Cohen & Co Inc. 10-Q

ITEM 2.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. GAAP. 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. Overview 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 June 30, 2020 , we had approximately $2.63 billion in assets under management (“AUM”) of which 78.2% 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; and ● 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; and ● 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. 55 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 June 30, 2020 , 78.2% 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. 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. 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. 56 U.S. 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. economy. 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 since 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 six months ended June 30, 2020 . See note 12. ● 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. 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 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. 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.  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. In April 2020, 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. See recent events below. 57 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 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.  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. ViaNova 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.  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. 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 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. The Company intends to opportunistically sell these loans if possible or allow them to mature. The latest maturity date of the loans is January 1, 2021. See notes 4 and 7 to our financial statements included in this Quarterly Report on Form 10-Q. Cares Act  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.  58 Paycheck Protection Program  In April 2020, we applied for and received a $2,166 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 did not have access to the public capital markets at that 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. See note 17 to our financial statements included in this Quarterly Report on Form 10-Q. Insurance SPAC 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 Insurance SPAC since the date of the Merger Agreement; (iii) the filings of 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 Insurance SPAC’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 our subsidiaries 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 us, 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 us, dated June 29, 2020 (the “Subsidiary Subscription Agreement”), provides for the purchase of 200,000 shares of Insurance SPAC Common Stock by us, which number of shares may be increased by up to 1,300,000 shares of Insurance SPAC Common Stock at the our election , 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 us pursuant to the Subsidiary Subscription Agreement. Upon closing of the Merger, we currently expect the Sponsor Entities to collectively retain 375,000 placement shares and between 4,000,000 and 4,500,000 founder shares (collectively, the “Sponsor Shares”) of Insurance SPAC. We currently consolidate the Sponsor Entities and treat our investment in Insurance SPAC as an equity method investment. Also, upon closing of the Merger, we will reclassify our 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 Insurance SPAC common equity; and (iii) fair value discounts related to the share sale restrictions on the Sponsor Shares outlined below. Upon recognition of the principal transaction revenue described above, we will record a non-controlling interest expense equal to the amount of Sponsor Shares distributable to the non-controlling interests. Currently, we expect 252,000 placement shares 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 we will likely write off advances it has made to the Insurance SPAC. Further, even if the merger with Shift is completed, there can be no assurance that the Sponsor Shares retained above will not change significantly. See Notes 4, 11, 24 and 25 to our consolidated financial statements included in this Quarterly Report on Form 10-Q. 59 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. Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019 The following table sets forth information regarding our consolidated results of operations for the six months ended June 30, 2020 and 2019 . COHEN & COMPANY INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands) (Unaudited) Six Months Ended June 30, Favorable / (Unfavorable) 2020 2019 $ Change % Change Revenues Net trading $ 38,567 $ 17,394 $ 21,173 122 % Asset management 3,307 3,747 (440 ) (12 )% Principal transactions and other income 15 1,168 (1,153 ) (99 )% Total revenues 41,889 22,309 19,580 88 % Operating expenses Compensation and benefits 25,458 12,796 (12,662 ) (99 )% Business development, occupancy, equipment 1,396 1,706 310 18 % Subscriptions, clearing, and execution 5,128 4,329 (799 ) (18 )% Professional fee and other operating 3,379 2,869 (510 ) (18 )% Depreciation and amortization 164 159 (5 ) (3 )% Impairment of goodwill 7,883 - (7,883 ) NM Total operating expenses 43,408 21,859 (21,549 ) (99 )% Operating income / (loss) (1,519 ) 450 (1,969 ) (438 )% Non-operating income / (expense) Interest expense, net (5,686 ) (3,793 ) (1,893 ) (50 )% Income / (loss) from equity method affiliates (1,340 ) (256 ) (1,084 ) (423 )% Income / (loss) before income taxes (8,545 ) (3,599 ) (4,946 ) (137 )% Income tax expense / (benefit) (29 ) (747 ) (718 ) (96 )% Net income / (loss) (8,516 ) (2,852 ) (5,664 ) (199 )% Less: Net income (loss) attributable to the non-controlling interest (6,315 ) (1,240 ) 5,075 409 % Net income / (loss) attributable to Cohen & Company Inc. $ (2,201 ) $ (1,612 ) (589 ) (37 )% Revenues Revenues increased by $19,580 , or 88% ,to $41,889 from $22,309 for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 . As discussed in more detail below, the change was comprised of (i) an increase in trading revenue of $21,173 ; (ii) a decrease in asset management revenue of $440 ; and (iii) a decrease in principal transactions and other revenue of $1,153 . Net Trading Net trading revenue increased by $21,173 , or 122% , to $38,567 for the six months ended June 30, 2020 from $17,394 for the six months ended June 30, 2019 . The following table shows the detail by group.   NET TRADING (Dollars in Thousands) Six Months Ended June 30, 2020 2019 Change Mortgage $ 5,060 $ 2,567 $ 2,493 Matched book repo 14,795 3,636 11,159 High yield corporate 2,093 3,502 (1,409 ) Investment grade corporate 11,170 407 10,763 Wholesale and other 5,449 7,282 (1,833 ) Total $ 38,567 $ 17,394 $ 21,173  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. 60 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 June 30, As of December 31, 2020 2019 2019 2018 Company sponsored CDOs $ 2,057,940 $ 2,311,484 $ 2,197,208 $ 2,386,614 Other Investment Vehicles (1) 573,467 484,003 559,382 465,665 Assets under management (2) $ 2,631,407 $ 2,795,487 $ 2,756,590 $ 2,852,279  (1) Other Investment Vehicles represent any investment vehicles that are not company sponsored CDOs. (2) 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 $440 , or 12% , to $3,307 for the six months ended June 30, 2020 from $3,747 for the six months ended June 30, 2019 , as discussed in more detail below. The following table provides a more detailed comparison of the two periods.  ASSET MANAGEMENT (Dollars in Thousands) Six Months Ended June 30, 2020 2019 Change CDOs $ 1,791 $ 1,853 $ (62 ) Other 1,516 1,894 (378 ) Total $ 3,307 $ 3,747 $ (440 ) CDOs 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. 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. Asset management fees from company sponsored CDOs decreased by $62 to $1,791 for the six months ended June 30, 2020 from $1,853 for the six months ended June 30, 2019 . The following table summarizes the periods presented by asset class. FEES EARNED BY ASSET CLASS (Dollars in Thousands) Six Months Ended June 30, 2020 2019 Change TruPS and insurance company debt - U.S. $ 1,497 $ 1,571 $ (74 ) TruPS and insurance company debt - Europe 190 198 (8 ) Broadly syndicated loans - Europe 104 84 20 Total $ 1,791 $ 1,853 $ (62 ) The reduction in asset management fees for TruPS and insurance company debt – U.S. 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 mostly the result of 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 six months ended June 30, 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. 61 Other Other asset management revenue decreased by $378 to $1,516 for the six months ended June 30, 2020 from $1,894 for the six months ended June 30, 2019 . The decrease was primarily due to a reduction in performance fees being earned on our managed accounts during the six months ended June 30, 2020 as compared to the same period in 2019. Principal Transactions and Other Income Principal transactions and other income decreased by $1,153 , or 99% , to $15 for the six months ended June 30, 2020 , as compared to $1,168 for the six months ended June 30, 2019 . The following table summarizes principal transactions and other income by category.   PRINCIPAL TRANSACTIONS & OTHER INCOME (Dollars in Thousands) Six Months Ended June 30, 2020 2019 Change EuroDekania $ - $ 281 $ (281 ) Currency hedges - 42 (42 ) CLO investments (535 ) 169 (704 ) IMXI 295 33 262 U.S. Insurance JV (30 ) 83 (113 ) SPAC Funds 28 49 (21 ) Other principal investments (52 ) 278 (330 ) Total principal transactions (294 ) 935 (1,229 ) IIFC revenue share 215 221 (6 ) All other income / (loss) 94 12 82 Other income 309 233 76 Total principal transactions and other income $ 15 $ 1,168 $ (1,153 ) Principal Transactions Principal transactions includes income earned or loss incurred on our investments classified as other investments, at fair value in our consolidated balance sheets. See notes 7 and 8 to our consolidated financial statements included in this Quarterly Report on Form 10-Q. 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 was denominated in Euros. We sometimes hedged 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. These investments were liquidated in June 2020. 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. (NASDAQ: IMXI), a publicly traded company that resulted from the merger of Intermex Holdings, LLC and FinTech Acquisition Corp. II. See note 18 to our consolidated financial statements included in this Quarterly Report on Form 10-Q. The U.S. Insurance JV is a company that invests in USD denominated debt issued by small insurance and reinsurance 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. 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 Other Income 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 $2,902. Also, in any particular year, the revenue share earned by us cannot exceed $2,000. 62 Operating Expenses Operating expenses increased by $21,549 , or 99% , to $43,408 for the six months ended June 30, 2020 from $21,859 for the six months ended June 30, 2019 . As discussed in more detail below, the change was comprised of (i) an increase of $12,662 in compensation and benefits; (ii) a decrease of $310 in business development, occupancy, and equipment; (iii) an increase of $799 in subscriptions, clearing, and execution; (iv) an increase of $510 of professional fee and other operating; (v) an increase of $5 of depreciation and amortization; and (vi) impairment of goodwill of $7,883 . Compensation and Benefits Compensation and benefits increased by $12,662 , or 99% , to $25,458 for the six months ended June 30, 2020 from $12,796 for the six months ended June 30, 2019 . COMPENSATION AND BENEFITS (Dollars in Thousands) Six Months Ended June 30, 2020 2019 Change Cash compensation and benefits $ 25,140 $ 12,433 $ 12,707 Equity-based compensation 318 363 (45 ) Total $ 25,458 $ 12,796 $ 12,662  Cash compensation and benefits in the table above was primarily comprised of salary, incentive compensation, and benefits. Cash compensation and benefits increased by $12,707 to $25,140 for the six months ended June 30, 2020 from $12,433 for the six months ended June 30, 2019 . The increase was due to an increase in incentive compensation that is tied to revenue and operating profitability. Our total headcount increased from 91 at June 30, 2019 to 94 at June 30, 2020 . Equity-based compensation decreased by $45 to $318 for the six months ended June 30, 2020 from $363 for the six months ended June 30, 2019 . Business Development, Occupancy, and Equipment Business development, occupancy, and equipment decreased by $310 , or 18% , to $1,396 for the six months ended June 30, 2020 from $1,706 for the six months ended June 30, 2019 . This was comprised of a decrease in business development of $283 and a decrease of occupancy and equipment of $27. Subscriptions, Clearing, and Execution Subscriptions, clearing, and execution increased by $799 , or 18% , to $5,128 for the six months ended June 30, 2020 from $4,329 for the six months ended June 30, 2019 . The increase was comprised of an increase in subscriptions of $122 and an increase in clearing and execution costs of $677. 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 $510 , or 18% , to $3,379 for the six months ended June 30, 2020 from $2,869 for the six months ended June 30, 2019 . The increase was comprised of an increase in professional fees of $476 and an increase in other operating expense of $34. Depreciation and Amortization Depreciation and amortization increased by $5 , or 3% , to $164 for the six months ended June 30, 2020 from $159 for the six months ended June 30, 2019 . Impairment of Goodwill  We determined the financial market volatility, as well as the reduction in volumes in the GCF repo and TBA businesses that resulted from COVID-19 was a triggering event that 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 its carrying value (including the goodwill). As a result, we recorded an impairment of $7,883 in the six months ended June 30, 2020 . See note 12 in our financial statements included in this Quarterly Report on Form 10-Q. 63 Non-Operating Income and Expense Interest Expense, net Interest expense, net increased by $1,893 , to $5,686 for the six months ended June 30, 2020 from $3,793 for the six months ended June 30, 2019 . INTEREST EXPENSE (Dollars in Thousands) Six Months Ended June 30, 2020 2019 Change Junior subordinated notes $ 1,573 $ 1,764 $ (191 ) 2020 Senior Notes 223 - 223 2013 Convertible Notes / 2019 Senior Notes 191 269 (78 ) 2017 Convertible Note 744 726 18 2018 FT LOC 514 182 332 Redeemable Financial Instrument - DGC Trust / CBF 1,147 409 738 Redeemable Financial Instrument - JKD Capital Partners I LTD 1,400 521 879 Redeemable Financial Instrument - ViaNova Capital Group, LLC (106 ) (78 ) (28 ) $ 5,686 $ 3,793 $ 1,893 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 $1,084 to ($1,340) for the six months ended June 30, 2020 from ($256) for the six months ended June 30, 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) increased by $718 to income tax expense / (benefit) of ($29) for the six months ended June 30, 2020 from ($747) for the six months ended June 30, 2019 . Excluding our goodwill impairment (which is non deductible for income tax purposes), our income before income tax increased for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 which resulted in an increase in income tax expense. Net Income / (Loss) Attributable to the Non-controlling Interest Net income / (loss) attributable to the non-controlling interest for the six months ended June 30, 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 Six Months Ended June 30, 2020 Wholly Owned Other Consolidated Total Operating LLC Cohen & Subsidiaries Subsidiaries Consolidated Company Inc. Consolidated Net income / (loss) before tax $ (6,903 ) $ (1,642 ) $ (8,545 ) $ - $ (8,545 ) Income tax expense / (benefit) (17 ) - (17 ) (12 ) (29 ) Net income / (loss) after tax (6,886 ) (1,642 ) (8,528 ) 12 (8,516 ) Other consolidated subsidiary non-controlling interest - (899 ) (899 ) Net income / (loss) attributable to the Operating LLC (6,886 ) (743 ) (7,629 ) Average effective Operating LLC non-controlling interest % (1) 70.99 % Operating LLC non-controlling interest $ (5,416 )   SUMMARY CALCULATION OF NON-CONTROLLING INTEREST For the Six Months Ended June 30, 2019 Wholly Owned Other Consolidated Total Operating LLC Cohen & Subsidiaries Subsidiaries Consolidated Company Inc. Consolidated Net income / (loss) before tax $ (3,343 ) $ (256 ) $ (3,599 ) $ - $ (3,599 ) Income tax expense / (benefit) 1 - 1 (748 ) (747 ) Net income / (loss) after tax (3,344 ) (256 ) (3,600 ) 748 (2,852 ) Other consolidated subsidiary non-controlling interest - (131 ) (131 ) Net income / (loss) attributable to the Operating LLC (3,344 ) (125 ) (3,469 ) Average effective Operating LLC non-controlling interest % (1) 31.97 % Operating LLC non-controlling interest $ (1,109 ) (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. 64 Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019 The following table sets forth information regarding our consolidated results of operations for the three months ended June 30, 2020 and 2019 . COHEN & COMPANY INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands) (Unaudited) Three Months Ended June 30, Favorable / (Unfavorable) 2020 2019 $ Change % Change Revenues Net trading $ 20,006 $ 8,670 $ 11,336 131 % Asset management 1,692 1,745 (53 ) (3 )% Principal transactions and other income 2,421 754 1,667 221 % Total revenues 24,119 11,169 12,950 116 % Operating expenses Compensation and benefits 11,324 6,432 (4,892 ) (76 )% Business development, occupancy, equipment 640 895 255 28 % Subscriptions, clearing, and execution 2,548 2,056 (492 ) (24 )% Professional fee and other operating 1,597 1,190 (407 ) (34 )% Depreciation and amortization 84 78 (6 ) (8 )% Total operating expenses 16,193 10,651 (5,542 ) (52 )% Operating income / (loss) 7,926 518 7,408 1430 % Non-operating income / (expense) Interest expense, net (3,081 ) (1,939 ) (1,142 ) (59 )% Income / (loss) from equity method affiliates (1,233 ) (248 ) (985 ) (397 )% Income / (loss) before income taxes 3,612 (1,669 ) 5,281 316 % Income tax expense / (benefit) 343 (641 ) (984 ) (154 )% Net income / (loss) 3,269 (1,028 ) 4,297 418 % Less: Net income (loss) attributable to the non-controlling interest 2,368 (618 ) (2,986 ) (483 )% Net income / (loss) attributable to Cohen & Company Inc. $ 901 $ (410 ) 1,311 320 % Revenues Revenues increased by $12,950 or 116% to $24,119 for the three months ended June 30, 2020 from $11,169 for the three months ended June 30, 2019 . As discussed in more detail below, the change was comprised of (i) an increase of $11,336 in net trading revenue; (ii) a decrease of $53 in asset management revenue; and (iii) an increase of $1,667 in principal transactions and other income. Net Trading Net trading revenue increased by $11,336 or 131% , to $20,006 for the three months ended June 30, 2020 from $8,670 for the three months ended June 30, 2019 . The following table shows the detail by group.   NET TRADING (Dollars in Thousands) Three Months Ended June 30, 2020 2019 Change Mortgage $ 2,025 $ 1,459 $ 566 Matched book repo 7,927 2,342 5,585 High yield corporate 4,089 1,502 2,587 Investment grade corporate 1,212 152 1,060 Wholesale and other 4,753 3,215 1,538 Total $ 20,006 $ 8,670 $ 11,336  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. 65 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. Asset management fees decreased by $53 , or 3% , to $1,692 for the three months ended June 30, 2020 from $1,745 for the three months ended June 30, 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 June 30, 2020 2019 Change CDOs $ 822 $ 903 $ (81 ) Other 870 842 28 Total $ 1,692 $ 1,745 $ (53 ) CDOs 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. 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. Asset management fees from company sponsored CDOs decreased by $81 to $822 for the three months ended June 30, 2020 from $903 for the three months ended June 30, 2019 . The following table summarizes the periods presented by asset class. FEES EARNED BY ASSET CLASS (Dollars in Thousands) Three Months Ended June 30, 2020 2019 Change TruPS and insurance company debt - U.S. $ 729 $ 773 $ (44 ) TruPS and insurance company debt - Europe 93 90 3 Broadly syndicated loans - Europe - 40 (40 ) Total $ 822 $ 903 $ (81 ) The reduction in asset management fees for TruPS and insurance company debt – U.S. was a result of average AUM declining due to principal repayments on the assets in these securitizations. The increase in asset management fees for TruPS and insurance company debt – Europe was a result of changes in foreign exchange rates.  Asset management fees for broadly syndicated loans – Europe consist of a single CLO. During August 2019, this CLO liquidated. No future revenue will be earned on this CLO. Other Other asset management revenue increased by $28 to $870 for the three months ended June 30, 2020 from $842 for the three months ended June 30, 2019 . The increase was primarily due to an increase in AUM during the three months ended June 30, 2020 as compared to the same period in 2019. 66 Principal Transactions and Other Income Principal transactions and other income increased by $1,667 , or 221% , to $2,421 for the three months ended June 30, 2020 , as compared to $754 for the three months ended June 30, 2019 . The following table summarizes principal transactions and other income by category.   PRINCIPAL TRANSACTIONS & OTHER INCOME (Dollars in Thousands) Three Months Ended June 30, 2020 2019 Change EuroDekania $ - $ (11 ) $ 11 Currency hedges - 2 (2 ) CLO investments (10 ) 96 (106 ) IMXI 2,046 151 1,895 U.S. Insurance JV 137 44 93 SPAC Funds 87 25 62 Other principal investments 44 278 (234 ) Total principal transactions 2,304 585 1,719 IIFC revenue share 99 125 (26 ) All other income / (loss) 18 44 (26 ) Other income 117 169 (52 ) Total principal transactions and other income $ 2,421 $ 754 $ 1,667 Principal Transactions Principal transactions includes income earned or loss incurred on our investments classified as other investments, at fair value in our consolidated balance sheets. See notes 7 and 8 to our consolidated financial statements included in this Quarterly Report on Form 10-Q. 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 was denominated in Euros. We sometimes hedged 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. These investments were liquidated in June 2020. 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. (NASDAQ: IMXI), a publicly traded company that resulted from the merger of Intermex Holdings, LLC and FinTech Acquisition Corp. II. See note 18 to our consolidated financial statements included in this Quarterly Report on Form 10-Q. The U.S. Insurance JV is a company that invests in USD denominated debt issued by small insurance and reinsurance 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 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 Other Income 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 $2,902. Also, in any particular year, the revenue share earned by us cannot exceed $2,000. Operating Expenses Operating expenses increased by $5,542 , or 52% , to $16,193 for the three months ended June 30, 2020 from $10,651 for the three months ended June 30, 2019 . As discussed in more detail below, the change was comprised of (i) an increase of $4,892 in compensation and benefits; (ii) a decrease of $255 in business development, occupancy, and equipment; (iii) an increase of $492 in subscriptions, clearing, and execution; (iv) an increase of $407 of professional fee and other operating; and (v) an increase of $6 of depreciation and amortization. 67 Compensation and Benefits Compensation and benefits increased by $4,892 , or 76% , to $11,324 for the three months ended June 30, 2020 from $6,432 for the three months ended June 30, 2019 . COMPENSATION AND BENEFITS (Dollars in Thousands) Three Months Ended June 30, 2020 2019 Change Cash compensation and benefits $ 11,164 $ 6,242 $ 4,922 Equity-based compensation 160 190 (30 ) Total $ 11,324 $ 6,432 $ 4,892  Cash compensation and benefits in the table above was primarily comprised of salary, incentive compensation, and benefits. Cash compensation and benefits increased by $4,922 to $11,164 for the three months ended June 30, 2020 from $6,242 for the three months ended June 30, 2019 . The increase was due to an increase in incentive compensation that is tied to revenue and operating profitability. Our total headcount increased from 91 at June 30, 2019 to 94 at June 30, 2020 .. Equity-based compensation decreased by $30 to $160 for the three months ended June 30, 2020 from $190 for the three months ended June 30, 2019 . Business Development, Occupancy, and Equipment Business development, occupancy, and equipment decreased by $255 , or 28% , to $640 for the three months ended June 30, 2020 from $895 for the three months ended June 30, 2019 . This decrease was comprised of a decrease in business development of $233 and a decrease in occupancy and equipment of $22. Subscriptions, Clearing, and Execution Subscriptions, clearing, and execution increased by $492 , or 24% , to $2,548 for the three months ended June 30, 2020 from $2,056 for the three months ended June 30, 2019 . The increase was comprised of an increase in subscriptions of $40 and an increase in clearing and execution costs of $452. 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 $407 , or 34% , to $1,597 for the three months ended June 30, 2020 from $1,190 for the three months ended June 30, 2019 . The increase was comprised of an increase in professional fees of $386 and an increase in other operating expense of $21. Depreciation and Amortization Depreciation and amortization increased by $6 , or 8% , to $84 for the three months ended June 30, 2020 from $78 for the three months ended June 30, 2019 . Non-Operating Income and Expense Interest Expense, net Interest expense, net increased by $1,142 , to $3,081 for the three months ended June 30, 2020 from $1,939 for the three months ended June 30, 2019 . INTEREST EXPENSE (Dollars in Thousands) Three Months Ended June 30, 2020 2019 Change Junior subordinated notes $ 752 $ 885 $ (133 ) 2020 Senior Notes 134 - 134 2013 Convertible Notes / 2019 Senior Notes 72 135 (63 ) 2017 Convertible Note 373 366 7 2018 FT LOC 362 90 272 Redeemable Financial Instrument - DGC Trust / CBF 457 261 196 Redeemable Financial Instrument - JKD Capital Partners I LTD 960 243 717 Redeemable Financial Instrument - ViaNova Capital Group, LLC (29 ) (41 ) 12 $ 3,081 $ 1,939 $ 1,142 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 $985 to ($1,233) for the three months ended June 30, 2020 from ($248) for the three months ended June 30, 2019 . See note 11 to our consolidated financial statements included in this Quarterly Report on Form 10-Q. 68 Income Tax Expense / (Benefit)  The income tax expense / (benefit) increased by $984 to income tax expense / (benefit) of $343 for the six months ended June 30, 2020 from ($641) for the three months ended June 30, 2019 . Our income before income tax increased for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 which resulted in an increase in income tax expense. Net Income / (Loss) Attributable to the Non-controlling Interest Net income / (loss) attributable to the non-controlling interest for the three months ended June 30, 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 June 30, 2020 Wholly Owned Other Consolidated Total Operating LLC Cohen & Subsidiaries Subsidiaries Consolidated Company Inc. Consolidated Net income / (loss) before tax $ 4,947 $ (1,335 ) $ 3,612 $ - $ 3,612 Income tax expense / (benefit) (42 ) - (42 ) 385 343 Net income / (loss) after tax 4,989 (1,335 ) 3,654 (385 ) 3,269 Other consolidated subsidiary non-controlling interest - (739 ) (739 ) Net income / (loss) attributable to the Operating LLC 4,989 (596 ) 4,393 Average effective Operating LLC non-controlling interest % (1) 70.73 % Operating LLC non-controlling interest $ 3,107   SUMMARY CALCULATION OF NON-CONTROLLING INTEREST For the Three Months Ended June 30, 2019 Wholly Owned Other Consolidated Total Operating LLC Cohen & Subsidiaries Subsidiaries Consolidated Company Inc. Consolidated Net income / (loss) before tax $ (1,421 ) $ (248 ) $ (1,669 ) $ - $ (1,669 ) Income tax expense / (benefit) (7 ) - (7 ) (634 ) (641 ) Net income / (loss) after tax (1,414 ) (248 ) (1,662 ) 634 (1,028 ) Other consolidated subsidiary non-controlling interest - (127 ) (127 ) Net income / (loss) attributable to the Operating LLC (1,414 ) (121 ) (1,535 ) Average effective Operating LLC non-controlling interest % (1) 31.99 % Operating LLC non-controlling interest $ (491 ) (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.  69 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 19 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, 2019, 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, 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 is designed to comply with Rule 10b5-1 under the Exchange Act. During the six months ended June 30, 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 six months ended June 30, 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 received a PPP Loan of $2,166. ● We repaid $4,386 of the 2019 Senior Notes. ● We repaid $4,777 of the LegacyTexas Credit Facility.  During the six months ended June 30, 2019 :  ● We drew $1,210 of the LegacyTexas Credit Facility ● We raised $1,268 of proceeds from redeemable financial instruments ● We raised $2,550 by issuing equity of the Sponsor Entities to third parties.  Cash Flows  We have seven primary uses for capital:  (1) 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. (2) 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. (3) 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. (4) 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. (5) To fund potential dividends and distributions . During the third quarter of 2010 and for each subsequent quarter through June 30, 2019 , 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. (6) 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 18 to our consolidated financial statements included in this Quarterly Report on Form 10-Q. (7) To pay off debt as it matures: The Company has indebtedness that must be repaid as it matures. See note 17 to our consolidated financial statements included in this Quarterly Report on Form 10-Q. 70 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 June 30, 2020 and December 31, 2019 , we maintained cash and cash equivalents of $ 235,018 and $ 8,304 , respectively. We generated cash from or used cash for the following activities.  SUMMARY CASH FLOW INFORMATION (Dollars in Thousands) . Six Months Ended June 30, 2020 2019 Cash flow from operating activities $ 209,225 $ (8,613 ) Cash flow from investing activities 2,627 3,500 Cash flow from financing activities 14,887 4,103 Effect of exchange rate on cash (25 ) (19 ) Net cash flow 226,714 (1,029 ) Cash and cash equivalents, beginning 8,304 14,106 Cash and cash equivalents, ending $ 235,018 $ 13,077  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. Six Months Ended June 30, 2020 As of June 30, 2020 , our cash and cash equivalents were $ 235,018 , representing an increase of $ 226,714 from December 31, 2019 . The increase was attributable to cash provided by operating activities of $ 209,225 , cash provided by investing activities of $ 2,627 , cash provided by financing activities of $ 14,887 , and the decrease in cash caused by the change in exchange rates of $ 25 . The cash provided by operating activities of $ 209,225 was comprised of (a) net cash inflows of $ 256,867 related to working capital fluctuations; (b) net cash outflows of $ 49,497 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 inflows from other earnings items of $ 1,855 (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, the 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 their 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. These amounts can be large and very volatile and should be taken into account when analyzing our cash flow from operations. As of June 30, 2020 , and December 31, 2019 , we had counterparty cash collateral of $218,731 and $9,524, respectively, which were included in both our cash and cash equivalents and other liability balances, respectively. Accordingly, included in our 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. 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 sheets. 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 or the repo matures. The cash provided by investing activities of $ 2,627 was comprised of (a) $4,959 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; (c) $2,097 of cash used for investments in equity method affiliates; and (d) $116 of cash used to purchase furniture and equipment. The cash provided by financing activities of $ 14,887 was comprised of (a) $17,500 proceeds from the 2019 FT Revolver; (b) $2,166 in proceeds from the PPP loan; and (c) $4,500 in proceeds from issuance of the 2020 Senior Notes; partially offset by (d) $9,163 of repayment of debt, (e) $54 of cash used to net settle equity awards, and (f) $62 in cash used to pay dividends on vested shares. 71 Six Months Ended June 30, 2019 As of June 30, 2019, our cash and cash equivalents were $13,077, representing a decrease of $1,029 from December 31, 2018. The decrease was attributable to cash used by operating activities of $8,613, cash provided by investing activities of $3,500, cash provided by financing activities of $4,103, and the decrease in cash caused by the change in exchange rates of $19. The cash used by operating activities of $8,613 was comprised of (a) net cash inflows of $2,149 related to working capital fluctuations; (b) net cash outflows of $7,751 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 $3,011 (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 $3,500 was comprised of (a) $8,008 of cash received from sales and returns of principal from other investments, at fair value; partially offset by (b) $705 of cash used to purchase other investments, at fair value; (c) $3,775 of investments in equity method affiliates; and (d) $28 of cash used to purchase furniture and equipment. The cash provided by financing activities of $4,103 was comprised of (a) $1,268 in proceeds from redeemable financial instruments; (b) $2,550 in proceeds from the issuance of non-controlling interests; and (c) $1,210 in proceeds from draws on the LegacyTexas Credit Facility; partially offset by (d) $128 in cash used to net settle equity awards; (e) $65 in cash used to purchase and retire Common Stock; (f) $213 in cash used for non-controlling interest distributions and (g) $519 in cash used to pay dividends  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. As a U.S. 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 June 30, 2020 were as follows. MINIMUM NET CAPITAL REQUIREMENTS (Dollars in Thousands) United States $ 608 Europe 817 Total $ 1,425 We operate with more than the minimum regulatory capital requirement in our licensed broker-dealers and at June 30, 2020 , total net capital, or the equivalent as defined by the relevant statutory regulations, in our licensed broker-dealers totaled $69,874. 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 June 30, 2020 , our total equity on a consolidated basis was $40,379. However, the total equity of JVB was $99,759. Therefore, all of our other subsidiaries and Cohen & Company, Inc. on a stand-alone basis have an equity deficit of $59,380. Furthermore, during the six months ended June 30, 2020 , JVB generated income before income tax expense of $10,654 while our consolidated net loss was $8,545 (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 income tax expense / (benefit) of $19,199 (including goodwill impairment of $7,883 recorded outside of JVB) for the six months ended June 30, 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. 72 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 six months ended June 30, 2020 and the twelve months ended December 31, 2019 for receivables under resale agreements and securities sold under agreements to repurchase. For the Six Months Ended June 30, 2020 For the Twelve Months Ended December 31, 2019 Receivables under resale agreements Period end $ 5,504,667 $ 7,500,002 Monthly average 6,987,310 6,458,757 Maximum month end 8,945,403 7,500,002 Securities sold under agreements to repurchase Period end $ 5,524,758 $ 7,534,443 Monthly average 7,026,453 6,501,691 Maximum month end 8,960,197 7,534,443 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. 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. DETAIL OF DEBT (Dollars in Thousands) As of As of Interest Description June 30, 2020 December 31, 2019 Rate Terms Interest (4) Maturity Non-convertible debt: 12.00% senior note (the "2020 Senior Note") $ 4,500 $ - Fixed 12.00 % January 2022 12.00% senior note (the "2019 Senior Note") 2,400 6,786 Fixed 12.00 % September 2020 (1) PPP Loan 2,166 - Fixed 1.00 % May 2022 Contingent convertible debt: 8.00% convertible senior note (the "2017 Convertible Note") 15,000 15,000 Fixed 8.00 % March 2022 (2) Less unamortized debt issuance costs (557 ) (703 ) 14,443 14,297 Junior subordinated notes (3): Alesco Capital Trust I 28,125 28,125 Variable 4.76 % July 2037 Sunset Financial Statutory Trust I 20,000 20,000 Variable 5.52 % March 2035 Less unamortized discount (24,925 ) (25,124 ) 23,200 23,001 FT Financial Bank, N.A. Credit Facility 17,500 - Variable N/A April 2021 LegacyTexas Credit Facility - 4,777 Variable N/A NA Total $ 64,209 $ 48,861 (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, 2019 . 73 (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 June 30, 2020 on a combined basis is 14.31% 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. Redeemable Financial Instruments  We had 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 June 30, 2020 As of December 31, 2019 JKD Capital Partners I LTD $ 7,957 $ 7,957 DGC Trust / CBF 8,500 8,500 ViaNova Capital Group LLC 421 526 Total $ 16,878 $ 16,983 Off-Balance Sheet Arrangements Other than as described in note 9 (derivative financial instruments) and note 15 (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 June 30, 2020 .  Contractual Obligations The table below summarizes our significant contractual obligations as of June 30, 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 June 30, 2020 (Dollars in Thousands) Payment Due by Period Total Less than 1 Year 1 - 3 Years 3 - 5 Years More than 5 Years Operating lease arrangements $ 8,731 $ 1,347 $ 1,820 $ 1,961 $ 3,603 Maturity of 2020 Senior Notes 4,500 - 4,500 - - Interest on 2020 Senior Notes 858 540 318 - - Maturity of 2019 Senior Notes 2,400 2,400 - - - Interest on 2019 Senior Notes 68 68 - - - Maturity of 2017 Convertible Note (1) 15,000 - 15,000 - - Interest on 2017 Convertible Note (1) 2,331 1,200 1,131 - - Maturities on junior subordinated notes 48,125 - - - 48,125 Interest on junior subordinated notes (2) 36,468 2,230 4,461 6,691 23,086 Redeemable Financial Instrument - JKD Capital Partners 1 (3) 7,957 7,957 - - - Redeemable Financial Instrument - DGC Trust / CBF (3) 8,500 8,500 - - - Redeemable Financial Instrument - ViaNova (3) 421 421 - - - Minimum variable payment due on Redeemable Financial Instruments (4) 80 80 - - - Other Operating Obligations (5) 4,221 2,380 1,652 189 - $ 139,660 $ 27,123 $ 28,882 $ 8,841 $ 74,814 (1) Assumes the 2017 Convertible Note is not converted prior to maturity. (2) The interest on the junior subordinated notes related to Alesco Capital Trust I is variable. The interest rate of 4.76% (based on a 90-day LIBOR rate in effect as of June 30, 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 4.46% (based on a 90-day LIBOR rate in effect as of June 30, 2020 plus 4.15%) was used to compute the contractual interest payment in each period noted. (3) 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. (4) 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. (5) Represents material operating contracts for various services.  74 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. 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 its consolidated financial statements.  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. 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. GAAP. 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 June 30, 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. 75