What changed in this filing

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Item 1. Financial Statements

2020-11-06 compared with 2020-08-07 · 403 added, 263 removed, 1613 unchanged (29% of the section changed)

ITEM 1.FINANCIAL STATEMENTS.

FINANCIAL STATEMENTS.

COHEN & COMPANY INC.

1 unchanged sentence

(Dollars in Thousands)

June 30, 2020

September 30, 2020

December 31, 2019

31 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Asset management

New issue and advisory

Principal transactions and other income

38 unchanged sentences

Cohen & Company Inc.

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Preferred Stock

14 unchanged sentences

June 30, 2020

Other comprehensive income / (loss)

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

Equity-based compensation and vesting of shares

Purchase and retirement of Common Stock

Investment in non-controlling interest

September 30, 2020

Cohen & Company Inc.

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Preferred Stock

18 unchanged sentences

June 30, 2019

Other comprehensive income

Equity-based compensation and vesting of shares

September 30, 2019

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

(Dollars in Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

34 unchanged sentences

Proceeds from redeemable financial instruments

Repayments of redeemable financial instruments

Cash used to net share settle equity awards

38 unchanged sentences

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

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

As of September 30, 2020 , the Company had $2.65 billion in assets under management (“AUM”) of which 77.4% , or $2.05 billion, was in collateralized debt obligations (“CDOs”).

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

2 unchanged sentences

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

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

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

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

7 unchanged sentences

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

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

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

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

17 unchanged sentences

Principal Investing :

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

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

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

15 unchanged sentences

All intercompany accounts and transactions have been eliminated in consolidation.

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

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

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

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

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

21 unchanged sentences

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

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

The Company recorded an impairment of goodwill for the nine months ended September 30, 2020 .

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

57 unchanged sentences

The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity.

This ASU simplifies accounting for convertible instruments by removing major separation models currently required.

The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception.

The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas.

This ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements.

Fair Value of Financial Instruments

30 unchanged sentences

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

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

As of September 30, 2020 and December 31, 2019 , the fair value of the Company’s debt was estimated to be $81,638 and $58,635 , respectively.

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

8 unchanged sentences

Insurance Acquisition Corporation ("Insurance SPAC")

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Operating LLC is the manager of Insurance Acquisition Sponsor, LLC (“IAS”) and Dioptra Advisors, LLC (“Dioptra,” and, together with IAS, the “Sponsor Entities”).

The Sponsor Entities were sponsors of Insurance Acquisition Corp.

("Insurance SPAC"), a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses.

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

On October 13, 2020, Insurance SPAC Merger Sub was merged (the "Insurance SPAC Merger") with and into Shift.

In connection with the Insurance SPAC Merger, the Insurance SPAC changed its name from "Insurance Acquisition Corp." to "Shift Technologies, Inc." and, on October 15, 2020, the Insurance SPAC's Nasdaq trading symbol changed from "INSU" to "SFT." The Insurance SPAC Merger was approved by the Insurance SPAC's stockholders at a special meeting of stockholders on October 13, 2020.

Upon the Closing, the Sponsor Entities held 375,000 shares of SFT’s Class A Common Stock, par value $0.0001 per share (“SFT Class A Common Stock”), and 187,500 warrants (“SFT Warrants”) to purchase an equal number of shares of SFT Class A Common Stock for $11.50 per share (such SFT Class A Common Stock and SFT Warrants, collectively, the “Placement Securities”) as a result of the 375,000 placement units which the Sponsor Entities had purchased in a private placement that occurred simultaneously with the Insurance SPAC’s initial public offering on March 22, 2019.

Further, upon the Closing, the Sponsor Entities collectively held an additional 4,497,525 shares of SFT Class A Common Stock as a result of its previous purchase of founder shares of the Insurance SPAC (collectively, the “Founder Shares,” and, together with the Placement Securities, the “Sponsor Shares”).

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

Effective upon the Closing, the Company has reclassified its equity method investment in the Insurance SPAC to other investments, at fair value and has adopted fair value accounting for the investment in SFT, 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 the SFT Class A Common Stock and the SFT Warrants;

and (iii) fair value discounts related to the share sale restrictions on the Sponsor Shares outlined below.

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

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

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

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

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

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

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

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

See notes 11, 24, and 25.

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

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

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

The Company currently expects that, upon the registration of the Sponsor Shares in accordance with the Amended and Restated Registration Rights Agreement described below, (a) of the Placement Securities, 252,335 shares of SFT Class A Common Stock and 126,500 SFT Warrants will be distributed to the non-controlling interest holders of the Sponsor Entities, and (b) of the Founder Shares, 2,477,803 shares of SFT Class A Common Stock will be distributed to the non-controlling interest holders of the Sponsor Entities.

Immediately following these distributions, the Company expects to retain (i) of the Placement Securities, 122,665 shares of SFT Class A Common Stock and 61,332 SFT Warrants, and (ii) of the Founder Shares, 2,019,721 shares of SFT Class A Common Stock.

Subject to certain limited exceptions, Placement Securities held by IAS will not be transferable or salable until 30 days following the Closing.

Of the Founder Shares held by the Sponsor Entities, (a) 20% are freely transferable and salable, and (b) subject to certain limited exception, the remaining shares will not be transferable or salable until the closing price of the SFT Class A Common Stock, for a period of 20 out of any 30 consecutive trading days following the Closing, (a) exceeds $12.00 with respect to 20% of such shares, (b) exceeds $13.50 with respect to an additional 20% of such shares, (c) exceeds $15.00 with respect to an additional 20% of such shares, and (d) exceeds $17.00 with respect to an additional 20% of such shares.

Concurrently with the Closing, a subsidiary of the Company purchased 600,000 shares of SFT Class A Common Stock at a purchase price per share of $10.00 pursuant to a subscription agreement that such subsidiary executed at the time of the execution of the Merger Agreement.

The Company’s subsidiary currently expects that, upon the registration of these 600,000 shares of SFT Class A Common Stock, the Company’s subsidiary will distribute 350,000 of such shares of SFT Class A Common Stock to its minority interest holders and distribute the remaining 250,000 of such shares of SFT Class A Common Stock to a wholly owned subsidiary of the Company.

At the Closing, the Sponsor Entities and SFT entered into a letter agreement (the “Sponsor Letter Agreement”), pursuant to which the Sponsor Entities will receive certain SFT board of directors observer rights.

Pursuant to the Sponsor Letter Agreement, for so long as the Sponsor Entities, the Operating LLC, or any of their respective affiliates (as such term is defined in Rule 405 of the Securities Act of 1933, as amended) continue to hold shares representing at least two percent of the total voting power of shares entitled to vote in the election of directors of SFT issued and outstanding, the Sponsor Entities will have the right to designate an individual to attend and observe SFT’s board meetings.

In addition, at the Closing, the Sponsor Entities entered into an amended and restated registration rights agreement (the “Amended and Restated Registration Rights Agreement”) with SFT, Cantor Fitzgerald & Co., and certain other initial stockholders of SFT, requiring SFT to, among other things, file a resale shelf registration statement on behalf of the stockholders promptly after the Closing.

The Amended and Restated Registration Rights Agreement will also provide certain demand rights and piggyback rights to the stockholders, subject to underwriter cutbacks and issuer blackout periods.

INSU Acquisition Corporation II ("Insurance SPAC II")

The Operating LLC, is the manager of Insurance Acquisition Sponsor II, LLC (“IAS II”) and Dioptra Advisors II, LLC (“Dioptra II” and, together with IAS II, the “Insurance SPAC II Sponsor Entities”).

The Insurance SPAC II Sponsor Entities are sponsors of INSU Acquisition Corp.

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

On September 8, 2020, Insurance SPAC II completed the sale of 23,000,000 units ("Insurance SPAC II Units") in its initial public offering ("IPO"), which includes 3,000,000 Insurance SPAC II Units issued pursuant to the underwriters’ over-allotment option.

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

The Insurance SPAC II Units were sold in the IPO at an offering price of $10.00 per Unit, for gross proceeds of $230,000 (before underwriting discounts and commissions and offering expenses).

Pursuant to the underwriting agreement in the IPO, Insurance SPAC II granted the underwriters in the IPO (the “Underwriters”) a 45-day option to purchase up to 3,000,000 additional Insurance SPAC II Units solely to cover over-allotments, if any;

and on September 4, 2020, the Underwriters notified Insurance SPAC II that they were exercising the over-allotment option in full.

Immediately following the completion of the IPO, there were an aggregate of 31,386,667 shares of Insurance SPAC II Common Stock issued and outstanding.

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

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

The Insurance SPAC II Sponsor Entities purchased 452,500 of the Insurance SPAC II placement units in a private placement that occurred simultaneously with the IPO for an aggregate of $4,525 or $10.00 per placement unit.

Cantor Fitzgerald & Co., the underwriter of the IPO, also purchased 87,500 of the Insurance SPAC II's placement units in the private placement for an aggregate of $875.

Each placement unit consists of one share of Insurance SPAC II Common Stock and one-third of one warrant (the “Insurance SPAC II Placement Warrant”).

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

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

In addition, the Insurance SPAC II Sponsor Entities collectively hold 7,846,667 founder shares of the Insurance SPAC II.

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

Certain executive and key employees of the Operating LLC purchased membership interests in Dioptra Advisors II, LLC and have an interest in the Insurance SPAC II’s founder shares through such membership interests.

The number of founders shares eventually retained by the Insurance SPAC II Sponsor Entities and in which such executives and key employees have an interest through the Insurance SPAC II Sponsor Entities will not be determined until the Insurance SPAC II Business Combination is complete.

A total of $230,000 of the net proceeds from the private placement and the IPO (including approximately $9,800 of the deferred underwriting commission from the IPO) were placed in a trust account.

Except for the withdrawal of interest to pay taxes (or dissolution expenses if the Insurance SPAC II Business Combination is not consummated), none of the funds held in the trust account will be released until the earlier of (i) the completion of the Insurance SPAC II's Business Combination, (ii) the redemption of Insurance SPAC II's public shares if it is unable to consummate an Insurance SPAC II's Business Combination within 18 months following the IPO, or (iii) the redemption of any public shares properly tendered in connection with a stockholder vote to amend the Insurance SPAC II's amended and restated certificate of incorporation to modify the substance or timing of Insurance SPAC II's obligation to redeem 100% of its public shares if it does not complete an Insurance SPAC II Business Combination within 18 months following the IPO and is unable to obtain an extension.

If Insurance SPAC II does not complete a Business Combination within the first 18 months following the IPO, the placement units and founders shares will become worthless.

In connection with the IPO, IAS II has agreed to indemnify Insurance SPAC II for all claims by third parties for services rendered or products sold to Insurance SPAC II, or claims by any prospective target business with which Insurance SPAC II discusses entering into a transaction agreement, to the extent the claims reduce the amount of funds in the Insurance SPAC II trust account to less than $10.00 per share of Insurance SPAC II Common Stock, and in each case only if Insurance SPAC II fails to obtain waivers from such third parties or prospective target businesses of claims against the Insurance SPAC II trust account.

The Operating LLC loaned Insurance SPAC II approximately $75 to cover IPO expenses, which was repaid in full at the closing of the IPO.

IAS II and its affiliates, including the Operating LLC, have also committed to loan Insurance SPAC II up to an additional $750 to cover operating and acquisition related expenses following the IPO.

This loan will bear no interest and, if the Insurance SPAC II consummates a Business Combination in the required time frame, the loan is to be repaid from the funds held in the Insurance SPAC II trust account.

If Insurance SPAC II does not consummate a Business Combination in the required time frame, no funds from the Insurance SPAC II trust account can be used to repay the loan.

In connection with the closing of the IPO, the Operating LLC and the Insurance SPAC II entered into an Administrative Services Agreement, dated September 2, 2020, a copy of which was filed as Exhibit 10.6 to Insurance SPAC II’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 9, 2020, pursuant to which the Operating LLC and Insurance SPAC II agreed that, commencing on the date that Insurance SPAC II's securities are first listed on the Nasdaq Capital Market through the earlier of Insurance SPAC II’s consummation of a Business Combination and its liquidation, Insurance SPAC II will pay the Operating LLC $20 per month for certain office space, utilities, secretarial support and administrative services.

ViaNova Capital Group LLC

5 unchanged sentences

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 LegacyTexas Credit Facility.

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

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

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

The Company intends to opportunistically sell these RTLs if possible or allow them to mature.

The latest maturity date of the RTLs is January 1, 2021.

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

Since March 19, 2020, ViaNova has repaid all outstanding indebtedness under the LegacyTexas Credit Facility and stopped acquiring new RTLs.

On August 22, 2020, the Company sold its investment in ViaNova to the former managing director of ViaNova in exchange for the managing director's assumption of all of ViaNova's liabilities and a potential earn out of up to $500.

In conjunction with the sale, the Company transferred one RTL representing a par value of $2,300 and a fair value of $2,243 from ViaNova to JVB with a maturity date of January 1, 2021.

The RTL is included in other investments, at fair value in the consolidated balance sheets.

COVID 19 / Impairment of Goodwill

10 unchanged sentences

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

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

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

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

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

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

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

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.

Prolonged high unemployment could eventually 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.

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

6 unchanged sentences

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

On September 23, 2020, the Company applied for forgiveness of the PPP loan.

The 2020 Senior Notes

5 unchanged sentences

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 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.

On September 25, 2020, the Company amended and restated the 2019 Senior Notes to extend the maturity date of the remaining $2,400 to September 25, 2021.

DGC Trust/CBF Redeemable Financial Instrument

On September 29, 2017, the Operating LLC entered into an investment agreement with CBF (the “CBF Investment Agreement”) and an investment agreement with the DGC Family Fintech Trust (the “DGC Trust”), a trust established by Daniel G.

Cohen (the “DGC Trust Investment Agreement”), pursuant to which CBF and the DGC Trust agreed to invest $8,000 and $2,000, respectively, into the Operating LLC.

As of September 25, 2020, the Company had outstanding investment balances of $6,500 and $2,000 related to the CBF Investment Agreement and the DGC Trust Investment Agreement, respectively.

On September 25, 2020, the Operating LLC and CBF entered into Amendment No.

3 to Investment Agreement, which amended the CBF Investment Agreement (i) to extend the date thereunder pursuant to which the Company or CBF could cause a redemption of the Investment Balance from September 27, 2020 to January 1, 2021, and (ii) to state that no such redemption by the Company could be in violation of any loan agreement to which the Company was then a party.

On September 30, 2020, the Company redeemed the DGC Trust Investment Agreement in full by making payment of $2,000 to the DGC Trust.

On October 9, 2020 and effective October 15, 2020, the Operating LLC entered into Amendment No.

4 to Investment Agreement, which further amended the CBF Investment Agreement to, among other things, (A) decrease the “Investment Amount” under the CBF Investment Agreement from $6,500 to $4,000 in exchange for a one-time payment of $2,500 from the Operating Company to CBF;

and (B) provide that the term “Investment Return” (as defined in the CBF Investment Agreement) will mean an annual return equal to, (i) for any twelve-month period following September 29, 2020 (each, an “Annual Period”) in which the revenue of the business of JVB (“Revenue of the Business”), is greater than zero, the greater of 20% of the Investment Amount or 9.4% of the Revenue of the Business, or (ii) for any Annual Period in which the Revenue of the Business is zero or less than zero, 3.75% of the Investment Amount.

Prior to the Investment Agreement Amendment, the term “Investment Return” under the CBF Investment Agreement was defined as (A) with respect to any Annual in which the Revenue of the Business was greater than zero, the greater of 20% of the Investment Amount or 15.2% of the Revenue of the Business, or (ii) for any Annual Period in which the Revenue of the Business was zero or less than zero, 3.75% of the Investment Amount.

The Company made the $2,500 payment to CBF on October 15, 2020.

Net trading consisted of the following in the periods presented.

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net realized gains (losses) - trading inventory

2 unchanged sentences

Interest income- trading inventory

Interest income - residential transition loans

Interest income - RTLs

Interest income-receivables under resale agreements

6 unchanged sentences

During 2019, RTLs were accounted for at lower of cost or market and included as a component of other assets and the interest income related to those loans was shown separately in the table above.

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

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

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

Income earned on RTLs in included in interest income-trading inventory in the table above.

In conjunction with the sale of ViaNova , the Company retained one loan and transferred it to JVB.

This loan is now included in other investments, at fair value on the consolidated balance sheets;

subsequent income earned on this RTL is included in principal transactions and other income in the consolidated statement of operations.

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

5 unchanged sentences

(Dollars in Thousands)

June 30, 2020

September 30, 2020

December 31, 2019

6 unchanged sentences

(Dollars in Thousands)

June 30, 2020

September 30, 2020

December 31, 2019

15 unchanged sentences

(Dollars in Thousands)

June 30, 2020

September 30, 2020

December 31, 2019

7 unchanged sentences

Equity securities

Residential transition loans

Investments-trading

3 unchanged sentences

(Dollars in Thousands)

June 30, 2020

September 30, 2020

December 31, 2019

government agency debt securities

Treasury securities

1 unchanged sentence

Municipal bonds

Equity securities

Trading securities sold, not yet purchased

5 unchanged sentences

(Dollars in Thousands)

June 30, 2020

September 30, 2020

Gain / (Loss)

Equity securities

Subordinated Notes

Residential loans

15 unchanged sentences

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

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

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

The Company recognized net gains (losses) related to changes in fair value of investments that are included as a component of other investments, at fair value during the three months ended September 30, 2020 and 2019 of $ 1,763 and $ 140 , respectively.

The Company recognized net gains (losses) related to changes in fair value of investments that are included as a component of other investments, at fair value during the nine months ended September 30, 2020 and 2019 of $ 1,308 and $ 879 , respectively.

Fair Value Measurements

2 unchanged sentences

The three levels of the valuation hierarchy under FASB ASC 820 are described below.

Level 1 Financial assets and liabilities whose values are based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 Financial assets and liabilities whose values are based on one or more of the following:

Level 1 Financial assets and liabilities with values that are based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 Financial assets and liabilities with values that are based on one or more of the following:

Quoted prices for similar assets or liabilities in active markets;

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Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.

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

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

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

4 unchanged sentences

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

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

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

FAIR VALUE MEASUREMENTS ON A RECURRING BASIS

June 30, 2020

September 30, 2020

(Dollars in Thousands)

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Equity securities

Residential transition loans

Total investments - trading

1 unchanged sentence

Equity securities

Subordinated Notes

Residential loans

2 unchanged sentences

Trading securities sold, not yet purchased:

government agency debt securities

Treasury securities

1 unchanged sentence

Municipal bonds

Equity securities

Total trading securities sold, not yet purchased

141 unchanged sentences

LEVEL 3 ROLLFORWARD

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Beginning of period

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

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

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

QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS

(Dollars in Thousands)

June 30, 2020

Investments - trading

Residential Transition Loans

September 30, 2020

Other investments, at fair value

Discounted Cash Flow Model

19 unchanged sentences

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

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

FAIR VALUE MEASUREMENTS OF INVESTMENTS IN CERTAIN ENTITIES

1 unchanged sentence

(Dollars in Thousands)

June 30, 2020

September 30, 2020

Notice Period

44 unchanged sentences

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

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

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

TBAs and Other Forward Agency MBS Contracts

7 unchanged sentences

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

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

At September 30, 2020 , the Company had open TBA and other forward MBS purchase agreements in the notional amount of $1,836,000 and open TBA and other forward MBS sale agreements in the notional amount of $1,936,750 .

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

3 unchanged sentences

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

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

At September 30, 2020 , the Company had open forward purchase commitments of $11,045 and open forward sale commitments of $0 .

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

The following table presents the Company’s derivative financial instruments and the amount and location of the fair value (unrealized gain / (loss)) recognized in the consolidated balance sheets as of June 30, 2020 and December 31, 2019 .

DERIVATIVE FINANCIAL INSTRUMENTS-BALANCE SHEET INFORMATION

2 unchanged sentences

Balance Sheet Classification

June 30, 2020

September 30, 2020

December 31, 2019

14 unchanged sentences

Income Statement Classification

Six Months Ended June 30, 2020

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2020

Nine Months Ended September 30, 2019

Foreign currency forward contracts

6 unchanged sentences

Income Statement Classification

Three Months Ended June 30, 2020

Three Months Ended June 30, 2019

Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

Foreign currency forward contracts

29 unchanged sentences

This line of credit arrangement was subsequently amended.

See note 26 for discussion of replacement credit agreement entered into in October 2020.

Other Repo Transactions

5 unchanged sentences

Repo Information

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

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

At June 30, 2020 and December 31, 2019 , the Company held repos of $5,524,758 and $7,534,443, respectively, and the fair value of securities and cash pledged as collateral under repos was $5,355,394 and $7,561,978, respectively.

At September 30, 2020 and December 31, 2019 , the Company held reverse repos of $6,055,291 and $7,500,002, respectively, and the fair value of collateral received under reverse repos was $6,237,942 and $7,769,693, respectively.

As of September 30, 2020 and December 31, 2019 , the reverse repo balance was comprised of receivables collateralized by securities with 34 and 41 counterparties, respectively.

At September 30, 2020 and December 31, 2019 , the Company held repos of $6,058,998 and $7,534,443, respectively, and the fair value of securities and cash pledged as collateral under repos was $6,001,643 and $7,561,978, respectively.

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

2 unchanged sentences

The lending facility allows for BONY to advance funds to JVB in order to facilitate the settlement of GCF repo transactions.

The total committed amount at June 30, 2020 was $75,000.

The total committed amount at September 30, 2020 was $75,000.

The current termination date of this facility is October 15, 2021.

It is expected that this facility will be renewed for successive 364-day periods provided that the Company continues its GCF matched book repo business .

It is expected that this facility will be renewed for successive 364-day periods provided that the Company continues its GCF repo business .

The BONY lending facility is structured so that advances are generally repaid before the end of each business day.

4 unchanged sentences

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

For the six months ended June 30, 2020 , the Company received no advances under the intraday lending facility.

For the nine months ended September 30, 2020 , the Company received no advances under the intraday lending facility.

During the year ended December 31, 2019 , advances of $32,818 were made under this facility.

9 unchanged sentences

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

As of June 30, 2020 and December 31, 2019 , the Company’s gestation reverse repos shown in the tables below represented balances from nine and seven counterparties, respectively.

As of September 30, 2020 and December 31, 2019 , the Company’s gestation reverse repos shown in the tables below represented balances from nine and seven counterparties, respectively.

The Company also has a limited number of repo counterparties in the gestation repo business.

1 unchanged sentence

Therefore, the Company considers the gestation repo business to be concentrated on the demand side.

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

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

The total net revenue earned by the Company on its matched book repo business (both gestation repo and GCF repo) was $8,850 and $23,645 for the three and nine months ended September 30, 2020 , respectively.

The total net revenue earned by the Company on its matched book repo business (both gestation repo and GCF repo) was $2,566 and $6,202 for the three and nine months ended September 30, 2019 , respectively.

Effective June 1, 2019, the Company changed its accounting policy regarding the netting of reverse repo and repo transactions.

4 unchanged sentences

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

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

As of September 30, 2020 , the Company had outstanding reverse repos of $6,055,291 and repos of $6,058,998 .

Included in these amounts are outstanding reverse repos of $1,360,835 and repos of $3,485,655 where the FICC was the Company’s counterparty to the transaction and which were subject to a master netting arrangement.

5 unchanged sentences

(Dollars in Thousands)

June 30, 2020

September 30, 2020

Repurchase Agreements

27 unchanged sentences

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

The Company elected to use the cumulative earnings approach for the distributions it receives from its equity method investments.

Under the cumulative earnings approach, any distributions received up to the amount of cumulative earnings are treated as return on investment and classified in operating activities within the cash flows.

Any excess distributions would be considered as return of investments and classified in investing activities.

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

2 unchanged sentences

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

See notes 8 and 24.

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

2 unchanged sentences

Insurance SPAC

Insurance SPAC II

FTAC Olympus Acquisition Corp.

January 1, 2020

2 unchanged sentences

Earnings / (loss) realized

June 30, 2020

September 30, 2020

SUMMARIZED FINANCIAL RESULTS OF SIGNIFICANT EQUITY METHOD SUBSIDIARIES

(Dollars in Thousands)

Three Months Ended

Nine Months Ended

September 30,

Insurance SPAC:

Net income/(loss)

Net income/(loss) attributable to the investee

Goodwill consisted of the following.

(Dollars in Thousands)

June 30, 2020

September 30, 2020

December 31, 2019

4 unchanged sentences

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

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

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

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

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

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

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

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

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

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

7 unchanged sentences

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

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

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

The weighted average remaining term of the leases was 8.0 years.

3 unchanged sentences

(Dollars in Thousands)

As of June 30, 2020

As of September 30, 2020

2020 - remaining

1 unchanged sentence

Lease obligation

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

During the nine months ended September 30, 2020 and 2019 , total cash payments of $1,187 and $1,153 , respectively, were recorded as a reduction in the operating lease obligation.

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

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

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

For the three and nine months ended September 30, 2020 rent expense, net of sublease income of $82 and $238 , was $371 and $1,134 , respectively.

For the three and nine months ended September 30, 2019 rent expense, net of sublease income of $73 and $202 , was $387 and $1,174 , respectively.

OTHER RECEIVABLES, OTHER ASSETS, ACCOUNTS PAYABLE AND OTHER LIABILITIES

2 unchanged sentences

(Dollars in Thousands)

June 30, 2020

September 30, 2020

December 31, 2019

21 unchanged sentences

(Dollars in Thousands)

June 30, 2020

September 30, 2020

December 31, 2019

3 unchanged sentences

Miscellaneous other assets

Residential transition loans

Furniture, equipment, and leasehold improvements, net

5 unchanged sentences

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

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

In conjunction with the sale of ViaNova, the remaining RTL was transferred to other investments at fair value.

See notes 4, 15, and 16 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2019 for further discussion of the firm’s furniture, equipment, and leasehold improvements.

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

2 unchanged sentences

(Dollars in Thousands)

June 30, 2020

September 30, 2020

December 31, 2019

15 unchanged sentences

In that case, the Company includes the cash returned as a component of other liabilities (counterparty cash collateral) in the table above.

See note 10 and 23.

VARIABLE INTEREST ENTITIES

5 unchanged sentences

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

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

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

As of September 30, 2020 , there were $1,567 of unfunded commitments to VIEs that the Company has invested in.

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

See table below.

6 unchanged sentences

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

Because of the high volume of trading activity in which the Company engages, the Company does not perform a formal assessment of each individual investment within its trading portfolio to determine if the investee is a VIE and if the Company is a primary beneficiary.

Due to the high volume of trading activity in which the Company engages, the Company does not perform a formal assessment of each individual investment within its trading portfolio to determine if the investee is a VIE and if the Company is a primary beneficiary.

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

2 unchanged sentences

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

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

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

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

(Dollars in Thousands)

As of June 30, 2020

As of September 30, 2020

As of December 31, 2019

5 unchanged sentences

(Dollars in Thousands)

As of June 30, 2020

As of September 30, 2020

As of December 31, 2019

21 unchanged sentences

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

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

the CBF Investment Agreement the DGC Trust Investment Agreement.

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

1 unchanged sentence

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

The payment of $1,500 was made by the Operating LLC to CBF in October 2019.

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

6 unchanged sentences

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

Except as set forth above, the other material terms and conditions of the CBF Investment Agreement and the DGC Trust Investment Agreement remained substantially unchanged by the amendment.

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

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

On September 25, 2020, the Operating LLC and CBF entered into Amendment No.

3 to CBF Investment Agreement, which amended the CBF Investment Agreement (i) to extend the date thereunder pursuant to which the Company or CBF could cause a redemption of the Investment Amount from September 27, 2020 to January 1, 2021, and (ii) to state that no such redemption by the Company could be in violation of any loan agreement to which the Company was then a party.

On September 30, 2020, the Company redeemed the DGC Trust Investment Agreement in full by making payment of $2,000.

On October 9, 2020 and effective October 15, 2020, the Operating LLC entered into Amendment No.

The Company made the $2,500 payment to CBF on October 15, 2020.

ViaNova Capital Group LLC

2 unchanged sentences

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

In February 2019, New Avenue invested $220 of its portion of the ViaNova Investment (i.e., $250), the remaining $30 is included in due from related parties on the consolidated balance sheets.

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

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

In February 2019, New Avenue invested $220 of its portion of the ViaNova Investment (i.e., $250).

Hancock is owned by an employee of the Company.

New Avenue is owned by a former employee of the Company.

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

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

Upon its termination, the remaining redeemable investment balance will be repaid by the Operating LLC to Hancock and New Avenue in accordance with the ViaNova Investment Agreement.

On August 22, 2020, the Company sold its investment in ViaNova and the remaining redeemable investment balances were paid by the Operating LLC to Hancock and New Avenue in accordance with the ViaNova Investment Agreement.

The Company had the following debt outstanding.

1 unchanged sentence

(Dollars in Thousands)

June 30, 2020

September 30, 2020

December 31, 2019

11 unchanged sentences

Less unamortized discount

FT Financial Bank, N.A.

Credit Facility

FT Financial Credit Facility

LegacyTexas Credit Facility

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

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

The post amendment notes are referred to herein as the “2019 Senior Notes” and the pre-amendment notes are referred to herein as the “2013 Convertible Notes.” On September 25, 2020, the 2019 Senior Notes were amended again to extend the maturity date from September 25, 2020 until September 25, 2021.

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

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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 was 14.31% assuming the variable rate in effect on the last day of the reporting period remains in effect until maturity.

When factoring in the discount, the yield to maturity of the junior subordinated notes as of September 30, 2020 on a combined basis was 14.24% assuming the variable rate in effect on the last day of the reporting period remains in effect until maturity.

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

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

On September 25, 2020, the 2019 Senior Notes were amended again to extend the maturity date from September 25, 2020 until September 25, 2021.

All other material terms and conditions of the 2019 Convertible Notes remained substantially the same.

The Amendment to the 2017 Convertible Note

In connection with the amendment to the 2019 Senior Notes, on September 25, 2020, the Operating LLC and DGC Trust entered into Amendment No.

1 ( the "Amendment to the 2017 Convertible Note") to the 2017 Convertible Note to provide that the voting proxy as defined in the 2017 Convertible Note will be revoked without further action by any party, upon the earliest to occur of the following:

(i) a Notice Default (as defined in the 2017 Convertible Note);

(ii) and Automatic Default (as defined in the 2017 Convertible Note);

and (iii) if Daniel Cohen and/or his affiliates cease to beneficially own (as defined in Rule 13d-3 under the Exchange Act) a majority of the voting securities of the Company pursuant to the terms and conditions of the Amendment to the 2017 Convertible Note.

All other material terms and conditions of the 2017 Note remained substantially the same.

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

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

On September 23, 2020, the Company applied for forgiveness of the PPP Loan.

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

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

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

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

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

The Company was in compliance with all covenants as of all periods presented.

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

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

See note 26 for discussion of replacement credit agreement entered into in October 2020.

Interest Expense, net

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(Dollars in Thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Junior subordinated notes

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2013 Convertible Notes / 2019 Senior Notes

2018 FT LOC/2019 FT Revolver

FT Financial Credit Facility

Redeemable Financial Instrument - DGC Trust / CBF

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Common Equity :

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

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

December 31, 2019

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Shares withheld for employee taxes and retired

June 30, 2020

Repurchase and retirement of Common Stock

September 30, 2020

Series E Voting Non-Convertible Preferred Stock :

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

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

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

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

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

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

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

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

During the nine months ended September 30, 2020 , Cohen & Company Inc.

received and surrendered units of the Operating LLC.

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Units related to UIS Agreement

Units surrendered from retirement of Common Stock

The Company recognized a net decrease in additional paid in capital of $417 and a net increase in AOCI of $25 with an offsetting increase in non-controlling interest of $392 in connection with the acquisition and surrender of additional units of the Operating LLC.

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

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

Six Months Ended

June 30, 2020

June 30, 2019

for the nine months ended September 30, 2020 and 2019 .

Nine Months Ended

September 30, 2020

September 30, 2019

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

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Repurchases of Shares and Retirement of Treasury Stock

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

On August 31, 2020 and March 19, 2018, the Company entered into letter agreements (the “2020 Letter Agreement” and the “2018 Letter Agreement,” respectively and, together, the "10b5-1 Plan").

The 2020 Letter Agreement was entered into with Piper Sandler & Co.

and the 2018 Letter Agreement was entered into with Sandler O'Neill & Partners, L.P.

(which, following a merger with Piper Jaffray, became Piper Sandler & Co.

(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 2020 Letter Agreement is in effect from August 31, 2020 until August 31, 2021.

The 2018 Letter was in effect from March 19, 2018 until March 19, 2019.

Both agreements authorized the Agent 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 must comply with Rule 10b-18 under the Exchange Act.

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

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

During the three and nine months ended September 30, 2020 , the Company repurchased 42,600 shares in the open market pursuant to the 10b5-1 Plan for a total purchase price of $746.

During the three and nine months ended September 30, 2019 , the Company repurchased 0 and 7,890 shares, respectively, in the open market pursuant to the 10b5-1 Plan for a total purchase price of $0 and $65, respectively.

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

The Company currently has no 10b5-1 Plan in place.

Non-Controlling Interest

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

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

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

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

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

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

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

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

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Cohen and the DGC Trust necessary to give the Company a majority of the votes at such Meeting.

On September 25, 2020, the SPA was amended to provide that the voting proxy shall be revoked in the event that Daniel G.

Cohen and/or his affiliates cease to beneficially own a majority of the voting securities of the Company.

NET CAPITAL REQUIREMENTS

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

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

As of September 30, 2020 , JVB’s adjusted net capital was $71,092 which exceeded the minimum requirements by $70,842

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

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

As of September 30, 2020 , the total minimum required net capital was $ 675 , and actual net capital in CCFEL was $ 1,156 , which exceeded the minimum requirements by $ 481 and was in compliance with the net liquid capital provisions.

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

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

As of September 30, 2020 , the total minimum required net liquid capital was $ 178 , and net liquid capital in CCFL was $ 621 , which exceeded the minimum requirements by $ 443 and was in compliance with the net liquid capital provisions.

EARNINGS / (LOSS) PER COMMON SHARE

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

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

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

Three Months Ended June 30, 2020

Six Months Ended June 30,

Three Months Ended September 30, 2020

Nine Months Ended September 30,

2017 Convertible Note

5 unchanged sentences

The Company’s U.S.

broker-dealer subsidiary, J.V.B.

Financial Group, LLC is a party to litigation commenced on August 7, 2019, in the Supreme Court of the State of New York under the caption VA Management, LP v.

broker-dealer subsidiary, JVB is a party to litigation commenced on August 7, 2019, in the Supreme Court of the State of New York under the caption VA Management, LP v.

Odeon Capital Group LLC;

4 unchanged sentences

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

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

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

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

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

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

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

The other defendants also appealed.

On July 13, 2020, JVB and the other defendants filed a joint appellate brief.

On August 12, 2020, plaintiff filed its opposition brief.

On August 21, 2020, JVB and the other defendants filed a joint reply brief.

Oral argument on the appeal has been scheduled for November 13, 2020.

While the appeal is pending, discovery in the underlying case is proceeding.

The Company intends to defend the action vigorously.

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

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

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

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

(a) Revenues and expenses directly associated with each business segment are included in determining net income / (loss) by segment, and (b) Indirect expenses (such as general and administrative expenses including executive and indirect overhead costs) not directly associated with specific business segments are not allocated to the business segments’ statements of operations.

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

3 unchanged sentences

Statement of Operations Information

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Asset management

New issue and advisory

Principal transactions and other income

16 unchanged sentences

Statement of Operations Information

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Asset management

New issue and advisory

Principal transactions and other income

22 unchanged sentences

Statement of Operations Information

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Asset management

New issue and advisory

Principal transactions and other income

16 unchanged sentences

Statement of Operations Information

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Asset management

New issue and advisory

Principal transactions and other income

15 unchanged sentences

BALANCE SHEET DATA

As of June 30, 2020

As of September 30, 2020

(Dollars in Thousands)

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(Dollars in Thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Total Revenues:

3 unchanged sentences

SUPPLEMENTAL CASH FLOW DISCLOSURE

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

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

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

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

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

Interest paid by the Company on its debt and redeemable financial instruments was $ 7,225 and $ 5,637 for the nine months ended September 30, 2020 and 2019 , respectively.

The Company paid income taxes of $ 195 and $ 30 for the nine months ended September 30, 2020 and 2019 , respectively.

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

respectively.

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

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

The Company recognized a net decrease in additional paid-in capital of $ 417 , a net increase of $ 25 in AOCI, and an increase of $ 392 in non-controlling interest.

2 unchanged sentences

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

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

In conjunction with the sale of ViaNova on August 22, 2020, the Company transferred one RTL with a fair value of $2,243 to JVB.

As a result, the Company recorded an increase in other investments at fair value and a corresponding decrease in other assets.

See notes 4 and 7.

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

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

4 unchanged sentences

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

As part of the Company's matched book repo operations, the Company enters into reverse repos with counterparties whereby it lends money and receive securities as collateral.

As part of the Company's matched book repo operations, the Company enters into reverse repos with counterparties whereby it lends money and receives securities as collateral.

In accordance with ASC 860, the collateral securities are not recorded in the Company's consolidated balance sheets.

2 unchanged sentences

There are two main reasons the Company may receive collateral in the form of cash as opposed to securities.

First, when the value of the collateral securities the Company has in its possession decline, the Company will require the counterparty to provide it with additional collateral.

First, when the value of the collateral securities the Company has in its possession declines, the Company will require the counterparty to provide it with additional collateral.

The Company will accept either cash or additional liquid securities.

4 unchanged sentences

The Company is generally required to return any cash collateral the same business day that it receives substitute securities.

As of June 30, 2020 , and December 31, 2019 , the Company had counterparty cash collateral of $218,731 and $9,524, respectively, which were included in both its cash and cash equivalents and other liability balances, respectively.

Accordingly, included in the Company's cash provided by operating activities of $ 209,225 during the six months ended June 30, 2020 is an inflow of $209,207 as a result of this increase in cash collateral held.

As of September 30, 2020 and December 31, 2019 , the Company had counterparty cash collateral of $125,294 and $9,524, respectively, which was included in both its cash and cash equivalents and other liability balances, respectively.

Accordingly, included in the Company's cash provided by operating activities of $ 115,288 during the nine months ended September 30, 2020 is an inflow of $115,770 as a result of this increase in cash collateral held.

The Company has no legal or contractual obligation to segregate this cash collateral held and therefore it is included as a component of its cash and cash equivalents in the Company's consolidated balance sheets.

1 unchanged sentence

RELATED PARTY TRANSACTIONS

The Company has identified the following related party transactions for the six months ended June 30, 2020 and 2019 .

The Company has identified the following related party transactions for the nine months ended September 30, 2020 and 2019 .

The transactions are listed by related party and, unless otherwise noted in the text of the description, the amounts are disclosed in the tables at the end of this section.

7 unchanged sentences

From time to time, the Company will enter into repos with TBBK as its counterparty.

As of June 30, 2020 and December 31, 2019 , the Company had no repos with TBBK.

For the three and six months ended June 30, 2020 , and 2019 , the Company incurred no interest expense related to repos with TBBK as its counterparty.

As of September 30, 2020 and December 31, 2019 , the Company had no repos with TBBK.

For the three and nine months ended September 30, 2020 , and 2019 , the Company incurred no interest expense related to repos with TBBK as its counterparty.

Cohen/Cohen Bros.

4 unchanged sentences

The Company included the value of the IMXI common stock in other investments, at fair value.

In connection with the IMXI share contribution, the Company paid $6 for legal fees on behalf of Daniel G.

Cohen, which is not included in the table at the end of this section.

In December 2019, the Company acquired a 45% interest in CK Capital Partners B.V.

7 unchanged sentences

The Company incurred interest expense on this instrument, which is disclosed as part of interest expense incurred in the table at the end of this section.

In October 2019, a payment of $1,500 was made by the Company to CBF which reduced the redeemable financial instrument balance.

In October 2020 and 2019, payments of $2,500 and $1,500, respectively, were made by the Company to CBF, which reduced the redeemable financial instrument balance to $4,000.

See notes 16 and 17.

5 unchanged sentences

On September 25, 2019, the 2013 Convertible Notes were amended and restated by the 2019 Senior Notes.

On September 25, 2020 the 2019 Senior Notes were amended again to extend their maturity date until September 25, 2021.

The Company incurred interest expense on this debt, which is disclosed as part of interest expense incurred in the table at the end of this section.

7 unchanged sentences

The Company incurred interest expense on this debt, which is disclosed as part of interest expense incurred in the tables at the end of this section.

The 2019 Senior Notes were fully repaid on February 3, 2020.

$4,386 of the 2019 Senior Notes were fully repaid on February 3, 2020.

See note 17 and note 20 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 .

18 unchanged sentences

Interest incurred on this instrument is disclosed in the tables at the end of this section.

FinTech Acquisition Corp.

In December 2018, the Operating LLC entered into an agreement with FinTech Acquisition Corp.

III whereby the Company will provide certain accounting and administrative services.

FinTech Acquisition Corp.

III is considered a related party because Daniel G.

Cohen is the chief executive officer of FinTech Acquisition Corp, III and Betsy Cohen is the mother of Daniel G.

Cohen and is the chairman of the board of directors of FinTech Acquisition Corp.

Income earned on this arrangement is disclosed in the tables below.

FinTech Investor Holdings II, LLC

FinTech Investor Holdings II, LLC is considered a related party because Daniel G.

Cohen is the manager of the entity.

In July 2018, the Operating LLC acquired publicly traded shares of FinTech Acquisition Corp.

II from an unrelated third party for a total purchase price of $2,513.

In connection with this purchase, the Operating LLC agreed with FinTech Investor Holdings II, LLC to not redeem these shares in advance of the merger between FinTech Acquisition Corp.

II and Intermex Holdings II, LLC.

In exchange for this agreement to not redeem these shares prior to the merger, as well as the outlay of capital to purchase the publicly traded shares of FinTech Acquisition Corp.

II, the Operating LLC received unregistered, restricted shares of common stock of FinTech Acquisition Corp.

II from FinTech Investor Holdings II, LLC.

In connection with the merger, FinTech Acquisition Corp.

II changed its name to International Money Express, Inc.

The Company redeemed the DGC Trust Redeemable Financial Instrument in full by making payment of $2,000 on September 30, 2020.

Duane Morris, LLP (“Duane Morris”)

3 unchanged sentences

FinTech Masala, LLC

FinTech Masala, LLC is a related party because Betsy Cohen is the mother of Daniel G.

Cohen and is a member of FinTech Masala, LLC.

FinTech Masala, LLC is a related party because Betsy Cohen, the mother of Daniel G.

Cohen, is a member of FinTech Masala, LLC.

Cohen is also a member of FinTech Masala, LLC.

11 unchanged sentences

Investment Vehicle and Other

EuroDekania is considered a related party because it is an equity method investment of the Company.

EuroDekania was considered a related party because it is an equity method investment of the Company.

The Company had an investment in and a management contract with EuroDekania.

6 unchanged sentences

Revenue earned on the management contract is included as part of asset management in the tables below.

As of June 30, 2020 , the Company owned 1.79% of the equity of the SPAC Fund.

As of September 30, 2020 , the Company owned 1.5% of the equity of the SPAC Fund.

Insurance JV is considered a related party because it is an equity method investment of the Company.

3 unchanged sentences

Revenue earned on the management contract is included as part of asset management and are shown in the tables below.

As of June 30, 2020 , the Company owned 4.66% of the equity of the U.S.

As of September 30, 2020 , the Company owned 4.66% of the equity of the U.S.

Insurance JV.

Insurance SPAC

The Insurance SPAC is a related party as it is an equity method investment of the Sponsor Entities, which are consolidated by the Company.

As of June 30, 2020 , the Sponsor Entities owned 26.5% of the equity in the Insurance SPAC.

The Insurance SPAC is a related party as it is an equity method investment of the Company.

The Operating LLC, is the manager of the Sponsor entities and the Company consolidates the Sponsor Entities..

As of September 30, 2020 , the Sponsor Entities owned 26.5% of the equity in the Insurance SPAC.

Income earned, or loss incurred on equity method investments is included in the tables below.

2 unchanged sentences

The Company agreed to lend the Insurance SPAC $750 for operating and acquisition related expenses.

As of June 30, 2020 , $350 has been lent under this facility;

this amount is included in due from related parties in the consolidated balance sheets.

As of September 30, 2020 , $650 had been lent by the Company to the Insurance SPAC which amount is included in due from related parties in the consolidated balance sheets.

On October 13, 2020 in connection with the Insurance SPAC Merger, the Insurance SPAC made a payment of $650 to the Company extinguishing the loan balance in full.

See notes 4, 11, and 25.

Insurance SPAC II

The Insurance SPAC II is a related party as it is an equity method investment of the Company.

The Operating LLC, is the manager of the Insurance SPAC II Sponsor entities and the Company consolidates the Insurance SPAC II Sponsor Entities.

As of September 30, 2020 , the non-controlling interest invested $4,550 in Insurance SPAC II Sponsor Entities and owns 45.5% of the equity in Insurance SPAC II Sponsor Entities.

Income earned, or loss incurred on the equity method investment is included in the tables below.

The Operating LLC and the Insurance SPAC II entered into an administrative services agreement, dated September 2, 2020, pursuant to which the Operating LLC and the Insurance SPAC agreed that, commencing on the date that the Insurance SPAC II’s securities were first listed on the Nasdaq Capital Market through the earlier of the Insurance SPAC II’s consummation of a Business Combination and its liquidation, the Insurance SPAC II will pay the Operating LLC $20 per month for certain office space, utilities, secretarial support, and administrative services.

Revenue earned by the Company from the administrative services agreement is included as part of principal transactions and other income in the tables below.

The Company agreed to lend the Insurance SPAC $750 for operating and acquisition related expenses.

As of September 30, 2020 , no amounts have been lent under this facility.

See notes 4 and 11.

Sponsor Entities of Other SPACs

In general, a SPAC is initially funded by a sponsor and that sponsor invests in and receives private placement and founders shares of the SPAC.

The sponsor may be organized as a single legal entity or multiple entities under common control.

In either case, the entity or entities is referred in this section as the sponsor of the SPAC.

The Company has had the following transactions with various sponsors of SPACs that are related parties and which the Company does not consolidate.

The sponsor of FinTech Acquisition Corp.

II ("FTAC II Sponsor") is a related party because Daniel G.

Cohen is the manager of the entity.

In July 2018, the Operating LLC acquired publicly traded shares of FinTech Acquisition Corp.

II from an unrelated third party for a total purchase price of $2,513.

In connection with this purchase, the Operating LLC agreed with FinTech II Sponsor to not redeem these shares in advance of the merger between FinTech Acquisition Corp.

II and Intermex Holdings II, LLC.

In exchange for this agreement to not redeem these shares prior to the merger, as well as the outlay of capital to purchase the publicly traded shares of FinTech Acquisition Corp.

II, the Operating LLC received unregistered, restricted shares of common stock of FinTech Acquisition Corp.

II from FTAC II Sponsor.

In connection with the merger, FinTech Acquisition Corp.

II changed its name to International Money Express, Inc.

The sponsor of Fintech Acquisition Corp.

III ("FTAC III Sponsor") is considered a related party because Daniel G.

Cohen is the manager of the entity In December 2018, the Operating LLC entered into an agreement with FinTech Acquisition Corp.

III whereby the Company will provide certain accounting and administrative services and in exchange the Company received 23,000 founders shares of FTAC III.

The revenue earned on this arrangement is disclosed in the tables below.

The sponsor of Fintech Olympus Acquisition Corp.

("FTAC Olympus Sponsor") is a related party as it is an equity method investment of the Company.

The Company made a sponsor investment in FTAC Olympus Sponsor, receiving an initial allocation of 600,000 founders shares of FTAC Olympus stock for $2.

In addition, on September 8, 2020, the Operating LLC entered into a letter agreement with FTAC Olympus whereby the Operating LLC will provide personnel to serve as the Chief Financial Officer as well as other accounting and administrative services to FTAC Olympus for a period not longer than 24 months.

As consideration for these services, the Company received an allocation of an additional 30,000 founders shares of FTAC Olympus stock to the Operating LLC and recorded an equity method investment of $40 for the valuation of these services.

The revenue earned from these services is recorded in the table below.

CK Capital and AOI

5 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Asset management

Principal transactions and other income

FinTech Acquisition Corp.

Fintech III Sponsor

FTAC Olympus Sponsor

Insurance SPAC

Insurance SPAC II

Income (loss) from equity method affiliates

FTAC Olympus Sponsor

Insurance SPAC

Insurance SPAC II

Operating expense (income)

9 unchanged sentences

The Company matches 50% of employee contributions for all participants not to exceed 3% of their salary.

Contributions made on behalf of the Company were $ 84 and $ 182 for the three and six months ended June 30, 2020 , respectively and $78 and $169 for the three and six months ended June 30, 2019 , respectively.

Contributions made on behalf of the Company were $ 48 and $ 230 for the three and nine months ended September 30, 2020 , respectively and $ 50 and $ 219 for the three and nine months ended September 30, 2019 , respectively.

The Company leases office space from Zucker and Moore, LLC.

1 unchanged sentence

The lease agreement expired in June 2020 and was subsequently amended to extend for a period of one year through June 2021.

The Company recorded $24 of rent expense related to this office space for the three months ended June 30, 2020 and 2019 , respectively and $48 of rent expense for the, six months ended June 30, 2020 and 2019 , respectively.

The Company recorded $24 of rent expense related to this office space for the three months ended September 30, 2020 and 2019 , respectively and $72 of rent expense for the nine months ended September 30, 2020 and 2019 , respectively.

DUE FROM / DUE TO RELATED PARTIES

8 unchanged sentences

(Dollars in Thousands)

June 30, 2020

September 30, 2020

December 31, 2019

3 unchanged sentences

SUBSEQUENT EVENTS

In addition to Insurance Acquisition Corporation (Nasdaq:

INSU), the Company is the sponsor of a second special purpose acquisition company (“SPAC II”).

SPAC II will seek to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses (a “SPAC II Business Combination”) that provides insurance or insurance related services but will not be required to complete an SPAC II Business Combination with an insurance business.

SPAC II has not raised any funds from investors to date.

In July 2020, SPAC II filed a registration statement with the SEC and has an intent to raise $175 million.

New Line of Credit Agreement

On October 28, 2020 (the “Effective Date”), Cohen & Company Inc., a Maryland corporation (the “Company”) entered into a Loan Agreement (the “Loan Agreement”) with Byline Bank, as lender (the “Lender”), by and among the Lender, the Company, as a guarantor, and the Company’s subsidiaries, Cohen & Company, LLC (the “Operating LLC”) and J.V.B.

Financial Group Holdings, LP (“Holdings LP”), as guarantors, and J.V.B.

Financial Group, LLC, as borrower (the “Borrower”), and C&Co PrinceRidge Holdings, LP (“C&Co.”), pursuant to which the Lender agreed to make loans at the Borrower’s request from time to time in the aggregate amount of up to $7.5 million.

In addition, on the Effective Date, the Borrower and the Lender entered into a Revolving Note and Cash Subordination Agreement (the “Revolving Note and Cash Subordination Agreement,” and, together with the Loan Agreement, the “Credit Facility”), pursuant to which, among other things, the Lender agreed to make loans at the Borrower’s request from time to time in the aggregate amount of up to $17.5 million.

Loans (both principal and interest) made by the Lender to the Borrower under the Loan Agreement and Revolving Note and Cash Subordination Agreement are scheduled to mature and become immediately due and payable in full on October 28, 2022.

In addition, loans may be made under the Loan Agreement and the Revolving Note and Cash Subordination Agreement until October 28, 2022 and October 28, 2021, respectively.

Loans under the Credit Facility will bear interest at a per annum rate equal to LIBOR plus 6.0%, provided that in no event can the interest rate be less than 7.0%.

The Borrower is required to pay on a quarterly basis an undrawn commitment fee at a per annum rate equal to 0.50% of the undrawn portion of the Lender’s $25 million commitment under the Credit Facility.

The Borrower is also required to pay on each anniversary of the Effective Date a commitment fee at a per annum rate equal to 0.50% of the Lender’s $25 million commitment under the Credit Facility.

Pursuant to the terms of the Credit Facility, the Borrower paid to the Lender a commitment fee of $250,000 on the Effective Date.

Loans under the Credit Facility must be used by the Borrower for working capital purposes and general liquidity of the Borrower.

The Borrower may request a reduction in the Lender’s $25 million commitment in a minimum amount of $1 million and multiples of $500,000 thereafter upon not less than five days’ prior notice to the Lender.

The obligations of the Borrower under the Credit Facility are guaranteed by the Company, the Operating LLC and Holdings LP (collectively, the “Guarantors”), and are secured by a lien on all of Holdings LP’s property, including its 100% ownership interest in all of the outstanding membership interests of the Borrower.

Pursuant to the Credit Facility, the Borrower and the Guarantors provide customary representations and warranties for a transaction of this type.

The Credit Facility also includes customary covenants for a transaction of this type, including covenants limiting the indebtedness that can be incurred by the Borrower and Holdings LP and restricting the Borrower’s ability to make certain loans and investments.

Additionally, the Borrower may not permit (i) the Borrower’s tangible net worth to be less than $80 million at any time from October 29, 2020 through December 31, 2021, and $85 million at any time thereafter;

and (ii) the Borrower’s excess net capital to be less than $40 million at any time.

The Borrower and each Guarantor are also limited in their ability to repay certain of their existing outstanding indebtedness.

The Credit Facility contains customary events of default for a transaction of this type.

If an event of default under the Credit Facility occurs and is continuing, then the Lender may declare and cause all or any part of the Loans and all other liabilities outstanding under the Credit Facility to become immediately due and payable.

The foregoing description of the Credit Facility does not purport to be complete and is qualified in its entirety by reference to the full text of the Loan Agreement and the Revolving Note and Cash Subordination Agreement, copies of which are attached hereto as Exhibit 10.1 and Exhibit 10.2, respectively, and are incorporated herein by reference.

The Credit Facility described above was entered into to replace (i) the Loan Agreement, by and among the Company, the Operating LLC and Holdings LP, as guarantors, and the Borrower, as borrower, C&Co, and Fifth Third Financial Bank, N.A.

(as successor to MB Financial Bank, N.A.), as lender, dated April 25, 2018, as amended (the “Original Loan Agreement”) and (ii) the Revolving Note and Cash Subordination Agreement, by and between the Borrower and Fifth Third Financial Bank, N.A.

(as successor to MB Financial Bank, N.A.), dated January 29, 2019 (the “Original Revolving Note and Cash Subordination Agreement,” and, together with the Original Loan Agreement, the “Original Credit Facility”).

Pursuant to the Original Credit Facility, Fifth Third Financial Bank had agreed to make loans at the Borrower’s request from time to time in the aggregate amount of up to $25 million.

In connection with the execution of the Credit Facility, on the Effective Date, the Original Loan Agreement and the Original Revolving Note and Cash Subordination Agreement were both terminated and the Borrower paid to Fifth Third Financial Bank, N.A.

all amounts outstanding under the Original Credit Facility as of the Effective Date.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements