on a combined basis was 1 5.04 % assuming the variable rate in effect on the last day of the reporting period remains in effect until maturity.

When factoring in the discount, the yield to maturity of the junior subordinated notes as of June 30, 2020 on a combined basis was 14.31% assuming the variable rate in effect on the last day of the reporting period remains in effect until maturity.

Represents the interest rate in effect as of the last day of the reporting period.

The 2020 Senior Notes

The JKD Investor is owned by Jack DiMaio, the vice chairman of the Company’s board of directors and the Operating LLC’s board of managers, and his spouse.

Pursuant to the note purchase agreement, JKD Investor and RNCS each purchased a senior promissory note in the principal amount of $2,250 (for an aggregate investment of $4,500).

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Cohen IRA in the principal amount of $4,386 (the “Cohen IRA Note”).

The Cohen IRA Note is included as a portion of the 2019 Senior Notes outstanding as of December 31, 2019 .

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The 2019 Senior Notes

On September 25, 2019, the Company amended and restated the previously outstanding 2013 Convertible Notes, which was scheduled to mature on September 25, 2019.

On September 25, 2019, the Company amended and restated the previously outstanding 2013 Convertible Notes, which were scheduled to mature on September 25, 2019.

The material terms and conditions of the 2013 Convertible Notes remained substantially the same, except that (i) the maturity date was changed from September 25, 2019 to September 25, 2020;

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and (iv) the restrictions regarding prepayment were removed.

The post amendment notes are referred to herein as the “2019 Senior Notes”

and the pre-amendment notes are referred to herein as the “2013 Convertible Notes”.

The post amendment notes are referred to herein as the “2019 Senior Notes” and the pre-amendment notes are referred to herein as the “2013 Convertible Notes”.

On May 1, 2020 the Company qualified for and received a loan pursuant to the PPP, ("PPP Loan") under the CARES Act and administered by the U.S.

Small Business Association ("SBA").

The PPP Loan is evidenced by a promissory note between the Company and FT Financial.

The PPP Loan bears interest at a fixed rate of 1.0% per year, with the first six months of interest deferred, has a term of two years and may be prepaid at any time without payment of any premium.

The PPP Loan is unsecured but guaranteed by the SBA.

Under the terms of the CARES Act, PPP Loan recipients can apply for and be granted forgiveness for all or a portion of the PPP Loan, with such forgiveness to be determined, subject to limitations, based on the use of the PPP Loan proceeds for payment of payroll costs and payments of mortgage interest, rent, and utilities.

The terms of any forgiveness may also be subject to further requirements in any regulations and guidelines the SBA may adopt.

In order to obtain forgiveness of the PPP Loan, the Company must submit a request and provide satisfactory documentation regarding its compliance with applicable requirements.

While the Company currently believes that its use of the PPP Loan proceeds will meet the conditions for forgiveness under the PPP, no assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.

The Company must repay any unforgiven principal amount of the PPP Loan, with interest, on a monthly basis following the deferral period.

The PPP Loan contains customary events of default relating to, among other things, payment defaults and breaches of representations, warranties or covenants.

The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company.

LegacyTexas Bank

On November 20, 2018, ViaNova, as borrower, entered into a Warehousing Credit and Security Agreement (the “LegacyTexas Credit Facility”) with LegacyTexas Bank, as the lender, with an effective date of November 16, 2018, and amended on May 4, 2019 and September 25, 2019.

The LegacyTexas Credit Facility supported the purchasing, aggregating, and distribution of residential transition loans by ViaNova.

Also, on March 19, 2020, ViaNova received notice from LegacyTexas Bank that the Bank had suspended funding all “Alternative”

loans for all of their clients, including the RTL s that are the subject of the LegacyTexas Credit Facility with LegacyTexas Bank.

Also, on March 19, 2020, ViaNova received notice from LegacyTexas Bank that the Bank had suspended funding all “Alternative” loans for all of their clients, including the RTLs that are the subject of the LegacyTexas Credit Facility with LegacyTexas Bank.

Since March 19, 2020 ViaNova has repaid all outstanding indebtedness under the Agreement.

ViaNova stopped acquiring new RTLs and does not intend to acquire any new RTLs in the future.

See note 20 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of the Company’s other debt.

FT Financial Bank, N.A.

(“FT Bank”) Credit Facility

FT Bank Credit Facility

The credit facility with FT Bank has a total borrowing capacity of $25,000.

It is comprised of a revolving credit facility ( the “

2019 FT Revolver ”) which has a total borrowing capacity of $17,500 and a line of credit ( the “

20 1 8 FT LOC ”), which has a total borrowing capacity of $7,500 .

It is comprised of a revolving credit facility (the “2019 FT Revolver”) which has a total borrowing capacity of $17,500 and a line of credit (the “2018 FT LOC”), which has a total borrowing capacity of $7,500.

Both mature on April 10, 2021.

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Furthermore, JVB is subject to financial covenants including a minimum excess net capital covenant, a debt to tangible net worth covenant, and a minimum tangible net worth covenant.

See note 20 to Company’s 2019 audited financial statements included in its annual report on Form 10-K.

The Company is currently working to extend the draw period and the maturity of the 2019 FT Revolver and the 2018 FT LOC.

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(Dollars in Thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Junior subordinated notes

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Redeemable Financial Instrument - ViaNova Capital Group, LLC

Because the LegacyTexas Credit Facility wa s used to directly finance the purchase of securities and loans, the interest expense incurred on the Legacy Texas Credit Facility is included as a component of net trading revenue.

Stockholders’

Because the LegacyTexas Credit Facility was used to directly finance the purchase of securities and loans, the interest expense incurred on the Legacy Texas Credit Facility is included as a component of net trading revenue.

Stockholders’ Equity

Common Equity :

The following table reflects the activity for the three months ended March 31, 2020 related to the number of shares of unrestricted Common Stock that the Company had issued.

The following table reflects the activity for the six months ended June 30, 2020 related to the number of shares of unrestricted Common Stock that the Company had issued.

December 31, 2019

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Shares withheld for employee taxes and retired

March 31, 2020

June 30, 2020

Series E Voting Non-Convertible Preferred Stock :

Each share of the Company’s Series E Voting Non-Convertible Preferred Stock (“Series E Preferred Stock”) has no economic rights but entitles the holders there of to vote the Series E Preferred Stock on all matters presented to the Company’s stockholders.

For every ten shares of Series E Preferred Stock, the holders are entitled to one vote on any such matter.

Cohen, the Company’s chairman, is the sole holder of all 4,983,557 shares of Series E Preferred Stock issued and outstanding as of March 31, 2020 , For a more detailed description of these shares see note 21 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 .

Cohen, the Company’s chairman, is the sole holder of all 4,983,557 shares of Series E Preferred Stock issued and outstanding as of June 30, 2020 .

For a more detailed description of these shares see note 21 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 .

Series F Voting Non-Convertible Preferred Stock :

On December 23, 2019, the Company’s board of directors adopted a resolution that reclassified 25,000,000 authorized but unissued shares of Preferred Stock, par value $ 0 .001 per share, of the Company as a series of Preferred Stock designated as Series F Voting Non-Convertible Preferred Stock (“Series F Preferred Stock”).

to the Securities Purchase Agreement (the “SPA”), dated December 30, 2019, by and among the Company, the Operating LLC, Daniel G.

Cohen, and The DGC Family FinTech Trust (the “DGC Trust”), the Company issued 12,549,273 Series F Preferred Stock to Daniel G.

On December 23, 2019, the Company’s board of directors adopted a resolution that reclassified 25,000,000 authorized but unissued shares of Preferred Stock, par value $0.001 per share, of the Company as a series of Preferred Stock designated as Series F Voting Non-Convertible Preferred Stock (“Series F Preferred Stock”).

Pursuant to the Securities Purchase Agreement (the “SPA”), dated December 30, 2019, by and among the Company, the Operating LLC, Daniel G.

Cohen, and The DGC Family FinTech Trust (the “DGC Trust”), the Company issued 12,549,273 Series F Preferred Stock to Daniel G.

Cohen and 9,880,268 Series F Preferred Stock to the DGC Trust.

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The holders of Series F Preferred Stock and Common Stock are required to vote, together as a single class on all matters with respect to which a vote of the stockholders of the Company is required or permitted.

Each outstanding share of Series F Preferred Stock entitles the holder to one vote for every ten shares of Series F Preferred Stock on each matter submitted to the h olders for their vote.

Each outstanding share of Series F Preferred Stock entitles the holder to one vote for every ten shares of Series F Preferred Stock on each matter submitted to the holders for their vote.

As of December 31, 2019 , there were 22,429,541 shares of Series F Preferred Stock issued and outstanding .

See Non-Controlling Interest/ - Securities Purchase Agreement –

Purchase of IMXI shares below.

For a more detailed description of these shares see note 21 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 .

See Non-Controlling Interest/ - Securities Purchase Agreement – Purchase of IMXI shares below.

For a more detailed description of these shares see note 21 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 .

Stockholder Rights Plan

On August 3, 2016, the Company adopted a Section 382 Rights Agreement (the “2016 Rights Agreement”) between the Company and Computershare, Inc.

The Company’s board of directors adopted the 2016 Rights Agreement in an effort to protect stockholder value by attempting to protect against a possible limitation on the Company’s ability to use its net operating loss and net capital loss carryforwards to reduce potential future federal income tax obligations.

On August 3, 2016, the Company adopted a Section 382 Rights Agreement (the “2016 Rights Agreement”) between the Company and Computershare, Inc.

This 2016 Rights Agreement expired in accordance with its terms on December 31, 2019 .

On March 10, 2020, the Company entered into a new Section 382 Rights Agreement (the “Rights Agreement”) with Computershare Inc., as rights agent (the “Rights Agent”).

The Rights Agreement provide d for a distribution of one preferred stock purchase right (each, a “Right,”

and collectively, the “Rights”) for each share of the Company’s common stock outstanding to stockholders of record at the close of business on March 20, 2020 (the “Record Date”).

Each Right entitles the registered holder to purchase from the Company a unit (a “Unit”) consisting of one ten-thousandth of a share of the Company’s Series C Junior Participating Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”), at a purchase price of $100.00 per Unit (the “Purchase Price”), subject to adjustment.

On March 10, 2020, the Company entered into a new Section 382 Rights Agreement (the “Rights Agreement”) with Computershare Inc., as rights agent (the “Rights Agent”).

The Rights Agreement provided for a distribution of one preferred stock purchase right (each, a “Right,” and collectively, the “Rights”) for each share of the Company’s common stock outstanding to stockholders of record at the close of business on March 20, 2020 (the “Record Date”).

The description and terms of the Rights are set forth in the Rights Agreement.

Initially, the Rights will be attached to all Common Stock certificates representing shares then outstanding or, in the case of uncertificated shares of Common Stock registered in book entry form (“Book Entry Shares”) by notation in book entry (which certificates for Common Stock and Book Entry Shares shall be deemed also to be certificates for Rights), and no separate Rights certificates will be distributed.

Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from the Common Stock and a “Distribution Date”

will occur upon the earlier of (i) 10 days following a public announcement that a person or group of affiliated or associated persons has become an “Acquiring Person”

(as defined below) (the “Stock Acquisition Date”) and (ii) 10 business days following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person.

Pursuant to the Rights Agreement, an “Acquiring Person”

means any person or entity who or which, together with all affiliates and associates of such person or entity, is the beneficial owner of 4.95% or more of the shares of Common Stock then outstanding, but does not include the Company or any “Exempted Person”

(as defined below).

Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from the Common Stock and a “Distribution Date” will occur upon the earlier of (i) 10 days following a public announcement that a person or group of affiliated or associated persons has become an “Acquiring Person” (as defined below) (the “Stock Acquisition Date”) and (ii) 10 business days following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person.

Pursuant to the Rights Agreement, an “Acquiring Person” means any person or entity who or which, together with all affiliates and associates of such person or entity, is the beneficial owner of 4.95% or more of the shares of Common Stock then outstanding, but does not include the Company or any “Exempted Person” (as defined below).

Until the Distribution Date, (i) the Rights will be evidenced by the Common Stock certificates and will be transferred with and only with such Common Stock certificates, (ii) new Common Stock certificates after the Record Date will contain a notation incorporating the Rights Agreement by reference, and (iii) the surrender for transfer of any certificates for Common Stock outstanding will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate.

Pursuant to the Rights Agreement, an “Exempted Person”

is any person or entity who, together with all affiliates and associates of such person or entity, was or could become, as of March 10, 2020, the beneficial owner of Common Stock and/or other securities exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock outstanding as of March 10, 2020.

Pursuant to the Rights Agreement, an “Exempted Person” is any person or entity who, together with all affiliates and associates of such person or entity, was or could become, as of March 10, 2020, the beneficial owner of Common Stock and/or other securities exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock outstanding as of March 10, 2020.

However, any such person or entity will no longer be deemed to be an Exempted Person and shall be deemed an Acquiring Person under the Rights Agreement if such person or entity, together with all affiliates and associates of such person or entity, becomes the beneficial owner (and so long as such person continues to be the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock) of additional shares of Common Stock, except (x) pursuant to equity compensation awards granted to such person or entity by the Company or options or warrants outstanding and beneficially owned by such person or entity as of March 10, 2020, or as a result of an adjustment to the number of shares of Common Stock represented by such equity compensation award pursuant to the terms thereof;

or (y) as a result of a stock split, stock dividend or the like.

However, any such person will no longer be deemed to be an Exempted Person and will be deemed to be an Acquiring Person if such

person, together with all affiliates and associates of such person, becomes the beneficial owner, at any time after the date such person became the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock, of additional shares of Common Stock, except if such additional securities are acquired (x) pursuant to the exercise of options or warrants to purchase Common Stock outstanding and beneficially owned by such person as of the date such person became the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock or as a result of an adjustment to the number of shares of Common Stock for which such options or warrants are exercisable pursuant to the terms thereof, or (y) as a result of a stock split, stock dividend or the like.

In addition, the Rights Agreement define s the term “Exempted Person”

to also include any person or entity who, together with all affiliates and associates of such person or entity, is the beneficial owner of Common Stock and/or other securities exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock outstanding, and whose beneficial ownership would not, as determined by the Company’s board of directors , jeopardize or endanger the availability of the Company of its deferred tax assets.

However, any such person or entity will cease to be an Exempted Person if (x) such person or entity ceases to beneficially own 4.95% or more of the shares of the then outstanding Common Stock or (y) the Company’s b oard of d irectors makes a contrary determination with respect to the effect of such person’s or entity’s beneficial ownership (together with all affiliates and associates of such person) with respect to the availability to the Company of its deferred tax assets.

In addition, any person or entity who, together with all affiliates and associates of such person or entity, becomes the beneficial owner of Common Stock and/or other securities exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock then outstanding as a result of a purchase by the Company or any of its subsidiaries of shares of Common Stock will also be an “Exempted Person.” However, any such person will no longer be deemed to be an Exempted Person and will be deemed to be an Acquiring Person if such person, together with all affiliates and associates of such person, becomes the beneficial owner, at any time after the date such person became the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock, of additional shares of Common Stock, except if such additional securities are acquired (x) pursuant to the exercise of options or warrants to purchase Common Stock outstanding and beneficially owned by such person as of the date such person

became the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock or as a result of an adjustment to the number of shares of Common Stock for which such options or warrants are exercisable pursuant to the terms thereof, or (y) as a result of a stock split, stock dividend or the like.

In addition, the Rights Agreement defines the term “Exempted Person” to also include any person or entity who, together with all affiliates and associates of such person or entity, is the beneficial owner of Common Stock and/or other securities exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock outstanding, and whose beneficial ownership would not, as determined by the Company’s board of directors, jeopardize or endanger the availability of the Company of its deferred tax assets.

However, any such person or entity will cease to be an Exempted Person if (x) such person or entity ceases to beneficially own 4.95% or more of the shares of the then outstanding Common Stock or (y) the Company’s board of directors makes a contrary determination with respect to the effect of such person’s or entity’s beneficial ownership (together with all affiliates and associates of such person) with respect to the availability to the Company of its deferred tax assets.

Pursuant to the Rights Agreement, a purchaser, assignee or transferee of the shares of Common Stock (or options or warrants exercisable for Common Stock) from an Exempted Person will not be considered an Exempted Person, except that a transferee from the estate of an Exempted Person who receives Common Stock as a bequest or inheritance from an Exempted Person will be an Exempted Person so long as such transferee continues to be the beneficial owner of 4.95% or more of the then outstanding shares of Common Stock.

The Rights are not exercisable until the Distribution Date and will expire on the earliest of (i) the close of business on December 31, 2023, (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement, (iii) the time at which the Rights are exchanged pursuant to the Rights Agreement, (iv) the repeal of Section 382 of the Code or any successor statute if the Company’s board of directors determines that the Rights Agreement is no longer necessary or desirable for the preservation of certain tax benefits, and (v) the beginning of a taxable year of the Company to which the Company’s board of directors determines that certain tax benefits may not be carried forward.

At no time will the Rights have any voting power.

Except as otherwise determined by the Company’s board of directors , only shares of Common Stock issued prior to the Distribution Date will be issued with Rights.

Except as otherwise determined by the Company’s board of directors, only shares of Common Stock issued prior to the Distribution Date will be issued with Rights.

Pursuant to the Rights Agreement, in the event that a person or entity becomes an Acquiring Person, each other holder of a Right will thereafter have the right to receive, upon exercise, Common Stock (or, in certain circumstances, cash, property or other securities of the Company), having a value equal to two times the exercise price of the Right.

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If the Common Stock at the time of exercise had a market value per share of $20.00, the holder of each valid Right would be entitled to purchase ten (10) shares of Common Stock for $100.00.

Notwithstanding any of the foregoing, following the occurrence of a person or entity becoming an Acquiring Person (the “Flip-In Event”), all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by such Acquiring Person will be null and void.

In the event that, at any time following the Stock Acquisition Date, (i) the Company engages in a merger or other business combination transaction in which the Company is not the surviving corporation;

(ii) the Company engages in a merger or other business combination transaction in which the Company is the surviving corporation and the Common Stock is changed or exchanged;

or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold or transferred, each holder of a Right (except Rights which have previously been voided as set forth above) will thereafter have the right to receive, upon exercise of the Right, common stock of the acquiring company having a value equal to two times the exercise price of the Right.

However, Rights are not exercisable following the occurrence of a Flip-In Event until such time as the Rights are no longer redeemable by the Company as set forth below.

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At any time until ten days following the Stock Acquisition Date, the Company may redeem the Rights in whole, but not in part, at a price of $0.001 per Right.

Immediately upon the action of the Company’s board of directors ordering redemption of the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the $0.001 redemption price.

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.

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Effective January 1, 2011, Cohen & Company Inc.

and the Operating LLC entered into a Unit Issuance and Surrender Agreement (the “UIS Agreement”), that was approved by the board of directors of Cohen & Company Inc.

and the board of managers of the Operating LLC.

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to surrender units to the Operating LLC when certain restricted shares are forfeited by the employee or repurchased by the Company.

During the three months ended March 31, 2020 , Cohen & Company Inc.

During the six months ended June 30, 2020 , Cohen & Company Inc.

received and surrendered units of the Operating LLC.

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The Company recognized a net decrease in additional paid in capital of $123 and a net increase in AOCI of $8 with an offsetting increase in non-controlling interest of $115 in connection with the acquisition and surrender of additional units of the Operating LLC.

The following schedule presents the effects of changes in Cohen & Company Inc.’s ownership interest in the Operating LLC on the equity attributable to Cohen & Company Inc.

for the three months ended March 31, 2020 and 2019 .

Three Months Ended

March 31, 2020

March 31, 2019

The following schedule presents the effects of changes in Cohen & Company Inc.’s ownership interest in the Operating LLC on the equity attributable to Cohen & Company Inc.

for the six months ended June 30, 2020 and 2019 .

Six Months Ended

June 30, 2020

June 30, 2019

Net income / (loss) attributable to Cohen & Company Inc.

5 unchanged sentences

Repurchases of Shares and Retirement of Treasury Stock

On March 19, 2018, the Company entered into a letter agreement (the “10b-5 Plan”) with Sandler O’Neill & Partners, L.P.

(the “Agent”).

On March 19, 2018, the Company entered into a letter agreement (the “10b-5 Plan”) with Sandler O’Neill & Partners, L.P.

(the “Agent”).

The 10b-5 Plan was in effect from March 19, 2018 until March 19, 2019 and was not renewed.

Pursuant to the 10b5-1 Plan, the Agent agreed to use its commercially reasonable efforts to purchase , on the Company’s behalf, up to an aggregate maximum of $2,000 of Common Stock on any day that the NYSE American Stock Exchange was open for business.

Pursuant to the 10b5-1 Plan, the Agent agreed to use its commercially reasonable efforts to purchase, on the Company’s behalf, up to an aggregate maximum of $2,000 of Common Stock on any day that the NYSE American Stock Exchange was open for business.

Pursuant to the 10b5-1 Plan, purchases of Common Stock may be made in public and private transactions and had to comply with Rule 10b-18 under the Exchange Act.

The 10b5-1 Plan was designed to comply with Rule 10b5-1 under the Exchange Act.

During the three months ended March 31 , 2019, the Company repurchased 7,890 shares in the open market pursuant to the 10b5-1 Plan for a total purchase price of $65 .

During the six months ended June 30, 2019 , the Company repurchased 7,890 shares in the open market pursuant to the 10b5-1 Plan for a total purchase price of $65.

All of the repurchases noted above were completed using cash on hand.

1 unchanged sentence

Non-Controlling Interest

Securities Purchase Agreement –

Purchase of IMXI shares

On December 30, 2019 (the “SPA Effective Date”), the Company entered into the SPA, pursuant to which Daniel G.

Cohen and the DGC Trust purchased (i) an aggregate of 22,429,541 newly issued units of membership interests in the Operating LLC (collectively, the “LLC Units”);

Securities Purchase Agreement – Purchase of IMXI shares

On December 30, 2019 (the “SPA Effective Date”), the Company entered into the SPA, pursuant to which Daniel G.

Cohen and the DGC Trust purchased (i) an aggregate of 22,429,541 newly issued units of membership interests in the Operating LLC (collectively, the “LLC Units”);

and (ii) 22,429,541 newly issued, Series F Preferred Stock.

In consideration for the issuance of the LLC Units and Series F Preferred Stock, Daniel G.

Cohen transferred to the Operating LLC 370,881 shares of common stock, par value $ 0 .00001 per share (“IMXI Common Stock”), of International Money Express, Inc.

Cohen transferred to the Operating LLC 370,881 shares of common stock, par value $0.00001 per share (“IMXI Common Stock”), of International Money Express, Inc.

(formerly FinTech Acquisition Corp.

II) a Delaware corporation (“IMXI”), and the DGC Trust transferred to the Operating LLC an aggregate of 291,480 shares of IMXI common stock.

The aggregate number of IMXI shares transferred to the Operating LLC was 662,361 , of which (a) 264,021 shares are subject to certain restrictions on transfer until the closing price per share of IMXI Common Stock (as reported by The Nasdaq Capital Market) exceeds $15.00 for any 20 trading days within a consecutive 30 trading day period or immediately upon certain change of control events involving IMXI, as set forth in the letter agreement, dated January 19, 2017 (the “Letter Agreement”), by and among IMXI, Daniel G.

II) a Delaware corporation (“IMXI”), and the DGC Trust transferred to the Operating LLC an aggregate of 291,480 shares of IMXI common stock.

The aggregate number of IMXI shares transferred to the Operating LLC was 662,361, of which (a) 264,021 shares are subject to certain restrictions on transfer until the closing price per share of IMXI Common Stock (as reported by The Nasdaq Capital Market) exceeds $15.00 for any 20 trading days within a consecutive 30 trading day period or immediately upon certain change of control events involving IMXI, as set forth in the letter agreement, dated January 19, 2017 (the “Letter Agreement”), by and among IMXI, Daniel G.

Cohen, the DGC Trust and the other parties named therein, and (b) 264,023 shares are subject to certain restrictions on transfer until the closing price per share of IMXI Common Stock (as reported by The Nasdaq Capital Market) exceeds $17.00 for any 20 trading days within a consecutive 30 trading day period or immediately upon certain change of control events involving IMXI, as set forth in the Letter Agreement.

2 unchanged sentences

The Company accounted for this transaction by recording an increase of $7,779 in other investments, at fair value and a corresponding increase in the non-controlling interest.

The IMXI Common Stock is listed on The Nasdaq Capital Market (“Nasdaq”) under the trading symbol “IMXI.”

Prior to the merger of IMXI with and into a special purpose acquisition company in a transaction that resulted in the listing of IMXI on Nasdaq, Mr.

The IMXI Common Stock is listed on The Nasdaq Capital Market (“Nasdaq”) under the trading symbol “IMXI.” Prior to the merger of IMXI with and into a special purpose acquisition company in a transaction that resulted in the listing of IMXI on Nasdaq, Mr.

Cohen served as the chief executive officer and member of the board of directors of the special purpose acquisition company.

3 unchanged sentences

Cohen, and the DGC Trust provide customary indemnifications thereunder.

Pursuant to the Amended and Restated Limited Liability Company Agreement of the Operating LLC, dated as of December 16, 2009, as amended (“LLC Agreement”), a holder of units of membership interests in the Operating Agreement, including the LLC Units, may cause the Operating LLC to redeem (each, a “Unit Redemption”) such units at any time for, at the Company’s option, (A) cash or (B) one share of Common Stock for every ten units of membership interests in the Operating LLC.

However, pursuant to the SPA, Daniel G.

Cohen and the DGC Trust agreed that, until the Company’s stockholders approve the Stockholder Proposal (as defined below), they will not cause a Unit Redemption with respect to any portion of the LLC Units if such Unit Redemption would result in the Company issuing a number of shares of Common Stock that, when aggregated with any shares of Common Stock previously issued in connection with any Unit Redemption of the LLC Units equals or exceeds 19.99% of the outstanding Common Stock as of the SPA Effective Date.

Pursuant to the SPA, Daniel G.

Cohen and the DGC Trust also agreed to not cause a Unit Redemption with respect to any portion of the Cohen LLC Units if the Company’s board of directors determines that the satisfaction of such Unit Redemption by the Company with shares of Common Stock would jeopardize or endanger the availability to the Company of its net operating loss and net capital loss carryforwards and certain other tax benefits under Section 382 of the Internal Revenue Code of 1986, as amended.

Pursuant to the SPA, at the 2020 annual meeting of the Company’s stockholders, the Company agreed to cause its stockholders to vote on proposals (collectively, the “Stockholder Proposal”) regarding the issuance of all shares of Common Stock issuable in connection with a redemption of the LLC Units for purposes of Section 713 of the NYSE American’s Company Guide.

Further, the Company’s board of directors must recommend to the Company’s stockholders that such stockholders approve the Stockholder Proposal and may not modify or withdraw such resolution.

In addition, effective as of the SPA Effective Date, if the Company owns a number of units of membership interests in the Operating LLC representing less than a majority of the votes entitled to be cast at any meeting or any other circumstances upon which a vote, agreement, consent (including unanimous written consents) or other approval is sought from the holders of units of membership interests in the Operating LLC (each, a “Meeting”), then for so long as the Company owns a number of units of membership interests in the Operating LLC representing less than a majority of the votes entitled to be cast at any Meeting, Daniel G.

Further, the Company’s board of directors must recommend to the Company’s stockholders that such stockholders approve the Stockholder Proposal and may not modify or withdraw such resolution.

The Stockholder Proposal was approved at the Company's 2020 annual meeting.

Cohen and the DGC Trust have agreed to grant a voting proxy to the Company pursuant to which the Company may vote at any Meeting the number of units of membership interests in the Operating LLC owned by Daniel G.

2 unchanged sentences

JVB is subject to the net capital provision of Rule 15c3-1 under the Exchange Act, which requires the maintenance of minimum net capital, as defined therein.

As of March 31, 2020 , JVB’s adjusted net capital was $ 56,517 which exceeded the minimum requirements by $55,632 .

CCFEL, a subsidiary of the Company regulated by the Central Bank of Ireland (“CBI”), is subject to certain regulatory capital requirements in accordance with the Capital Requirements Regulation 575/2013 and applicable CBI requirements.

As of March 31, 2020 , the total minimum required net capital was $945 , and actual net capital in CCFEL was $2,194 , which exceeded the minimum requirements by $1,249 and was in compliance with the net liquid capital provisions.

As of June 30, 2020 , JVB’s adjusted net capital was $67,830 which exceeded the minimum requirements by $67,222

As of June 30, 2020 , the total minimum required net capital was $ 647 , and actual net capital in CCFEL was $ 1,419 , which exceeded the minimum requirements by $ 772 and was in compliance with the net liquid capital provisions.

CCFL, a subsidiary of the Company and an entity regulated by the FCA, is subject to the net liquid capital provision of the Financial Services and Markets Act 2000, GENPRU 2.140R to 2.1.57R, relating to financial prudence with regards to the European Investment Services Directive and the European Capital Adequacy Directive, which requires the maintenance of minimum liquid capital, as defined therein.

As of March 31, 2020 , the total minimum required net liquid capital was $ 145 , and net liquid capital in CCFL was $627 , which exceeded the minimum requirements by $ 482 and was in compliance with the net liquid capital provisions.

EAR NINGS / (Loss) PER COMMON SHARE

As of June 30, 2020 , the total minimum required net liquid capital was $ 170 , and net liquid capital in CCFL was $ 625 , which exceeded the minimum requirements by $ 455 and was in compliance with the net liquid capital provisions.

EARNINGS / (LOSS) PER COMMON SHARE

The following table presents a reconciliation of basic and diluted earnings / (loss) per common share for the periods indicated.

1 unchanged sentence

(Dollars in Thousands, except share or per share information)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net income / (loss) attributable to Cohen & Company Inc.

1 unchanged sentence

Income / (loss) attributable to non-controlling interest attributable to Operating LLC membership (1)

Interest expense incurred on dilutive convertible notes

Add / (deduct):

3 unchanged sentences

Unrestricted Operating LLC membership units exchangeable into Cohen & Company, Inc.

Restricted units or shares

Shares issuable upon conversion of dilutive convertible notes

Weighted average common shares outstanding - Diluted (3)

4 unchanged sentences

The Operating LLC units of membership interests not held by Cohen & Company Inc.

are redeemable, at the member’s option at any time, for (i) cash in an amount equal to the average of the per share closing prices of the Common Stock for the ten consecutive trading days immediately preceding the date the Company receives the member’s redemption notice, or (ii) at the Company’s option, one tenth of a share of the Common Stock, subject, in each case, to appropriate adjustment upon the occurrence of an issuance of additional shares of the Common Stock as a dividend or other distribution on the outstanding Common Stock, or a further subdivision or combination of the outstanding shares of the Common Stock.

These units are not included in the computation of

basic earnings per share.

These units are not included in the computation of basic earnings per share.

These units enter into the computation of diluted net income (loss) per common share when the effect is not anti-dilutive using the if-converted method.

1 unchanged sentence

Potentially diluted securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:

Three Months Ended March 31,

Three Months Ended June 30, 2020

Six Months Ended June 30,

2017 Convertible Note

4 unchanged sentences

Legal and Regulatory Proceedings

The Company’s U.S.

broker-dealer subsidiary, J.V.B.

4 unchanged sentences

and JVB Financial Group LLC .

The plaintiff, VA Management, LP (f/k/a Visium Asset Management, LP) (“Visium”), alleges that the defendants, as third-party broker-dealer s, aided and abetted Visium’s portfolio managers’

breaches of their fiduciary duties by assisting in carrying out a fraudulent “mismarking scheme.”

Visium is seeking in excess of $1 billion in damages from the defendants including disgorgement of the compensation paid to Visium’s portfolio managers, restitution of and damages for the investigative and legal fees, administrative wind down costs, and regulatory penalties paid by Visium as a result of the “mismarking scheme,”

direct and consequential damages for the destruction of Visium’s business, including lost profits and lost enterprise value, and attorneys’

fees and costs.

JVB filed a motion to dismiss the complaint in lieu of an answer on October 16, 2019.

Visium’s response to the motion was due on November 15, 2019 and JVB filed a reply brief on Novem b er 26, 2019.

The plaintiff, VA Management, LP (f/k/a Visium Asset Management, LP) (“Visium”), alleges that the defendants, as third party broker-dealers, aided and abetted Visium’s portfolio managers’ breaches of their fiduciary duties by assisting in carrying out a fraudulent “mismarking scheme.” Visium is seeking in excess of $1 billion in damages from the defendants including disgorgement of the compensation paid to Visium’s portfolio managers, restitution of and damages for the investigative and legal fees, administrative wind down costs, and regulatory penalties paid by Visium as a result of the “mismarking scheme,” direct and consequential damages for the destruction of Visium’s business, including lost profits and lost enterprise value, and attorneys’ fees and costs.

JVB and the other defendants filed a motion to dismiss the complaint in lieu of an answer on October 16, 2019.

Visium’s response to the motion was due on November 15, 2019 and JVB filed a reply brief on November 26, 2019.

On April 29, 2020, the Court issued a ruling denying the motions to dismiss filed by each of the defendants.

The Company intends to defend the action vigorously.

In addition to the matter set forth above, the Company is a party to various routine legal proceedings and regulatory inquiries arising out of the ordinary course of the Company’s business.

Management believes that the results of these routine legal proceedings and regulatory matters will not have a material adverse effect on the Company’s financial condition, or on the Company’s operations and cash flows.

However, the Company cannot estimate the legal fees and expenses to be incurred in connection with these routine matters and, therefore, is unable to determine whether these future legal fees and expenses will have a material impact on the Company’s operations and cash flows.

It is the Company’s policy to expense legal and other fees as incurred.

JVB and the other defendants filed an appeal on one of the grounds for dismissal on July 14, 2020.

On May 20, 2020, JVB filed a Notice of Appeal with the Appellate Division of the Supreme Court, First Department.

On July 13, 2020, JVB filed a brief in support of its appeal.

While the appeal is pending, discovery in the underlying case is proceeding The Company intends to defend the action vigorously.

In addition to the matter set forth above, the Company is a party to various routine legal proceedings and regulatory inquiries arising out of the ordinary course of the Company’s business.

It is the Company’s policy to expense legal and other fees as incurred.

SEGMENT AND GEOGRAPHIC INFORMATION

2 unchanged sentences

Capital Markets, Asset Management, and Principal Investing.

The Company’s business segment information was prepared using the following methodologies and generally represents the information that is relied upon by management in its decision- making processes:

(a) Revenues and expenses directly associated with each business segment are included in determining net income / (loss) by segment, and

(b) Indirect expenses (such as general and administrative expenses including executive and indirect overhead costs) not directly associated with specific business segments are not allocated to the business segments’

statements of operations.

Accordingly, the Company presents segment information consistent with internal management reporting.

See note (1) in the table below for more detail on unallocated items.

The following tables present the financial information for the Company’s segments for the periods indicated.

SEGMENT INFORMATION

Statement of Operations Information

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

Asset management

17 unchanged sentences

Statement of Operations Information

Three Months Ended March 31, 2019

Six Months Ended June 30, 2019

Asset management

21 unchanged sentences

Management does not consider these items necessary for an understanding of the operating results of these business segments and such amounts are excluded in business segment reporting to the chief operating decision maker.

SEGMENT INFORMATION

Statement of Operations Information

Three Months Ended June 30, 2020

Asset management

Principal transactions and other income

Total revenues

Salaries/Wages

Other Operating Expense

Impairment of goodwill

Total operating expenses

Operating income (loss)

Interest income (expense)

Income (loss) from equity method affiliates

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Net income (loss) attributable to the non-controlling interest

Net income (loss) attributable to Cohen & Company Inc.

Other statement of operations data

Depreciation and amortization (included in total operating expense)

SEGMENT INFORMATION

Statement of Operations Information

Three Months Ended June 30, 2019

Asset management

Principal transactions and other income

Total revenues

Salaries/Wages

Other Operating Expense

Impairment of goodwill

Total operating expenses

Operating income (loss)

Interest (expense) income

Income (loss) from equity method affiliates

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Net income (loss) attributable to the non-controlling interest

Net income (loss) attributable to Cohen & Company Inc.

Other statement of operations data

Depreciation and amortization (included in total operating expense)

BALANCE SHEET DATA

As of March 31, 2020

As of June 30, 2020

(Dollars in Thousands)

Included within total assets:

Investment in equity method affiliates

Investments in equity method affiliates

Intangible assets (2)

3 unchanged sentences

Included within total assets:

Investment in equity method affiliates

Investments in equity method affiliates

Intangible assets (2)

11 unchanged sentences

(Dollars in Thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Total Revenues:

3 unchanged sentences

SUPPLEMENTAL CASH FLOW DISCLOSURE

Interest paid by the Company on its debt and redeemable financial instruments was $ 2,033 and $ 2,070 for the three months ended March 31, 2020 and 2019 , respectively.

The Company paid income taxes of $ 4 and $ 4 for the three months ended March 31, 2020 and 2019 , respectively.

The Company received income tax refunds of $48 for the three months ended March 31, 2019 .

For the three months ended March 31, 2020 , the Company had the following significant non-cash transactions that are not reflected on the statement of cash flows:

Interest paid by the Company on its debt and redeemable financial instruments was $ 4,753 and $3,525 for the six months ended June 30, 2020 and 2019 , respectively.

The Company paid income taxes of $ 114 and $24 for the six months ended June 30, 2020 and 2019 , respectively.

The Company received income tax refunds of $ 12 and $48 for six months ended June 30, 2020 and 2019 .

For the six months ended June 30, 2020 , the Company had the following significant non-cash transactions that are not reflected on the statement of cash flows:

The Company net surrendered units of membership interests the Operating LLC.

The Company recognized a net decrease in additional paid-in capital of $ 123 , a net increase of $ 8 in AOCI , and a increase of $ 115 in non-controlling interest.

See note 1 8 .

The investment return related to certain of the Company’s redeemable financial instruments was negative within certain quarterly periods.

The Company recognized a net decrease in additional paid-in capital of $ 123 , a net increase of $ 8 in AOCI, and an increase of $ 115 in non-controlling interest.

The investment return related to certain of the Company’s redeemable financial instruments was negative within certain quarterly periods.

According to the terms of those agreements, the redemption value of the instrument is reduced in those cases.

Accordingly, the Company recorded interest income and reduced the balance of redeemable financial instruments by $105.

For the three months ended March 31, 2019 , the Company had the following significant non-cash transactions that are not reflected on the statement of cash flows:

For the six months ended June 30, 2019 , the Company had the following significant non-cash transactions that are not reflected on the statement of cash flows:

The Company net surrendered units of membership interests in the Operating LLC.

The Company recognized a net increase in additional paid-in capital of $133, a net decrease of $14 in AOCI, and a decrease of $119 in non-controlling interest.

See note 1 8 .

The investment return related to certain of the Company’s redeemable financial instruments was negative within certain quarterly periods.

According to the terms of those agreements, the redemption value of the instrument is reduced in those cases.

Accordingly, the Company recorded interest income and reduced the balance of redeemable financial instruments by $78.

The Company recognized an accrual of $335 in accounts payable and other accrued liabilities for dividends and distributions declared on March 6, 2019, which were paid after March 31, 2019.

On January 1, 2019, the Company recorded a right of use asset of $8,416 and a right of use liability of $8,860, a reduction in retained earnings from cumulative effect of adoption of $20, an increase in other receivables of $18, and a reduction in other liabilities of $406, resulting from the adoption of ASU 2016-02.

As part of the Company's matched book repo operations, the Company enters into reverse repos with counterparties whereby it lends money and receive securities as collateral.

In accordance with ASC 860, the collateral securities are not recorded in the Company's consolidated balance sheets.

However, from time to time the Company will hold cash instead of securities as collateral for these transactions.

When the Company is provided cash as collateral for reverse repo transactions, the Company will make an entry to increase its cash and cash equivalents and to increase its other liabilities for the amount of cash received.

There are two main reasons the Company may receive collateral in the form of cash as opposed to securities.

First, when the value of the collateral securities the Company has in its possession decline, the Company will require the counterparty to provide it with additional collateral.

The Company will accept either cash or additional liquid securities.

Often, the Company's counterparties will provide it with cash as they may not have liquid securities readily available.

Second, from time to time, the Company's counterparties require a portion of the collateral securities in the Company's possession returned to them for operating purposes.

In such instances, the counterparty may not have substitute liquid securities available and will often provide the Company with cash as collateral instead.

It is important to note that when the Company receives cash as collateral, it is temporary in nature and the Company has an obligation to return that cash when the counterparty provides substitute liquid securities as collateral or otherwise satisfies their associated reverse repo obligation.

The Company is generally required to return any cash collateral the same business day that it receives substitute securities.

As of June 30, 2020 , and December 31, 2019 , the Company had counterparty cash collateral of $218,731 and $9,524, respectively, which were included in both its cash and cash equivalents and other liability balances, respectively.

Accordingly, included in the Company's cash provided by operating activities of $ 209,225 during the six months ended June 30, 2020 is an inflow of $209,207 as a result of this increase in cash collateral held.

The Company has no legal or contractual obligation to segregate this cash collateral held and therefore it is included as a component of its cash and cash equivalents in the Company's consolidated balance sheets.

However, it is not available for use in the Company's general operations as the Company must stand ready at all times to return the collateral held immediately once the reverse repo counterparty provides substitute liquid securities or the repo matures.

RELATED PARTY TRANSACTIONS

The Company has identified the following related party transactions for the three months ended March 31, 2020 and 2019 .

The Company has identified the following related party transactions for the six months ended June 30, 2020 and 2019 .

The transactions are listed by related party and, unless otherwise noted in the text of the description, the amounts are disclosed in the tables at the end of this section.

The Bancorp, Inc.

(“TBBK”)

TBBK is identified as a related party because Daniel G.

Cohen is chairman of TBBK.

As part of the Company’s broker-dealer operations, the Company from time to time purchases securities from third parties and sells those securities to TBBK.

The Company may purchase securities from TBBK and ultimately sell those securities to third parties.

2 unchanged sentences

From time to time, the Company will enter into repos with TBBK as its counterparty.

As of March 31, 2020 and December 31, 2019 , the Company had no repos with TBBK.

For the three months ending March 31, 2020 , and 2019, the Company incurred no interest expense related to repos with TBBK as its counterparty.

As of June 30, 2020 and December 31, 2019 , the Company had no repos with TBBK.

For the three and six months ended June 30, 2020 , and 2019 , the Company incurred no interest expense related to repos with TBBK as its counterparty.

Cohen/Cohen Bros.

Financial, LLC (“CBF”)/ EBC 2013 Family Trust (“EBC”)

On December 30, 2019, Daniel G.

3 unchanged sentences

In December 2019, the Company acquired a 45% interest in CK Capital Partners B.V.

CK Capital ”) .

(“CK Capital”).

The Company purchased this interest for $18 (of which $17 was from an entity controlled by Daniel G.

In addition, the Company also acquired a 10% interest in Amersfoot Office Investment I Cooperatief U.A.

AOI ”), a real estate holding company, for $1 from entities controlled by Daniel G.

(“AOI”), a real estate holding company, for $1 from entities controlled by Daniel G.

CK Capital is a private company incorporated in the Netherlands and provides asset and investment advisory services relating to real estate holdings.

CBF has been identified as a related party because (i) CBF is a non-controlling interest holder of the Company and (ii) CBF is wholly owned by Daniel G.

On September 29, 2017, CBF also invested $8,000 of the $10,000 total investment in the Company’s Redeemable Financial Instrument –

DGC Trust / CBF pursuant to the CBF Investment Agreement.

On September 29, 2017, CBF also invested $8,000 of the $10,000 total investment in the Company’s Redeemable Financial Instrument – DGC Trust / CBF pursuant to the CBF Investment Agreement.

The Company incurred interest expense on this instrument, which is disclosed as part of interest expense incurred in the table at the end of this section.

5 unchanged sentences

The Company issued $2,400 in principal amount of the 2013 Convertible Notes and $1,600 of Common Stock to EBC.

See note 20 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year

ended December 31, 2019.

See note 20 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 .

On September 25, 2019, the 2013 Convertible Notes were amended and restated by the 2019 Senior Notes.

9 unchanged sentences

The 2019 Senior Notes were fully repaid on February 3, 2020.

See note 17 and note 20 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

See note 17 and note 20 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 .

The JKD Investor is an entity owned by Jack J.

DiMaio, the vice chairman of the board of directors and vice chairman of the Operating LLC’s board of managers, and his spouse.

On October 3, 2016, JKD Investor invested $6,000 in the Operating LLC.

4 unchanged sentences

DGC Trust was established by Daniel G.

Cohen, chairman of the Company’s board of directors and chairman of the Operating LLC board of managers.

Cohen does not have any voting or dispositive control of securities held in the interest of the trust.

5 unchanged sentences

The Company incurred interest expense on the 2017 Convertible Note, which is disclosed as part of interest expense incurred in the table at the end of this section.

On September 29, 2017, the DGC Trust invested $2,000 of the $10,000 total investment in the Company’s Redeemable Financial Instrument –

DGC Trust / CBF pursuant to the DGC Trust Investment Agreement.

See notes 19 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and note 16 herein .

On September 29, 2017, the DGC Trust invested $2,000 of the $10,000 total investment in the Company’s Redeemable Financial Instrument – DGC Trust / CBF pursuant to the DGC Trust Investment Agreement.

See notes 19 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and note 16 herein.

Interest incurred on this instrument is disclosed in the tables at the end of this section.

4 unchanged sentences

III is considered a related party because Daniel G.

Cohen is the chief executive officer of FinTech Acquisition Corp, III and Betsy Cohen is the chairman of the board of directors of Fin T ech Acquisition Corp.

Cohen is the chief executive officer of FinTech Acquisition Corp, III and Betsy Cohen is the mother of Daniel G.

Cohen and is the chairman of the board of directors of FinTech Acquisition Corp.

Income earned on this arrangement is disclosed in the tables below.

11 unchanged sentences

II changed its name to International Money Express, Inc.

Duane Morris, LLP (“Duane Morris”)

Duane Morris is an international law firm and serves as legal counsel to the Company.

6 unchanged sentences

The Company has engaged Betsy Cohen on behalf of FinTech Masala, LLC as a consultant to provide certain services related to the Insurance SPAC.

The Company agreed to pay a consultant fee of $1 per month, which commenced July 1, 2019 and shall continue until the earlier of (i ) the date that is thirty days following the closing of the Insurance SPAC’s initial B usiness C ombination and ( ii ) the date on which the Company or Betsy Cohen terminates the consulting agreement.

The Company agreed to pay a consultant fee of $1 per month, which commenced July 1, 2019 and shall continue until the earlier of (i) the date that is thirty days following the closing of the Insurance SPAC’s initial Business Combination and (ii) the date on which the Company or Betsy Cohen terminates the consulting agreement.

Betsy Cohen made a $2 investment in the Sponsor Entities in March 2019, which is included as a component of non-controlling interest in the consolidated balance sheet.

5 unchanged sentences

It has an annual term that auto-renews if not cancelled earlier.

It can be cancelled by either party upon 90 days’

It can be cancelled by either party upon 90 days’ notice.

The income earned on this sublease is included as a reduction in rent expense in the consolidated statements of income and are disclosed in the tables below.

1 unchanged sentence

EuroDekania is considered a related party because it is an equity method investment of the Company.

The Company ha d an investment in and a management contract with EuroDekania.

The Company had an investment in and a management contract with EuroDekania.

Income earned or loss incurred on the investment is included as part of principal transactions and other income in the tables below.

5 unchanged sentences

Revenue earned on the management contract is included as part of asset management in the tables below.

As of March 31, 2020 , the Company owned 2.53 % of the equity of the SPAC Fund.

As of June 30, 2020 , the Company owned 1.79% of the equity of the SPAC Fund.

Insurance JV is considered a related party because it is an equity method investment of the Company.

3 unchanged sentences

Revenue earned on the management contract is included as part of asset management and are shown in the tables below.

As of March 31, 2020 , the Company owned 4.66 % of the equity of the U.S.

As of June 30, 2020 , the Company owned 4.66% of the equity of the U.S.

Insurance JV.

1 unchanged sentence

The Insurance SPAC is a related party as it is an equity method investment of the Sponsor Entities, which are consolidated by the Company.

As of March 31, 2020 , the Sponsor Entities owned 26.5 % of the equity in the Insurance SPAC.

Income earned, or loss

incurred on equity method investments is included in the tables below.

The Operating LLC and the Insurance SPAC entered into an administrative services agreement, dated March 19, 2019, pursuant to which the Operating LLC and the Insurance SPAC agreed that, commencing on the date that the Insurance SPAC’s securities were first listed on the Nasdaq Capital Market through the earlier of the Insurance SPAC’s consummation of a Business Combination and its liquidation, the Insurance SPAC will pay the Operating LLC $10 per month for certain office space, utilities, secretarial support, and administrative services.

As of June 30, 2020 , the Sponsor Entities owned 26.5% of the equity in the Insurance SPAC.

Income earned, or loss incurred on equity method investments is included in the tables below.

Revenue earned by the Company from the administrative services agreement is included as part of principal transactions and other income in the tables below.

The Company agreed to lend the Insurance SPAC $750 for operating and acquisition related expenses.

No amounts have been lent to date under this facility.

See note 11 .

As of June 30, 2020 , $350 has been lent under this facility;

this amount is included in due from related parties in the consolidated balance sheets.

See notes 4, 11, and 25.

CK Capital and AOI

4 unchanged sentences

The following tables display the routine transactions recognized in the statements of operations from the identified related parties that are described above.

Related Party Transactions

(Dollars in Thousands)

Three Months Ended

March 31, 2020

March 31, 2019

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Asset management

15 unchanged sentences

The Company matches 50% of employee contributions for all participants not to exceed 3% of their salary.

Contributions made on behalf of the Company were $98 and $91 for the three months ended March 31, 2020 , and 2019 , respectively .

Contributions made on behalf of the Company were $ 84 and $ 182 for the three and six months ended June 30, 2020 , respectively and $78 and $169 for the three and six months ended June 30, 2019 , respectively.

The Company leases office space from Zucker and Moore, LLC.

Zucker and Moore, LLC is partially owned by Jack DiMaio, Jr., the vice chairman of the Company’s board of directors.

The Company recorded $24 of rent expense related to this office space for the three months ended March 31, 2020 and 2019.

Zucker and Moore, LLC is partially owned by Jack DiMaio, Jr., the vice chairman of the Company’s board of directors.

The lease agreement expired in June 2020 and was subsequently amended to extend for a period of one year through June 2021.

The Company recorded $24 of rent expense related to this office space for the three months ended June 30, 2020 and 2019 , respectively and $48 of rent expense for the, six months ended June 30, 2020 and 2019 , respectively.

DUE FROM / DUE TO RELATED PARTIES

Amounts due to related parties related to redeemable financial instruments and outstanding debt are included as components of those balances in the consolidated balance sheet s .

Also, interest or investment return owed on those balances are included as a component of accounts payable and other in the consolidated balance sheet s .

Any investment made in an equity method affiliate for which the Company does not elect the fair value option is included as a component of investments in equity method affiliates in the consolidated balance sheet s .

Any investment made in an equity method affiliate for which the Company elected the fair value option is included as a component of other investments, at fair value in the consolidated balance sheet s .

Amounts due to related parties related to redeemable financial instruments and outstanding debt are included as components of those balances in the consolidated balance sheets.

Also, interest or investment return owed on those balances are included as a component of accounts payable and other in the consolidated balance sheets.

The following table summarizes amounts due from / to related parties as of each date shown.

3 unchanged sentences

(Dollars in Thousands)

March 31, 2020

June 30, 2020

December 31, 2019

Employees & other

Insurance SPAC

Due from related parties

SUBSEQUENT EVENTS

The Company has applied for and received a $2.2 million loan under the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The Company has carefully considered the eligibility requirements for PPP loans as well as supplemental guidance regarding the PPP beyond the applicable statute issued from time to time by government agencies and certain government officials.

The Company is eligible to receive a PPP loan because it has fewer than 100 employees.

In part due to the PPP loan, the Company does not anticipate any significant workforce reduction or reductions in compensation levels in the near future.

However, the Company will continue to carefully monitor revenue levels to assess whether compensatory or other cost-cutting measures might be necessary.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of the consolidated financial condition and results of operations of Cohen & Company Inc.

and its majority owned subsidiaries (collectively, “we,”

“us,”

“our,”

or the “Company”) should be read in conjunction with the unaudited consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations”

is based on our consolidated financial statements, which have been prepared in accordance with U.S.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.

On a regular basis, we evaluate these estimates, including fair value of financial instruments.

These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

Actual results may differ from these estimates.

All amounts in this disclosure are in thousands (except share and unit and per share and per unit data) except where noted.

We are a financial services company specializing in fixed income markets.

We were founded in 1999 as an investment firm focused on small-cap banking institutions, but have grown to provide an expanding range of capital markets and asset management services.

We are organized into three business segments:

Capital Markets, Asset Management, and Principal Investing.

Capital Markets :

Our Capital Markets business segment consists primarily of fixed income sales, trading, matched book repo financing, new issue placements in corporate and securitized products, and advisory services.

Our fixed income sales and trading group provides trade execution to corporate investors, institutional investors, mortgage originators, and other smaller broker-dealers.

We specialize in a variety of products, including but not limited to:

corporate bonds, ABS, MBS, RMBS, CDOs, CLOs, CBOs, CMOs, municipal securities, TBAs and other forward agency MBS contracts, SBA loans, U.S.

government bonds, U.S.

government agency securities, brokered deposits and CDs for small banks, and hybrid capital of financial institutions including TruPS, whole loans, and other structured financial instruments.

We also offer execution and brokerage services for equity products.

We carry out our capital markets activities primarily through our subsidiaries:

JVB in the United States and CCFL and CCFEL in Europe.

Asset Management :

Our Asset Management business segment manages assets within CDOs, managed accounts, joint ventures, and investment funds (collectively, “Investment Vehicles”).

A CDO is a form of secured borrowing.

The borrowing is secured by different types of fixed income assets such as corporate or mortgage loans or bonds.

The borrowing is in the form of a securitization, which means that the lenders are actually investing in notes backed by the assets.

In the event of default, the lenders will have recourse only to the assets securing the loan.

Our Asset Management business segment includes our fee-based asset management operations, which include on-going base and incentive management fees .

As of March 31, 2020 , we had approximately $2.65 billion in assets under management (“AUM”) of which 79.1% was in CDOs.

A substantial portion of our asset management revenue is earned from the management of CDOs.

We have not completed a new securitization since 2008.

As a result, our asset management revenue has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, and defaults.

Our ability to complete securitizations in the future will depend upon, among other things, our asset origination capacity and success, our ability to arrange warehouse financing to originate assets, our willingness and capacity to fund required amounts to obtain warehouse financing and securitized financings, and the demand in the markets for such securitizations.

The remaining portion of our AUM is from a diversified mix of other Investment Vehicles that were more recently formed.

Principal Investing :

Our Principal Investing business segment is comprised of investments that we have made for the purpose of earning an investment return rather than investments to support our trading, matched book repo, or other Capital Markets business segment activities.

These investments are a component of our other investments, at fair value in our consolidated balance sheet.

We generate our revenue by business segment primarily through the following activities.

Capital Markets:

Our trading activities, which include execution and brokerage services, securities lending activities, riskless trading activities, as well as gains and losses (unrealized and realized) and income and expense earned on securities and derivatives classified as trading;

Net interest income on our matched book repo financing activities;

New issue and advisory revenue comprised primarily of (a) new issue revenue associated with originating, arranging, or placing newly created financial instruments and (b) revenue from advisory services.

Asset Management:

Asset management fees for our on-going asset management services provided to certain Investment Vehicles, which may include fees both senior and subordinate to the securities issued in the Investment Vehicle;

Incentive management fees earned based on the performance of the various Investment Vehicles.

Principal Investing:

Gains and losses (unrealized and realized) and income and expense earned on securities classified as other investments, at fair value.

Business Environment

Our business in general and our Capital Markets business segment in particular, do not produce predictable earnings.

Our results can vary dramatically from year to year and quarter to quarter.

Our business is materially affected by economic conditions in the financial markets, political conditions, broad trends in business and finance, the housing and mortgage markets, changes in volume and price levels of securities transactions, and changes in interest rates, including overnight funding rates, all of which can affect our profitability and are unpredictable and beyond our control.

These factors may affect the financial decisions made by investors and companies, including their level of participation in the financial markets and their willingness to participate in corporate transactions.

Severe market fluctuations or weak economic conditions could reduce our trading volume and revenues, negatively affect our ability to generate new issue and advisory revenue, and adversely affect our profitability.

As a general rule, our trading business benefits from increased market volatility.

Increased volatility usually results in increased activity from our clients and counterparties.

However, periods of extreme volatility may at times result in clients reducing their trading volumes, which would negatively impact our results.

Also, periods of extreme volatility may result in large fluctuations in securities valuations and we may incur losses on our holdings.

Also, our mortgage group’s business benefits when mortgage volumes increase, and may suffer when mortgage volumes decrease.

Among other things, mortgage volumes are significantly impacted by changes in interest rates.

In addition, as a smaller firm, we are exposed to intense competition.

Although we provide financing to our customers, larger firms have a much greater capability to provide their clients with financing, giving them a competitive advantage.

We are much more reliant upon our employees’

relationships, networks, and abilities to identify and capitalize on market opportunities.

Therefore, our business may be significantly impacted by the addition or loss of key personnel.

We try to address these challenges by (i) focusing our business on clients and asset classes that are underserved by the large firms, (ii) continuing to monitor our fixed costs to enhance operating leverage and limit our losses during periods of low volumes, and (iii) attempting to hire and retain entrepreneurial and effective traders and salespeople.

Our business environment is rapidly changing.

New risks and uncertainties emerge continuously and it is not possible for us to predict all the risks we will face.

This may negatively impact our operating performance.

A portion of our revenue is generated from net trading activity.

We engage in proprietary trading for our own account, provide securities financing for our customers, and execute “riskless”

trades with a customer order in hand resulting in limited market risk to us.

The inventory of securities held for our own account, as well as held to facilitate customer trades, and our market making activities are sensitive to market movements.

A portion of our revenue is generated from new issue and advisory engagements.

The fees charged and volume of these engagements are sensitive to the overall business environment.

We provide investment banking and advisory services in Europe through our subsidiary CCFEL and new issue services in the U.S.

through our subsidiary JVB.

Currently, our primary source of new issue revenue is from originating assets for our U.S.

and European insurance asset management business .

A portion of our revenue is generated from management fees.

Our ability to charge management fees and the amount of those fees is dependent upon the underlying investment performance and stability of the Investment Vehicles.

If these types of investments do not provide attractive returns to investors, the demand for such instruments will likely fall, thereby reducing our opportunity to earn new management fees or maintain existing management fees.

As of March 31, 2020 , 79.0% of our existing AUM were in CDOs.

The creation of CDOs has depended upon a vibrant securitization market.

Since 2008, volumes within the securitization market have dropped significantly and have not fully recovered since that time.

We have not completed a new securitization since 2008.

The remaining portion of our AUM is from a diversified mix of other Investment Vehicles most of which were more recently formed.

A substantial portion of our asset management revenue is earned from the management of CDOs.

As a result, our asset management revenue has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, and defaults.

A portion of our revenues is generated from our principal investing activities.

Therefore, our revenues are impacted by the overall market supply and demand of these investments as well as the individual performance of each investment.

Our principal investments are included within other investments, at fair value in our consolidated balance sheets.

See note 7 to our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

Margin Pressures in Fixed Income Brokerage Business

Performance in the financial services industry in which we operate is highly correlated to the overall strength of the economy and financial market activity.

Overall market conditions are a product of many factors beyond our control and can be unpredictable.

These factors may affect the financial decisions made by investors, including their level of participation in the financial markets.

In turn, these decisions may affect our business results.

With respect to financial market activity, our profitability is sensitive to a variety of factors including the volatility of the equity and fixed income markets, the level and shape of the various yield curves, and the volume and value of trading in securities.

Margins and volumes in certain products and markets within the fixed income brokerage business continue to decrease materially as competition has increased and general market activity has declined.

Further, we continue to expect that competition will increase over time, resulting in continued margin pressure.

Our response to this margin compression has included:

(i) building a diversified fixed income trading platform;

(ii) acquiring or building out new product lines and expanding existing product lines;

(iii) building a hedging execution and funding operation to service mortgage originators;

(iv) becoming a full netting member of the FICC enabling us to expand our matched book repo business;

and (v) monitoring our fixed costs.

Our cost management initiatives are ongoing.

However, there can be no certainty that these efforts will be sufficient.

If insufficient, we will likely see a decline in profitability.

Housing Market

In recent years, our mortgage group has grown in significance to our Capital Markets segment and our company overall.

The mortgage group primarily earns revenue by providing hedging execution, securities financing, and trade execution services to mortgage originators and other investors in mortgage backed securities.

Therefore, this group’s revenue is highly dependent on the volume of mortgage originations in the U.S.

Origination activity is highly sensitive to interest rates, the U.S.

job market, housing starts, sale activity of existing housing stock, as well as the general health of the U.S.

In addition, any new regulation that impacts U.S.

government agency mortgage backed security issuance activity, residential mortgage underwriting standards, or otherwise impacts mortgage originators will impact our business.

We have no control over these external factors and there is no effective way for us to hedge against these risks.

Our mortgage group’s volumes and profitability will be highly impacted by these external factors.

COVID 19 / Impairment of Goodwill

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread throughout the United States.

The spread of COVID-19 has caused significant volatility in domestic and international markets.

There is on-going uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S.

and international economies.

While we cannot fully assess the impact COVID-19 will have on all of our operations at this time, there are certain impacts that we have identified:

The unprecedented volatility of the financial markets experienced in March 2020, has caused us to operate JVB at a lower level of leverage than prior to the pandemic.

Specifically, JVB has reduced the size of its GCF repo operations and the volume of its TBA trading.

We have determined that at our pre-pandemic levels in these businesses, we were exposed to a higher level of counterparty credit risk than we should have and were experiencing too much volatility in our available liquidity to conservatively meet capital requirements and margin calls in these businesses.

We expect JVB to operate at lower volumes in both these businesses for an indefinite period of time, which could unfavorably impact the operating profitability of JVB.

The financial market volatility, as well as the reduction in volumes in the GCF repo and TBA businesses, that resulted from COVID-19 required us to reassess the goodwill we had recorded related to JVB under the guidance of ASC 350.

We determined that the fair value of JVB was less than the carrying value (including the goodwill).

As a result, we recorded an impairment loss of $7,883 in the three months ended March 31, 2020.

We expect that our asset management segment will also be adversely impacted by the pandemic.

While it is difficult to determine the extent of the impact at this time, we expect that raising capital for new funds may become more challenging.

In addition, lower returns earned by funds will adversely impact our asset management fees and investors’

need for liquidity may result in reductions in AUM.

JVB’s mortgage group’s operations are centered on serving the financial needs of mortgage originators and institutions that invest in mortgage backed securities.

We will likely be impacted by the pandemic in other ways which we cannot yet determine.

We will continue to monitor market conditions and respond accordingly.

Subsequent to March 31, t he Company has applied for and received a $2.2 million loan under the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

See recent events below.

Recent Events

The 2019 Senior Notes

On September 25, 2019, we amended the previously outstanding 2013 Convertible Notes that were scheduled to mature on September 25, 2019.

The material terms and conditions of the 2013 Convertible Notes remained substantially the same , except that (i) the maturity date changed from September 25, 2019 to September 25, 2020;

(ii) the conversion feature in the 2013 Convertible Notes was removed;

(iii) the interest rate changed from 8% per annum (9% in the event of certain events of default) to 12% per annum (13% in the event of certain events of default);

and (iv) the restrictions regarding prepayment was removed .

The post amendment notes are referred to herein as the “2019 Senior Notes”

and the pre-amendment notes are referred to herein as the “2013 Convertible Notes.”

The 2020 Senior Notes

The JKD Investor is owned by Jack DiMaio, the vice chairman of the Company’s board of directors and the Operating LLC’s board of managers, and his spouse.

Pursuant to the Note Purchase Agreement, JKD Investor and RNCS each purchased a Senior Promissory Note in the principal amount of $2,250 (for an aggregate investment of $4,500).

The Senior Promissory Notes bear interest at a fixed rate of 12% per annum and mature on January 31, 2022.

On February 3, 2020, pursuant to the Note Purchase Agreement, the Operating LLC used the proceeds received from the issuance of the Senior Promissory Notes to repay in full all amounts outstanding under the Senior Promissory Note, dated September 25, 2019, issued by the Company to Pensco Trust Company, Custodian fbo Edward E.

Cohen IRA in the principal amount of $4,386 (the “Cohen IRA Note”).

The Cohen IRA Note is included as a portion of the 2019 Senior Notes outstanding as of December 31, 2019.

The Cohen IRA Note was fully paid and extinguished on February 3, 2020.

Subsequent to this repayment, $2,400 of the 2019 Senior Notes remain outstanding.

See note 17 to our financial statements included in this Quarterly Report on Form 10-Q.

In 2018, we formed a new subsidiary, ViaNova, for the purpose of building a RTL business.

RTLs are small balance commercial loans secured by first lien mortgages used by professional investors and real estate developers to finance the purchase and rehabilitation of residential properties.

ViaNova’s business plan includes buying, aggregating, and distributing these loans to produce superior risk-adjusted returns through the pursuit of opportunities overlooked by commercial banks.

Also, on March 19, 2020, ViaNova received notice from LegacyTexas Bank that the Bank had suspended funding all “Alternative”

loans for all of their clients, including the RTL loans that are the subject of the LegacyTexas Credit Facility with LegacyTexas Bank.

Since March 19, 2020 ViaNova has repaid all outstanding indebtedness under the Agreement.

ViaNova stopped acquiring new RTLs and does not intend to acquire any new RTLs in the future.

As of March 31, 2020, the Company had four RTL s and several interest strips representing a par value of $3,034 and a fair value of $2,956, including the fair value of interest strips held.

These RTLs and interest strips are included as a component of investments-trading (see note 7).

The Company intends to opportunistically sell these loans if possible or allow them to mature.

The latest maturity date of the loans is January 9, 2021.

See note 4 to our financial statements included in this Quarterly Report on Form 10-Q.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

The Cares Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to curtail the effect of COVID-19.

The CARES Act includes significant business tax provisions that, among other things, include the removal of certain limitations on utilization of net operating losses, increase the loss carryback period for certain losses to five years, and increase the ability to deduct interest expense , as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act.

We do not expect the CARES Act to have a significant impact on our tax obligations.

Paycheck Protection Program

Subsequent to March 31, 2020, we applied for and received a $2.2 million loan under the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

We have carefully considered the eligibility requirements for PPP loans as well as supplemental guidance regarding the PPP beyond the applicable statute issued from time to time by government agencies and certain government officials.

We are eligible to receive a PPP loan because we have fewer than 100 employees.

Further, although we are public and listed on the NYSE American stock exchange, our market capitalization is small, and we believe that we do not have access to the public capital markets at this time.

In part due to the PPP loan, we do not anticipate any significant workforce reduction or reductions in compensation levels in the near future.

However, we will continue to carefully monitor revenue levels to assess whether compensatory or other cost-cutting measures might be necessary.

Consolidated Results of Operations

This section provides a comparative discussion of our consolidated results of operations for the specified periods.

The period-to-period comparisons of financial results are not necessarily indicative of future results.

Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019

The following table sets forth information regarding our consolidated results of operations for the three months ended March 31, 2020 and 2019 .

COHEN & COMPANY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands)

Three Months Ended March 31,

Favorable / (Unfavorable)

Asset management

Principal transactions and other income

Total revenues

Operating expenses

Compensation and benefits

Business development, occupancy, equipment

Subscriptions, clearing, and execution

Professional fee and other operating

Depreciation and amortization

Impairment of goodwill

Total operating expenses

Operating income / (loss)

Non-operating income / (expense)

Interest expense, net

Income / (loss) from equity method affiliates

Income / (loss) before income taxes

Income tax expense / (benefit)

Net income / (loss)

Net income (loss) attributable to the non-controlling interest

Net income / (loss) attributable to Cohen & Company Inc.

Revenues increased by $6,630, or 60%, to $17,770 for the three months ended March 31, 2020 from $11,140 for the three months ended March 31, 2019 .

As discussed in more detail below, the change was comprised of (i) an increase of $9,837 in net trading revenue;

(ii) a decrease of $387 in asset management revenue;

and (iii) a decrease of $2,820 in principal transactions and other income.

Net trading revenue increased by $9,837, or 113% , to $18,561 for the three months ended March 31, 2020 from $8,724 for the three months ended March 31, 2019 .

The following table shows the detail by group.

(Dollars in Thousands)

Three Months Ended March 31,

Matched book repo

High yield corporate

Investment grade corporate

Wholesale and other

Our net trading revenue includes unrealized gains on our trading investments as of the applicable measurement date that may never be realized due to changes in market or other conditions not in our control.

This may adversely affect the ultimate value realized from these investments.

In addition, our net trading revenue also includes realized gains on certain proprietary trading positions.

Our ability to derive trading gains from such trading positions is subject to overall market conditions.

Due to volatility and uncertainty in the capital markets, the net trading revenue recognized may not be indicative of future results.

Furthermore, from time to time, some of the assets included in the investments-trading line of our consolidated balance sheets represent level 3 valuations within the FASB valuation hierarchy.

Level 3 assets are carried at fair value based on estimates derived using internal valuation models and other estimates.

See notes 7, 8, and 9 to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

The fair value estimates made by us may not be indicative of the final sale price at which these assets may be sold.

We consider our matched book repo business to be subject to significant concentration risk.

See note 10 to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Asset Management

Assets Under Management

Our AUM equals the sum of:

(1) the gross assets included in CDOs that we have sponsored and manage;

plus (2) the NAV of investment funds we manage;

plus (3) the NAV or gross assets of other accounts we manage.

Our calculation of AUM may differ from the calculations used by other asset managers and, as a result, this measure may not be comparable to similar measures presented by other asset managers.

This definition of AUM is not necessarily identical to a definition of AUM that may be used in our management agreements.

ASSETS UNDER MANAGEMENT

(Dollars in Thousands)

As of March 31,

As of December 31,

Company sponsored CDOs

Other Investment Vehicles (1)

Assets under management (2)

Other Investment Vehicles represent any investment vehicles that are not company sponsored CDOs.

In some cases, accounts we manage employ leverage.

In some cases, our fees are based on gross assets and in some cases on net assets.

AUM included herein is calculated using either the gross or net assets of each managed account or CDO based on whichever serves as the basis for our management fees.

Asset management fees decreased by $387 , or 19% , to $1,615 for the three months ended March 31, 2020 from $2,002 for the three months ended March 31, 2019 , as discussed in more detail below.

The following table provides a more detailed comparison of the two periods.

ASSET MANAGEMENT

(Dollars in Thousands)

Three Months Ended March 31,

A substantial portion of our asset management revenue is earned from the management of CDOs.

As a result, our asset management revenue has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, and defaults.

Asset management fees from company sponsored CDOs increased by $19 to $969 for the three months ended March 31, 2020 from $950 for the three months ended March 31, 2019 .

The following table summarizes the periods presented by asset class.

FEES EARNED BY ASSET CLASS

(Dollars in Thousands)

Three Months Ended March 31,

TruPS and insurance company debt - U.S.

TruPS and insurance company debt - Europe

Broadly syndicated loans - Europe

The reduction in asset management fees for TruPS and insurance company debt –

was a result of average AUM declining due to principal repayments on the assets in these securitizations.

The reduction in asset management fees for TruPS and insurance company debt –

Europe was a result a decline in AUM due to principal repayments on the assets in these securitizations as well as changes in foreign exchange rates .

Asset management fees for broadly syndicated loans –

Europe consist of a single CLO.

During August 2019, this CLO liquidated.

The revenue earned in the three months ended March 31, 2020 represented a final portion of a contingent successful liquidation fee earned and received by us.

No future revenue will be earned on this CLO.

Other asset management revenue decreased by $406 to $646 for the three months ended March 31, 2020 from $1,052 for the three months ended March 31, 2019 .

The decrease was primarily due to a reduction in performance fees being earned on our managed accounts during the three months ended March 31, 2020 as compared to the same period in 2019.

Principal Transactions and Other Income

Principal transactions and other income decreased by $2,820 , or 681% , to ($2,406) for the three months ended March 31, 2020 , as compared to $414 for the three months ended March 31, 2019 .

The following table summarizes principal transactions and other income by category.

PRINCIPAL TRANSACTIONS & OTHER INCOME

(Dollars in Thousands)

Three Months Ended March 31,

Currency hedges

CLO investments

Other principal investments

Total principal transactions

IIFC revenue share

All other income / (loss)

Total principal transactions and other income

Principal Transactions

EuroDekania was a company that invested in hybrid capital securities of European companies and we carried our investment at the reported NAV.

Income recognized in each period is the result of changes in the underlying NAV of the fund as well as distributions received.

Our investment in EuroDekania wa s denominated in Euros.

We sometimes hedge d this exposure (as described in greater detail below).

EuroDekania sold its remaining investments and liquidated in 2019.

Our currency hedge consisted of a Euro forward agreement designed to hedge the currency risk primarily associated with our investment in EuroDekania.

The CLO investments represent investments in the most junior tranche of certain CLOs.

The average carrying value of our CLO investments for the three months ended March 31, 2020 was $2,319 as compared to $2,738 for the three months ended March 31, 2019.

These investments are carried at fair value.

See note 8 to our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q for information about how we determine the value of these instruments.

IMXI represents unrestricted and restricted equity positions of International Money Express, Inc.

IMXI), a publicly traded company that resulted from the merger of Intermex Holdings, LLC and FinTech Acquisition Corp.

Insurance JV is a company that invests in debt issued by insurance companies and we carry our investment at its reported NAV.

Income recognized in each period is the result of changes in the underlying NAV of the fund as well as distributions received.

See notes 7 and 8.

The SPAC Fund primarily invests in the equity of SPACs and we carry our investment at its reported NAV.

Income recognized in each period is the result of changes in the underlying NAV of the SPAC Fund as well as distributions received.

See notes 7 and 8.

Other income increased by $128 to $192 for the three months ended March 31, 2020 , as compared to $64 for the three months ended March 31, 2019 .

Other income / (loss) is comprised of certain ongoing revenue share arrangements as well as other miscellaneous operating income items.

The revenue share arrangements noted in the table above entitle us to either a percentage of revenue earned by certain entities or a percentage of revenue earned in excess of certain thresholds.

The IIFC revenue share arrangement expires at the earlier of (i) the dissolution of IIFC or (ii) when we have earned a cumulative $20,000 in revenue share payments.

To date, we have earned $2,832.

Also, in any particular year, the revenue share earned by us cannot exceed $2,000.

Operating Expenses

Operating expenses increased by $16,007 , or 143% , to $27,215 for the three months ended March 31, 2020 from $11,208 for the three months ended March 31, 2019 .

As discussed in more detail below, the change was comprised of (i) an increase of $7,770 in compensation and benefits;

(ii) a decrease of $55 in business development, occupancy, and equipment;

(iii) an increase of $307 in subscriptions, clearing, and execution;

(iv) an increase of $103 of professional fee and other operating;

(v) a decrease of $1 of depreciation and amortization;

and (vi) impairment of goodwill of $7,883.

Compensation and Benefits

Compensation and benefits increased by $7,770 , or 122% , to $14,134 for the three months ended March 31, 2020 from $6,364 for the three months ended March 31, 2019 .

COMPENSATION AND BENEFITS

(Dollars in Thousands)

Three Months Ended March 31,

Cash compensation and benefits

Equity-based compensation

Cash compensation and benefits in the table above was primarily comprised of salary, incentive compensation, and benefits.

Cash compensation and benefits increased by $7,784 to $13,976 for the three months ended March 31, 2020 from $6,192 for the three months ended March 31, 2019.

Our total headcount increased from 88 at March 31, 2019 to 95 at March 31, 2020.

Cash c ompensation and benefits as a percentage of revenue was 79% for the three months ended March 31, 2020, compared to 56% for the three months ended March 31, 2019.

During the quarter ended March 31, 2020, the Company’s variable compensation structure had an outsized unfavorable impact on the percentage of revenue metric, due to the significant negative revenue recorded from realized and unrealized losses in certain trading books, totaling $5,107 and from principal transactions, totaling $2,598, with no corresponding reduction in variable compensation to offset the negative revenue.

Equity-based compensation decreased by $14 to $158 for the three months ended March 31, 2020 from $172 for the three months ended March 31, 2019 .

Business Development, Occupancy, and Equipment

Business development, occupancy, and equipment decreased by $55 , or 7% , to $756 for the three months ended March 31, 2020 from $811 for the three months ended March 31, 2019 .

This was comprised of a decrease in business development of $51 and a decrease of occupancy and equipment of $4.

Subscriptions, Clearing, and Execution

Subscriptions, clearing, and execution increased by $307 , or 14% , to $2,580 for the three months ended March 31, 2020 from $2,273 for the three months ended March 31, 2019 .

The increase was comprised of an increase in subscriptions of $81 and an increase in clearing and execution costs of $226.

Clearing and execution costs increased primarily as a result of increased trading volumes.

Professional Fee and Other Operating Expenses

Professional fee and other operating expenses increased by $103 , or 6% , to $1,782 for the three months ended March 31, 2020 from $1,679 for the three months ended March 31, 2019 .

The increase was comprised of an increase in professional fees of $91 and an increase in other operating expense of $12.

Depreciation and Amortization

Depreciation and amortization decreased by $1 , or 1% , to $80 for the three months ended March 31, 2020 from $81 for the three months ended March 31, 2019 .

Impairment of Goodwill

We determined the financial market volatility that resulted from COVID-19 was a triggering event that required us to reassess the goodwill we ha d recorded related to JVB under the guidance of ASC 350.

We determined that the fair value of JVB was less than its carrying value (including the goodwill).

As a result, we recorded an impairment of $7,883 in the three months ended March 31, 2020.

See note 12 in our financial statements included in this Quarterly Report on Form 10-Q.

Non-Operating Income and Expense

Interest Expense, net

Interest expense, net increased by $751, or 41%, to $2,605 for the three months ended March 31, 2020 from $1,854 for the three months ended March 31, 2019 .

INTEREST EXPENSE

(Dollars in Thousands)

Three Months Ended March 31,

Junior subordinated notes

2020 Senior Notes

2013 Convertible Notes / 2019 Senior Notes

2017 Convertible Note

Redeemable Financial Instrument - DGC Trust / CBF

Redeemable Financial Instrument - JKD Capital Partners I LTD

Redeemable Financial Instrument - ViaNova Capital Group, LLC

See notes 16 and 17 to our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

Income / (loss) from Equity Method Affiliates

Income / (loss) from equity method affiliates decreased by $99 to ($107) for the three months ended March 31, 2020 from ($8) for the three months ended March 31, 2019.

See note 11 to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

Income Tax Expense / (Benefit)

The income tax expense / (benefit) decreased by $266 to income tax expense / (benefit) of ($372) for the three months ended March 31, 2020 from ($106) for the three months ended March 31, 2019 .

In the three months ended March 31, 2020, we estimated that we will incur a net operating loss in 2020 for U.S.

income tax purposes.

Therefore, we expect to have additional net operating loss carryforwards available to offset a portion of our deferred tax liability in future years.

The reduction of the deferred tax liability is recorded as an income tax benefit.

Net Income / (Loss) Attributable to the Non-controlling Interest

Net income / (loss) attributable to the non-controlling interest for the three months ended March 31, 2020 and 2019 was comprised of the non-controlling interest related to member interests in the Operating LLC other than interests held by us for the relevant periods.

In addition, net income / (loss) attributable to the non-controlling interest also included non-controlling interest related to entities that were consolidated by the Operating LLC but not wholly owned by us.

SUMMARY CALCULATION OF NON-CONTROLLING INTEREST

For the Three Months Ended March 31, 2020

Wholly Owned Subsidiaries

Other Consolidated Subsidiaries

Total Operating LLC Consolidated

Cohen & Company Inc.

Net income / (loss) before tax

Income tax expense / (benefit)

Net income / (loss) after tax

Other consolidated subsidiary non-controlling interest

Net income / (loss) attributable to the Operating LLC

Average effective Operating LLC non-controlling interest % (1)

Operating LLC non-controlling interest

SUMMARY CALCULATION OF NON-CONTROLLING INTEREST

For the Three Months Ended March 31, 2029

Wholly Owned Subsidiaries

Other Consolidated Subsidiaries

Total Operating LLC Consolidated

Cohen & Company Inc.

Net income / (loss) before tax

Income tax expense / (benefit)

Net income / (loss) after tax

Other consolidated subsidiary non-controlling interest

Net income / (loss) attributable to the Operating LLC

Average effective Operating LLC non-controlling interest % (1)

Operating LLC non-controlling interest

(1) Because earnings are recognized unevenly throughout the year and the non-controlling interest percentage may change during the period, the average effective non-controlling interest percentage may not equal the percentage at the end of any period or the simple average of the beginning and ending percentages.

Liquidity and Capital Resources

Liquidity is a measurement of our ability to meet potential cash requirements including ongoing commitments to repay debt borrowings, make interest payments on outstanding borrowings, fund investments, and support other general business purposes.

In addition, our United States, United Kingdom, and Irish broker-dealer subsidiaries are subject to certain regulatory requirements to maintain minimum levels of net capital.

Historically, our primary sources of funds have been our operating activities and general corporate borrowings.

In addition, our trading operations have generally been financed by use of collateralized securities financing arrangements as well as margin loans.

Certain subsidiaries of the Operating LLC have restrictions on the withdrawal of capital and otherwise in making distributions and loans.

JVB is subject to net capital restrictions imposed by the Securities and Exchange Commission (“SEC”) and Financial Industry Regulatory Authority (“FINRA”) that require certain minimum levels of net capital to remain in this subsidiary.

In addition, these restrictions could potentially impose notice requirements or limit our ability to withdraw capital above the required minimum amounts (excess capital) whether through a distribution or a loan.

CCFL is regulated by the Financial Conduct Authority (“FCA”) and CCFEL is regulated by the Central Bank of Ireland (the “CBI”) and each must maintain certain minimum levels of capital.

See note 18 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

See Liquidity and Capital Resources –

Contractual Obligations below.

During the third quarter of 2010, our board of directors initiated a dividend of $0.50 per quarter, which was paid regularly through December 31, 2011.

Beginning in 2012, our board of directors declared a dividend of $0.20 per quarter, which was paid regularly through the first quarter of 2019.

Each time a cash dividend was declared by our board of directors, a pro rata distribution was made to the other members of the Operating LLC upon payment of dividends to our stockholders.

On August 2, 201 9 , we announced that we have decided to suspend our quarterly cash dividend.

Suspending the $0.20 quarterly dividend is expected to save approximately $ 1,341 in cash annually.

We currently intend to use the related annual cash savings to invest in new business initiatives and improve our financial position.

Any future determination to declare and pay dividends will be made at the discretion of our board of directors, after taking into account a variety of factors, including business, financial, and regulatory considerations as well as any limitations under Maryland law or imposed by any agreements governing our indebtedness.

Going forward, the board of directors will re-assess our capital resources and may or may not determine to reinstate the dividend based on that assessment.

On March 19, 2018, the Company entered into a letter agreement (the “10b-5 Plan”) with Sandler O’Neill & Partners, L.P.

(the “Agent”).

The 10b-5 Plan was in effect from March 19, 2018 until March 19, 2019 and was not renewed.

Pursuant to the 10b5-1 Plan, purchases of Common Stock may be made in public and private transactions and had to comply with Rule 10b-18 under the Exchange Act.

The 10b5-1 Plan is designed to comply with Rule 10b5-1 under the Exchange Act.

During the three months ended March 31, 2019, we repurchased 7,890 shares in the open market under the 10b5-1 Plan for a total purchase price of $65.

All of the repurchases noted above were completed using cash on hand.

During the three months ended March 31, 2020:

We drew on the 2019 FT Revolver in the amount of $17,500.

We raised $4,500 in proceeds from issuance of the 2020 Senior Notes.

We repaid $4,386 of the 2019 Senior Notes.

We repaid $4,277 of the LegacyTexas Credit Facility.

During the three months ended March 31, 2019:

We raised $1,268 of proceeds from redeemable financial instruments

We raised $2,550 by issuing equity of the Sponsor Entities to third parties.

We have seven primary uses for capital:

To fund the operations of our Capital Markets business segment .

Our Capital Markets business segment utilizes capital (i) to fund securities inventory to facilitate client trading activities;

(ii) for risk trading on the firm’s own account;

(iii) to fund our collateralized securities lending activities;

(iv) for temporary capital needs associated with underwriting activities;

(v) to fund business expansion into existing or new product lines including additional capital dedicated to our mortgage group as well as our matched book repo business;

and (vi) to fund any operating losses incurred.

To fund the expansion of our Asset Management business segment .

We generally grow our assets under management by sponsoring new Investment Vehicles.

The creation of a new Investment Vehicle often requires us to invest a certain amount of our own capital to attract outside capital to manage.

Also, these new Investment Vehicles often require warehouse and other third party financing to fund the acquisition of investments.

Finally, we generally will hire employees to manage new Investment Vehicles and will operate at a loss for a startup period.

To fund investments .

We make principal investments to generate returns.

We may need to raise additional debt or equity financing in order to ensure we have the capital necessary to take advantage of attractive investment opportunities.

To fund mergers or acquisitions .

We may opportunistically use capital to acquire other asset managers, individual asset management contracts, or financial services firms.

To the extent our liquidity sources are insufficient to fund our future merger or acquisition activities, we may need to raise additional funding through an equity or debt offering.

No assurances can be given that additional financing will be available in the future, or that if available, such financing will be on favorable terms.

To fund potential dividends and distributions .

During the third quarter of 2010 and for each subsequent quarter through March 31, 20 19, the board of directors has declared a dividend.

A pro rata distribution has been paid to the other members of the Operating LLC upon the payment of any dividends to stockholders of Cohen & Company Inc.

On August 2, 2019, we announced that we have decided to suspend our quarterly cash dividend.

To fund potential repurchases of Common Stock.

The Company has opportunistically repurchased Common Stock in private transactions as well as through its 10b5-1 Plan.

See note 17 to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

To pay off debt as it matures:

The Company has indebtedness that must be repaid as it matures.

See note 16 to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

If we are unable to raise sufficient capital on economically favorable terms, we may need to reduce the amount of capital invested for the uses described above, which may adversely impact earnings and our ability to pay future dividends, if any.

As of March 31, 2020 and December 31, 2019 , we maintained cash and cash equivalents of $85,454 and $8,304 , respectively.

We generated cash from or used cash for the following activities.

SUMMARY CASH FLOW INFORMATION

(Dollars in Thousands)

Three Month Ended March 31,

Cash flow from operating activities

Cash flow from investing activities

Cash flow from financing activities

Effect of exchange rate on cash

Net cash flow

Cash and cash equivalents, beginning

Cash and cash equivalents, ending

See the statement of cash flows in our consolidated financial statements.

We believe our available cash and cash equivalents, as well as our investment in our trading portfolio and related borrowing capacity, will provide sufficient liquidity to meet the cash needs of our ongoing operations in the near term.

Three Months Ended March 31, 2020

As of March 31, 2020 , our cash and cash equivalents were $85,454 , representing an increase of $77,150 from December 31, 2019 .

The increase was attributable to cash provided by operating activities of $64,470 , cash provided by investing activities of $30 , cash provided by financing activities of $12,721 , and the decrease in cash caused by the change in exchange rates of $71 .

The cash provided by operating activities of $64,470 was comprised of (a) net cash inflows of $100,31 5 related to working capital fluctuations;

(b) net cash outflows of $34,964 from trading activities comprised of our investments-trading, trading securities sold, not yet purchased, receivables under resale agreements, securities sold under agreements to repurchase, and receivables and payables from brokers, dealers, and clearing agencies, as well as the changes in unrealized gains and losses on the investments-trading and trading securities sold, but not yet purchased;

and (c) net cash outflows from other earnings items of $88 1 (which represents net income or loss adjusted for the following non-cash operating items:

other income / (expense), realized and unrealized gains and losses and accretion of income on other investments, equity based compensation, depreciation and amortization, impairment of goodwill, and amortization of discount on debt).

As part of our matched book repo operations, we enter into reverse repos with counterparties whereby we lend money and receive securities as collateral.

In accordance with ASC 860, t he collateral securities are not recorded in our consolidated balance sheets.

However, from time to time we will hold cash instead of securities as collateral for these transactions.

When we are provided cash as collateral for reverse repo transactions, we will make an entry to increase our cash and cash equivalents and to increase our other liabilities for the amount of cash received.

There are two main reasons we may receive collateral in the form of cash as opposed to securities.

First, when the value of the collateral securities we have in our possession decline, we will require the counterparty to provide us with additional collateral.

We will accept either cash or additional liquid securities.

Often, our counterparties will provide us with cash as they may not have liquid securities readily available.

Second, from time to time, our counterparties require a portion of the collateral securities in our possession returned to them for operating purposes.

In such instances , the counterparty may not have substitute liquid securities available and will often provide us with cash as collateral instead.

It is important to note that when we receive cash as collateral, it is temporary in nature and we have an obligation to return that cash when the counterparty provides substitute liquid securities as collateral or otherwise satisfies the ir associated reverse repo obligation.

We are generally required to return any cash collateral the same business day that we receive substitute securities.

The amount of cash we receive as collateral for our repo operations is volatile and therefore both our cash and cash equivalents balance and our cash provided by and used in operations are volatile as they are both impacted.

As of March 31, 2020, and December 31, 2019, we had counterparty cash collateral of $74,692 and $9,524 , respectively , which were included in both our cash and cash equivalents and other liability balances, respectively.

Accordingly, included in our cash flow from operations of $64,470 during the three months ended March 31, 2020 is an inflow of $65,168 as a result of this increase in cash collateral held.

We have no legal or contractual obligation to segregate this cash collateral held and therefore it is included as a component of our cash and cash equivalents in our consolidated balance sheet s .

However, it is not available for use in our general operations as we must stand ready at all times to return the collateral held immediately once the reverse repo counterparty provides substitute liquid securities.

The cash provided by investing activities of $30 was comprised of (a) $2,309 of cash received from sales and returns of principal from other investments, at fair value;

partially offset by (b) $119 of cash used to purchase other investments, at fair value;

and (d) $62 of cash used to purchase furniture and equipment.

The cash provided by financing activities of $12,721 was comprised of (a) $17,500 proceeds from the 2019 FT Revolver and (b) $4,500 in proceeds from issuance of the 2020 Senior Notes;

partially offset by (c) $9,163 of repayment of debt, (d) $54 of cash used to net settle equity awards, and (e) $62 in cash used to pay dividends on vested shares.

Three Months Ended March 31, 2019

As of March 31, 2019, our cash and cash equivalents were $9,283, representing a decrease of $4,823 from December 31, 2018.

The decrease was attributable to cash used by operating activities of $9,270, cash provided by investing activities of $888, cash provided by financing activities of $3,564, and the decrease in cash caused by the change in exchange rates of $5.

The cash used by operating activities of $9,270 was comprised of (a) net cash inflows of $1,129 related to working capital fluctuations;

(b) net cash outflows of $8,596 from trading activities comprised of our investments-trading, trading securities sold, not yet purchased, securities sold under agreements to repurchase, and receivables and payables from brokers, dealers, and clearing agencies, as well as the changes in unrealized gains and losses on the investments-trading and trading securities sold, but not yet purchased;

and (c) net cash outflows from other earnings items of $1,803 (which represents net income or loss adjusted for the following non-cash operating items:

other income / (expense), realized and unrealized gains and losses and accretion of income on other investments, equity based compensation, depreciation and amortization, and amortization of discount on debt).

The cash provided by investing activities of $888 was comprised of (a) $5,091 of sales and returns of principal-other investments, at fair value;

partially offset by (b) $3,775 of investment in equity method affiliate;

and (d) $20 of purchase of furniture fixtures and equipment.

The cash provided by financing activities of $3,564 was comprised of (a) $1,268 of proceeds from a redeemable financial instrument;

(b) $2,550 in proceeds from issuance of non-controlling interests;

partially offset by (c) $128 in cash used to net settle equity awards;

(d) $61 in dividends paid;

and (e) $65 in purchases and retirement of Common Stock.

Regulatory Capital Requirements

We have three subsidiaries that are licensed securities dealers:

JVB in the United States, CCFL in the United Kingdom, and CCFEL in Ireland.

broker-dealer, JVB is subject to the Uniform Net Capital Rule in Rule 15c3-1 under the Exchange Act.

Our London-based subsidiary, CCFL, is subject to the regulatory supervision and requirements of the FCA and our Ireland-based subsidiary, CCFEL, is subject to the regulatory supervision and requirements of the CBI.

The amount of net assets that these subsidiaries may distribute is subject to restrictions under these applicable net capital rules.

These subsidiaries have historically operated in excess of minimum net capital requirements.

Our minimum capital requirements at March 31, 2020 were as follows.

MINIMUM NET CAPITAL REQUIREMENTS

(Dollars in Thousands)

United States

We operate with more than the minimum regulatory capital requirement in our licensed broker-dealers and at March 31, 2020 , total net capital, or the equivalent as defined by the relevant statutory regulations, in our licensed broker-dealers totaled $59,338 .

See note 18 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

In addition, our licensed broker-dealers are generally subject to capital withdrawal notification and restrictions.

Restrictions of Distributions of Capital from JVB

As of March 31, 20 20 , our total equity on a consolidated basis was $36,913.

However, the total equity of JVB was $93,271.

Therefore, all of our other subsidiaries and Cohen & Company, Inc.

on a stand-alone basis have an equity deficit of $56,358.

Furthermore, during the three months ended March 31, 20 20 , JVB generated income before income tax expense of $2,666 while our consolidated net loss was $ 11,785 (including goodwill impairment of $7,883 ).

Therefore, all of our other subsidiaries and Cohen & Company, Inc.

on a stand-alone basis had a combined net loss before of $ 14,451 (including goodwill impairment of $7,883 recorded outside of JVB) for the three months ended March 31, 2020.

We are dependent on taking distributions of income (and potentially returns of capital) from JVB to satisfy the cash needs as a result of the loss incurred outside of JVB or to satisfy other obligations that come due outside of JVB.

However, we are subject to significant limitations on our ability to make distributions from JVB.

These limitations include limitations imposed by FINRA under rule 15c3-1 (described immediately above) and limitations under our line of credit with FT Bank (see note 17 to our consolidated financial statements included in this Quarterly Report on Form 10-Q).

Furthermore, counterparties to JVB have their own internal counterparty credit requirements.

The specific requirements are not generally shared with us.

However, if we take too much in capital distributions from JVB (beyond its net income), we may not be able to trade with certain counterparties which may cause JVB’s operations to deteriorate.

Securities Financing

We maintain repurchase agreements with various third party institutional investors.

There is no maximum limit as to the amount of securities that may be transferred pursuant to these agreements, and transactions are approved on a case-by-case basis.

The repurchase agreements do not include substantive provisions other than those covenants and other customary provisions contained in standard master repurchase agreements.

The repurchase agreements generally require us to transfer additional securities to the counterparty in the event the value of the securities then held by the counterparty in the margin account falls below specified levels and contain events of default in cases where we breach our obligations under the agreement.

We receive margin calls from our repurchase agreement counterparties from time to time in the ordinary course of business.

To date, we have maintained sufficient liquidity to meet margin calls, and we have always been able to satisfy a margin call, however, no assurance can be given that we will be able to satisfy requests from our counterparties to post additional collateral in the future.

See note 10 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

If there were an event of default under the repurchase agreements, we would give our counterparty the option to terminate all repurchase transactions existing with us and make any amount due from us to the counterparty payable immediately.

Repurchase obligations are full recourse obligations to us.

If we were to default under a repurchase obligation, the counterparty would have recourse to our other assets if the collateral was not sufficient to satisfy the obligation in full.

Most of our repurchase agreements are entered into as part of our matched book repo business.

Our clearing agencies provide securities financing arrangements including margin arrangements and securities borrowing and lending arrangements.

These arrangements generally require us to transfer additional securities or cash to the clearing agency in the event the value of the securities then held by the clearing agency in the margin account falls below specified levels and contain events of default in cases where we breach our obligations under such agreements.

An event of default under the clearing agreement would give our counterparty the option to terminate our clearing arrangement.

Any amounts owed to the clearing agency would be immediately due and payable.

These obligations are recourse to us.

Furthermore, a termination of our clearing arrangements would result in a significant disruption to our business and would have a significant negative impact on our dealings and relationship with our customers.

The following table presents our period end balance, average monthly balance, and maximum balance at any month end during the three months ended March 31, 2020 and the twelve months ended December 31, 2019 for receivables under resale agreements and securities sold under agreements to repurchase.

For the Three Months Ended March 31, 2020

For the Twelve Months Ended December 31, 2019

Receivables under resale agreements

Monthly average

Maximum month end

Securities sold under agreements to repurchase

Monthly average

Maximum month end

Fluctuations in the balance of our repurchase agreements from period to period and intra-period are dependent on business activity in those periods.

The fluctuations in the balances of our receivables under resale agreements over the periods presented were impacted by our clients’

desires to execute collateralized financing arrangements through the repurchase market or other financing products.

Average balances and period end balances will fluctuate based on market and liquidity conditions and we consider such intra-period fluctuations as typical for the repurchase market.

Month-end balances may be higher or lower than average period balances.

Debt Financing

The following table summarizes the Company’s long-term indebtedness and other financing outstanding.

DETAIL OF DEBT

(Dollars in Thousands)

As of March 31, 2020

As of December 31, 2019

Interest Rate Terms

Non-convertible debt:

12.00% senior note s (the "2020 Senior Note s ")

12.00% senior note s (the "2019 Senior Note s ")

September 2020 (1)

Contingent convertible debt:

8.00% convertible senior note (the "2017 Convertible Note")

March 2022 (2)

Less unamortized debt issuance costs

Junior subordinated notes (3):

Alesco Capital Trust I

Sunset Financial Statutory Trust I

Less unamortized discount

FT Financial Bank, N.A.

Credit Facility

LegacyTexas Credit Facility

(1) On September 25, 2019, we amended the previously outstanding 2013 Convertible Notes which were scheduled to mature September 25, 2019.

The material terms and conditions of the 2013 Convertible Notes remained substantially the same , except that (i) the maturity date changed from September 25, 2019 to September 25, 2020;

(ii) the conversion feature in the 2013 Convertible Notes was removed;

(iii) the interest rate changed from 8% per annum (9% in the event of certain events of default) to 12% per annum (13% in the event of certain events of default);

and (iv) the restrictions regarding prepayment were removed .

The post-amendment notes are referred to as the “2019 Senior Notes”

and the pre-amendment notes are referred to herein as the “2013 Convertible Notes.”

(2) The holder of the 2017 Convertible Note may convert all or any part of the outstanding principal amount at any time prior to maturity into units of membership interests of the Operating LLC at a conversion price of $1.45 per unit, subject to customary anti-dilution adjustments.

Units of membership interests of the Operating LLC not held by Cohen & Company Inc.

may, with certain restrictions, be redeemed and exchanged into shares of the Cohen & Company Inc.

common stock, par value $0.01 per share (“

Common Stock ”) on a ten -for-one basis.

Therefore, the 2017 Convertible Note can be converted into Operating LLC units of membership interests and then redeemed and exchanged into Common Stock at an effective conversion price of $14.50 .

See note 20 to our Annual Report on Form 10-K for the year ended December 31, 201 9 .

(3) The junior subordinated notes listed represent debt the Company owes to the two trusts noted above.

The total par amount owed by the Company to the trusts is $49,614 .

However, the Company owns the common stock of the trusts in a total par amount of $1,489 .

The Company pays interest (and at maturity, principal) to the trusts on the entire $49,614 junior notes outstanding.

However, the Company receives back from the trusts the pro rata share of interest and principal on the common stock held by the Company.

These trusts are VIEs and the Company does not consolidate them even though the Company holds the common stock.

The Company carries the common stock on its balance sheet at a value of $0 .

The junior subordinated notes are recorded at a discount to par.

When factoring in the discount, the yield to maturity of the junior subordinated notes as of March 31, 2020 on a combined basis is 15.04 % assuming the variable rate in effect on the last day of the reporting period remains in effect until maturity.

(4) Represents the interest rate in effect as of the last day of the reporting period.

See note 17 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q for a discussion of the Company’s outstanding debt.

Redeemable Financial Instruments

W e ha d the following sources of financing that we account for as redeemable financial instruments.

See note 16 to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

REDEEMABLE FINANCIAL INSTRUMENTS

(Dollars in thousands)

As of March 31, 2020

As of December 31, 2019

JKD Capital Partners I LTD

DGC Trust / CBF

ViaNova Capital Group LLC

Off-Balance Sheet Arrangements

Other than as described in note 9 (derivative financial instruments) and note 14 (variable interest entities) to our consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q, there were no material off balance sheet arrangements as of March 31, 2020 .

Contractual Obligations

The table below summarizes our significant contractual obligations as of March 31, 2020 and the future periods in which such obligations are expected to be settled in cash.

We assumed that the 2017 Convertible Note is not converted prior to maturity.

Our junior subordinated notes are assumed to be repaid on their respective maturity dates.

Excluded from the table below are obligations that are short-term in nature, including trading liabilities (including derivatives) and repurchase agreements.

CONTRACTUAL OBLIGATIONS

March 31, 2020

(Dollars in Thousands)

Payment Due by Period

Less than 1 Year

More than 5 Years

Operating lease arrangements

Maturity of 2020 Senior Notes

Interest on 2020 Sen i or Notes

Maturity of 2019 Senior Notes

Interest on 2019 Sen i or Notes

Maturity of 2017 Convertible Note (1)

Interest on 2017 Convertible Note (1)

Maturities on junior subordinated notes

Interest on junior subordinated notes (2)

Redeemable Financial Instrument - JKD Capital Partners 1 (3)

Redeemable Financial Instrument - DGC Trust / CBF (3)

Redeemable Financial Instrument - ViaNova (3)

Minimum variable payment due on Redeemable Financial Instruments (4)

Other Operating Obligations (5)

Assumes the 2017 Convertible Note is not converted prior to maturity.

The interest on the junior subordinated notes related to Alesco Capital Trust I is variable.

The interest rate of 5.77% (based on a 90-day LIBOR rate in effect as of March 31, 2020 plus 4.00%) was used to compute the contractual interest payment in each period noted.

The interest on the junior subordinated notes related to Sunset Financial Statutory Trust I is variable.

The interest rate of 5.52% (based on a 90-day LIBOR rate in effect as of March 31, 2020 plus 4.15%) was used to compute the contractual interest payment in each period noted.

Represents redemption value of the redeemable financial instruments as of the reporting period.

The redeemable financial instruments do not have a fixed maturity date.

The period shown above represents the first period the holder of these instruments has the ability to require redemption by us.

The redeemable financial instruments require certain variable payments be made by us based on revenues earned by certain of our operations.

The amounts shown here represent the minimum amount of payments that would be due under these instruments.

Represents material operating contracts for various services.

We believe that we will be able to continue to fund our current operations and meet our contractual obligations through a combination of existing cash resources and other sources of credit.

Due to the uncertainties that exist in the economy, we cannot be certain that we will be able to replace existing financing or find sources of additional financing in the future.

Recent Accounting Pronouncements

The following is a list of recent accounting pronouncements that we believe will have a continuing impact on our financial statements going forward.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

This ASU is intended to simplify accounting for income taxes.

It removes specific exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application.

This ASU is effective for fiscal years beginning after December 15, 2020 and interim period with those fiscal years We are currently evaluating the new guidance to determine the impact it may have on our consolidated financial statements.

This ASU clarifies accounting certain topics impacted by Topic 321 Investments-Equity Securities.

These topics include measuring equity securities using the measurement alternative, how the measurement alternative should be applied to equity method accounting, and certain forward contracts and purchased options which would be accounted for under the equity method of accounting upon settlement or exercise.

This ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

We are currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements .

Critical Accounting Policies and Estimates

Our accounting policies are essential to understanding and interpreting the financial results reported in our condensed consolidated financial statements.

The significant accounting policies used in the preparation of our condensed consolidated financial statements are summarized in note 3 to our consolidated financial statements and notes thereto found in our Annual Report on Form 10-K for the year ended December 31, 2019 .

Certain of those policies are considered to be particularly important to the presentation of our financial results because they require us to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures.

We base our assumptions, estimates, and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our consolidated financial statements are prepared.

On a regular basis, management reviews the accounting policies, assumptions, estimates, and judgments to ensure that our financial statements are presented fairly and in accordance with U.S.

However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

During the three months ended March 31, 2020 , there were no material changes to matters discussed under the heading “Critical Accounting Policies and Estimates”

in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019 .

Effective January 1, 2019, we adopted ASU No.

2016-02, Leases (Topic 842) .

Effective January 1, 2019, we recorded the following:

(a) a right of use asset of $8,416 (b) a lease commitment liability of $8,860 (c) a reduction in retained earnings from cumulative effect of adoption of $20 (d) an increase in other receivables of $18 and (e) a reduction in other liabilities of $406.

See notes 3 and 13 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion.

In addition to Insurance Acquisition Corporation (Nasdaq:

INSU), the Company is the sponsor of a second special purpose acquisition company (“SPAC II”).

SPAC II will seek to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses (a “SPAC II Business Combination”) that provides insurance or insurance related services but will not be required to complete an SPAC II Business Combination with an insurance business.

SPAC II has not raised any funds from investors to date.

In July 2020, SPAC II filed a registration statement with the SEC and has an intent to raise $175 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements