Cohen & Co Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On a regular basis, we evaluate these estimates, including fair value of financial instruments. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.  All amounts in this disclosure are in thousands (except share, unit, per share, and per unit data) except where otherwise noted.  Overview  We are a financial services company specializing in fixed income markets and, more recently, the SPAC markets. We were founded in 1999 as an investment firm focused on small-cap banking institutions but have grown to provide an expanding range of capital markets and asset management services. We are organized into three business segments: Capital Markets, Asset Management, and Principal Investing.  • Capital Markets : Our Capital Markets business segment consists primarily of fixed income sales, trading, matched book repo financing, new issue placements in corporate and securitized products, and advisory services. Our fixed income sales and trading group provides trade execution to corporate investors, institutional investors, mortgage originators, and other smaller broker-dealers. We specialize in a variety of products, including but not limited to: corporate bonds, ABS, MBS, RMBS, CDOs, CLOs, CBOs, CMOs, municipal securities, TBAs and other forward agency MBS contracts, SBA loans, U.S. government bonds, U.S. government agency securities, brokered deposits and CDs for small banks, and hybrid capital of financial institutions including TruPS, whole loans, and other structured financial instruments. We also offer execution and brokerage services for equity products. We carry out our capital markets activities primarily through our subsidiaries: JVB in the U.S. and CCFEL in Europe. • Asset Management : Our Asset Management business segment manages assets within CDOs, managed accounts, joint ventures, and investment funds (collectively, “Investment Vehicles”). A CDO is a form of secured borrowing. The borrowing is secured by different types of fixed income assets such as corporate or mortgage loans or bonds. The borrowing is in the form of a securitization, which means that the lenders are actually investing in notes backed by the assets. In the event of default, the lenders will have recourse only to the assets securing the loan. Our Asset Management business segment includes our fee-based asset management operations, which include on-going base and incentive management fees. As of December 31, 2020 , we had approximately $2.77 billion in AUM, $2.06 billion of which was in CDOs. A substantial portion of our asset management revenue is earned from the management of CDOs. We have not completed a new securitization since 2008. As a result, our asset management revenue has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, and defaults. Our ability to complete securitizations in the future will depend upon, among other things, our asset origination capacity and success, our ability to arrange warehouse financing to originate assets, our willingness and capacity to fund required amounts to obtain warehouse financing and securitized financings, and the demand in the markets for such securitizations. The remaining portion of our AUM is from a diversified mix of other Investment Vehicles that were more recently formed. • Principal Investing : Our Principal Investing business segment is comprised of investments that we hold related to our SPAC franchise and other investments we have made for the purpose of earning an investment return rather than investments made to support our trading, matched book repo, or other Capital Markets business segment activities. These investments are included in other investments, at fair value and investments in equity method affiliates in our consolidated balance sheets.  We generate our revenue by business segment primarily through the following activities.  Capital Markets:  • Our trading activities, which include execution and brokerage services, securities lending activities, riskless trading activities, as well as gains and losses (unrealized and realized) and income and expense earned on securities classified as trading; • Net interest income on our matched book repo financing activities; and • New issue and advisory revenue comprised of (a) new issue revenue associated with originating, arranging, or placing newly created financial instruments; and (b) revenue from advisory services.  Asset Management:  • Asset management fees for our on-going asset management services provided to certain Investment Vehicles, which may include fees both senior and subordinate to the securities issued by the Investment Vehicle; and • Incentive management fees earned based on the performance of the certain Investment Vehicles.  Principal Investing:  • Gains and losses (unrealized and realized) and income and expense earned on securities classified as other investments, at fair value; and • Income and loss earned on equity method investments.  38 Business Environment Our business in general and our Capital Markets business segment in particular, do not produce predictable earnings. Our results can vary dramatically from year to year and quarter to quarter. Our business is materially affected by economic conditions in the financial markets, political conditions, broad trends in business and finance, the housing and mortgage markets, changes in volume and price levels of securities transactions, and changes in interest rates, including overnight funding rates, all of which can affect our profitability and are unpredictable and beyond our control. These factors may affect the financial decisions made by investors and companies, including their level of participation in the financial markets and their willingness to participate in corporate transactions. Severe market fluctuations or weak economic conditions could reduce our trading volume and revenues, negatively affect our ability to generate new issue and advisory revenue, and adversely affect our profitability. As a general rule, our trading business benefits from increased market volatility. Increased volatility usually results in increased activity from our clients and counterparties. However, periods of extreme volatility may at times result in clients reducing their trading volumes, which would negatively impact our results. Also, periods of extreme volatility may result in large fluctuations in securities valuations and we may incur losses on our holdings. Also, our mortgage group’s business benefits when mortgage volumes increase, and may suffer when mortgage volumes decrease. Among other things, mortgage volumes are significantly impacted by changes in interest rates. In addition, as a smaller firm, we are exposed to intense competition. Although we provide financing to our customers, larger firms have a much greater capability to provide their clients with financing, giving them a competitive advantage. We are much more reliant upon our employees’ relationships, networks, and abilities to identify and capitalize on market opportunities. Therefore, our business may be significantly impacted by the addition or loss of key personnel. We try to address these challenges by (i) focusing our business on clients and asset classes that are underserved by the large firms, (ii) continuing to monitor our fixed costs to enhance operating leverage and limit our losses during periods of low volumes, and (iii) attempting to hire and retain entrepreneurial and effective traders and salespeople. Our business environment is rapidly changing. New risks and uncertainties emerge continuously and it is not possible for us to predict all the risks we will face. This may negatively impact our operating performance. A portion of our revenue is generated from net trading activity. We engage in proprietary trading for our own account, provide securities financing for our customers, and execute “riskless” trades with a customer order in hand resulting in limited market risk to us. The inventory of securities held for our own account, as well as held to facilitate customer trades, and our market making activities are sensitive to market movements. A portion of our revenue is generated from new issue and advisory engagements. The fees charged and volume of these engagements are sensitive to the overall business environment. We provide investment banking and advisory services in Europe primarily through our subsidiary CCFEL and new issue services in the U.S. through our subsidiary JVB. Currently, our primary source of new issue revenue is from originating assets for our U.S. insurance asset management business and the PriDe funds and managed accounts. A portion of our revenue is generated from management fees. Our ability to charge management fees and the amount of those fees is dependent upon the underlying investment performance and stability of the Investment Vehicles. If these types of investments do not provide attractive returns to investors, the demand for such instruments will likely fall, thereby reducing our opportunity to earn new management fees or maintain existing management fees. As of December 31, 2020 , 74.3% of our existing AUM were CDOs. The creation of CDOs has depended upon a vibrant securitization market. Since 2008, volumes within the securitization market have dropped significantly and have not fully recovered since that time. We have not completed a new securitization since 2008. The remaining portion of our AUM is from a diversified mix of other Investment Vehicles most of which were more recently formed. A substantial portion of our asset management revenue is earned from the management of CDOs. As a result, our asset management revenue has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, and defaults. Our ability to complete securitizations in the future will depend upon, among other things, our asset origination capacity and success, our ability to arrange warehouse financing to originate assets, our willingness and capacity to fund required amounts to obtain warehouse financing and securitized financings, and the demand in the markets for such securitizations. A portion of our revenues is generated from our principal investing activities. Therefore, our revenues are impacted by the overall market supply and demand of these investments as well as the individual performance of each investment. Our principal investments are included within other investments, at fair value in our consolidated balance sheets. See note 9 to our consolidated financial statements included in this Annual Report on Form 10-K. The SPAC Market Beginning in 2018, we began sponsoring a series of SPACs. Each sponsored SPAC seeks to complete a business combination with a company involved in the insurance market. In addition, we invest in other SPACs at various stages of their business life cycle. In 2019 and 2020, these SPAC activities have become a significant portion of our Principal Investing business segment. In August 2018, we invested in and became the general partner of a series of newly formed partnerships (the “SPAC Funds”), which were created for the purpose of investing in the equity interests of SPACs and SPAC sponsor entities including SPACs sponsored by us, our affiliates, and third parties. As a complement to the SPAC Funds, we established and became manager of two newly formed umbrella limited liability companies (the “SPAC Series Funds”) that issue a separate series of interest for each investment portfolio, which typically consists of investments in the sponsor entities of individual SPACs. Generally, when a SPAC acquires or merges with a privately held target company, the target company winds up owning a majority of the resulting outstanding equity of the SPAC so the transaction is accounted for as a reverse merger. Private companies utilize reverse mergers with SPACs as a method of going public as an alternative to a traditional IPO. All of our business activity related to SPACs is highly sensitive to the volume of activity in the SPAC market. Volumes could be negatively impacted if target companies no longer see SPACs as an attractive alternative thereby reducing the number of suitable potential business combination targets. Also, investor demand for SPACs would be negatively impacted if the stock of SPACs that successfully complete a business combination underperform the market. If volumes of SPAC activity decline, our results of operations will likely be significantly negatively impacted. 39 Margin Pressures in Fixed Income Brokerage Business Performance in the financial services industry in which we operate is highly correlated to the overall strength of the economy and financial market activity. Overall market conditions are a product of many factors beyond our control and can be unpredictable. These factors may affect the financial decisions made by investors, including their level of participation in the financial markets. In turn, these decisions may affect our business results. With respect to financial market activity, our profitability is sensitive to a variety of factors including the volatility of the equity and fixed income markets, the level and shape of the various yield curves, and the volume and value of trading in securities. Margins and volumes in certain products and markets within the fixed income brokerage business continue to decrease materially as competition has increased and general market activity has declined. Further, we continue to expect that competition will increase over time, resulting in continued margin pressure. Our response to this margin compression has included: (i) building a diversified fixed income trading platform; (ii) acquiring or building out new product lines and expanding existing product lines, including the most recent hiring of several investment banking professionals within JVB, who are seeking to generate new issue revenue in the Fintech and SPAC spaces, further expanding our enterprise-wide SPAC capabilities; (iii) building a hedging execution and funding operation to service mortgage originators; (iv) becoming a full netting member of the FICC enabling us to expand our matched book repo business, and (v) monitoring our fixed costs. Our cost management initiatives are ongoing. However, there can be no certainty that these efforts will be sufficient. If insufficient, we will likely see a decline in profitability. U.S. Housing Market In recent years, our mortgage group has grown in significance to our Capital Markets segment and our company overall. The mortgage group primarily earns revenue by providing hedging execution, securities financing, and trade execution services to mortgage originators and other investors in mortgage backed securities. Therefore, this group’s revenue is highly dependent on the volume of mortgage originations in the U.S. Origination activity is highly sensitive to interest rates, the U.S. job market, housing starts, sale activity of existing housing stock, as well as the general health of the U.S. economy. In addition, any new regulation that impacts U.S. government agency mortgage backed security issuance activity, residential mortgage underwriting standards, or otherwise impacts mortgage originators will impact our business. We have no control over these external factors and there is no effective way for us to hedge against these risks. Our mortgage group’s volumes and profitability will be highly impacted by these external factors. COVID-19 / Impairment of Goodwill In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread throughout the United States and worldwide. The spread of COVID-19 has caused significant volatility in domestic and international markets. There is on-going uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies. While we cannot fully assess the impact COVID-19 will have on all of our operations at this time, there are certain impacts that we have identified: ● The unprecedented volatility of the financial markets experienced since March 2020, has caused us to operate JVB at a lower level of leverage than prior to the pandemic. Specifically, JVB has reduced the size of its GCF repo operations and the volume of its TBA trading. We have determined that at our pre-pandemic levels in these businesses, we were exposed to a higher level of counterparty credit risk and were experiencing too much volatility in our available liquidity to conservatively meet capital requirements and margin calls in these businesses. We expect JVB to operate at lower volumes in both these businesses for an indefinite period of time. ● The financial market volatility, as well as the reduction in volumes in the GCF repo and TBA businesses, that resulted from COVID-19 required us to reassess the goodwill we had recorded related to JVB under the guidance of ASC 350. We determined that the fair value of JVB was less than the carrying value (including the goodwill). As a result, we recorded an impairment loss of $7,883 in 2020. See note 13 to our consolidated financial statements included in this Annual Report on Form 10-K. ● 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 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. In 2021, medical professionals developed COVID-19 vaccines and governments began to distribute them globally, which is expected to reduce virus spread and further aid economic recovery. Despite broad improvements, we will likely be impacted by the pandemic in other ways which we cannot reliably determine. We will continue to monitor market conditions and respond accordingly. In April 2020, the Company applied for and received a $2,166 loan under the Paycheck Protection Program ("PPP") of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act. See "Recent Events and Transactions" below for additional information regarding this loan. 40 Recent Events and Transactions  The 2020 Senior Notes On January 31, 2020, the Operating LLC entered into a note purchase agreement with JKD Capital Partners I LTD, a New York corporation (“JKD Investor”), and RN Capital Solutions LLC, a Delaware limited liability company (“RNCS”). The JKD Investor is owned by Jack DiMaio, the vice chairman of the Company’s board of directors, and his spouse. Pursuant to the note purchase agreement, JKD Investor and RNCS each purchased a senior promissory note in the principal amount of $2,250 (for an aggregate investment of $4,500). The senior promissory notes bear interest at a fixed rate of 12% per annum and mature on January 31, 2022. On February 3, 2020, pursuant to the note purchase agreement, the Operating LLC used the proceeds received from the issuance of the senior promissory notes to the JKD Investor and RNCS to repay in full all amounts outstanding under the senior promissory note, dated September 25, 2019, issued by the Company to Pensco Trust Company, Custodian fbo Edward E. Cohen IRA in the principal amount of $4,386 (the “Cohen IRA Note”). The Cohen IRA Note was included as a portion of the 2019 Senior Notes (as defined below) 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 and are held by EBC. On September 25, 2020, the 2019 Senior Notes were amended to extend the maturity date of the remaining $2,400 to September 25, 2021. See note 20 to our financial statements included in this Annual Report on Form 10-K for additional information regarding the 2019 Senior Notes and the senior promissory notes issued to the JKD Investor and RNCS. ViaNova In 2018, we formed a new subsidiary, ViaNova Capital Group LLC ("ViaNova"), for the purpose of building a RTL business. RTLs are small balance commercial loans secured by first lien mortgages used by professional investors and real estate developers to finance the purchase and rehabilitation of residential properties. ViaNova’s business plan included buying, aggregating, and distributing these loans to produce superior risk-adjusted returns through the pursuit of opportunities overlooked by commercial banks. On March 19, 2020, ViaNova received a notice of default from LegacyTexas Bank regarding the LegacyTexas Credit Facility, stating that ViaNova’s unrestricted cash balance was less than the amount required. Also, on March 19, 2020, ViaNova received notice from LegacyTexas Bank that 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 with LegacyTexas Bank. Since March 19, 2020, ViaNova 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. 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 payments from ViaNova to the Company of up to $500. CARES Act  On March 27, 2020, the United States enacted the CARES Act. The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to curtail the effect of COVID-19. The CARES Act includes significant business tax provisions that, among other things, include the removal of certain limitations on utilization of net operating losses, increase the loss carryback period for certain losses to five years, and increase the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act. We do not expect the CARES Act to have a significant impact on our tax obligations. Paycheck Protection Program In April 2020, we applied for and received a $2,166 loan under the PPP. We have carefully considered the eligibility requirements for PPP loans as well as supplemental guidance regarding the PPP beyond the applicable statute issued from time to time by government agencies and certain government officials. We were eligible to receive a PPP loan because we have fewer than 100 employees. Further, although we are a publicly traded company and are listed on the NYSE American stock exchange, our market capitalization is small relative to many other publicly traded companies, and we believed that we did not have access to the public capital markets at the time we applied for and received a loan under the PPP. In part due to the PPP loan, we do not anticipate any significant workforce reduction or reductions in compensation levels in the near future. On September 23, 2020, we applied for forgiveness of the PPP loan. As of the date of this report, we have not heard back regarding the forgiveness of the PPP loan. See note 20 to our financial statements included in this Annual Report on Form 10-K for additional information regarding the loan we received under the PPP. 41 Insurance SPAC The Operating LLC is the manager of Insurance Acquisition Sponsor, LLC (“IAS”) and Dioptra Advisors , LLC (“Dioptra” and, together with IAS , the “Insurance SPAC Sponsor Entities”). The Insurance SPAC 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 held on October 13, 2020. Upon the closing of the Insurance SPAC Merger, the Insurance SPAC 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 Insurance SPAC 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 of the Insurance SPAC Merger, the Insurance SPAC 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. In general, when founders shares and placement shares are discussed as a group, we refer to them as Sponsor Shares. Of the 375,000 placement units, 122,665 were allocable to us. Of the 4,497,525 founders Shares, 2,019,721 were allocable to us. As of the closing of the Insurance SPAC Merger, we continued to consolidate the Insurance SPAC Sponsor Entities. Prior to the closing, we treated the consolidated Insurance SPAC Sponsor Entities’ investment in the Insurance SPAC as an equity method investment. Effective upon the closing of the Insurance SPAC Merger: 1. We determined the fair value of the Sponsor Shares held by the Insurance SPAC Sponsor Entities. 2. We reclassified the equity method investment to other investments, at fair value and recorded principal transactions and other income for the difference between the fair value of the Sponsor Shares held by the Insurance SPAC Sponsor Entities and the equity method investment balance immediately prior to the merger closing. 3. We then recorded non-controlling interest expense or compensation expense related to the Sponsor Shares distributable to the non-controlling interest holders in the Insurance SPAC Sponsor Entities. If the non-controlling interest holder was an employee, we recorded the expense as equity-based compensation expense. Otherwise, the expense was recorded as non-controlling interest expense. Subsequent to the closing of the Insurance SPAC Merger, any change in the fair value of the shares held by the Insurance SPAC Sponsor Entities has been recorded as a component of principal transactions and other income. We concurrently record a corresponding non-controlling interest entry related to the Sponsor Shares distributable to the non-controlling interest holders in the Insurance SPAC Sponsor Entities. No adjustment is made to the equity-based compensation expense recorded as of the closing of the Insurance SPAC Merger. Rather, all post-merger changes in value related to Sponsor Shares distributable to the non-controlling interest holders in the Insurance SPAC Sponsor Entities are recorded as non-controlling interest expense. In December 2020, the Insurance SPAC Sponsor Entities distributed a portion of the Sponsor Shares held to the Operating LLC or other wholly owned subsidiaries of the Operating LLC; and the non-controlling interest holders, in a partial liquidating distribution of the Insurance SPAC Sponsor Entities. For the Sponsor Shares we hold outside of the Insurance SPAC Sponsor Entities, we record principal transactions and other income for any change in their value. In this case, there is no corresponding non-controlling interest income or expense. We expect the Insurance SPAC Sponsor Entities to distribute all of their holdings of Sponsor Shares and fully liquidate the Insurance SPAC Sponsor Entities in the first quarter of 2021. Concurrently with the closing of the Insurance SPAC Merger, a subsidiary of the Operating LLC, INSU Pipe Sponsor, LLC, 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 Insurance SPAC Merger Agreement. Our interest in INSU Pipe Sponsor LLC entitled us to an allocation of 350,000 shares of SFT Class A Common Stock. During 2020, we consolidated INSU Pipe Sponsor, LLC and recorded principal transactions and other income for the full 600,000 shares and then non-controlling interest expense or income for the 250,000 shares not owned by us. In December 2020, the shares of SFT Class A Common Stock were registered for sale and INSU Pipe Sponsor, LLC distributed the shares to the non-controlling interest holders resulting in INSU Pipe Sponsor, LLC being 100% owned by the Operating LLC. INSU Pipe Sponsor, LLC was dissolved in the first quarter of 2021, and our 350,000 shares transferred to the Operating LLC or other wholly owned subsidiary of the Operating LLC. The following table details the impact of all the entries associated with the Insurance SPAC during 2020. This table excludes any tax impact. Year Ended December 31, 2020 Insurance SPAC Sponsor Entities INSU Pipe Sponsor, LLC Operating LLC Total Principal transactions and other income $ 41,035 $ (842 ) $ 426 $ 40,619 Equity-based compensation (11,700 ) - - (11,700 ) Other operating (2 ) - - (2 ) Income / (loss) from equity method affiliates (3,138 ) - - (3,138 ) Net income / (loss) 26,195 (842 ) 426 25,779 Less: Net (loss) income attributable to the non-controlling interest - Operating LLC (9,328 ) 410 - (8,918 ) Net income / (loss) - Operating LLC 16,867 (432 ) 426 16,861 Less: Net income / (loss) attributable to the convertible non-controlling interest 12,205 (313 ) 308 12,200 Net income / (loss) attributable to Cohen & Company Inc. $ 4,662 $ (119 ) $ 118 $ 4,661 As of December 31, 2020, the Operating LLC's total investment in Shift of $36,395 is included as a component of other investments, at fair value in our consolidated balance sheet. Offsetting this is $1,337 included as other investments sold, not yet purchased and $16,686 of non-controlling interest in our consolidated balance sheet related to shares of Shift held in consolidated entities that are distributable to the non-controlling interest holders. Therefore, the Operating LLC's share of the consolidated investment in Shift as of December 31, 2020 was $18,372. See note 4 to our financial statements included in this Annual Report on Form 10-K. 42 INSU Acquisition Corp. 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 sought 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 November 24, 2020, Insurance SPAC II entered into an Agreement and Plan of Merger and Reorganization (the “Insurance SPAC II Merger Agreement”) with INSU II Merger Sub Corp., a Delaware corporation and direct wholly owned subsidiary of Insurance SPAC II (“Insurance SPAC II Merger Sub”), and MetroMile, Inc., a Delaware corporation (at the time, named MetroMile Operating Company) (“MetroMile”). The Insurance SPAC II Merger Agreement provided for, among other things, the acquisition of MetroMile by Insurance SPAC II pursuant to the proposed merger of Insurance SPAC II Merger Sub with and into MetroMile with MetroMile continuing as the surviving entity and a direct wholly owned subsidiary of Insurance SPAC II (the “Insurance SPAC II Merger”). On February 9, 2021, the Insurance SPAC II Merger was consummated and Insurance SPAC II changed its name to MetroMile. Upon closing of the Insurance SPAC II Merger, the Insurance SPAC II Sponsor Entities received a total of 6,669,667 founder shares and 452,500 placement units. Each placement unit consists of one share of Insurance SPAC II Common Stock and one-third of one warrant (the “Insurance SPAC II Warrant”). Each whole Insurance SPAC II Warrant entitles the holder to purchase one share of Insurance SPAC II common stock for $11.50 per share. Of the 6,669,667 founders shares, (i) 1,569,333 founder shares were freely transferable and saleable at the closing as of the Insurance SPAC II Merger, (ii) 2,550,167 founder shares will become freely transferable and saleable at such time as MetroMile's stock price is greater than $15.00 per share for any period of 20 trading days out of 30 consecutive trading days; (iii) 2,550,167 founder shares will become freely transferable and saleable at such time as MetroMile's stock price is greater than $17.00 per share for any period of 20 trading days out of 30 consecutive trading days. We currently consolidate the Insurance SPAC II Sponsor Entities and prior to the Insurance SPAC II Merger treated their investment in the Insurance SPAC II as an equity method investment. Effective upon the closing of the Insurance SPAC II Merger on February 9, 2021, we reclassified the equity method investment in the Insurance SPAC II to other investments, at fair value and adopted fair value accounting for the investment in MetroMile, resulting in an amount of principal transaction revenue derived from the (i) the Sponsor Shares retained by the Insurance SPAC II Sponsor Entities described in the previous paragraph; (ii) the trading share price of MetroMile's common stock and the MetroMile Warrants; and (iii) fair value discounts related to the share sale restrictions on the Sponsor Shares. Upon recognition of the principal transaction revenue described above, we recorded non-controlling interest expense or compensation expense related to the amount of Sponsor Shares distributable to the non-controlling interest holders in the Insurance SPAC II Sponsor Entities. If the non-controlling interest holder is an employee of the Company, the expense is recorded as compensation. Otherwise, the expense is non-controlling interest expense. Of the Sponsor Shares retained by the Insurance SPAC II Sponsor Entities, the amount to be allocable to the Operating LLC included (i) 765,833 founder shares that are freely transferable and saleable at the closing of the Insurance SPAC II Merger, (ii) 1,244,479 founder shares that will become freely transferable and saleable at such time as MetroMile's stock price is greater than $15.00 per share for any period of 20 trading days out of 30 consecutive trading days; and (iii) 1,244,479 founder shares that will become freely transferable and saleable in full at such time as MetroMile's stock price is greater than $17.00 per share for any period of 20 trading days out of 30 consecutive trading days. As of December 31, 2020, we had a total equity method investment in Insurance SPAC II of $4,064 which was included as a component of investment in equity method affiliates in our consolidated balance sheet. Offsetting this amount was non-controlling interest of $4,295 which was included as a component of non-controlling interest in our consolidated balance sheet. Therefore, the net carrying value of our investment in Insurance SPAC II was $(231) as of December 31, 2020. See note 4 to our financial statements included in this Annual Report on Form 10-K. 43 INSU Acquisition Corp III ("Insurance SPAC III") The Operating LLC is the manager of Insurance Acquisition Sponsor III, LLC (“IAS III”) and Dioptra Advisors III, LLC (together with IAS III, the “Insurance SPAC III Sponsor Entities”). On December 22, 2020, INSU Acquisition Corp. III completed the sale of 25,000,000 units (the “Insurance SPAC III Units”) in its initial public offering which includes 3,200,000 units issued pursuant to the underwriters’ over-allotment option. Each Insurance SPAC III Unit consists of one share of Class A common stock, par value $0.0001 per share (“Insurance SPAC III Common Stock”), and one-third of one warrant (each, an “Insurance SPAC III Warrant”), where each whole Insurance SPAC III Warrant entitles the holder to purchase one share of Insurance SPAC III Common Stock for $11.50 per share. The Insurance SPAC III Units were sold in the IPO at an offering price of $10.00 per Unit, for gross proceeds of $250,000 (before underwriting discounts and commissions and offering expenses). Pursuant to the underwriting agreement in the IPO, Insurance SPAC III granted the underwriters in the IPO (the “Insurance SPAC III Underwriters”) a 45-day option to purchase up to 3,270,000 additional Insurance SPAC III units solely to cover over-allotments, if any; and on December 21, 2020, the Insurance SPAC III Underwriters notified the Company that they were partially exercising the over-allotment option for 3,200,000 Units and waiving the remainder of the over-allotment option. Immediately following the completion of the IPO, there were an aggregate of 34,100,000 shares of Insurance SPAC III Common Stock issued and outstanding. If the Insurance SPAC III fails to consummate a business combination within the first 24 months following the IPO, its corporate existence will cease except for the purposes of winding up its affairs and liquidating its assets. The Insurance SPAC III Sponsor Entities purchased an aggregate of 575,000 of placement units in a private placement that occurred simultaneously with the IPO for an aggregate of $5,750, or $10.00 per placement unit. Each placement unit consists of one share of Insurance SPAC III Common Stock and one-third of one warrant (the “Insurance SPAC III Placement Warrant”). The Insurance SPAC III placement units are identical to the Insurance SPAC III Units sold in the IPO except (i) the shares of Insurance SPAC III Common Stock issued as part of the placement units and the Insurance SPAC III Warrants will not be redeemable by Insurance SPAC III, (ii) the Insurance SPAC III Warrants may be exercised by the holders on a cashless basis, and (iii) the shares of Insurance SPAC III Common Stock issued as part of the placement units, together with the Insurance SPAC III Warrants, are entitled to certain registration rights. Subject to certain limited exceptions, the placement units (including the underlying Insurance SPAC III Warrants and Insurance SPAC III Common Stock and the shares of Insurance SPAC III Common Stock issuable upon exercise of the Insurance SPAC III Warrants) will not be transferable, assignable or salable until 30 days after the completion of the Insurance SPAC III’s initial business combination. A total of $250,000 of the net proceeds from the private placement and the IPO (including approximately $10,600 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 a 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 Insurance SPAC III’s initial business combination, (ii) in connection with a stockholder vote to amend the Insurance SPAC III’s amended and restated certificate of incorporation (A) to modify the substance or timing of Insurance SPAC III’s obligation to redeem 100% of its public shares if it does not complete an initial business combination within 24 months from the completion of the IPO or (B) with respect to any other provision relating to stockholders’ rights or preinitial business combination activity, or (iii) the redemption of all of Insurance SPAC III’s public shares issued in the IPO if the Insurance SPAC III is unable to consummate an initial business combination within 24 months from the completion of the IPO. If Insurance SPAC III does not complete a business combination within the first 24 months following the IPO, the placement units will expire worthless. The Insurance SPAC III Sponsor Entities collectively hold 8,525,000 founder shares. Subject to certain limited exceptions, the founder shares will not be transferable or salable except (a) with respect to 25% of such shares, until consummation of a business combination, and (b) with respect to additional 25% tranches of such shares, when the closing price of Insurance SPAC III Common Stock exceeds $12.00, $13.50, and $17.00, respectively, for 20 out of any 30 consecutive trading days following the consummation of a business combination. Certain non-controlling interests in the Insurance SPAC III Sponsor Entities, including executive and key employees of the Operating LLC, purchased membership interests in the Insurance SPAC III Sponsor Entities and, in addition to having an interest in Insurance SPAC III’s placement units discussed above, have an interest in Insurance SPAC III’s founder shares through such membership interests in the Insurance SPAC III Sponsor Entities. The number of the Insurance SPAC III’s founders shares in which such non-controlling interests in the Insurance SPAC III Sponsor Entities, including such executives and key employees of the Operating LLC, have an interest in through the Insurance SPAC III Sponsor Entities will not be finally and definitively determined until consummation of a business combination. The number of the Insurance SPAC III’s founder shares currently allocated to the Operating LLC is 4,467,500, but such number of founder shares will also not be finally and definitively determined until the consummation of a business combination. As of December 31, 2020, we had a total equity method investment in Insurance SPAC III of $5,741, which was included as a component of investment in equity method affiliates in our consolidated balance sheet. Partially offsetting this amount was non-controlling interest of $5,416, which was included as a component of non-controlling interest in our consolidated balance sheet. Therefore, the net carrying value of our investment in Insurance SPAC III was $325 as of December 31, 2020. See note 4 to our financial statements included in this Annual Report on Form 10-K. 44 DGC Trust/CBF Redeemable Financial Instrument On September 29, 2017, the Operating LLC entered into investment agreements with CBF (the “CBF Investment Agreement”) and 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 the 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 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 the CBF 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 LLC 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 amendment No. 4 to the CBF Investment Agreement, the term “Investment Return” under the CBF Investment Agreement was defined as (A) with respect to any Annual Period 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. Furthermore, subsequent to December 31, 2020, we have given notice to CBF that we intend to redeem the remaining $4,000 investment on or around March 31, 2021. 45 Table of Contents Consolidated Results of Operations  The following section provides a comparative discussion of our consolidated results of operations for the specified periods. The period-to-period comparisons of financial results are not necessarily indicative of future results.  Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019  The following table sets forth information regarding our consolidated results of operations for the years ended December 31, 2020 and 2019 . COHEN & COMPANY INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands) (Unaudited) Year Ended December 31, Favorable / (Unfavorable) 2020 2019 $ Change % Change Revenues Net trading $ 73,611 $ 38,172 $ 35,439 93 % Asset management 8,759 7,560 1,199 16 % New issue and advisory 2,234 1,831 403 22 % Principal transactions and other income 45,506 2,103 43,403 2064 % Total revenues 130,110 49,666 80,444 162 % Operating expenses Compensation and benefits 59,902 25,972 (33,930 ) (131 )% Business development, occupancy, equipment 2,708 3,402 694 20 % Subscriptions, clearing, and execution 9,887 9,682 (205 ) (2 )% Professional fee and other operating 7,068 6,251 (817 ) (13 )% Depreciation and amortization 334 318 (16 ) (5 )% Impairment of goodwill 7,883 - (7,883 ) NM Total operating expenses 87,782 45,625 (42,157 ) (92 )% Operating income / (loss) 42,328 4,041 38,287 947 % Non-operating income / (expense) Interest expense, net (9,589 ) (7,584 ) (2,005 ) (26 )% Income / (loss) from equity method affiliates (2,955 ) (553 ) (2,402 ) (434 )% Income / (loss) before income taxes 29,784 (4,096 ) 33,880 827 % Income tax expense / (benefit) (8,669 ) (523 ) 8,146 1558 % Net income / (loss) 38,453 (3,573 ) 42,026 1176 % Less: Net income (loss) attributable to the non-controlling interest 24,248 (1,519 ) (25,767 ) (1696 )% Net income / (loss) attributable to Cohen & Company Inc. $ 14,205 $ (2,054 ) $ 16,259 792 %  Revenues  Revenues increased by $80,444 , or 162% , to $130,110 for the year ended December 31, 2020 , as compared to $49,666 for the year ended December 31, 2019 . As discussed in more detail below, the change was comprised of (i) an increase of $35,439 in net trading revenue; (ii) an increase of $1,199 in asset management revenue; (iii) an increase of $403 in new issue and advisory revenue; and (iv) an increase of $43,403 in principal transactions and other income.  46 Table of Contents Net Trading  Net trading revenue increased by $35,439 , or 93% , to $73,611 for the year ended December 31, 2020 , as compared to $38,172 for the year ended December 31, 2019 . The following table shows the detail by trading group.  NET TRADING (Dollars in Thousands) Year Ended December 31, 2020 2019 Change Mortgage $ 9,641 $ 6,780 $ 2,861 Matched book repo 33,980 12,011 21,969 High yield corporate 8,342 5,989 2,353 Investment grade corporate 9,978 565 9,413 Wholesale and other 11,670 12,827 (1,157 ) Total $ 73,611 $ 38,172 $ 35,439  Our net trading revenue includes unrealized gains on our trading investments, as of the applicable measurement date that may never be realized due to changes in market or other conditions not in our control. This may adversely affect the ultimate value realized from these investments. In addition, our net trading revenue also includes realized gains on certain proprietary trading positions. Our ability to derive trading gains from such trading positions is subject to overall market conditions. Due to volatility and uncertainty in the capital markets, the net trading revenue recognized during the year may not be indicative of future results. Furthermore, from time to time, some of the assets included in the Investments-trading line of our consolidated balance sheets represent level 3 valuations within the FASB valuation hierarchy. Level 3 assets are carried at fair value based on estimates derived using internal valuation models and other estimates. See notes 9 and 10 to our consolidated financial statements included in this Annual Report on Form 10-K. The fair value estimates made by us may not be indicative of the final sale price at which these assets may be sold.  We consider our matched book repo business to be subject to significant concentration risk. See note 11 to our consolidated financial statements included in this Annual Report on Form 10-K.  Asset Management  Assets Under Management  Our AUM equals the sum of: (1) the gross assets included in CDOs that we have sponsored and manage; plus (2) the NAV of investment funds we manage; plus (3) the NAV or gross assets of other accounts we manage. Our calculation of AUM may differ from the calculations used by other asset managers and, as a result, this measure may not be comparable to similar measures presented by other asset managers. This definition of AUM is not necessarily identical to the definitions of AUM that may be used in our management agreements.   ASSETS UNDER MANAGEMENT (Dollars in Thousands) As of December 31, 2020 2019 2018 Company sponsored CDOs $ 2,057,178 $ 2,197,208 $ 2,386,614 Other Investment Vehicles (1) 712,028 559,382 465,665 Assets under management (2) $ 2,769,206 $ 2,756,590 $ 2,852,279  (1) Other Investment Vehicles include any Investment Vehicle that is not a Company sponsored CDO. (2) In some cases, accounts we manage employ leverage. In some cases, our fees are based on gross assets while in other cases our fees are based on net assets. AUM included herein is calculated using either the gross or net assets of each Investment Vehicle based on whichever serves as the basis for calculation of our management fees. 47 Table of Contents Asset management fees increased by $1,199 , or 16% , to $8,759 for the year ended December 31, 2020 , as compared to $7,560 for the year ended December 31, 2019 , as discussed in more detail below. ASSET MANAGEMENT (Dollars in Thousands) Year Ended December 31, 2020 2019 Change CDOs $ 3,407 $ 4,028 $ (621 ) Other 5,352 3,532 1,820 Total $ 8,759 $ 7,560 $ 1,199  CDOs  A substantial portion of our asset management fees are earned from the management of CDOs. We have not completed a new securitization since 2008. As a result, our asset management revenue from CDOs has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, and defaults. Our ability to complete securitizations in the future will depend upon, among other things, our asset origination capacity and success, our ability to arrange warehouse financing to originate assets, our willingness and capacity to fund required amounts to obtain warehouse financing and securitized financings, and the demand in the markets for such securitizations.  Asset management revenue from Company-sponsored CDOs decreased by $621 to $3,407 for the year ended December 31, 2020 , as compared to $4,028 for the year ended December 31, 2019 . The following table summarizes the periods presented by asset class. FEES EARNED BY ASSET CLASS (Dollars in Thousands) Year Ended December 31, 2020 2019 Change TruPS and insurance company debt - U.S. $ 2,922 $ 3,113 $ (191 ) TruPS and insurance company debt - Europe 381 369 12 Broadly syndicated loans - Europe 104 546 (442 ) Total $ 3,407 $ 4,028 $ (621 )  The reduction in asset management fees for TruPS and insurance company debt – U.S. was a result of average AUM declining due to principal repayments on the assets in these securitizations. Asset management fees for TruPS and insurance company debt – Europe remained flat. Asset management fees for broadly syndicated loans – Europe consisted of a single CLO. During August 2019, this CLO liquidated. The revenues earned during 2020 represented final fees earned by us upon successful liquidation. No future revenue will be earned related to this management contract.  Other  Other asset management revenue increased by $1,820 to $5,352 for the year ended December 31, 2020 , as compared to $3,532 for the year ended December 31, 2019 . The increase was due to an increase in AUM and an increase in incentive management fees earned.  New Issue and Advisory Revenue  New issue and advisory revenue increased by $403 , or 22% , to $2,234 for the year ended December 31, 2020 , as compared to $1,831 for the year ended December 31, 2019 .  48 Table of Contents Our revenue earned from new issue and advisory has been, and we expect will continue to be, volatile. We earn revenue from a limited number of engagements. Therefore, a small change in the number of engagements can result in large fluctuations in the revenue recognized. Further, even if the number of engagements remains consistent, the average revenue per engagement can fluctuate considerably. Finally, our revenue is generally earned when an underlying transaction closes (rather than on a monthly or quarterly basis). Therefore, the timing of underlying transactions increases the volatility of our revenue recognition.  In addition, we often incur certain costs related to new issue engagements. These costs are included as a component of either subscriptions, clearing and execution, or professional fees and other and will generally be recognized in the same period that the related revenue is recognized.  Principal Transactions and Other Income  Principal transactions and other income increased by $43,403 to $45,506 for the year ended December 31, 2020 , as compared to $2,103 for the year ended December 31, 2019 . PRINCIPAL TRANSACTIONS & OTHER INCOME (Dollars in Thousands) Year Ended December 31, 2020 2019 Change SFT $ 40,619 $ - $ 40,619 EuroDekania - 279 (279 ) Currency hedges - 51 (51 ) CLO investments (535 ) 258 (793 ) Other SPAC equity 1,503 116 1,387 IMXI 2,703 172 2,531 U.S. Insurance JV 222 150 72 SPAC Funds 183 29 154 Other principal investments 7 465 (458 ) Total principal transactions 44,702 1,520 43,182 IIFC revenue share 491 531 (40 ) All other income / (loss) 313 52 261 Other income 804 583 221 Total principal transactions and other income $ 45,506 $ 2,103 $ 43,403  Principal Transactions Shift is a publicly traded company. The shares of Shift we hold are comprised of both unrestricted and restricted shares and are carried at fair value. See note 4 for discussion of sale restrictions on these shares. See note 9 to our consolidated financial statements included in this Annual Report on Form 10-K for information about how we determine the value of these instruments. The income recognized is mostly comprised of income of the Insurance SPAC Sponsor Entities and another consolidated subsidiary; both of which are not wholly owned. See compensation and non-controlling interest discussion below. EuroDekania was a company that invested in hybrid capital securities of European companies and we carried our investment at the reported NAV. Income recognized in 2019 was the result of changes in the underlying NAV of the fund as well as distributions received. EuroDekania sold its remaining investments and liquidated in 2019. Our currency hedge consisted of a Euro forward agreement designed to hedge the currency risk primarily associated with our investment in EuroDekania. We terminated this hedge during 2019 and do not expect to enter into this hedge going forward. The CLO investments represent investments in the most junior tranche of certain CLOs. These investments were carried at fair value. See note 9 to our consolidated financial statements included in this Annual Report on Form 10-K for information about how we determine the value of these instruments. These investments were fully liquidated in 2020. Other SPAC equity represents equity investments in publicly traded SPACs. See note 9 to our consolidated financial statements included in this Annual Report on Form 10-K for information about how we determined the value of these instruments. IMXI represents unrestricted and restricted equity positions of International Money Express, Inc. (NASDAQ: IMXI), a publicly traded company that resulted from the merger of Intermex Holdings, LLC and FinTech Acquisition Corp. II. See note 9 to our consolidated financial statements included in this Annual Report on Form 10-K for information about how we determine the value of these instruments. Also see note 4 and 31 to our consolidated financial statements included in this Annual Report on Form 10-K. 49 Table of Contents The U.S. Insurance JV is a company that invests in USD denominated debt issued by small insurance and reinsurance companies and we carry our investment at its NAV. Income recognized in each period is the result of changes in the underlying NAV of the fund as well as distributions received. See notes 4 and 10 to our consolidated financial statements included in this Annual Report on Form 10-K. The SPAC Funds primarily invest in the equity of SPACs and we carry our investment at its reported NAV. Income recognized in each period is the result of changes in the underlying NAV of the SPAC Funds as well as distributions received. See notes 4 and 9 to our consolidated financial statements included in this Annual Report on Form 10-K.  Other Income  Other income increased by $221 to $804 for the year ended December 31, 2020 , as compared to $583 for the year ended December 31, 2019 .  The revenue share arrangement noted in the table above entitles us to a percentage of revenue earned by IIFC. The IIFC revenue share arrangement expires at the earlier of (i) the dissolution of IIFC or (ii) when we have earned a cumulative $20,000 in revenue share payments. To date, we have earned $3,178. In addition, in any particular year, the revenue share earned by us cannot exceed $2,000. Operating Expenses  Operating expenses increased by $42,157 , or 92% , to $87,782 for the year ended December 31, 2020 , as compared to $45,625 for the year ended December 31, 2019 . As discussed in more detail below, the change was comprised of (i) an increase of $33,930 in compensation and benefits; (ii) a decrease of $694 in business development, occupancy, and equipment; (iii) an increase of $205 in subscriptions, clearing, and execution; (iv) an increase of $817 in professional fee and other operating; (v) an increase of $16 in depreciation and amortization; and (vi) an impairment of goodwill of $7,883.  Compensation and Benefits  Compensation and benefits increased by $33,930 , or 131% , to $59,902 for the year ended December 31, 2020 , as compared to $25,972 for the year ended December 31, 2019 . COMPENSATION AND BENEFITS (Dollars in Thousands) Year Ended December 31, 2020 2019 Change Cash compensation and benefits $ 47,349 $ 25,228 $ 22,121 Equity-based compensation 12,553 744 11,809 Total $ 59,902 $ 25,972 $ 33,930  Cash compensation and benefits in the table above is primarily comprised of salary, incentive compensation, and benefits. Cash compensation and benefits increased by $22,121 to $47,349 for the year ended December 31, 2020 , as compared to $25,228 for the year ended December 31, 2019 . Our headcount decreased to 87 as of December 31, 2020 from 94 as of December 31, 2019 . Cash compensation increased primarily due to an increase in incentive compensation related to the increase in net trading revenue and overall firm income.  Equity-based compensation increased by $11,809 to $12,553 for the year ended December 31, 2020 , as compared to $744 for the year ended December 31, 2019 . Of the $12,553 of equity compensation recognized in 2020, $11,700 was due to equity-based compensation related to the issuance of membership units of the Insurance SPAC Sponsor Entities to employees of the Company. This expense was recognized upon the completion of the merger between the Insurance SPAC and Shift in October 2020. No further equity-based compensation expense will be recognized related to membership units of the Insurance SPAC Sponsor Entities in the future. Following the business combination forward, the membership units of the Insurance SPAC Sponsor Entities held by employees will be treated as part of the non-controlling interest. The Insurance SPAC II Sponsor Entities and Insurance SPAC III Sponsor Entities have also issued membership units to employees of the Company. If the Insurance SPAC II or Insurance SPAC III successfully complete a business combination, the Company will also recognize significant equity compensation expense related to these issuances. The amount of future equity-based compensation expense that will be recognized if these business combinations are completed will be dependent upon the total number of founders shares ultimately allocable to employees and the value of the shares upon the completion of the business combination. See notes 4 and 22 to our consolidated financial statements included in this Annual Report on Form 10-K. The remaining $853 of equity-based compensation recognized during 2020 relates to restricted grants of the Company's Common Stock and Operating LLC units. This amount increased by $109 as compared to $744 for the prior year. This increase was due to a higher grant date fair value of issuances during 2020 as compared to 2019.  Business Development, Occupancy, and Equipment  Business development, occupancy, and equipment decreased by $694 , or 20% , to $2,708 for the year ended December 31, 2020 , as compared to $3,402 for the year ended December 31, 2019 . Of the decrease, $630 was due to reduced business development costs due to reduced travel and entertainment as a result of the COVID-19 pandemic. The remainder of the decrease was due to reduced occupancy and equipment costs of $64.  50 Table of Contents Subscriptions, Clearing, and Execution Subscriptions, clearing, and execution increased by $205 , or 2% , to $9,887 for the year ended December 31, 2020 , as compared to $9,682 for the year ended December 31, 2019 . Subscriptions expenses declined by $7 and clearing and execution increased by $212.  Professional Fee and Other Operating Expenses  Professional fee and other operating expenses increased by $817 , or 13% , to $7,068 for the year ended December 31, 2020 , as compared to $6,251 for the year ended December 31, 2019 . Professional fees increased $680 and other operating expenses increased by $137.  Depreciation and Amortization  Depreciation and amortization increased by $16 , or 5% , to $334 for the year ended December 31, 2020 , as compared to $318 for the year ended December 31, 2019 .  Impairment of Goodwill We determined the financial market volatility, as well as the reduction in volumes in the GCF repo and TBA businesses that resulted from COVID-19 was a triggering event that required us to reassess the goodwill we had recorded related to JVB under the guidance of ASC 350. We determined that the fair value of JVB was less than its carrying value (including the goodwill). As a result, we recorded an impairment of $7,883 in 2020. See note 13 to our consolidated financial statements included in this Annual Report on Form 10-K. Non-Operating Income and Expense  Interest Expense, net  Interest expense, net increased by $2,005 to $9,589 for the year ended December 31, 2020 , as compared to $7,584 for the year ended December 31, 2019 .    INTEREST EXPENSE (Dollars in Thousands) Year Ended December 31, 2020 2019 Change Junior subordinated notes $ 2,882 $ 3,457 $ (575 ) 2020 Senior Notes 496 - 496 2013 Convertible Notes / 2019 Senior Notes 336 615 (279 ) 2017 Convertible Note 1,505 1,472 33 Line of Credit (Byline / FT) 1,102 365 737 Redeemable Financial Instrument - DGC Trust / CBF 1,490 1,166 324 Redeemable Financial Instrument - JKD Capital Partners I LTD 1,883 699 1,184 Redeemable Financial Instrument - ViaNova Capital Group, LLC (105 ) (190 ) 85 $ 9,589 $ 7,584 $ 2,005  See notes 19 and 20 to our consolidated financial statements included in this Annual Report on Form 10-K. Income / (loss) from Equity Method Affiliates Income / (loss) from equity method affiliates decreased by $2,402 to ($2,955) for the year ended December 31, 2020 from ($553) for the year ended December 31, 2019 . See note 12 to our consolidated financial statements included in this Annual Report on Form 10-K. Year Ended December 31, 2020 2019 Change Insurance SPACs $ (3,656 ) $ (553 ) $ (3,103 ) SPAC Sponsor Entities (18 ) - (18 ) AOI 360 - 360 CK Capital 278 - 278 SPAC Series Funds 81 - 81 $ (2,955 ) $ (553 ) $ (2,402 )  51 Income Tax Expense / (Benefit)  The income tax expense / (benefit) was ($8,669) for the year ended December 31, 2020 , as compared to ($523) for the year ended December 31, 2019 .  The tax benefit recognized in 2020 was comprised of a deferred tax benefit of $8,877, partially offset by current tax expense of $208. The current tax expense incurred in 2020 was the result of foreign, state, and local income tax. The deferred tax benefit was a U.S. tax benefit, which was the result of the reduction in the valuation allowance applied against the Company's net operating loss carryforward ("NOL") and net capital loss carryforward ("NCL") tax assets. Prior to 2020, we had concluded that due to our recent history of tax losses, we should only recognize our NOL asset to the extent the reversal of our deferred tax liability amounts could be scheduled against it. For our NCL asset, we applied a full valuation allowance. In 2020, we generated significant taxable income (both ordinary and capital) and we expect to generate income going forward. Accordingly, as of December 31, 2020, we adjusted the calculation of the valuation allowances applied against our NOL and NCL asset. We now apply both the expected reversal of our deferred tax liability as well as an expected level of income based on 2020 actual results projected forward. The recent improvement of our operations was the result of income earned from the sponsorship of and investment in SPACs (mostly capital income) as well as improving operations of our other business lines (mostly operating income). We will continue to reevaluate our operations on a quarterly basis and may make further adjustments to our valuation allowances going forward as necessary. These adjustments could be material and could result in additional tax benefit or tax expense. These adjustments will only impact our deferred tax assets, liabilities, and expense or benefit. Our current tax expense or benefit will not be impacted by these adjustments.  The tax benefit recognized in 2019 was comprised of a deferred tax benefit of $678, partially offset by current tax expense of $155. The current tax expense incurred in 2019 was primarily the result of foreign income tax. The deferred tax benefit was a U.S. tax benefit, which was the result of the net loss incurred by us in 2019. This net loss provided additional NOLs which were recognized as a benefit to the extent such NOLs can be scheduled against our deferred tax liability reversal. Net Income / (Loss) Attributable to the Non-controlling Interest  Net income / (loss) attributable to the non-controlling interest for the years ended December 31, 2020 and 2019 was comprised of the non-controlling interest related to member interests in the Operating LLC other than interests held by us for the relevant periods. In addition, net income / (loss) attributable to the non-controlling interest also included non-controlling interest related to entities that were consolidated but not wholly owned by the Operating LLC. SUMMARY CALCULATION OF NON-CONTROLLING INTEREST For the Year Ended December 31, 2020 Wholly Owned Subsidiaries Other Consolidated Subsidiaries Total Operating LLC Consolidated Cohen & Company Inc. Consolidated Net income / (loss) before tax $ 4,951 $ 24,833 $ 29,784 $ - $ 29,784 Income tax expense / (benefit) 187 - 187 (8,856 ) (8,669 ) Net income / (loss) after tax 4,764 24,833 29,597 8,856 38,453 Other consolidated subsidiary non-controlling interest - 10,048 10,048 Net income / (loss) attributable to the Operating LLC 4,764 14,785 19,549 Average effective Operating LLC non-controlling interest % (1) 72.64 % Operating LLC non-controlling interest $ 14,200   SUMMARY CALCULATION OF NON-CONTROLLING INTEREST For the Year Ended December 31, 2019 Wholly Owned Subsidiaries Other Consolidated Subsidiaries Total Operating LLC Consolidated Cohen & Company Inc. Consolidated Net income / (loss) before tax $ (3,543 ) $ (553 ) $ (4,096 ) $ - $ (4,096 ) Income tax expense / (benefit) 157 - 157 (680 ) (523 ) Net income / (loss) after tax (3,700 ) (553 ) (4,253 ) 680 (3,573 ) Other consolidated subsidiary non-controlling interest - (288 ) (288 ) Net income / (loss) attributable to the Operating LLC (3,700 ) (265 ) (3,965 ) Average effective Operating LLC non-controlling interest % (1) 31.05 % Operating LLC non-controlling interest $ (1,231 ) (1) Non-controlling interest is recorded on a quarterly basis. Because earnings are recognized unevenly throughout the year and the non-controlling interest percentage may change during the period, the average effective non-controlling interest percentage may not equal the percentage at the end of any period or the simple average of the beginning and ending percentages. The non-controlling interest percentage changed significantly in December 2019. See discussion of in kind contribution in note 4 to our consolidated financial statements included in this Annual Report on Form 10-K.  52 Table of Contents Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018  The following table sets forth information regarding our consolidated results of operations for the years ended December 31, 2019 and 2018 .  COHEN & COMPANY INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands) (Unaudited) Year Ended December 31, Favorable / (Unfavorable) 2019 2018 $ Change % Change Revenues Net trading $ 38,172 $ 29,298 $ 8,874 30 % Asset management 7,560 12,536 (4,976 ) (40 )% New issue and advisory 1,831 2,979 (1,148 ) (39 )% Principal transactions and other income 2,103 4,573 (2,470 ) (54 )% Total revenues 49,666 49,386 280 1 % Operating expenses Compensation and benefits 25,972 25,385 (587 ) (2 )% Business development, occupancy, equipment 3,402 2,995 (407 ) (14 )% Subscriptions, clearing, and execution 9,682 8,627 (1,055 ) (12 )% Professional fee and other operating 6,251 8,459 2,208 26 % Depreciation and amortization 318 261 (57 ) (22 )% Total operating expenses 45,625 45,727 102 0 % Operating income / (loss) 4,041 3,659 382 10 % Non-operating income / (expense) Interest expense, net (7,584 ) (8,487 ) 903 11 % Income / (loss) from equity method affiliates (553 ) - (553 ) NM Income / (loss) before income taxes (4,096 ) (4,828 ) 732 15 % Income tax expense / (benefit) (523 ) (841 ) (318 ) (38 )% Net income / (loss) (3,573 ) (3,987 ) 414 10 % Less: Net income (loss) attributable to the non-controlling interest (1,519 ) (1,524 ) (5 ) (0 )% Net income / (loss) attributable to Cohen & Company Inc. $ (2,054 ) $ (2,463 ) $ 409 17 %  Revenues  Revenues increased by $280 , or 1% to $49,666 for the year ended December 31, 2019 , as compared to $49,386 for the year ended December 31, 2018 . As discussed in more detail below, the change was comprised of (i) an increase of $8,874 in net trading revenue; (ii) a decrease of $4,976 in asset management revenue; (iii) a decrease of $1,148 in new issue and advisory revenue; and (iv) a decrease of $2,470 in principal transactions and other income.  53 Table of Contents Net Trading  Net trading revenue increased by $8,874 , or 30% , to $38,172 for the year ended December 31, 2019 , as compared to $29,298 for the year ended December 31, 2018 . The following table shows the detail by trading group.   NET TRADING (Dollars in Thousands) For the Year Ended December 31, 2019 2018 Change Mortgage $ 6,780 $ 5,129 1,651 Matched book repo 12,011 4,624 7,387 High yield corporate 5,989 9,930 (3,941 ) Investment grade corporate 565 1,918 (1,353 ) Wholesale and other 12,827 7,697 5,130 Total $ 38,172 $ 29,298 $ 8,874  Our net trading revenue includes unrealized gains on our trading investments as of the applicable measurement date, which may never be realized due to changes in market or other conditions not in our control. This may adversely affect the ultimate value realized from these investments. In addition, our net trading revenue also includes realized gains on certain proprietary trading positions. Our ability to derive trading gains from such trading positions is subject to overall market conditions. Due to volatility and uncertainty in the capital markets, the net trading revenue recognized during any year may not be indicative of future results. Furthermore, from time to time, some of the assets included in the Investments-trading line of our consolidated balance sheets represent level 3 valuations within the FASB valuation hierarchy. Level 3 assets are carried at fair value based on estimates derived using internal valuation models and other estimates. See notes 8 and 9 to our consolidated financial statements included in this Annual Report on Form 10-K. The fair value estimates determined by us may not be indicative of the final sale price at which these assets may be sold.  We consider our matched book repo business to be subject to significant concentration risk. See note 11 to our consolidated financial statements included in Item 1 of this Annual Report on Form 10-K.  Asset Management  Asset management fees decreased by $4,976 , or 40% , to $7,560 for the year ended December 31, 2019 , as compared to $12,536 for the year ended December 31, 2018 , as discussed in more detail below.  ASSET MANAGEMENT (Dollars in Thousands) For the Year Ended December 31, 2019 2018 Change CDOs $ 4,028 $ 7,919 $ (3,891 ) Other 3,532 4,617 (1,085 ) Total $ 7,560 $ 12,536 $ (4,976 )  CDOs  A substantial portion of our asset management fees are earned from the management of CDOs. We have not completed a new securitization since 2008. As a result, our asset management revenue has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, and defaults. Our ability to complete securitizations in the future will depend upon, among other things, our asset origination capacity and success, our ability to arrange warehouse financing to originate assets, our willingness and capacity to fund required amounts to obtain warehouse financing and securitized financings, and the demand in the markets for such securitizations. The remaining portion of our AUM is from a diversified mix of other Investment Vehicles most of which were more recently formed. 54 Table of Contents Asset management revenue from Company-sponsored CDOs decreased by $3,891 to $4,028 for the year ended December 31, 2019 , as compared to $7,919 for the year ended December 31, 2018 . The following table summarizes the periods presented by asset class.  FEES EARNED BY ASSET CLASS (Dollars in Thousands) For the Year Ended December 31, 2019 2018 Change TruPS and insurance company debt - U.S. $ 3,113 $ 6,594 $ (3,481 ) TruPS and insurance company debt - Europe 369 995 (626 ) Broadly syndicated loans - Europe 546 330 216 Total $ 4,028 $ 7,919 $ (3,891 )  Asset management fees for TruPS and insurance company debt – U.S. declined. In October 2018, the Alesco II CDO had a successful auction of its assets and liquidated. During 2018, the Company recorded management fee revenue of $3,211 associated with the Alesco II CDO, which included $2,974 earned upon the successful auction. The remaining reduction in asset management fees for TruPS and insurance company debt – U.S. was a result of average AUM declining due to principal repayments on the assets in these securitizations. Asset management fees for TruPS and insurance company debt – Europe declined. In June 2018, the Dekania Europe I CDO had a successful auction of its assets and liquidated. During 2018, the Company recorded management fee revenue of $435 associated with the Dekania Europe I CDO. The remaining reduction in asset management fees for TruPS and insurance company debt – Europe was a result a decline in AUM due to principal repayments on the assets in these securitizations. Asset management fees for broadly syndicated loans – Europe consist of a single CLO. During August 2019, this CLO liquidated. Of the revenue earned in 2019, $452 represented fees earned by us upon successful liquidation. No significant future revenue will be earned related to this management contract.  Other  Other asset management revenue decreased by $1,085 to $3,532 for the year ended December 31, 2019 , as compared to $4,617 for the year ended December 31, 2018 . The decrease was primarily due to lower performance fees being earned on managed accounts in 2019 as compared 2018.  New Issue and Advisory Revenue  New issue and advisory revenue decreased by $1,148 , or 39% , to $1,831 for the year ended December 31, 2019 , as compared to $2,979 for the year ended December 31, 2018 .  Our new issue and advisory revenue has been, and we expect it will continue to be, volatile. We earn revenue from a limited number of engagements. Therefore, a small change in the number of engagements can result in large fluctuations in the revenue recognized. Further, even if the number of engagements remains consistent, the average revenue per engagement can fluctuate considerably. Finally, our revenue is generally earned when an underlying transaction closes (rather than on a monthly or quarterly basis). Therefore, the timing of underlying transactions increases the volatility of our revenue recognition.  In addition, we often incur certain costs related to new issue engagements. These costs are included as a component of either subscriptions, clearing and execution, or professional fees and other and will generally be recognized in the same period that the related revenue is recognized.  55 Table of Contents Principal Transactions and Other Income  Principal transactions and other income decreased by $2,470 to $2,103 for the year ended December 31, 2019 , as compared to $4,573 for the year ended December 31, 2018 .   PRINCIPAL TRANSACTIONS & OTHER INCOME (Dollars in Thousands) For the Year Ended December 31, 2019 2018 Change EuroDekania $ 279 $ 709 $ (430 ) Currency hedges 51 87 (36 ) CLO investments 258 1,456 (1,198 ) SPAC equity positions 116 230 (114 ) IMXI 172 1,321 (1,149 ) U.S. Insurance JV 150 25 125 SPAC Funds 29 (8 ) 37 Other principal investments 465 5 460 Total principal transactions 1,520 3,825 (2,305 ) Star Asia revenue share - 169 (169 ) IIFC revenue share 531 504 27 All other income / (loss) 52 75 (23 ) Other income 583 748 (165 ) Total principal transactions and other income $ 2,103 $ 4,573 (2,470 )  Principal Transactions EuroDekania was a company that invested in hybrid capital securities of European companies and we carried our investment at the reported NAV. Income recognized in each period was the result of changes in the underlying NAV of the fund as well as distributions received. EuroDekania sold its remaining investments and liquidated in 2019. Our currency hedge consisted of a Euro forward agreement designed to hedge the currency risk primarily associated with our investment in EuroDekania. We terminated this hedge during 2019 and do not expect to enter into this hedge going forward. The CLO investments represent investments in the most junior tranche of certain CLOs. The average carrying value of our CLO investments for the year ended December 31, 2019 was $2,662 as compared to $11,384 for the year ended December 31, 2018. These investments are carried at fair value. See note 9 to our consolidated financial statements included in this Annual Report on Form 10-K for information about how we determine the value of these instruments. SPAC equity positions represents unrestricted equity investments in publicly traded SPACs. See note 9 to our consolidated financial statements included in this Annual Report on Form 10-K for information about how we determine the value of these instruments IMXI represents unrestricted and restricted equity positions of International Money Express, Inc. (NASDAQ: IMXI), a publicly traded company that resulted from the merger of Intermex Holdings, LLC and FinTech Acquisition Corp. II. See note 9 to our consolidated financial statements included in this Annual Report on Form 10-K for information about how we determine the value of these instruments. Also see notes 8, 9, and 31 to our consolidated financial statements included in this Annual Report on Form 10-K. The U.S. Insurance JV is a company that invests in debt issued by insurance companies and we carry our investment at its NAV. Income recognized in each period is the result of changes in the underlying NAV of the fund as well as distributions received. See notes 4 and 10 to our consolidated financial statements included in this Annual Report on Form 10-K. The SPAC Funds primarily invest in the equity of SPACs and we carry our investment at its reported NAV. Income recognized in each period is the result of changes in the underlying NAV of the SPAC Funds as well as distributions received. See notes 4 and 9 to our consolidated financial statements included in this Annual Report on Form 10-K.  Other Income  Other income decreased by $165 to $583 for the year ended December 31, 2019 , as compared to $748 for the year ended December 31, 2018 .  56 Table of Contents The revenue share arrangements noted in the table above entitle us to either a percentage of revenue earned by certain entities or a percentage of revenue earned above certain thresholds. See discussion of revenue share arrangements in “Item 1 — Business” beginning on page 5. These arrangements expire, or have expired, as follows:  • The Star Asia revenue share arrangement terminated during 2018. We earned a large incentive payment from Star Asia in the year ended December 31, 2018 . • The IIFC revenue share arrangement expires at the earlier of (i) the dissolution of IIFC or (ii) when we have earned a cumulative $20,000 in revenue share payments. Through December 31, 2019, we have earned $2,716 in the aggregate. Also, in any particular year, the revenue share earned by us cannot exceed $2,000.  Operating Expenses  Operating expenses decreased by $102 , or 0% , to $45,625 for the year ended December 31, 2019 , as compared to $45,727 for the year ended December 31, 2018 . As discussed in more detail below, the change was comprised of (i) an increase of $587 in compensation and benefits; (ii) an increase of $407 in business development, occupancy, and equipment; (iii) an increase of $1,055 in subscriptions, clearing, and execution; (iv) a decrease of $2,208 in professional fee and other operating; and (v) an increase of $57 in depreciation and amortization.  Compensation and Benefits  Compensation and benefits increased by $587 , or 2% , to $25,972 for the year ended December 31, 2019 , as compared to $25,385 for the year ended December 31, 2018 .  COMPENSATION AND BENEFITS (Dollars in Thousands) For the Year Ended December 31, 2019 2018 Change Cash compensation and benefits $ 25,228 $ 24,762 $ 466 Equity-based compensation 744 623 121 Total $ 25,972 $ 25,385 $ 587  Cash compensation and benefits in the table above is primarily comprised of salary, incentive compensation, and benefits. Cash compensation and benefits increased by $466 to $25,228 for the year ended December 31, 2019, as compared to $24,762 for the year ended December 31, 2018. Our headcount increased to 94 as of December 31, 2019 from 88 as of December 31, 2018. Cash compensation increased primarily due to an increase in incentive compensation related to the increase in net trading revenue. Equity-based compensation increased by $121 to $744 for the year ended December 31, 2019, as compared to $623 for the year ended December 31, 2018. The increase was a result of a higher level of grants in 2019 as compared to 2018. See note 22 to our consolidated financial statements included in this Annual Report on Form 10-K.  Business Development, Occupancy, and Equipment  Business development, occupancy, and equipment increased by $407 , or 14% , to $3,402 for the year ended December 31, 2019 , as compared to $2,995 for the year ended December 31, 2018 . The increase was comprised of an increase in business development of $148 and an increase in occupancy and equipment of $259. Occupancy and equipment increased primarily due to our entry into a new office lease for office space in New York City, which commenced in August 2018.  Subscriptions, Clearing, and Execution  Subscriptions, clearing, and execution increased by $1,055 , or 12% , to $9,682 for the year ended December 31, 2019 , as compared to $8,627 for the year ended December 31, 2018 . The increase was due to increases of $326 in subscriptions and $729 in clearing and execution. The increase in clearing and execution was due to increased trading volume.  57 Table of Contents Professional Fee and Other Operating Expenses  Professional fee and other operating expenses decreased by $2,208 , or 26% , to $6,251 for the year ended December 31, 2019 , as compared to $8,459 for the year ended December 31, 2018 . The decrease was due to decreases of $2,098 in professional fees and $110 in other operating expense. The professional fee decrease was primarily the result of a reduction in consulting costs related to new issue revenue incurred in 2019 as compared to 2018 due to less new issue revenue earned in 2019. In addition, in 2018, we incurred sub-advisory fees in connection with the successful auction of the Alesco II CDO managed by DCM. No CDOs were the subject of a successful auction during 2019. Depreciation and Amortization  Depreciation and amortization increased by $57 , or 22% , to $318 for the year ended December 31, 2019 , as compared to $261 for the year ended December 31, 2018 . The increase was the result of additional leasehold improvements during 2019.  Non-Operating Income and Expense  Interest Expense, net  Interest expense, net decreased by $903 , or 11% , to $7,584 for the year ended December 31, 2019 , as compared to $8,487 for the year ended December 31, 2018 .   INTEREST EXPENSE (Dollars in Thousands) For the Year Ended December 31, 2019 2018 Change Junior subordinated notes $ 3,457 $ 3,499 $ (42 ) 2013 Convertible Notes / 2019 Senior Notes 615 752 (137 ) 2017 Convertible Note 1,472 1,445 27 2018 FT LOC 365 270 95 Redeemable Financial Instrument - DGC Trust / CBF 1,166 587 579 Redeemable Financial Instrument - JKD Capital Partners I LTD 699 1,968 (1,269 ) Redeemable Financial Instrument - ViaNova Capital Group, LLC (190 ) (34 ) (156 ) $ 7,584 $ 8,487 $ (903 )  See notes 19 and 20 to our consolidated financial statements included in this Annual Report on Form 10-K.  Income Tax Expense / (Benefit)  Income tax expense / (benefit) was ($523) for the year ended December 31, 2019 , as compared to income tax expense / (benefit) of ($841) for the year ended December 31, 2018 . The tax benefit recognized in 2019 was comprised of a deferred tax benefit of $678 partially offset by current tax expense of $155. The current tax expense incurred in 2019 was primarily the result of foreign income tax. The deferred tax benefit was a U.S. tax benefit, which was the result of the net loss incurred by us in 2019. This net loss provides additional NOLs which can be recognized as a benefit to the extent such NOLs can scheduled against our deferred tax liability reversal. The tax benefit recognized in 2018 was comprised of a current tax benefit of $3 and a deferred tax benefit of $838. The deferred tax benefit was a U.S. tax benefit which was the result of the net loss incurred by us in 2018. This net loss provides additional NOL carryforwards that can be recognized as a benefit to the extent such NOLs can scheduled against our deferred tax liability reversal.  58 Table of Contents Net Income / (Loss) Attributable to the Non-controlling Interest  Net income / (loss) attributable to the non-controlling interest for the years ended December 31, 2019 and 2018 was comprised of the non-controlling interest related to member interests in the Operating LLC other than interests held by us for the relevant periods. In addition, net income / (loss) attributable to the non-controlling interest also included non-controlling interest related to entities that were consolidated but not wholly owned by the Operating LLC.   SUMMARY CALCULATION OF NON-CONTROLLING INTEREST For the Year Ended December 31, 2019 Wholly Owned Subsidiaries Other Consolidated Subsidiaries Total Operating LLC Consolidated Cohen & Company Inc. Consolidated Net income / (loss) before tax $ (3,543 ) $ (553 ) $ (4,096 ) $ - $ (4,096 ) Income tax expense / (benefit) 157 - 157 (680 ) (523 ) Net income / (loss) after tax (3,700 ) (553 ) (4,253 ) 680 (3,573 ) Other consolidated subsidiary non-controlling interest - (288 ) (288 ) Net income / (loss) attributable to the Operating LLC (3,700 ) (265 ) (3,965 ) Average effective Operating LLC non-controlling interest % (1) 31.05 % Operating LLC non-controlling interest $ (1,231 )   SUMMARY CALCULATION OF NON-CONTROLLING INTEREST For the Year Ended December 31, 2018 Wholly Owned Subsidiaries Other Consolidated Subsidiaries Total Operating LLC Consolidated Cohen & Company Inc. Consolidated Net income / (loss) before tax $ (4,828 ) $ - $ (4,828 ) $ - $ (4,828 ) Income tax expense / (benefit) 25 - 25 (866 ) (841 ) Net income / (loss) after tax (4,853 ) - (4,853 ) 866 (3,987 ) Other consolidated subsidiary non-controlling interest - - - Net income / (loss) attributable to the Operating LLC (4,853 ) - (4,853 ) Average effective Operating LLC non-controlling interest % (1) 31.40 % Operating LLC non-controlling interest $ (1,524 )  (1) Non-controlling interest is recorded on a quarterly basis. Because earnings are recognized unevenly throughout the year and the non-controlling interest percentage may change during the period, the average effective non-controlling interest percentage may not equal the percentage at the end of any period or the simple average of the beginning and ending percentages.  59 Liquidity and Capital Resources  Liquidity is a measurement of our ability to meet potential cash requirements including ongoing commitments to repay debt borrowings, make interest payments on outstanding borrowings, fund investments, and support other general business purposes. In addition, our U.S. and European broker-dealer subsidiaries are subject to certain regulatory requirements to maintain minimum levels of net capital. Historically, our primary sources of funds have been our operating activities and general corporate borrowings. In addition, our trading operations have generally been financed by the use of collateralized securities financing arrangements as well as margin loans. In recent years, we have engaged in a number of capital raising transactions with Daniel G. Cohen, chairman of the board and president and chief executive of European operations, and/or persons or entities controlled by or close to Mr. Cohen because the terms of such transactions have been more favorable than terms available from unrelated third parties.  Certain subsidiaries of the Operating LLC have restrictions on the withdrawal of capital and otherwise in making distributions and loans. JVB is subject to net capital restrictions imposed by the SEC and FINRA that require certain minimum levels of net capital to remain in this subsidiary. In addition, these restrictions could potentially impose notice requirements or limit our ability to withdraw capital above the required minimum amounts (excess capital) whether through a distribution or a loan. CCFEL is regulated by the CBI and must maintain certain minimum levels of capital. See note 25 to our consolidated financial statements included in this Annual Report on Form 10-K. See Liquidity and Capital Resources – Contractual Obligations below. During the third quarter of 2010, our board of directors initiated a dividend of $0.50 per quarter, which was paid regularly through December 31, 2011. Beginning in 2012, our board of directors declared a dividend of $0.20 per quarter, which was paid regularly through the first quarter of 2019. Each time a cash dividend was declared by our board of directors, a pro rata distribution was made to the other members of the Operating LLC upon payment of dividends to our stockholders.  On August 2, 2019, our board of directors announced that we have decided to suspend our quarterly cash dividend. We currently intend to use the related annual cash savings to invest in new business initiatives and improve our financial position. Any future determination to declare and pay dividends will be made at the discretion of our board of directors, after taking into account a variety of factors, including business, financial, and regulatory considerations as well as any limitations under Maryland law or imposed by any agreements governing our indebtedness. Going forward, the board of directors will re-assess our capital resources and may or may not determine to reinstate the dividend based on that assessment.  On December 21, 2020, August 31, 2020 and March 19, 2018, the Company entered into letter agreements (the “December 2020 Letter Agreement”, the "August 2020 Letter Agreement” and the “2018 Letter Agreement,” respectively and, together, the "10b5-1 Plan"). The December 2020 Letter Agreement and the August 2020 Letter Agreement were 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 agreements authorized the Agent to use reasonable efforts to purchase, on the Company’s behalf, up to an aggregate purchase price of $2,000 of Common Stock on any day that the NYSE was open for business. The December 2020 Letter Agreement became effective December 23, 2020 and is in effect until December 31,2021. The August 2020 Letter Agreement was in effect from August 31, 2020 until August 31, 2021 or until an aggregate purchase price of $2,000 shares had been purchased, which occurred on November 10, 2020. The 2018 Letter Agreement was in effect from March 19, 2018 until March 19, 2019. . 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 year ended December 31, 2020 , we repurchased 121,181 shares in the open market under the 10b5-1 Plan for a total purchase price of $2,143. During the year ended December 31, 2019 , we repurchased 7,890 shares in the open market under the 10b5-1 Plan for a total purchase price of $65. During the year ended December 31, 2018 , we repurchased 57,526 shares in the open market under the 10b5-1 Plan for a total purchase price of $594.  In addition to purchases made under the 10b5-1 plan, we made the following repurchases in privately negotiated transactions during the years ended December 31, 2020 , 2019 , and 2018 :  • During the third quarter of 2020, we purchased 42,600 shares for $746. • During the fourth quarter of 2019, we purchased 23,000 shares of Common Stock for $230 or $10.00 per share from a former member of the board of directors. • During the fourth quarter of 2019, we purchased 1,000 shares of Common Stock for $5 or $4.50 per share from the Company’s chief financial officer. • During the third quarter of 2018, we purchased 17,555 shares of Common Stock for $176 or $10.00 per share from a current member of the board of directors.  All of the repurchases noted above were completed using cash on hand.  During the years ended December 31, 2020 , 2019 , and 2018 , we had the following other significant financing transactions. See notes 19 and 20 in our consolidated financial statements included in our Annual Report on Form 10-K:  60 Table of Contents • During 2020: o We raised $5,431 by issuing equity of the Insurance SPAC III Sponsor Entities to third parties. o We distributed (in kind) $6,603 to the non-controlling interest holders of the Insurance SPAC Sponsor Entities and the INSU Pipe Sponsor, LLC. o We drew and repaid the 2019 FT Revolver in the amount of $17,500. o We raised $4,500 in proceeds from issuance of the 2020 Senior Notes. o We received a PPP Loan of $2,166. o We repaid $4,386 of the 2019 Senior Notes. o We repaid $4,777 of the LegacyTexas Credit Facility. o We repaid $2,000 of the redeemable financial instrument with DGC Trust. o We repaid $2,500 of the redeemable financial instrument with CBF. o We repaid $421 of the ViaNova redeemable financial instruments. o We raised $4,556 by issuing equity of the Insurance SPAC II Sponsor Entities to third parties. • During 2019: o We amended and restructured the 2018 FT LOC and issued a new subordinated revolving note, the 2019 FT Revolver. o We amended the previously outstanding 2013 Convertible Notes, extending the maturity date from September 25, 2019 to September 25, 2020, increasing the interest rate from 8% to 12%, and removing the conversion feature. The post amendment notes are referred to as the 2019 Senior Notes. o We began periodic draws on the LegacyTexas Credit Facility totaling $4,777. o We raised an additional $1,268 from redeemable financial instruments via an additional investment by JKD Capital Partners I on January 9, 2019. On March 6, 2019, the agreement was amended to change the definition of Investment Return (as defined in the agreement). o Effective October 1, 2019, the DGC Trust / CBF redeemable financial instruments were amended and restated. The definition of Investment Return (as defined in the agreements) was modified in both the DGC Trust and CBF agreements. The Investment Amount was reduced by $1,500 in the CBF agreement and the Company made a $1,500 one-time payment to CBF. o The Insurance SPAC Sponsor Entities raised $2,550 from equity investors, which was recorded as non-controlling interest in our consolidated financial statements. o The Company entered into the SPA with Daniel G. Cohen and DGC Trust effective December 30, 2019. This transaction combined with the related issuance of series F preferred stock resulted in an increase in non-controlling interest of $7,779 and an increase in preferred stock of $22. See note 4 and 31 to our consolidated financial statements included in this Annual Report on Form 10-K. • During 2018: o We entered into the 2018 FT LOC credit facility with Fifth Third Bank (“FT Financial”). o We repaid $1,461 of the 2013 Convertible Notes and extended the maturity of the remaining $6,786 outstanding 2013 Convertible Notes from September 25, 2018 to September 25, 2019. o We raised $500 in proceeds from redeemable financial instruments related to ViaNova. o We entered into a credit facility with LegacyTexas Bank (the “LegacyTexas Credit Facility”) related to our ViaNova business line, which provided for draws up to $12,500. o We issued the 2017 Convertible Note in an aggregate principal amount of $15,000 to the DGC Trust. o We raised $11,000 in proceeds from redeemable financial instruments: $10,000 by issuing redeemable financial instruments to CBF and the DGC Trust; and, $1,000 in additional proceeds from the already issued redeemable financial instrument to JKD Capital Partners I LTD.  Cash Flows  We have seven primary uses for capital: (1) To fund the operations of our Capital Markets business segment. Our Capital Markets business segment utilizes capital (i) to fund securities inventory to facilitate client trading activities; (ii) for risk trading for our own account; (iii) to fund our collateralized securities lending activities; (iv) for temporary capital needs associated with underwriting activities; (v) to fund business expansion into existing or new product lines including additional capital dedicated to our mortgage group as well as our matched book repo business; and (vi) to fund any operating losses incurred. (2) To fund the expansion of our Asset Management business segment. We generally grow our AUM by sponsoring new Investment Vehicles. The creation of a new Investment Vehicle often requires us to invest a certain amount of our own capital to attract outside capital to manage. Also, these new Investment Vehicles often require warehouse and other third-party financing to fund the acquisition of investments. Finally, we generally will hire employees to manage new Investment Vehicles and will operate at a loss for a startup period. (3) To fund investments. We make principal investments (including sponsor and other investments in SPACs) to generate returns. We may need to raise additional debt or equity financing in order to ensure we have the capital necessary to take advantage of attractive investment opportunities. (4) To fund mergers or acquisitions. We may opportunistically use capital to acquire other asset managers, individual asset management contracts, or financial services firms. To the extent our liquidity sources are insufficient to fund our future merger or acquisition activities, we may need to raise additional funding through an equity or debt offering. No assurances can be given that additional financing will be available in the future, or that if available, such financing will be on favorable terms. 61 Table of Contents (5) To fund potential dividends and distributions. During the third quarter of 2010 and for each subsequent quarter through March 31, 2019, the board of directors declared a dividend. A pro rata distribution was paid to the other members of the Operating LLC upon the payment of any dividends to our stockholders. (6) To fund potential repurchases of Common Stock. We have opportunistically repurchased Common Stock in private transactions as well through the 10b5-1 Plan. See note 21 to our consolidated financial statements included in this Annual Report on Form 10-K. (7) To pay off debt as it matures. We have indebtedness that must be repaid as it matures. See note 20 to our consolidated financial statements included in this Annual Report on Form 10-K. If we are unable to raise sufficient capital on economically favorable terms, we may need to reduce the amount of capital invested for the uses described above, which may adversely impact earnings and our ability to pay dividends.  As of December 31, 2020 , and December 31, 2019 , we maintained cash and cash equivalents of $41,996 and $8,304, respectively. We generated cash from or used cash for the activities described below.  SUMMARY CASH FLOW INFORMATION (Dollars in Thousands) Year Ended December 31, 2020 2019 2018 Cash flow from operating activities $ 41,435 $ (15,463 ) $ (6,999 ) Cash flow from investing activities (11,948 ) 3,734 2,156 Cash flow from financing activities 3,789 5,936 (3,722 ) Effect of exchange rate on cash 416 (9 ) (262 ) Net cash flow 33,692 (5,802 ) (8,827 ) Cash and cash equivalents, beginning 8,304 14,106 22,933 Cash and cash equivalents, ending $ 41,996 $ 8,304 $ 14,106  See the statements of cash flows in our consolidated financial statements. We believe our available cash and cash equivalents, as well as our investment in our trading portfolio and related borrowing capacity, will provide sufficient liquidity to meet the cash needs of our ongoing operations in the near term.  2020 Cash Flows  As of December 31, 2020 , our cash and cash equivalents were $41,996, representing an increase of $33,692 from December 31, 2019 . The increase was attributable to the cash provided by operating activities of $41,435, the cash used in investing activities of $11,948, the cash provided in financing activities of $3,789, and the increase in cash resulting from a change in exchange rates of $416.  The cash provided by operating activities of $41,435 was comprised of (a) net cash inflows of $79,555 related to working capital fluctuations; (b) net cash outflows of $47,557 from trading activities comprised of our investments-trading, trading securities sold, not yet purchased, securities sold under agreement to repurchase, receivables under resale agreements, and receivables and payables from brokers, dealers, and clearing agencies, as well as the changes in unrealized gains and losses on the investments-trading and trading securities sold, not yet purchased; and (c) net cash inflows from other earnings items of $9,437 (which represents net income or loss adjusted for the following non-cash operating items: deferred taxes, other income / (expense), realized and unrealized gains and losses on other investments at fair value, other investments sold, not yet purchased, income / (loss) from equity method affiliates, equity-based compensation, depreciation, impairment of goodwill, and amortization).  The cash used in investing activities of $11,948 was comprised of (a) $62,282 in purchases of other investments at fair value; (b) $12,519 in purchase of other investments sold, not yet purchased; (c) $12,675 in investments in equity method affiliates; (d) $217 in purchase of furniture, equipment, and leasehold improvements; partially offset by (e) $54,748 in sales and returns of principal of other investments, at fair value; (f) $20,997 in sales and returns of principal of other investments sold, not yet purchased.  The cash provided by financing activities of $3,789 was comprised of (a) $2,166 of proceeds from the PPP loan; (b) $17,500 in draws on the FT LOC; (c) $4,500 in proceeds from issuance of non-convertible debt; (d) $13,489 in proceeds from issuance of non-controlling interests; partially offset by (e) $17,500 in payments on the FT LOC; (f) $9,163 in repayment of debt; (g) $24 in debt issuance costs; (h) $4,921 of repayments of redeemable financial instruments; (i) $54 in cash used to net settle equity awards; (j) $35 in non-controlling interest distributions; (k) $27 in dividends paid; and (l) $2,142 used to purchase and retire common stock.  62 Table of Contents 2019 Cash Flows  As of December 31, 2019, our cash and cash equivalents were $8,304, representing a decrease of $5,802 from December 31, 2018. The decrease was attributable to the cash used by operating activities of $15,463, the cash provided by investing activities of $3,734, the cash provided by financing activities of $5,936, and the decrease in cash resulting from a change in exchange rates of $9. The cash used by operating activities of $15,463 was comprised of (a) net cash outflows of $32,007 related to working capital fluctuations; (b) net cash inflows of $19,458 from trading activities comprised of our investments-trading, trading securities sold, not yet purchased, securities sold under agreement to repurchase, receivables under resale agreements, and receivables and payables from brokers, dealers, and clearing agencies, as well as the changes in unrealized gains and losses on the investments-trading and trading securities sold, not yet purchased; and (c) net cash outflows from other earnings items of $2,914 (which represents net income or loss adjusted for the following non-cash operating items: deferred taxes, other income / (expense), realized and unrealized gains and losses on other investments, income / (loss) from equity method affiliates, equity-based compensation, depreciation, and amortization). The cash provided by investing activities of $3,734 was comprised of (a) $10,114 of sales and returns of principal from other investments, at fair value, partially offset by (b) $4,352 of cash used to invest in an equity method affiliate (see note 12 to our consolidated financial statements included in this Annual Report on Form 10-K), (c) $101 of cash used to purchase furniture, fixtures, and equipment, and (d) $1,927 of cash used to purchase other investments, at fair value. The cash provided by financing activities of $5,936 was comprised of (a) $1,268 of proceeds from redeemable financing instrument (see note 19 to our consolidated financial statements included in this Annual Report on Form 10-K); (b) $4,777 in proceeds from net draws on the LegacyTexas Credit Facility (see note 20 to our consolidated financial statements included in this Annual Report on Form 10-K); (c) $2,550 in proceeds from the issuance of non-controlling interests; partially offset by (d) $1,500 of cash used for the partial redemption of a redeemable financial instrument (see note 19 to our consolidated financial statements included in this Annual Report on Form 10-K); (e) $128 of cash used to net settle equity awards; (f) $299 of cash used to purchase and retire Common Stock; (g) $213 of cash used for distributions to the non-controlling interests of the Operating LLC; and (h) $519 of cash used to pay Common Stock dividends. 2018 Cash Flows As of December 31, 2018, our cash and cash equivalents were $14,106, representing a decrease of $8,827 from December 31, 2017. The decrease was attributable to the cash used by operating activities of $6,999, the cash provided by investing activities of $2,156, the cash used in financing activities of $3,722, and the decrease in cash resulting from a change in exchange rates of $262. The cash used by operating activities of $6,999 was comprised of (a) net cash outflows of $2,896 related to working capital fluctuations; (b) net cash inflows of $2,219 from trading activities comprised of our investments-trading, trading securities sold, not yet purchased, securities sold under agreement to repurchase, receivables from resale agreements, and receivables and payables from brokers, dealers, and clearing agencies, as well as the changes in unrealized gains and losses on the investments-trading and trading securities sold, not yet purchased; and (c) net cash outflows from other earnings items of $6,322 (which represents net income or loss adjusted for the following non-cash operating items: deferred taxes, other income / (expense), realized and unrealized gains and losses on other investments, equity-based compensation, depreciation, and amortization). The cash provided by investing activities of $2,156 was comprised of (a) $30,023 of sales and returns of principal from other investments, at fair value, partially offset by (b) $1,002 of cash used to purchase furniture, fixtures, and equipment, and (c) $26,865 of cash used to purchase other investments, at fair value. The cash used in financing activities of $3,722 was comprised of (a) $1,461 of cash used to repay a portion of the 2013 Convertible Notes (see note 20 to our consolidated financial statements in this Annual Report on Form 10-K); (b) $525 of payment of debt issuance costs; (c) $75 of cash used to net settle equity awards; (d) $769 of cash used to repurchase and retire Common Stock; (e) $426 of distributions to the non-controlling interests of the Operating LLC; (f) $966 of dividends to our stockholders. partially offset by (g) $500 of cash proceeds from redeemable financial instruments (see note 19 to our consolidated financial statements in this Annual Report on Form 10-K).  Note Regarding Collateral Deposits and Impact on Operating Cash Flow As part of our matched book repo operations, we enter into reverse repos with counterparties whereby we lend money and receive securities as collateral. In accordance with ASC 860, the collateral securities are not recorded in our consolidated balance sheets. However, from time to time we will hold cash instead of securities as collateral for these transactions. When we are provided cash as collateral for reverse repo transactions, we will make an entry to increase our cash and cash equivalents and to increase our other liabilities for the amount of cash received. There are two main reasons we may receive collateral in the form of cash as opposed to securities. First, when the value of the collateral securities we have in our possession decline, we will require the counterparty to provide us with additional collateral. We will accept either cash or additional liquid securities. Often, our counterparties will provide us with cash as they may not have liquid securities readily available. Second, from time to time, our counterparties require a portion of the collateral securities in our possession returned to them for operating purposes. In such instances, the counterparty may not have substitute liquid securities available and will often provide us with cash as collateral instead. It is important to note that when we receive cash as collateral, it is temporary in nature and we have an obligation to return that cash when the counterparty provides substitute liquid securities as collateral or otherwise satisfies their associated reverse repo obligation. We are generally required to return any cash collateral the same business day that we receive substitute securities. The amount of cash we receive as collateral for our repo operations is volatile and therefore, both our cash and cash equivalents balance and our cash provided by and used in operations are volatile as they are both impacted. These amounts can be large and should be taken into account when analyzing our cash flow from operations. The following table shows the impact of changes in these collateral deposits had on our cash flows in each period presented: Year Ended December 31, 2020 2019 2018 Collateral deposit end of period $ 41,119 $ 9,524 $ 4,277 Less: Collateral deposit beginning of period 9,524 4,277 1,219 Impact to cash flow from operations $ 31,595 $ 5,247 $ 3,058 63 Table of Contents Regulatory Capital Requirements  We have two subsidiaries that are licensed securities dealers: JVB in the U.S. and CCFEL in Ireland. As a U.S. broker-dealer, JVB is subject to the Uniform Net Capital Rule in Rule 15c3-1 under the Exchange Act. Our Ireland-based subsidiary, CCFEL, is subject to the regulatory supervision and requirements of the CBI. The amount of net assets that these subsidiaries may distribute is subject to restrictions under these applicable net capital rules. These subsidiaries have historically operated in excess of minimum net capital requirements. Our minimum capital requirements at December 31, 2020 were as follows.  MINIMUM NET CAPITAL REQUIREMENTS (Dollars in Thousands) U.S. $ 250 Europe 707 Total $ 957  We operate with more than the minimum regulatory capital requirement in our licensed broker-dealers and at December 31, 2020 total net capital, or the equivalent as defined by the relevant statutory regulations, in our licensed broker-dealers totaled $ 68,826 . See note 25 to our consolidated financial statements included in this Annual Report on Form 10-K. In addition, our licensed broker-dealers are generally subject to capital withdrawal notification and restrictions. Restrictions of Distributions of Capital from JVB As of December 31, 2020, our total equity on a consolidated basis was $101,437. However, the total equity of JVB was $105,785. Therefore, all of our other subsidiaries and Cohen & Company Inc. on a stand-alone basis have an equity deficit of $4,348. During certain periods of time, we have generated losses or negative cash flow outside of JVB. We are dependent on taking distributions of income (and potentially returns of capital) from JVB to satisfy the cash needs as a result of the losses incurred outside of JVB or to satisfy other obligations that come due outside of JVB. However, we are subject to significant limitations on our ability to make distributions from JVB. These limitations include limitations imposed by FINRA under rule 15c3-1 (described immediately above) and limitations under our line of credit with Byline Bank (see note 20 to our consolidated financial statements included in this Annual Report on Form 10-K). Furthermore, counterparties to JVB have their own internal counterparty credit requirements. The specific requirements are not generally shared with us. However, if we take too much in capital distributions from JVB (beyond its net income), we may not be able to trade with certain counterparties which may cause JVB’s operations to deteriorate.  Securities Financing  We maintain repurchase agreements with various third-party financial institutions. There is no maximum limit as to the amount of securities that may be transferred pursuant to these agreements, and transactions are approved on a case-by-case basis. The repurchase agreements do not include substantive provisions other than those covenants and other customary provisions contained in standard master repurchase agreements. The repurchase agreements generally require us to transfer additional securities to the counterparty in the event the value of the securities then held by the counterparty in the margin account falls below specified levels and contain events of default were we to breach our obligations under the agreement. We receive margin calls from our repurchase agreement counterparties from time to time in the ordinary course of business. To date, we have maintained sufficient liquidity to meet margin calls, and we have never been unable to satisfy a margin call, however, no assurance can be given that we will be able to satisfy requests from our counterparties to post additional collateral in the future. See note 11 to our consolidated financial statements included in this Annual Report on Form 10-K.  If there were an event of default under a repurchase agreement, the counterparty would have the option to terminate all repurchase transactions existing with us and make any amount due from us to the counterparty payable immediately. Repurchase obligations are full recourse obligations to us. If we were to default under a repurchase obligation, the counterparty would have recourse to our other assets if the collateral was not sufficient to satisfy our obligations in full. Most of our repurchase agreements are entered into as part of our matched book repo business.  Our clearing brokers provide securities financing arrangements including margin arrangements and securities borrowing and lending arrangements. These arrangements generally require us to transfer additional securities or cash to the clearing broker in the event the value of the securities then held by the clearing broker in the margin account falls below specified levels and contain events of default were we to breach our obligations under such agreements.  An event of default under the clearing agreement would give the counterparty the option to terminate the clearing arrangement. Any amounts owed to the clearing broker would be immediately due and payable. These obligations are recourse to us. Furthermore, a termination of any of our clearing arrangements would result in a significant disruption to our business and would have a significant negative impact on our dealings and relationship with our customers.  64 Table of Contents The following table presents our period end balance, average monthly balance, and maximum balance at any month end for receivables under resale agreements and securities sold under agreements to repurchase. For the Twelve Months Ended December 31, 2020 For the Twelve Months Ended December 31, 2019 Receivables under resale agreements Period end $ 5,716,343 $ 7,500,002 Monthly average $ 6,461,534 6,458,757 Maximum month end $ 8,945,403 7,500,002 Securities sold under agreements to repurchase Period end $ 5,713,212 $ 7,534,443 Monthly average $ 6,486,137 6,501,691 Maximum month end $ 8,960,197 7,534,443  Fluctuations in the balance of our repurchase agreements from period to period and intraperiod are dependent on business activity in those periods. The fluctuations in the balances of our receivables under resale agreements over the periods presented were impacted by our clients’ desires to execute collateralized financing arrangements through the repurchase market or other financing products. Average balances and period end balances will fluctuate based on market and liquidity conditions and we consider such intraperiod fluctuations as typical for the repurchase market. Month-end balances may be higher or lower than average period balances.  Debt Financing  The following table summarizes our long-term indebtedness and other financing outstanding. See note 20 to our consolidated financial statements in our Annual Report on Form 10-K for more information. DETAIL OF DEBT (Dollars in Thousands) As of December 31, Description 2020 2019 Interest Rate Terms Interest (4) Maturity Non-convertible debt: 12.00% senior notes (the "2020 Senior Notes") $ 4,500 $ - Fixed 12.00 % January 2022 12.00% senior notes (the "2019 Senior Notes") 2,400 6,786 Fixed 12.00 % September 2021 (1) PPP Loan 2,166 - Fixed 1.00 % May 2022 Contingent convertible debt: 8.00% convertible senior note (the "2017 Convertible Note") 15,000 15,000 Fixed 8.00 % March 2022 (2) Less unamortized debt issuance costs (401 ) (703 ) 14,599 14,297 Junior subordinated notes (3): Alesco Capital Trust I 28,125 28,125 Variable 4.21 % July 2037 Sunset Financial Statutory Trust I 20,000 20,000 Variable 4.37 % March 2035 Less unamortized discount (24,690 ) (25,124 ) 23,435 23,001 ByLine Bank - - Variable N/A October 2021 FT Financial Bank, N.A. Credit Facility - - Variable N/A N/A LegacyTexas Credit Facility - 4,777 Variable N/A N/A Total $ 47,100 $ 48,861 (1) On September 25, 2019, we amended and restated the previously outstanding 2013 Convertible Notes, which were scheduled to mature September 25, 2019. The material terms and conditions of the 2013 Convertible Notes remained substantially the same, except that (i) the maturity date thereof changed from September 25, 2019 to September 25, 2020; (ii) the conversion feature in the 2013 Convertible Notes was removed; (iii) the interest rate thereunder changed from 8% per annum (9% in the event of certain events of default) to 12% per annum (13% in the event of certain events of default); and (iv) the restrictions regarding prepayment were removed. The post-amendment notes are referred to 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 to September 25, 2021. 65 Table of Contents (2) The holder of the 2017 Convertible Note may convert all or any part of the outstanding principal amount at any time prior to maturity into units of the Operating LLC at a conversion price of $1.45 per unit, subject to customary anti-dilution adjustments. Units of the membership interests of Operating LLC not held by Cohen & Company Inc. may, with certain restrictions, be redeemed and exchanged into shares of Common Stock on a ten-for-one basis. Therefore, the 2017 Convertible Note can be converted into Operating LLC units of membership interests and then redeemed and exchanged into Common Stock at an effective conversion price of $14.50. (3) The junior subordinated notes listed represent debt the Company owes to the two trusts noted above. The total par amount owed by the Company to the trusts is $49,614. However, the Company owns the common stock of the trusts in a total par amount of $1,489. The Company pays interest (and at maturity, principal) to the trusts on the entire $49,614 junior notes outstanding. However, the Company receives back from the trusts the pro rata share of interest and principal on the common stock held by the Company. These trusts are variable interest entities (“VIEs”) and the Company does not consolidate them even though the Company holds the common stock. The Company carries the common stock on its balance sheet at a value of $0. The junior subordinated notes are recorded at a discount to par. When factoring in the discount, the yield to maturity of the junior subordinated notes as of December 31, 2020 on a combined basis is 11.58% assuming the variable rate in effect on the last day of the reporting period remains in effect until maturity. (4) Represents the interest rate in effect as of the last day of the reporting period. Redeemable Financial Instruments  As of December 31, 2020 , we have the following sources of financing, which we account for as redeemable financial instruments. See note 19 to our consolidated financial statements included in this Annual Report on Form 10-K. Subsequent to December 31, 2020, we have notice to CBF that we intent to redeem the remining $4,000 outstanding on or around March 31, 2021.  REDEEMABLE FINANCIAL INSTRUMENTS (Dollars in thousands) As of December 31, 2020 2019 JKD Investor $ 7,957 $ 7,957 DGC Trust / CBF 4,000 8,500 ViaNova Capital Group, LLC - 526 $ 11,957 $ 16,983 Off-Balance Sheet Arrangements  Other than as described in note 10 (derivative financial instruments) and note 18 (variable interest entities) to our consolidated financial statements included in this Annual Report on Form 10-K, there were no material off balance sheet arrangements as of December 31, 2020 .  66 Table of Contents Contractual Obligations  The table below summarizes our significant contractual obligations as of December 31, 2020 and the future periods in which such obligations are expected to be settled in cash. Our junior subordinated notes are assumed to be repaid on their respective maturity dates. Also, we have assumed that the 2017 Convertible Note is not converted prior to maturity. Excluded from the table are obligations that are short-term in nature, including trading liabilities and repurchase agreements. In addition, amortization of discount on debt is excluded.  CONTRACTUAL OBLIGATIONS December 31, 2020 (Dollars in Thousands) Payment Due by Period Total Less than 1 Year 1 - 3 Years 3 - 5 Years More than 5 Years Operating lease arrangements $ 8,826 $ 1,398 $ 2,279 $ 2,037 $ 3,112 Maturity of 2020 Senior Notes 4,500 - 4,500 - - Interest on 2020 Senior Notes 586 540 46 - - Maturity of 2019 Senior Note 2,400 2,400 - - - Interest on 2019 Senior Note 211 211 - - - Maturity of 2017 Convertible Note (1) 15,000 - 15,000 - - Interest on 2017 Convertible Note (1) 1,427 1,200 227 - - Maturities on junior subordinated notes 48,125 - - - 48,125 Interest on junior subordinated notes (2) 32,319 2,060 4,120 6,180 19,959 Redeemable Financial Instrument - JKD Capital Partners 1 (3) 7,957 7,957 - - - Redeemable Financial Instrument - CBF (3) 4,000 4,000 - - - Other Operating Obligations (4) 2,933 1,713 1,172 48 - $128,284 $21,479 $27,344 $8,265 $71,196  (1) Assumes the 2017 Convertible Note is not converted prior to maturity. The holder of the Convertible Note has control over whether or not the convertible note is paid off in cash or converted into equity. If it is converted into equity, no cash outflow will be required. (2) The interest on the junior subordinated notes related to Alesco Capital Trust I is variable. The interest rate of 4.21% (based on a 90-day LIBOR rate in effect as of December 31, 2020 plus 4.00%) was used to compute the contractual interest payment in each period noted. The interest on the junior subordinated notes related to Sunset Financial Statutory Trust I is variable. The interest rate of 4.37% (based on a 90-day LIBOR rate in effect as of December 31, 2020 plus 4.15%) was used to compute the contractual interest payment in each period noted. (3) Represents redemption value of the redeemable financial instruments as of the reporting period. The redeemable financial instruments do not have a fixed maturity date. The period shown above represents the first period the holder of these instruments has the ability to require redemption by us. (4) Represents material operating contracts for various services.  We believe that we will be able to continue to fund our current operations and meet our contractual obligations through a combination of existing cash resources and other sources of credit. Due to the uncertainties that exist in the economy, we cannot be certain that we will be able to replace existing financing or find sources of additional financing in the future.  Critical Accounting Policies and Estimates  Our accounting policies are essential to understanding and interpreting the financial results in our consolidated financial statements. Our industry is subject to a number of highly complex accounting rules and requirements many of which place heavy burdens on management to make judgments relating to our business. We encourage readers of this Form 10-K to read all of our critical accounting policies, which are included in note 3 to our consolidated financial statements included herein for a full understanding of these issues and how the financial statements are impacted by these judgments. Certain of these policies are considered to be particularly important to the presentation of our financial results because they require us to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures. We base our assumptions, estimates, and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates, and judgments to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.  67 Table of Contents We consider the accounting policies discussed below to be the policies that are the most impactful to our financial statements and also subject to significant management judgment.  Valuation of Financial Instruments  How fair value determinations impact our financial statements  All of the securities we own that are classified as investments-trading, securities sold, not yet purchased, other investments, at fair value, or other investments sold, not yet purchased are recorded at fair value with changes in fair value (both unrealized and realized) recorded in earnings.  Unrealized and realized gains and losses on securities classified as investments-trading and securities sold, not yet purchased in the consolidated balance sheets are recorded as a component of net trading revenue in the consolidated statements of operations. Unrealized and realized gains and losses on securities classified as other investments, at fair value, and other investments sold, not yet purchased in the consolidated balance sheets are recorded as a component of principal transactions and other income in the consolidated statements of operations.  How we determine fair value for securities  We account for our investment securities at fair value under various accounting literature, including Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 320, Investments — Debt and Equity Securities (“ASC 320”), pertaining to investments in debt and equity securities and the fair value option of financial instruments in ASC 825, Financial Instruments (“ASC 825”). We also account for certain assets at fair value under applicable industry guidance such as: (a) FASB ASC 946 , Financial Services-Investment Companies (“ASC 946”); and (b) FASB ASC 940-320, Proprietary Trading Securities (“ASC 940-320") .  The determination of fair value is based on quoted market prices of an active exchange, independent broker market quotations, market price quotations from third-party pricing services, or, when independent broker quotations or market price quotations from third-party pricing services are unavailable, valuation models prepared by management. These models include estimates and the valuations derived from them could differ materially from amounts realizable in an open market exchange.  We adopted the fair value measurement provisions in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), applicable to financial assets and financial liabilities effective January 1, 2008. ASC 820 defines fair value as the price that would be received to sell the asset or paid to transfer the liability between market participants at the measurement date (“exit price”). An exit price valuation will include margins for risk even if they are not observable. In accordance with ASC 820, we categorize our financial instruments, based on the priority of the inputs to the valuation technique, into a three-level valuation hierarchy. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the hierarchy under 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: (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in non-active markets; (c) pricing models whose inputs are observable for substantially the full term of the asset or liability; or (d) 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. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.  In certain cases, the inputs used to measure fair value may fall into different levels of the valuation hierarchy. In such cases, the level of the valuation hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.  68 Table of Contents Financial instruments carried at contract amounts with short-term maturities (one year or less) are repriced frequently or bear market interest rates. Accordingly, those contracts are carried at amounts approximating fair value. Financial instruments carried at contract amounts on our consolidated balance sheets include receivables from and payables to brokers, securities purchased under agreements to resell (“reverse repurchase agreements” or “receivables under resale agreements”), and sales of securities under agreements to repurchase (“repurchase agreements”).  How we determine fair value for investments in investment funds and similar vehicles  A portion of our other investments, at fair value represents investments in investment funds and other non-publicly traded entities that have the attributes of investment companies as described in ASC 946-15-2. We estimate the fair value of these entities using the reported net asset value per share as of the reporting date in accordance with the “practical expedient” provisions related to investments in certain entities that calculated net asset value per share (or its equivalent) included in ASC 820.  Derivative Financial Instruments  We do not utilize hedge accounting for our derivatives. Accordingly, all derivatives are carried at fair value with unrealized and realized gains recognized in earnings.  If the derivative is expected to be managed by employees of our Capital Markets business segment or is a hedge for an investment classified as investments-trading, the derivative will be carried as a component of investments-trading if it is an asset or securities sold, not yet purchased if a liability. If the derivative is a hedge for an investment carried as a component of other investments, at fair value, the derivative will be recorded in other investments, at fair value if it is an asset or other investments sold, not yet purchase if it is a liability.  We may, from time to time, enter into derivatives to manage our risk exposures arising from (i) fluctuations in foreign currency rates with respect to our investments in foreign currency denominated investments; (ii) our investments in interest sensitive investments; (iii) our investments in various equity instruments; and (iv) our facilitation of mortgage-backed trading. Derivatives entered into by us, from time to time, may include (i) foreign currency forward contracts; (ii) purchase and sale agreements of TBAs and other forward agency MBS contracts; (iii) other extended settlement trades; and (iv) equity options such as calls and puts.  TBAs are forward contracts to purchase or sell mortgage-backed securities whose collateral remain “to be announced” until just prior to the trade settlement. In addition to TBAs, we sometimes enter into forward purchases or sales of agency mortgage-backed securities where the underlying collateral has been identified. These transactions are referred to as other forward agency MBS contracts. We account for TBAs and other forward agency MBS contracts as derivatives.  In addition to TBAs and other forward agency MBS contracts as part of our broker-dealer operations, we may from time to time enter into other securities or loan trades that do not settle within the normal securities settlement period. In those cases, the purchase or sale of the security or loan is not recorded until the settlement date. However, from the trade date until the settlement date, our interest in the security is accounted for as a derivative as either a forward purchase commitment or forward sale commitment.  Derivatives involve varying degrees of off-balance sheet risk, whereby changes in the level or volatility of interest rates or market values of the underlying financial instruments may result in changes in the value of a particular financial instrument in excess of its carrying amount. Depending on our investment strategy, realized and unrealized gains and losses are recognized in principal transactions and other income or in net trading in our consolidated statements of operations on a trade date basis.  Accounting for Income Taxes  We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.  We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such a determination, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial operations. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.  Our policy is to record penalties and interest as a component of provision for income taxes in our consolidated statements of operations. 69 Table of Contents Our voting-controlled subsidiary, the Operating LLC, is treated as a pass-through entity for U.S. federal income tax purposes and in most of the states in which we do business. The Operating LLC is subject to entity level taxes in certain state and foreign jurisdictions. However, as a result of the AFN Merger, we acquired significant deferred tax assets and liabilities and now have significant tax attributes. Effective as of January 1, 2010, we began to be treated as a C corporation for U.S. federal and state income tax purposes.  As shown in note 23 to the consolidated financial statements contained herein, we currently have significant recognized as well as unrecognized deferred tax assets. Deferred tax assets should only be recognized to the extent that we determine we can benefit in the future from the asset. Generally, this determination is based on our estimates of our ability to generate future taxable income. This determination is complex and subject to judgment. The determination is ongoing and subject to change. If we were to change this determination in the future, a significant deferred tax benefit or deferred tax expense would be recognized as a component of earnings.  Revenue Recognition  Net trading  Net trading includes: (i) all gains, losses, interest income, dividend income, and interest expense from securities classified as investments-trading and trading securities sold, not yet purchased; (ii) interest income and expense from collateralized securities transactions; and (iii) commissions and riskless trading profits. Net trading is reduced by margin interest, which is recorded on an accrual basis. We refer to investments included as a component of investments - trading and trading securities sold, not yet purchased as trading assets.  Riskless trades are transacted through our proprietary account with a customer order in hand, resulting in little or no market risk to us. Transactions that settle in the regular way are recognized on a trade date basis. Extended settlement transactions are recognized on a settlement date basis (although in cases of extended settlement trades, the unsettled trade is accounted for as a derivative between trade and settlement date). See notes 3 and 10 to our consolidated financial statements included in this Annual Report on Form 10-K. The investments classified as trading are carried at fair value. The determination of fair value is based on quoted market prices of an active exchange, independent broker market quotations, market price quotations from third-party pricing services or, when independent broker quotations or market price quotations from third-party pricing services are unavailable, valuation models prepared by our management. The models include estimates, and the valuations derived from them could differ materially from amounts realizable in an open market exchange. See note 9 to our consolidated financial statements included in this Annual Report on Form 10-K.  Asset management  Asset management revenue consists of management fees earned from Investment Vehicles. In the case of CDOs, the fees earned by us generally consist of senior, subordinated, and incentive fees.  The senior asset management fee is generally senior to all the securities in the CDO capital structure and is recognized on a monthly basis as services are performed. The senior asset management fee is generally paid on a quarterly basis.  The subordinated asset management fee is an additional payment for the same services but has a lower priority in the CDO cash flows. If the CDO experiences a certain level of asset defaults and deferrals, these fees may not be paid. There is no recovery by the CDO of previously paid subordinated asset management fees. It is our policy to recognize these fees on a monthly basis as services are performed. The subordinated asset management fee is generally paid on a quarterly basis. However, if we determine that the subordinated asset management fee will not be paid (which generally occurs on the quarterly payment date), we will stop recognizing additional subordinated asset management fees on that particular CDO and will reverse any subordinated asset management fees that are accrued and unpaid. We will begin accruing the subordinated asset management fee again if payment resumes and, in management’s estimate, continued payment is reasonably assured. If payment were to resume but we were unsure of continued payment, we would recognize the subordinated asset management fee as payments were received and would not accrue such fees on a monthly basis.  The incentive management fee is an additional payment, made typically after five to seven years of the life of a CDO, which is based on the clearance of an accumulated cash return on investment (“Hurdle Return”) received by the most junior CDO securities holders. It is an incentive for us to perform in our role as asset manager by minimizing defaults and maximizing recoveries. The incentive management fee is not ultimately determined or payable until the achievement of the Hurdle Return by the most junior CDO securities holders. We recognize incentive fee revenue when it is probable and there is not a significant chance of reversal in the future.  In the case of Investment Vehicles other than CDOs, generally we earn a base fee and, in some cases, also earns an incentive fee. Base fees will generally be recognized monthly as services are performed and will be paid monthly or quarterly. The contractual terms of each arrangement will determine our revenue recognition policy for incentive fees in each case. However, in all cases, we recognize the incentive fees when they are probable and there is not a significant chance of reversal in the future.  70 Table of Contents New issue and advisory  New issue and advisory revenue include: (i) new issue revenue associated with originating, arranging, or placing newly created financial instruments and (ii) revenue from advisory services. New issue and advisory revenue is recognized when all services have been provided and payment is earned.  Principal transactions and other income  Principal transactions include all gains, losses, and income (interest and dividend) from financial instruments classified as other investments, at fair value and other investments sold, not yet purchased in the consolidated balance sheets. We refer to investments included as a component of other investments, at fair value and other investments sold, not yet purchased as our principal investing assets.  The investments classified as other investments, at fair value and other investments sold, not yet purchased are carried at fair value. The determination of fair value is based on quoted market prices of an active exchange, independent broker market quotations, market price quotations or models from third-party pricing services, or, when independent broker quotations or market price quotations or models from third-party pricing services are unavailable, valuation models prepared by management. These models include estimates, and the valuations derived from them could differ materially from amounts realizable in an open market exchange. Dividend income is recognized on the ex-dividend date.  Other income / (loss) includes foreign currency gains and losses, interest earned on cash and cash equivalents, interest earned and losses incurred on notes receivable, and other miscellaneous income including revenue from revenue sharing arrangements.  Variable Interest Entities  FASB ASC 810, Consolidation (“ASC 810”) contains the guidance surrounding the definition of VIEs, the definition of variable interests, and the consolidation rules surrounding VIEs. In general, VIEs are entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. As a general matter, a reporting entity must consolidate a VIE when it is deemed to be the primary beneficiary. The primary beneficiary is the entity that has both (a) the power to direct the matters that most significantly impact the VIE’s financial performance and (b) a significant variable interest in the VIE.  We can potentially become involved with a VIE in three main ways:  Our Principal Investing Portfolio  For each investment made within the principal investing portfolio, we assess whether the investee is a VIE and if we are the primary beneficiary. If we determine the entity is a VIE and we are the primary beneficiary, we will consolidate it.  Our Asset Management Activities  For each investment management contract, we enter into, we will assess whether the entity being managed is a VIE and if we are the primary beneficiary. If we determine the entity is a VIE and we are the primary beneficiary, we will consolidate it.  Our Trading Portfolio  From time to time, we may have an interest in a VIE through the investments we make as part of our trading activities. Because of the high volume of trading activity in which we engage, we do not perform a formal assessment of each individual investment within our trading portfolio to determine if the investee is a VIE and if we are the primary beneficiary. Even if we were to obtain a variable interest in a VIE through our trading portfolio, we would not be deemed to be the primary beneficiary for two main reasons: (a) we do not usually obtain the power to direct activities that most significantly impact any investee’s financial performance and (b) a scope exception exists within the consolidation guidance for cases where the reporting entity is a broker-dealer and any control (either as the primary beneficiary of a VIE or through a controlling interest in a voting interest entity) was deemed to be temporary. In the unlikely case that we obtained the power to direct activities and obtained a significant variable interest in an investee in our trading portfolio that was a VIE, any such control would be deemed to be temporary due to the rapid turnover within the trading portfolio. Stock Compensation We account for stock compensation according to FASB ASC 718, Stock Compensation (“ASC 718”). In the periods presented herein, we have had three different types of grants that fall under ASC 718. First, we sometimes grant to employees and directors restricted common stock in Cohen & Company Inc. These grants vest over a period of time and only have service based vesting criteria. In these cases, we determine the fair value of the grants by taking the closing stock price of Cohen & Company Inc. on the grant date and multiplying it by the number of restricted shares granted. The recipient is entitled to dividends during the vesting period but they are paid only if (and to the extent) the restricted share grant ultimately vests. We recognize the expense over the service period on a straight-line basis. We assume no forfeitures up front and record forfeitures as they occur by reducing expense. Second, we sometimes grant to employees operating units of the Operating LLC. These grants also vest over a period of time and only have service based vesting criteria. Because there is a fixed exchange ratio between units of the Operating LLC and shares of Cohen & Company Inc., the fair value of the grant is calculated by taking the closing stock price of Cohen & Company Inc. on the grant date, adjusting for the exchange ratio, and then multiplying by the number of units of the Operating LLC granted. The recipient is entitled to distributions during the vesting period but they are paid only if (and to the extent) the unit grant ultimately vests. We recognize the expense over the service period on a straight-line basis. We assume no forfeitures up front and record forfeitures as they occur by reducing expense. 71 Third, employees sometimes invest in the membership interests of consolidated SPAC sponsor entities (the Insurance SPAC Sponsor Entities, the Insurance SPAC II Sponsor Entities, and the Insurance SPAC III Sponsor Entities). Because these entities are consolidated and the employees are investing in the consolidated company's non-controlling interest, these equity interests fall under ASC 718. Generally, the employee invests a de-minimus amount and receives an allocation of the founders shares held by the sponsor entity. The investment does not have any explicit vesting criteria associated with it. Generally, the employee's investment will be worthless if the SPAC is liquidated and it will become worth something if the SPAC completes its business combination. Therefore, we treat these grants as having a performance condition (i.e. the completion of the SPAC business combination). Further, at the time of the investments, we treat this performance condition as being non-probable. The effect of this is that we record no expense related to these investments until (and only if) the business combination is completed. Upon completion of the business combination, we record compensation expense in an amount equal to the fair value of the grant. The fair value of the grant is equal to the public trading price of the SPAC on the date of the grant adjusted for certain sale restrictions imposed on the shares the employee receives (generally, they are restricted for sale for some time period and subject to certain hurdle prices before they become freely tradeable). We use a Monte Carlo simulation model to determine the appropriate discount to place on shares that are subject to hurdle prices. The compensation amount is recorded with an offsetting credit to non-controlling interest. From that point forward, the shares received by the employee are treated as part of the non-controlling interest and allocated income, expense, gains, and losses accordingly until the applicable sponsor entity is liquidated or otherwise de-consolidated. Investments in Special Purpose Acquisition Companies ("SPACs") Sponsor Entities We invest in the sponsor entities of SPACs. The sponsor entities are limited liability companies (each an "LLC") that pool their members' interests and invest in the private placement and founders shares (together, sponsor shares) of a SPAC. The SPAC will also raise funds in a public offering and seek to complete a business combination within an agreed upon time frame. The SPAC will use the proceeds raised from the sponsor shares to pay transaction and operating expenses during the period it is seeking a business combination. The proceeds of the public offering are placed in an interest bearing trust and can only be used to complete the business combination and pay taxes on the interest earned. Generally, the public investors must approve any business combination prior to its effectiveness. If a business combination is not completed within the agreed upon time frame, the SPAC will liquidate and return the public investors' investment to them. If there are funds remaining after liquidation, the sponsor entities may receive some portion of their investment back, but likely they will suffer a total loss of their investment. If the business combination is completed, the sponsor entities private placement in the SPAC will entitle them to a combination of unrestricted common, restricted common, and (in some cases) warrants of the post-business combination SPAC (which is a publicly traded company). The following summarizes our accounting policies related to our investments in these entities: • The sponsor entities are LLCs that give all important decision making rights to their respective managing member. Furthermore, the other members of the LLC can not replace the managing member. Accordingly, we have concluded that the sponsor entities are VIEs and the managing member has the power to direct its most important economic activities. In all cases where we are the managing member of a sponsor entity, we also have had a significant economic interest in such sponsor entity and therefore consolidate such sponsor entity. • In all cases where we have consolidated a sponsor entity, we have determined that the sponsor entity's private placement investment in the SPAC which it sponsors should be treated as an equity method investment during the SPAC's pre-business combination period. Furthermore, because of the difficulty of determining the fair value of such an investment in the SPAC's pre-business combination period, we have chosen to not elect fair value option. • If a SPAC completes its business combination, the sponsor entity's investment in the SPAC will be converted to a combination of unrestricted and restricted shares in the post-business combination SPAC. At this point (assuming we consolidate the sponsor entity), we will account for the shares received at fair value. We will reclassify any remaining equity method investment balance to other investments, at fair value and record principal transactions income for the difference. We will record non-controlling interest expense for the SPAC shares that are distributable to the non-controlling interest holders of the sponsor entity. The fair value of the unrestricted shares received is equal to the public trading price of the SPAC on the date of the business combination. The fair value of the restricted shares received is adjusted downwards from the public trading price for certain sale restrictions imposed (generally, they are restricted for sale for some time period and subject to certain hurdle prices before they become freely tradeable). We use a Monte Carlo simulation model to determine the appropriate discount to place on shares that are subject to hurdle prices. In the case of a SPAC business combination where we consolidate the sponsor entity, generally there is also an equity-based compensation entry to be recorded at the date of the business combination. See equity-based compensation section above. We will continue to mark the sponsor entity's investment in the SPAC to market and record principal transactions income or loss and offsetting non-controlling interest income or expense until the sponsor entity itself distributes all of the SPAC shares it owns to its members and liquidates. At that point, we will hold the SPAC shares directly (rather than through a consolidated subsidiary) and will record principal transaction income and loss until the SPAC shares themselves are liquidated. • We will also invest in sponsor entities that we do not consolidate because we are not the managing member of such sponsor entity or otherwise do not otherwise have the power to direct the sponsor entity's most important activities. In these cases, we treat our investment in the sponsor entity as an equity method investment. Furthermore, because of the difficulty of determining the fair value of such an investment in the applicable SPAC's pre-business combination period, we have chosen to not elect fair value option. • If a SPAC completes a business combination and we have an equity method investment in the associated sponsor entity, the sponsor entity will record income equal to the difference between the fair value of the restricted and unrestricted shares we receive and the carrying value of its equity method investment in the SPAC. We will recognize our share of this gain as income from equity method affiliates. The sponsor entity will continue to mark its investment in the SPAC to market after the business combination and we will recognize our share of the change in fair value as income or loss from equity method affiliates. Once the sponsor entity distributes our share of the SPAC shares we owns, we will reclassify our investment from investment in equity method affiliate to other investments, at fair value as we will hold the SPAC shares directly (rather than through an equity method investee). We will then record principal transactions income and loss until the SPAC shares themselves are liquidated. • If a SPAC liquidates and we have an investment in it (either directly in the case of consolidated sponsor entities or indirectly in the case of equity method sponsor entities), we will write off our remaining equity method balance and record loss on equity method investment. In the case of consolidated sponsor entities we will also record an offsetting entry to non-controlling interest.   72 Table of Contents Recent Accounting Pronouncements  The following is a list of recent accounting pronouncements that, we believe, will have a continuing impact on our financial statements going forward. For a more complete list of recent pronouncements, see note 3 to our consolidated financial statements included in this Annual Report on Form 10-K. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU is intended to simplify accounting for income taxes. It removes specific exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. This ASU is effective for fiscal years beginning after December 15, 2020 and interim period with those fiscal years. We are currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements. In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 . This ASU clarifies certain accounting certain topics impacted by Topic 321 Investments-Equity Securities. These topics include measuring equity securities using the measurement alternative, how the measurement alternative should be applied to equity method accounting, and certain forward contracts and purchased options which would be accounted for under the equity method of accounting upon settlement or exercise. This ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We are currently evaluating the new guidance to determine the impact it may have on our 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. We are currently evaluating the new guidance to determine the impact it may have on our consolidated financial statements. In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs. The ASU clarifies that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for cash reporting period. This ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within fiscal years beginning after December 15, 2022. We are currently evaluating the new guidance to determine the impact it may have on our consolidated financial statements.  In October 2020, the FASB issued 2020-10 Codification Improvements. The ASU affects a wide variety of Topics in the Codification. The ASU, among other things, contains amendments that improve consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section. Many of the amendments arose because the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section of the Codification. The option to disclose information in the notes to financial statements should have been codified in the Disclosure Section as well as the Other Presentation Matters Section (or other Section of the Codification in which the option to disclose in the notes to financial statements appears). The amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. We are currently evaluating the new guidance to determine the impact it may have on our consolidated financial statements.  73 Table of Contents