OPPENHEIMER HOLDINGS INC 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Management's Report on Internal Control over Financial Reporting 57 Report of Independent Registered Public Accounting Firm (PCAOB ID: 34 ) 58 Report of Independent Registered Public Accounting Firm 59 Consolidated Balance Sheets as of December 31, 2023 and 2022 61 Consolidated Income Statements for the three years ended December 31, 2023, 2022 and 2021 62 Consolidated Statements of Comprehensive Income for the three years ended December 31, 2023, 2022 and 2021 63 Consolidated Statements of Changes in Stockholders’ Equity for the three years ended December 31, 2023, 2022 and 2021 64 Consolidated Statements of Cash Flows for the three years ended December 31, 2023, 2022 and 2021 65 Notes to Consolidated Financial Statements 66 57 Table of Contents MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management of Oppenheimer Holdings Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is a process designed under the supervision of the Company's principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. As of December 31, 2023, management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on this assessment, management has concluded that the Company's internal control over financial reporting as of December 31, 2023 was effective. The Company's internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets and provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the Company's financial statements. The Company's internal control over financial reporting as of December 31, 2023 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report included herein, which expresses an unqualified opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2023. 58 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Oppenheimer Holdings Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Oppenheimer Holdings Inc. and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated March 1, 2024, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP New York, New York March 1, 2024 59 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Oppenheimer Holdings Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Oppenheimer Holdings Inc. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated income statements, statements of comprehensive income, statements of changes in stockholders’ equity and redeemable noncontrolling interests, and statements of cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Advisory Fees – Earned on Asset-based programs - Refer to Note 6 to the financial statements Critical Audit Matter Description The Company earns advisory fees in connection with advisory and asset management services it provides to various types of funds and investment vehicles through its subsidiaries. Advisory fees earned on asset-based programs are generally based on the customer’s account value at the valuation date per the respective asset management agreements. Fees are calculated based on underlying information, such as asset balances and rates, sourced from multiple internal and external systems. Advisory fees earned on assets held in the Company’s asset-based programs are included as a part of the Company’s total advisory fee revenue. Given the Company's use of multiple systems and databases in recording advisory fees earned on asset-based programs, auditing advisory fees earned on asset-based programs was complex and challenging due to the extent of audit effort required to 60 Table of Contents evaluate the completeness and accuracy of underlying information and required the involvement of information technology (IT) professionals with specialized skills and expertise. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Company’s systems to process advisory fees earned on asset-based programs included the following, among others: • With the assistance of our IT specialists, we identified the significant systems used in the calculation of advisory fees earned on asset-based programs and, using a risk-based approach, tested the relevant general IT controls over each of these systems. Additionally, for the relevant service organizations, we obtained the service auditor's reports and evaluated IT-related controls, related exceptions and complementary user entity controls specified in the reports. • We tested the effectiveness of controls over the Company’s advisory fees earned on asset-based programs, including automated business controls and system interface controls, as well as the controls designed to ensure the accuracy and completeness of advisory fees earned on asset-based programs. • With the assistance of our data specialists, we created data visualizations to evaluate recorded advisory fees earned on asset-based programs and evaluate trends in the transactional revenue data. • For a sample of advisory fees earned on asset-based programs, we performed detail testing by agreeing the amounts recognized to source documents and testing the mathematical accuracy of the recorded advisory fees earned on asset-based programs. • For a sample of accounts within the asset-based programs, we tested the accuracy and completeness of assets under management by obtaining independent pricing support and reconciling total positions to third-party statements. /s/ Deloitte & Touche LLP New York, New York March 1, 2024 We have served as the Company's auditor since 2013. 61 Table of Contents OPPENHEIMER HOLDINGS INC. CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, (Expressed in thousands, except number of shares and per share amounts) 2023 2022 ASSETS Cash and cash equivalents $ 28,835 $ 112,433 Deposits with clearing organizations 78,706 77,691 Restricted cash — 25,534 Receivable from brokers, dealers and clearing organizations 284,696 206,077 Receivable from customers, net of allowance for credit losses of $ 345 ($ 350 in 2022) 1,059,892 1,202,764 Income tax receivable 7,199 — Securities purchased under agreements to resell 5,842 — Securities owned, including amounts pledged of $ 689,381 ($ 175,724 in 2022), at fair value 795,312 498,594 Notes receivable, net 62,640 57,495 Furniture, equipment and leasehold improvements, net of accumulated depreciation of $ 82,732 ($ 97,751 in 2022) 43,874 36,742 Right-of-use lease assets, net of accumulated amortization of $ 99,716 ($ 82,449 in 2022) 140,554 142,630 Intangible assets 34,340 32,100 Goodwill 142,162 137,889 Other assets 190,764 184,443 Total assets $ 2,874,816 $ 2,714,392 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Drafts payable $ 9,002 $ — Payable to brokers, dealers and clearing organizations 361,890 550,006 Payable to customers 369,287 456,475 Securities sold under agreements to repurchase 640,382 161,009 Securities sold but not yet purchased, at fair value 31,676 52,768 Accrued compensation 256,244 239,136 Accounts payable and other liabilities 82,810 102,202 Income tax payable — 4,130 Lease liabilities 183,273 182,570 Senior secured notes, net of debt issuance costs of $ 392 ($ 616 in 2022) 112,658 113,434 Deferred tax liabilities, net of deferred tax assets of $ 45,961 ($ 55,628 in 2022) 38,355 32,241 Total liabilities 2,085,577 1,893,971 Commitments and contingencies (Note 18) Redeemable non-controlling interests — $ 25,466 Stockholders' equity Common Stock ($ 0.001 par value per share): Class A: shares authorized: 50,000,000 ; shares issued and outstanding 10,186,783 and 10,868,556 as of December 31, 2023 and 2022, respectively Class B: shares authorized, issued and outstanding: 99,665 as of December 31, 2023 and 2022 10 11 Additional paid-in capital 31,774 28,628 Retained earnings 756,468 764,178 Accumulated other comprehensive income 914 1,416 Total Oppenheimer Holdings Inc. stockholders' equity 789,166 794,233 Non-controlling interests (Note 2) $ 73 $ 722 Total Stockholders' Equity $ 789,239 $ 794,955 Total Liabilities, Redeemable Non-controlling Interests and Stockholders' Equity $ 2,874,816 $ 2,714,392 The accompanying notes are an integral part of these consolidated financial statements. 62 Table of Contents OPPENHEIMER HOLDINGS INC. CONSOLIDATED INCOME STATEMENTS FOR THE THREE YEARS ENDED DECEMBER 31, (Expressed in thousands, except number of shares and per share amounts) 2023 2022 2021 REVENUE Commissions $ 349,248 $ 370,382 $ 401,607 Advisory fees 415,679 425,615 451,197 Investment banking 117,665 127,529 435,870 Bank deposit sweep income 172,807 104,558 15,557 Interest 104,550 60,713 36,482 Principal transactions, net 65,347 21,031 23,984 Other 23,529 1,113 29,338 Total revenue 1,248,825 1,110,941 1,394,035 EXPENSES Compensation and related expenses 782,396 740,827 886,840 Communications and technology 91,321 85,474 80,520 Occupancy and equipment costs 66,002 59,897 60,069 Clearing and exchange fees 24,928 25,566 22,306 Interest 68,599 23,846 9,855 Other 168,809 129,777 109,804 Total expenses 1,202,055 1,065,387 1,169,394 Pre-tax income 46,770 45,554 224,641 Income tax provision 16,498 13,444 65,677 Net income $ 30,272 $ 32,110 $ 158,964 Net income (loss) attributable to non-controlling interests, net of tax 93 ( 241 ) — Net income attributable to Oppenheimer Holdings Inc. $ 30,179 $ 32,351 $ 158,964 Earnings per share attributable to Oppenheimer Holdings Inc. Basic $ 2.81 $ 2.77 $ 12.57 Diluted 2.59 $ 2.57 $ 11.70 Weighted average shares outstanding Basic 10,736,166 11,666,194 12,642,306 Diluted 11,645,708 12,607,752 13,582,828 Period end shares outstanding 10,286,448 10,968,221 12,546,701 The accompanying notes are an integral part of these consolidated financial statements. 63 Table of Contents OPPENHEIMER HOLDINGS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE YEARS ENDED DECEMBER 31, (Expressed in thousands) 2023 2022 2021 Net income $ 30,272 $ 32,110 $ 158,964 Other comprehensive income (loss), net of tax Currency translation adjustment ( 502 ) ( 2,809 ) 777 Comprehensive income $ 29,770 $ 29,301 $ 159,741 Less net income (loss) attributable to non-controlling interests 93 ( 241 ) — Comprehensive income attributable to Oppenheimer Holdings Inc. $ 29,677 $ 29,542 $ 159,741 The accompanying notes are an integral part of these consolidated financial statements. 64 Table of Contents OPPENHEIMER HOLDINGS INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND REDEEMABLE NON-CONTROLLING INTERESTS FOR THE THREE YEARS ENDED DECEMBER 31, (Expressed in thousands except per share amounts) 2023 2022 2021 (1) Common stock ($ 0.001 par value per share) Balance at beginning of year $ 11 $ 13 $ 12 Issuance of Class A non-voting common stock — — 1 Repurchase of Class A non-voting common stock for cancellation ( 1 ) ( 2 ) — Balance at end of year 10 11 13 Additional paid-in capital Balance at beginning of year 28,628 78,032 80,802 Issuance of Class A non-voting common stock 6,061 2,924 4,846 Repurchase of Class A non-voting common stock for cancellation ( 3,936 ) ( 58,581 ) ( 7,738 ) Share-based expense 13,058 11,555 10,514 Vested employee share plan awards ( 11,892 ) ( 5,081 ) ( 9,739 ) Change in redemption value of redeemable non-controlling interests ( 145 ) ( 221 ) ( 653 ) Balance at end of year 31,774 28,628 78,032 Retained earnings Balance at beginning of year 764,178 740,926 601,406 Repurchase of Class A non-voting common stock for cancellation ( 31,437 ) ( 2,055 ) — Net income (2) 30,179 32,351 158,964 Dividends paid ( 6,452 ) ( 7,044 ) ( 19,444 ) Balance at end of year 756,468 764,178 740,926 Accumulated other comprehensive income Balance at beginning of year 1,416 4,225 3,448 Currency translation adjustment ( 502 ) ( 2,809 ) 777 Balance at end of year 914 1,416 4,225 Total Oppenheimer Holdings Inc. stockholders' equity 789,166 794,233 823,196 Non-controlling interests Balance at beginning of year 722 2,069 11,946 Capital distribution to non-controlling interests ( 198 ) ( 90 ) — Net income (loss) attributable to non-controlling interests 93 ( 241 ) ( 11 ) Change in redemption value of redeemable non-controlling interests ( 544 ) ( 1,016 ) ( 9,866 ) Balance at end of year 73 722 2,069 Total stockholders' equity $ 789,239 $ 794,955 $ 825,265 Redeemable Non-controlling Interests Balance at beginning of year 25,466 127,765 117,246 Redemption of redeemable non-controlling interests ( 26,155 ) ( 103,536 ) — Change in redemption value of redeemable non-controlling interests 689 1,237 10,519 Balance at end of year $ — $ 25,466 $ 127,765 Dividends paid per share $ 0.60 $ 0.60 $ 1.54 (1) Certain prior period reported amounts were reclassified to conform to the current period presentation, See Note 2. (2) Attributable to Oppenheimer Holdings Inc. The accompanying notes are an integral part of these consolidated financial statements. 65 Table of Contents OPPENHEIMER HOLDINGS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED DECEMBER 31, (Expressed in thousands) 2023 2022 2021 Cash flows from operating activities Net income $ 30,272 $ 32,110 $ 158,964 Adjustments to reconcile net income to net cash provided by (used in) operating activities Non-cash items included in net income: Depreciation and amortization of furniture, equipment and leasehold improvements 9,924 7,605 7,994 Deferred income taxes 6,457 ( 14,616 ) ( 792 ) Amortization of notes receivable 15,966 13,741 13,427 Amortization of debt issuance costs 219 248 250 Write-off of debt issuance costs 5 61 — Provision for (reversal of) credit losses ( 5 ) ( 2,955 ) 2,896 Share-based compensation 16,940 15,914 31,138 Amortization of right-of-use lease assets 27,281 26,804 26,125 Gain on repurchase of senior secured notes ( 51 ) ( 235 ) — Decrease (increase) in operating assets: Deposits with clearing organizations ( 1,015 ) ( 10,723 ) 16,375 Receivable from brokers, dealers and clearing organizations ( 78,619 ) ( 36,175 ) 33,592 Receivable from customers 142,877 21,641 ( 113,511 ) Income tax receivable ( 7,199 ) — — Securities purchased under agreements to resell ( 5,842 ) 935 ( 935 ) Securities owned ( 296,718 ) 135,910 ( 23,987 ) Notes receivable ( 21,111 ) ( 17,253 ) ( 21,249 ) Other assets ( 11,246 ) 16,412 65,814 Increase (decrease) in operating liabilities: Drafts payable 9,002 — — Payable to brokers, dealers and clearing organizations ( 188,116 ) 127,949 162,146 Payable to customers ( 87,188 ) ( 483 ) ( 45,849 ) Securities sold under agreements to repurchase 479,373 ( 116,313 ) ( 65,116 ) Securities sold but not yet purchased ( 21,092 ) ( 19,190 ) ( 54,213 ) Accrued compensation 13,227 ( 107,350 ) 23,238 Income tax payable ( 4,130 ) ( 9,406 ) 3,810 Accounts payable and other liabilities ( 48,021 ) ( 139 ) 7,669 Cash provided by/(used in) operating activities ( 18,810 ) 64,492 227,786 Cash flows from investing activities Purchase of furniture, equipment and leasehold improvements ( 17,056 ) ( 16,311 ) ( 8,268 ) Acquisition of BondWave LLC, net of cash consideration ( 2,929 ) — — Proceeds from the settlement of Company-owned life insurance 4,424 2,174 2,001 Cash used in investing activities ( 15,561 ) ( 14,137 ) ( 6,267 ) Cash flows from financing activities Cash dividends paid on Class A non-voting and Class B voting common stock ( 6,452 ) ( 7,044 ) ( 19,444 ) Issuance of Class A non-voting common stock 75 127 58 Repurchase of Class A non-voting common stock for cancellation ( 35,124 ) ( 60,636 ) ( 7,737 ) Payments for employee taxes withheld related to vested share-based awards ( 5,907 ) ( 2,283 ) ( 4,967 ) Payment of Company sponsored Initial Public Offering costs — — ( 454 ) Contributions from non-controlling interests — — 3,147 Proceeds from Company sponsored Initial Public Offering — — 126,500 Distribution to non-controlling interests ( 198 ) ( 90 ) — Redemption on redeemable non-controlling interests ( 26,155 ) ( 103,536 ) — Repurchase of senior secured notes ( 1,000 ) ( 10,950 ) — Debt issuance costs — — ( 22 ) Decrease in bank call loans, net — ( 69,500 ) ( 12,500 ) Cash provided by/(used in) financing activities ( 74,761 ) ( 253,912 ) 84,581 Net increase/(decrease) in cash and cash equivalents and restricted cash ( 109,132 ) ( 203,557 ) 306,100 Cash and cash equivalents and restricted cash, beginning of year 137,967 341,524 35,424 Cash and cash equivalents and restricted cash, end of year $ 28,835 $ 137,967 $ 341,524 Reconciliation of cash and cash equivalents and restricted cash within the consolidated balance sheet: 2023 2022 2021 Cash and cash equivalents $ 28,835 $ 112,433 $ 213,759 Restricted cash — 25,534 127,765 Total cash and cash equivalents and restricted cash $ 28,835 $ 137,967 $ 341,524 Schedule of non-cash financing activities Employee share plan issuance $ 9,376 $ 4,288 $ 7,361 Fair value of non-cash assets acquired $ 6,658 $ — $ — Fair value of liabilities assumed in acquisition $ 1,544 $ — $ — Contingent consideration for BondWave LLC $ ( 1,395 ) $ — $ — Supplemental disclosure of cash flow information Cash paid during the year for interest $ 68,399 $ 22,810 $ 10,089 Cash paid during the year for income taxes, net $ 20,576 $ 37,512 $ 62,378 The accompanying notes are an integral part of these consolidated financial statements. 66 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements 1. Organization Oppenheimer Holdings Inc. ("OPY" or the "Parent") is incorporated under the laws of the State of Delaware. The consolidated financial statements include the accounts of OPY and its consolidated subsidiaries (together, the "Company"). Oppenheimer Holdings Inc., through its operating subsidiaries, is a leading middle market investment bank and full service broker-dealer that is engaged in a broad range of activities in the financial services industry, including retail securities brokerage, institutional sales and trading, investment banking (corporate and public finance), equity and fixed income research, market-making, trust services, and investment advisory and asset management services. The Company is headquartered in New York and has 90 retail branch offices in 25 states located throughout the United States and offices in Puerto Rico, Tel Aviv, Israel, Hong Kong, China, London, England, St. Helier, Isle of Jersey, Portugal and Geneva, Switzerland. The principal subsidiaries of OPY are Oppenheimer & Co. Inc. ("Oppenheimer"), a registered broker-dealer in securities and investment adviser under the Investment Advisers Act of 1940; Oppenheimer Asset Management Inc. ("OAM") and its wholly-owned subsidiary, Oppenheimer Investment Management LLC, both registered investment advisers under the Investment Advisers Act of 1940; Oppenheimer Trust Company of Delaware ("Oppenheimer Trust"), a limited purpose trust company that provides fiduciary services such as trust and estate administration and investment management; OPY Credit Corp., which conducts secondary trading activities related to the purchase and sale of loans, primarily on a riskless principal basis; Oppenheimer Europe Ltd., based in the United Kingdom, with offices in the Isle of Jersey, Portugal, and Switzerland, which provides institutional equities and fixed income brokerage and corporate finance and is regulated by the Financial Conduct Authority; and Oppenheimer Investments Asia Limited, based in Hong Kong, China, which provides fixed income and equities brokerage services to institutional investors and is regulated by the Securities and Futures Commission. Oppenheimer owns Freedom Investments, Inc. ("Freedom"), a registered broker dealer in securities, which provides discount brokerage services, and Oppenheimer Israel (OPCO) Ltd., based in Tel Aviv, Israel, which provides investment services in the State of Israel and operates subject to the authority of the Israel Securities Authority. 2. Summary of significant accounting policies and estimates Basis of Presentation The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP"). Intercompany transactions and balances have been eliminated in the preparation of the consolidated financial statements. Change in Presentation Effective June 30, 2022, the Company reclassified certain stockholders' equity amounts on the consolidated balance sheet and consolidated statements of changes in stockholders' equity and redeemable non-controlling interests. The reclassification included separately presenting the par value of common stock, and combining previously disclosed share capital and contributed capital amounts in the currently reported additional paid-in capital amount. The reclassification had no impact on previously reported total stockholders’ equity amounts. Use of Estimates The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. In presenting the consolidated financial statements, management makes estimates regarding valuations of financial instruments, loans and allowances for credit losses, the outcome of legal and regulatory matters, goodwill and other intangible assets, share-based compensation plans and income taxes. Estimates, by their nature, are based on judgment and available information. Therefore, actual results could be materially different from these estimates. 67 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements Financial Instruments and F ai r Value Financial Instruments Securities owned, securities sold but not yet purchased, investments and derivative contracts are carried at fair value with changes in fair value recognized in earnings each period. Fair Value Measurements Accounting guidance for the fair value measurement of financial assets defines fair value, establishes a framework for measuring fair value, establishes a fair value measurement hierarchy, and requires certain fair value measurement disclosures. Fair value, as defined by the accounting guidance, is the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy established by this accounting guidance prioritizes the inputs used in valuation techniques into the following three categories (highest to lowest priority): Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets; Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly; and Level 3: Unobservable inputs that are significant to the overall fair value measurement. The Company's financial instruments that are recorded at fair value generally are classified within Level 1 or Level 2 within the fair value hierarchy using quoted market prices or quotes from market makers or broker-dealers. Financial instruments classified within Level 1 are valued based on quoted market prices in active markets and consist of U.S. Treasury and corporate equities. Level 2 financial instruments primarily consist of investment grade and high-yield corporate debt, convertible bonds, U.S. Agency securities, mortgage and asset-backed securities, and municipal obligations. Financial instruments classified as Level 2 are valued based on quoted prices for similar assets and liabilities in active markets and quoted prices for identical or similar assets and liabilities in markets that are not active. Some financial instruments are classified within Level 3 within the fair value hierarchy as observable pricing inputs are not available due to limited market activity for the asset or liability. As of December 31, 2023 and December 31, 2022, the Company had $ 2.7 million and $ 31.8 million respectively, of auction rate securities ("ARS") in Level 3 assets. See note 8 for further details. Consolidation The Company consolidates all subsidiaries in which it has a controlling financial interest, as well as any variable interest entities ("VIEs") where the Company is deemed to be the primary beneficiary, when it has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb significant losses or the right to receive benefits that could potentially be significant to the VIE. The Company reviews factors, including the rights of the equity holders at risk and obligations of equity holders to absorb losses or receive expected residual returns, to determine if the entity is a VIE. Under US GAAP, a general partner will not consolidate a partnership or similar entity under the voting interest model. See note 10 for further details. Financing Receivables The Company's financing receivables include customer margin loans, securities purchased under agreements to resell ("reverse repurchase agreements"), and securities borrowed transactions. The Company uses financing receivables to extend margin loans to customers, meet trade settlement requirements, and facilitate its matched-book arrangements and inventory requirements. The Company's financing receivables are secured by collateral received from clients and counterparties. In many cases, the Company is permitted to sell or re-pledge securities held as collateral. These securities may be used to collateralize repurchase agreements, to enter into securities lending agreements, to cover short positions or to fulfill the obligation of securities fails to deliver. The Company monitors the fair value of the collateral received on a daily basis and may require clients and counterparties to deposit additional collateral or return collateral pledged, when appropriate. Customer receivables, primarily consisting of customer margin loans collateralized by customer-owned securities, are stated net of allowance for credit losses. The Company reviews large customer accounts that do not comply with the Company's margin 68 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements requirements on a case-by-case basis to determine the likelihood of collection and records an allowance for credit loss following that process. For small customer accounts that do not comply with the Company's margin requirements, the allowance for credit loss is generally recorded as the amount of unsecured or partially secured receivables. The Company also periodically makes loans to financial advisors and other revenue producers as part of its hiring process. These loans are recorded as notes receivable on its consolidated balance sheet. Allowances are established on these loans if the employee is no longer associated with the Company and the loan has not been promptly repaid. Legal and Regulatory Reserves The Company records reserves related to legal and regulatory proceedings in accounts payable and other liabilities. The determination of the amounts of these reserves requires significant judgment on the part of management. In accordance with applicable accounting guidance, the Company establishes reserves for litigation and regulatory matters where available information indicates that it is probable a liability had been incurred and the Company can reasonably estimate the amount of that loss. When loss contingencies are not probable or cannot be reasonably estimated, the Company does not establish reserves. When determining whether to record a reserve, management considers many factors including, but not limited to, the amount of the claim; the stage and forum of the proceeding, the sophistication of the claimant, the amount of the loss, if any, in the client's account and the possibility of wrongdoing, if any, on the part of an employee of the Company; the basis and validity of the claim; previous results in similar cases; and applicable legal precedents and case law. Each legal and regulatory proceeding is reviewed with counsel in each accounting period and the reserve is adjusted as deemed appropriate by management. Any change in the reserve amount is recorded in the results of that period. The assumptions of management in determining the estimates of reserves may be incorrect and the actual disposition of a legal or regulatory proceeding could be greater or less than the reserve amount. Leases Right-of-use ("ROU") assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term, excluding non-base rent components such as fixed common area maintenance costs and other fixed costs such as real estate taxes and insurance. The discount rates used in determining the present value of leases are the Company’s incremental borrowing rates, developed based upon each lease’s term. The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. For operating leases, the ROU assets also include any prepaid lease payments and initial direct costs incurred and are reduced by lease incentives. For these leases, lease expense is recognized on a straight-line basis over the lease term if the ROU asset has not been impaired or abandoned. Goodwill The Company's goodwill resides in its Private Client Division ("PCD") and Corporate/Other operating segment. Goodwill of a reporting unit is subject to at least an annual test for impairment to determine if the estimated fair value of a reporting unit is less than its carrying amount. Goodwill of a reporting unit is required to be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Due to the volatility in the financial services sector and equity markets in general, determining whether an impairment of goodwill has occurred is increasingly difficult and requires management to exercise significant judgment. Goodwill within the Corporate/Other operating segment relates to the Company’s acquisition of BondWave LLC, which closed on December 29, 2023. Because the valuation of goodwill associated with this transaction was determined on the last business day of 2023, no impairment testing was deemed necessary. The Company's annual goodwill impairment analysis performed over the goodwill within the PCD reporting unit as of December 31, 2023 applied the same valuation methodologies with consistent inputs as that performed as of December 31, 2022. In estimating the fair value of the PCD reporting unit, the Company uses traditional standard valuation methods, including the market comparable approach and income approach. The market comparable approach is based on comparisons of the subject company to public companies whose stocks are actively traded ("Price Multiples") or to similar companies engaged in an actual 69 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements merger or acquisition ("Precedent Transactions"). As part of this process, multiples of value relative to financial variables, such as earnings or stockholders' equity, are developed and applied to the appropriate financial variables of the subject company to indicate its value. The income approach involves estimating the present value of the subject company's future cash flows by using projections of the cash flows that the business is expected to generate, and discounting these cash flows at a given rate of return ("Discounted Cash Flow" or "DCF"). Each of these standard valuation methodologies requires the use of management estimates and assumptions. In its Price Multiples valuation analysis, the Company uses various operating metrics of comparable companies, including revenues, after-tax earnings, and EBITDA as well as price-to-book value ratios at a point in time. The Company analyzes prices paid in Precedent Transactions that are comparable to the business conducted in the PCD. The DCF analysis includes the Company's assumptions regarding discount rate, growth rates of the PCD's revenues, expenses, EBITDA, and capital expenditures, adjusted for current economic conditions and expectations. The Company weighs each of the three valuation methods equally in its overall valuation. Given the subjectivity involved in selecting which valuation method to use, the corresponding weightings, and the input variables for use in the analyses, it is possible that a different valuation model and the selection of different input variables could produce a materially different estimate of the fair value of the PCD reporting unit. Intangible Assets Indefinite intangible assets are comprised of trademarks, trade names and an Internet domain name. These intangible assets carried at $ 32.7 million, which are not amortized, are subject to at least an annual test for impairment to determine if the estimated fair value is less than their carrying amount. The fair value of the trademarks and trade names was substantially in excess of their carrying value as of December 31, 2023. Defined-lived intangible assets are comprised of developed technology and customer relationships. These intangible assets carried at $ 1.6 million are amortized over their estimated lives and are periodically evaluated for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable from future undiscounted cash flows. Share-Based Compensation Plans As part of the compensation to employees and directors, the Company uses stock-based compensation, consisting of restricted stock, stock options and stock appreciation rights. In accordance with ASC Topic 718, "Compensation - Stock Compensation," the Company classifies the stock options and restricted stock awards as equity awards, which requires the compensation cost to be recognized in the consolidated income statements over the requisite service period of the award at grant date fair value and adjusted for actual forfeitures. The fair value of restricted stock awards is determined based on the grant date closing price of the Company's Class A non-voting common stock ("Class A Stock") adjusted for the present value of the dividend to be received upon vesting. The fair value of stock options is determined using the Black-Scholes model. Key assumptions used to estimate the fair value include the expected term and the expected volatility of the Company's Class A Stock over the term of the award, the risk-free interest rate over the expected term, and the Company's expected annual dividend yield. The Company classifies stock appreciation rights ("OARs") as liability awards, which requires the fair value to be remeasured at each reporting period until the award vests. The fair value of OARs is also determined using the Black-Scholes model at the end of each reporting period. The compensation cost is adjusted each reporting period for changes in fair value prorated for the portion of the requisite service period rendered. Revenue Recognition Brokerage Customers' securities and commodities transactions are reported on a settlement date basis, which is generally two business days after trade date for securities transactions and one day for commodities transactions. Related commission income and expense is recorded on a trade date basis. Principal Transactions Transactions in proprietary securities and related revenue and expenses are recorded on a trade date basis. Securities owned and securities sold but not yet purchased are reported at fair value generally based upon quoted prices. Realized and unrealized changes in fair value are recognized in principal transactions, net in the period in which the change occurs. 70 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements Investment Banking Fees Advisory fees from mergers, acquisitions and restructuring transactions are recorded when services for the transactions are completed and income is reasonably determinable, generally as set forth under the terms of the engagement. Retainer fees and engagement fees are recognized ratably over the service period. Underwriting fees are recorded when the transactions are completed. Transaction-related expenses, primarily consisting of legal, travel and other costs directly associated with the transaction, are deferred and recognized in the same period as the related investment banking transaction revenue. Underwriting revenues and the related expenses are presented gross on the consolidated income statements. Interest Interest revenue represents interest earned on margin debit balances, securities borrowed transactions, reverse repurchase agreements, fixed income securities, firm investments, and cash and cash equivalents. Interest revenue is recognized in the period earned based upon average or daily asset balances, contractual cash flows, and interest rates. Asset Management Asset management fees are generally recognized over the period the related service is provided based on the account value at the valuation date per the respective asset management agreements. In certain circumstances, OAM is entitled to receive performance (or incentive) fees when the return on assets under management ("AUM") exceeds certain benchmark returns or other performance targets. Performance fees are generally based on investment performance over a 12-month period and are not subject to adjustment once the measurement period ends. Such fees are computed as of the fund's year-end when the measurement period ends and generally are recorded as earned in the fourth quarter of the Company's fiscal year. Asset management fees and performance fees are included in advisory fees in the consolidated income statements. Assets under management are not included as assets of the Company. Bank Deposit Sweep Income Bank deposit sweep income consists of revenues earned from the Advantage Bank Deposit Program. Under this program, client funds are swept into deposit accounts at participating banks and are eligible for FDIC deposit insurance up to FDIC standard maximum deposit insurance amounts. The Company earns the fee paid on these deposits after administrative fees are paid to the administrator of the program. The fee earned in the period is recorded in bank deposit sweep income and the portion of interest credited to clients is recorded in interest expense in the consolidated income statements. Balance Sheet Cash and Cash Equivalents The Company defines cash equivalents as highly liquid investments with original maturities of less than 90 days that are not held for sale in the ordinary course of business. Receivables from / Payables to Brokers, Dealers and Clearing Organizations Securities borrowed and securities loaned are carried at the amounts of cash collateral advanced or received. Securities borrowed transactions require the Company to deposit cash or other collateral with the lender. The Company receives cash or collateral in an amount generally in excess of the market value of securities loaned. The Company monitors the market value of securities borrowed and loaned on a daily basis and may require counterparties to deposit additional collateral or return collateral pledged, when appropriate. Securities failed to deliver and receive represent the contract value of securities which have not been delivered or received, respectively, by settlement date. Receivables from / Payables to Customers Receivables from and payables to customers include balances arising from customer securities and margin transactions. Receivables from customers are recorded when margin loans are extended to customers and are recorded on a settlement date 71 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements basis. Payables to customers are recorded when customers deposit cash into their accounts and are recorded on a settlement date basis. Securities Purchased under Agreements to Resell and Securities Sold under Agreements to Repurchase Reverse repurchase agreements and securities sold under agreements to repurchase ("repurchase agreements") are treated as collateralized financing transactions and are recorded at their contractual amounts plus accrued interest. The resulting interest income and expense for these arrangements are included in interest income and interest expense in the consolidated income statements. Additionally, the Company elected the fair value option for repurchase agreements and reverse repurchase agreements that do not settle overnight or have an open settlement date. The Company presents the reverse repurchase and repurchase transactions on a net-by-counterparty basis when the specific offsetting requirements are satisfied. Notes Receivable Notes receivable primarily represent recruiting and retention payments generally in the form of upfront loans to financial advisors and key revenue producers as part of the Company's overall growth strategy. These notes generally amortize over a service period of 3 to 10 years from the initial date of the note or based on productivity levels of employees. All such notes are contingent on the employees' continued employment with the Company. The unforgiven portion of the notes becomes due on demand in the event the employee departs during the service period. Amortization of notes receivable is included in the consolidated income statements in compensation and related expenses. Furniture, Equipment and Leasehold Improvements Furniture, equipment and leasehold improvements are stated at cost less accumulated depreciation. Depreciation of furniture, fixtures, and equipment is provided on a straight-line basis generally over 3 to 7 years. Leasehold improvements are amortized on a straight-line basis over the shorter of the life of the improvement or the remaining term of the lease. Drafts Payable Drafts payable represent amounts drawn by the Company against a bank. Bank Call Loans Bank call loans are generally payable on demand and bear interest at various rates, and such loans are collateralized by firm and/or customer's margin securities. Foreign Currency Translations Foreign currency balances have been translated into U.S. dollars as follows: monetary assets and liabilities at exchange rates prevailing at period end; revenue and expenses at average rates for the period; gains or losses resulting from translating foreign currency financial statements, net of related tax effects, are reflected in accumulated other comprehensive income in the consolidated balance sheets. The functional currency of the overseas operations is the local currency in each location except for Oppenheimer Europe Ltd. and Oppenheimer Investments Asia Limited which have the U.S. dollar as their functional currency. Income Taxes The Company accounts 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 on the basis of the differences between the financial statement and tax bases 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. The Company recognizes deferred tax assets to the extent it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and the results of recent operations. 72 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements The Company records uncertain tax positions on the basis of a two-step process whereby it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company records interest and penalties accruing on unrecognized tax benefits in pre-tax income as interest expense and other expense, respectively, in its consolidated income statements. The Company permanently reinvests eligible earnings of its foreign subsidiaries and, accordingly, does not accrue any U.S. income taxes that would arise if such earnings were repatriated. OPY Acquisition Corp. I On October 26, 2021, OPY Acquisition Corp. I (“OHAA”) consummated its $ 126.5 million initial public offering (the “OHAA IPO”). OHAA is a special purpose acquisition company, incorporated in Delaware for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (a “Business Combination”). OPY Acquisition LLC I (the “Sponsor”), a Delaware series limited liability company and the Company’s subsidiary, is the sponsor of OHAA. The Company and its employees control OHAA through the Sponsor’s ownership of Class A founder shares of OHAA. As a result, both OHAA and the Sponsor are recorded in the Company's consolidated financial statements. Upon IPO completion, funds totaling $ 127.8 million, including proceeds from the OHAA IPO of $ 126.5 million and $ 1.3 million investment from the Sponsor, were held in a trust account until the earlier of (i) the completion of a Business Combination or (ii) ten business days after April 29, 2023, 18 months from the closing of the OHAA IPO (“Combination Period”), pursuant to OHAA's certificate of incorporation. On October 26, 2023, OHAA’s stockholders approved an amendment to its certificate of incorporation to extend the deadline by which it must complete its initial business combination from October 30, 2023 to June 30, 2024 on a month-to-month basis. However, a fter careful consideration of the current SPAC market and after having completed an extensive search, OHAA determined it would be unable to deliver and fund a high quality value enhancing transaction to stockholders despite the extension. Therefore, on December 18, 2023, OHAA determined not to further extend the term it has to complete an initial business combination and instead announced its intention to dissolve and liquidate. On December 28, 2023, all OHAA Class A ordinary shares were cancelled with shareholders receiving their respective share redemption amounts. Accordingly, there were no “Redeemable non-controlling interests” or restricted cash balances associated with the publicly held OHAA Class A ordinary shares recorded on the Company’s consolidated balance sheet as of December 31, 2023. The remaining steps of OHAA’s dissolution are expected to be completed in the first quarter of 2024. Oppenheimer Principal Investments LLC Oppenheimer Principal Investments LLC ("OPI") is a Delaware special purpose "Series" limited liability company formed in December 2020 and designed to retain and reward talented employees of the Company, primarily in connection with the deployment of Company capital into successful private market investments, and also in connection with the Company's receipt of non-cash compensation from investment banking assignments. OPI is designed to promote alignment of Company, client and employee interests as they relate to profitable investment opportunities. This program acts as an incentive for senior employees to identify attractive private investments for the Company and its clients, and as a retention tool for key employees of the Company. OPI treats its members as partners for tax purposes generally and with respect to the separate Series formed to participate in (i) the incentive fees generated by successful client investments in the Company's Private Market Opportunities program, or (ii) principal investments made by the Company or a portion of the gains thereon, either through the outright purchase of an investment or consideration earned in lieu of an investment banking fee or other transaction fee. Employees who become members of a Series receive a "profit interest", as that term is used in IRS regulations, and receive an allocation of capital appreciation of the investment held by the particular Series that exceeds a threshold amount established for each Series. Participating employees are also subject to vesting and forfeiture requirements for each Series investment. Vested profit interests are accounted for as compensation expense under FASB Topic ASC 710. Additionally, the Company’s policy is to consolidate those entities where it owns the majority voting interests. The Company owns the majority voting interest of OPI 73 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements through Oppenheimer Alternative Investment Management (“OAIM”), the managing member of OPI and a subsidiary of OAM. Pursuant to the Company’s policy for consolidation, the Company consolidates OPI. Non-controlling Interests Non-controlling interests represents ownership interests in the Sponsor of OHAA. For the year ended December 31, 2023, the net gain (net of taxes) attributed to non-controlling interests was $ 93,000 . For the year ended December 31, 2022, the net loss (net of taxes) attributed to non-controlling interests was$ 241,000 . Restricted Cash Restricted cash represents OHAA deposits held in trust. Since these deposits were returned to OHAA’s Class A shareholders as indicated above, there was no restricted cash as of December 31, 2023. 3. Acquisitions On December 29, 2023, the Company acquired 100 % of the membership interests of BondWave LLC, a cloud-based financial markets software as a service provider that offers institutions active in fixed income markets with an integrated suite of portfolio analytics, transaction analytics and proprietary data solutions. Under the terms of the agreement, the Company paid approximately $ 3.6 million on closing, with the potential for additional contingent payments to be made within 18 months after the closing date. The Company accounted for the acquisition under the acquisition method of accounting in accordance with ASC 805, “Business Combinations.” The Company allocated $ 4.3 million of the purchase price to goodwill, $ 2.2 million to definite-lived intangible assets, $ 625 thousand to cash acquired and the remainder to other assets acquired and liabilities assumed as part of the acquisition. The goodwill, which has been allocated to the “Corporate/Other” segment, primarily reflects the expected synergies of combining the scalable software platform with Oppenheimer’s broader client base. 4. Financial Instruments - Credit Losses Under ASC 326 "Financial Instruments - Credit Losses", the Company can elect to use an approach to measure the allowance for credit losses using the fair value of collateral where the borrower is required to, and reasonably expected to, continually adjust and replenish the amount of collateral securing the instrument to reflect changes in the fair value of such collateral. The Company has elected to use this approach for securities borrowed, margin loans, and reverse repurchase agreements. No material historical losses have been reported on these assets. See note 9 for details. As of December 31, 2023, the Company has $ 62.6 million of notes receivable. Notes receivable primarily represents recruiting and retention payments generally in the form of upfront loans to financial advisors and key revenue producers as part of the Company's overall growth strategy. These notes generally amortize over a service period of 3 to 10 years from the initial date of the note or based on productivity levels of employees. All such notes are contingent on the employees' continued employment with the Company. The unforgiven portion of the notes becomes due on demand in the event the employee departs during the service period. At this point any uncollected portion of the notes gets reclassified into a defaulted notes category. The allowance for uncollectibles is a valuation account that is deducted from the amortized cost basis of the defaulted notes balance to present the net amount expected to be collected. Balances are charged-off against the allowance when management deems the amount to be uncollectible. The Company reserves 100 % of the uncollected balance of defaulted notes which are five years and older and applies an expected loss rate to the remaining balance. The expected loss rate is based on historical collection rates of defaulted notes. The expected loss rate is adjusted for changes in environmental and market conditions such as changes in unemployment rates, changes in interest rates and other relevant factors. For the year ended December 31, 2023, no adjustments were made to the expected loss rates. The Company will continuously monitor the effect of these factors on the expected loss rate and adjust it as necessary. 74 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements The allowance is measured on a pool basis as the Company has determined that the entire defaulted portion of notes receivable has similar risk characteristics. As of December 31, 2023, the uncollected balance of defaulted notes was $ 7.1 million and the allowance for uncollectibles was $ 3.9 million. The allowance for uncollectibles consisted of $ 1.7 million related to defaulted notes balances (five years and older) and $ 2.2 million (under five years). The following table presents the disaggregation of defaulted notes by year of default as of December 31, 2023: (Expressed in thousands) As of December 31, 2023 2023 $ 2,497 2022 285 2021 1,837 2020 423 2019 314 2018 and prior 1,709 Total $ 7,065 The following table presents activity in the allowance for uncollectibles of defaulted notes for the years ended December 31, 2023 and 2022: (Expressed in thousands) For the Year Ended December 31, 2023 2022 Beginning balance $ 4,327 $ 4,923 Additions and other adjustments ( 458 ) ( 596 ) Ending balance $ 3,869 $ 4,327 5. Leases The Company has operating leases for office space and equipment expiring at various dates through 2034. The Company leases its corporate headquarters at 85 Broad Street, New York, New York which houses its executive management team and many administrative functions for the firm as well as its research, trading, investment banking, and asset management divisions and an office in Troy, Michigan, which among other things, houses its payroll and human resources departments. In addition, the Company has 90 retail branch offices in the United States as well as offices in London, England, St. Helier, Isle of Jersey, Geneva, Switzerland, Munich, Germany, Tel Aviv, Israel and Hong Kong, China. The Company is constantly assessing its needs for office space and, on a rolling basis, has many leases that expire in any given year. Substantially all of the leases are held by the Company's subsidiary, Viner Finance Inc., which is a consolidated subsidiary and 100 % owned by the Company. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Most leases include an option to renew and the exercise of lease renewal options is at the Company's sole discretion. The Company did not include the renewal options as part of the right of use assets and liabilities. 75 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements The depreciable life of assets and leasehold improvements is limited by the expected lease term. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. As of December 31, 2023, the Company had right-of-use operating lease assets of $ 140.6 million (net of accumulated amortization of $ 99.7 million) which are comprised of real estate leases of $ 137.9 million (net of accumulated amortization of $ 97.1 million) and equipment leases of $ 2.7 million (net of accumulated amortization of $ 2.6 million). As of December 31, 2023, the Company had operating lease liabilities of $ 183.3 million which are comprised of real estate lease liabilities of $ 180.6 million and equipment lease liabilities of $ 2.7 million. The Company had no finance leases as of December 31, 2023. As most of the Company's leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date. The Company used the incremental borrowing rate as of the lease commencement date for the operating leases that commenced subsequent to January 1, 2019. The following table presents the weighted average lease term and weighted average discount rate for the Company's operating leases as of December 31, 2023 and December 31, 2022, respectively: As of December 31, 2023 December 31, 2022 Weighted average remaining lease term (in years) 6.35 6.82 Weighted average discount rate 7.72 % 6.66 % The following table presents operating lease costs recognized for the years ended December 31, 2023 and December 31, 2022, respectively, which are included in occupancy and equipment costs on the consolidated income statements: (Expressed in thousands) For the Year Ended December 31, 2023 For the Year Ended December 31, 2022 Operating lease costs: Real estate leases - Right-of-use lease asset amortization $ 25,568 $ 25,128 Real estate leases - Interest expense 13,413 12,996 Equipment leases - Right-of-use lease asset amortization 1,717 1,672 Equipment leases - Interest expense 184 152 The maturities of lease liabilities as of December 31, 2023 are as follows: 76 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements 77 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements (Expressed in thousands) As of December 31, 2023 2024 $ 43,885 2025 38,759 2026 36,757 2027 34,823 2028 21,660 After 2028 58,081 Total lease payments $ 233,965 Less interest ( 50,692 ) Present value of lease liabilities $ 183,273 As of December 31, 2023, the Company had $ 5.8 million of additional operating leases that have not yet commenced. ($ 40.2 million as of December 31, 2022). 6. Revenues from contracts with customers Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by transferring the promised goods or services to customers. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring the Company's progress in satisfying the performance obligation in a manner that depicts the transfer of the goods or services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised good or service. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for those promised goods or services (i.e., the "transaction price"). In determining the transaction price, the Company considers multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, the Company considers the range of possible outcomes, the predictive value of its past experiences, the time period during which uncertainties are expected to be resolved and the amount of consideration that is susceptible to factors outside of the Company's influence, such as market volatility or the judgment and actions of third parties. The Company earns revenue from contracts with customers and other sources (principal transactions, interest and other). The following provides detailed information on the recognition of the Company's revenue from contracts with customers: Commissions Commissions from Sales and Trading — The Company earns commission revenue by executing, settling and clearing transactions with clients primarily in exchange-traded and over-the-counter corporate equity and debt securities, money market instruments and exchange-traded options and futures contracts. A substantial portion of Company's revenue is derived from commissions from private clients through accounts with transaction-based pricing. Trade execution and clearing services, when provided together, represent a single performance obligation as the services are not separately identifiable in the context of the contract. Commission revenue associated with combined trade execution and clearing services, as well as trade execution services on a standalone basis, is recognized at a point in time on trade date when the performance obligation is satisfied. 78 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements Commission revenue is generally paid on settlement date, which is generally two business days after trade date for equity securities and corporate bond transactions and one day for government securities, options and commodities transactions. The Company records a receivable on the trade date and receives a payment on the settlement date. Mutual Fund Income — The Company earns mutual fund income for sales and distribution of mutual fund shares, which consists of a fixed fee amount and a variable amount. The Company recognizes mutual fund income at a point in time on trade date when the performance obligation is satisfied which is when the mutual fund interest is sold to the investor. The ongoing distribution fees for distributing investment products from mutual fund companies are generally considered variable consideration because they are based on the value of AUM and are uncertain on trade date. The Company recognizes distribution fees over the investment period as the amounts become known and the portion recognized in the current period may relate to distribution services performed in prior periods. Mutual fund income is generally received within 90 days. Advisory Fees The Company earns management and performance (or incentive) fees in connection with the advisory and asset management services it provides to various types of funds, asset-based programs and investment vehicles through its subsidiaries. Management fees are generally based on the account value at the valuation date per the respective asset management agreements and are recognized over time as the customer receives the benefits of the services evenly throughout the term of the contract. Performance fees are recognized when the return on client AUM exceeds a specified benchmark return or other performance targets over a 12-month measurement period are met. Performance fees are considered variable as they are subject to fluctuation and/or are contingent on a future event over the measurement period and are not subject to adjustment once the measurement period ends. Such fees are computed as of the fund's year-end when the measurement period ends and generally are recorded as earned in the fourth quarter of the Company's fiscal year. Both management and performance fees are generally received within 90 days. Investment Banking The Company earns underwriting revenues by providing capital raising solutions for corporate clients through initial public offerings, follow-on offerings, equity-linked offerings, private investments in public entities, and private placements. Underwriting revenues are recognized at a point in time on trade date, as the client obtains the control and benefit of the capital markets offering at that time. These fees are generally received within 90 days after the transactions are completed. Transaction-related expenses, primarily consisting of legal, travel and other costs directly associated with the transaction, are deferred and recognized in the same period as the related investment banking transaction revenue. Underwriting revenues and related expenses are presented gross on the consolidated income statements. Revenue from financial advisory services includes fees generated in connection with mergers, acquisitions and restructuring transactions. Such revenue and fees are primarily recorded at a point in time when services for the performance obligations have been completed and income is reasonably determinable, generally as set forth under the terms of the engagement. Payment for advisory services is generally due upon a completion of the transaction or milestone. Retainer fees and fees earned from certain advisory services are recognized ratably over the service period as the customer receives the benefit of the services throughout the term of the contracts, and such fees are collected based on the terms of the contracts. Bank Deposit Sweep Income Bank deposit sweep income consists of revenue earned from the FDIC-insured bank deposit program. Under this program, client funds are swept into deposit accounts at participating banks and are eligible for FDIC deposit insurance up to FDIC standard maximum deposit insurance amounts. Fees are earned over time and are generally received within 30 days. Disaggregation of Revenue The following presents the Company's revenue from contracts with customers disaggregated by major business activity and other sources of revenue for the years ended December 31, 2023 and 2022: 79 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements 80 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements For the Year Ended December 31, 2023 Reportable Segments Private Client Asset Management Capital Markets Corporate/Other Total Revenues from contracts with customers: Commissions from sales and trading $ 155,039 $ — $ 162,706 $ 23 $ 317,768 Mutual fund income 31,457 — 7 16 31,480 Advisory fees 319,191 96,259 — 229 415,679 Investment banking - capital markets 7,543 — 40,499 — 48,042 Investment banking - advisory — — 69,623 — 69,623 Bank deposit sweep income 172,807 — — — 172,807 Other 15,500 ( 1 ) 1,436 166 17,101 Total revenues from contracts with customers 701,537 96,258 274,271 434 1,072,500 Other sources of revenue: Interest 85,105 — 15,196 4,249 104,550 Principal transactions, net 3,400 — 55,572 6,375 65,347 Other 11,712 ( 7,825 ) 858 1,683 6,428 Total other sources of revenue 100,217 ( 7,825 ) 71,626 12,307 176,325 Total revenue $ 801,754 $ 88,433 $ 345,897 $ 12,741 $ 1,248,825 (Expressed in thousands) For the Year Ended December 31, 2022 Reportable Segments Private Client Asset Management Capital Markets Corporate/Other Total Revenues from contracts with customers: Commissions from sales and trading $ 159,441 $ — $ 179,694 $ 40 $ 339,175 Mutual fund income 31,173 — 8 26 31,207 Advisory fees 326,240 99,224 117 34 425,615 Investment banking - capital markets 9,352 — 33,481 — 42,833 Investment banking - advisory 127 — 84,569 — 84,696 Bank deposit sweep income 104,558 — — — 104,558 Other 16,451 — 2,113 510 19,074 Total revenues from contracts with customers 647,342 99,224 299,982 610 1,047,158 Other sources of revenue: Interest 51,866 — 7,453 1,394 60,713 Principal transactions, net ( 4,013 ) — 29,610 ( 4,566 ) 21,031 Other ( 19,515 ) 18 776 760 ( 17,961 ) Total other sources of revenue 28,338 18 37,839 ( 2,412 ) 63,783 Total revenue $ 675,680 $ 99,242 $ 337,821 $ ( 1,802 ) $ 1,110,941 Contract Assets and Liabilities The timing of the Company's revenue recognition may differ from the timing of payment by its customers. The Company records contract assets when payment is due from a client conditioned on future performance or the occurrence of other events. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. 81 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements The Company had receivables related to revenue from contracts with customers of $ 39.9 million and $ 32.8 million at December 31, 2023 and December 31, 2022, respectively. The Company had no significant impairments related to these receivables during the years ended December 31, 2023 and 2022. As of December 31, 2023 and December 31, 2022, the Company had no contract assets. Deferred revenue relates to IRA fees received annually in advance on customers' IRA accounts managed by the Company and retainer fees and other fees earned from certain advisory transactions where the performance obligations have not yet been satisfied. Total deferred revenue was $ 1,118,000 and $ 900,000 for years ended December 31, 2023 and 2022, respectively. The following presents the Company's receivables and deferred revenue balances from contracts with customers, which are included in other assets and other liabilities, respectively, on the consolidated balance sheet: (Expressed in thousands) As of December 31, 2023 December 31, 2022 Receivables: Commission (1) $ 4,554 $ 3,533 Mutual fund income (2) 5,365 4,993 Advisory fees (3) 5,746 5,368 Bank deposit sweep income (4) 5,223 9,057 Investment banking fees (5) 12,847 5,136 Other 6,126 4,686 Total receivables $ 39,861 $ 32,773 Deferred revenue (payables): Investment banking fees (6) $ 1,118 $ 900 Total deferred revenue $ 1,118 $ 900 (1) Commission recorded on trade date but not yet settled. (2) Mutual fund income earned but not yet received. (3) Management and performance fees earned but not yet received. (4) Fees earned from FDIC-insured bank deposit program but not yet received. (5) Underwriting revenue and advisory fees earned but not yet received. (6) Retainer fees and fees received from certain advisory transactions where the performance obligations have not yet been satisfied. Contract Costs The Company incurs incremental transaction-related costs to obtain and/or fulfill contracts associated with investment banking and advisory engagements where the revenue is recognized at a point in time and the costs are determined to be recoverable. As of December 31, 2023, these contract costs were $ 1.9 million ($ 1.4 million as of December 31, 2022). There were no significant charges recognized in relation to these costs for year ended December 31, 2023. 82 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements 7. Receivable from and payable to brokers, dealers and clearing organizations (Expressed in thousands) As of December 31, 2023 2022 Receivable from brokers, dealers and clearing organizations consists of: Securities borrowed $ 158,612 $ 127,817 Receivable from brokers 65,639 49,125 Securities failed to deliver 29,656 9,099 Clearing organizations and other 30,789 20,036 Total $ 284,696 $ 206,077 Payable to brokers, dealers and clearing organizations consists of: Securities loaned $ 284,987 $ 320,843 Payable to brokers 447 123 Securities failed to receive 23,809 62,646 Clearing organizations and other (1) 52,647 166,394 Total $ 361,890 $ 550,006 (1) The balances are primarily related to a trade/settlement date adjustment for positions in inventory. 8. Fair value measurements Securities owned, securities sold but not yet purchased, investments and derivative contracts are carried at fair value with changes in fair value recognized in earnings each period. Valuation Techniques A description of the valuation techniques applied and inputs used in measuring the fair value of the Company's financial instruments is as follows: U.S. Government Obligations U.S. Treasury securities are valued using quoted market prices obtained from active market makers and inter-dealer brokers. U.S. Agency Obligations U.S. agency securities consist of agency issued debt securities and mortgage pass-through securities. Non-callable agency issued debt securities are generally valued using quoted market prices, quoted market prices for comparable securities or discounted cash flow models. Callable agency issued debt securities are valued by benchmarking model-derived prices to quoted market prices and trade data for identical or comparable securities. The fair value of mortgage pass-through securities are model driven with respect to spreads of the comparable to-be-announced ("TBA") security. Sovereign Obligations The fair value of sovereign obligations is determined based on quoted market prices when available or a valuation model that generally utilizes interest rate yield curves and credit spreads as inputs. Corporate Debt and Other Obligations The fair value of corporate bonds is estimated using recent transactions, broker quotations and bond spread information. 83 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements Mortgage and Other Asset-Backed Securities The Company values non-agency securities collateralized by home equity and various other types of collateral based on external pricing and spread data provided by independent pricing services. When specific external pricing is not observable, the valuation is based on yields and spreads for comparable bonds. Municipal Obligations The fair value of municipal obligations is estimated using recently executed transactions, broker quotations, and bond spread information. Convertible Bonds The fair value of convertible bonds is estimated using recently executed transactions and dollar-neutral price quotations, where observable. When observable price quotations are not available, fair value is determined based on cash flow models using yield curves and bond spreads as key inputs. Corporate Equities Equity securities and options are generally valued based on quoted prices from the exchange or market where traded. To the extent quoted prices are not available, fair values are generally derived using bid/ask spreads. Auction Rate Securities ("ARS") As of December 31, 2023, the Company owned $ 2.7 million of ARS. This represents the amount that the Company holds as a result of ARS buybacks in previous years. The Company has valued the ARS securities owned at the tender offer price and categorized them in Level 3 of the fair value hierarchy due to the illiquid nature of the securities and the period of time since the last tender offer. The fair value of ARS is particularly sensitive to movements in interest rates. However, an increase or decrease in short-term interest rates may or may not result in a higher or lower tender offer in the future or the tender offer price may not provide a reasonable estimate of the fair value of the securities. In such cases, other valuation techniques might be necessary. As of December 31, 2023, the Company had a valuation allowance totaling $ 0.2 million relating to ARS owned (which is included as a reduction to securities owned on the consolidated balance sheet). Investments In its role as general partner in certain hedge funds and private equity funds, the Company, through its subsidiaries, holds direct investments in such funds. The Company records these investments within other assets and uses the net asset value of the underlying fund as a basis for estimating the fair value of its investment unless another method provides a better indicator of fair value. Changes in the fair value of these investments are reflected within other income in the consolidated financial statements. 84 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements The following table provides information about the Company's investments in Company-sponsored funds as of December 31, 2023: (Expressed in thousands) Fair Value Unfunded Commitments Redemption Frequency Redemption Notice Period Hedge funds (1) $ 446 $ — Quarterly - Annually 30 - 120 Days Private equity funds (2) 5,072 2,367 N/A N/A $ 5,518 $ 2,367 (1) Includes investments in hedge funds and hedge fund of funds that pursue long/short, event-driven, and activist strategies. (2) Includes private equity funds and private equity fund of funds with diversified portfolios focusing on but not limited to technology companies, venture capital and global natural resources. The following table provides information about the Company's investments in Company-sponsored funds as of December 31, 2022: (Expressed in thousands) Fair Value Unfunded Commitments Redemption Frequency Redemption Notice Period Hedge funds (1) $ 574 $ — Quarterly - Annually 30 - 120 Days Private equity funds (2) 8,221 3,018 N/A N/A $ 8,795 $ 3,018 (1) Includes investments in hedge funds and hedge fund of funds that pursue long/short, event-driven, and activist strategies. (2) Includes private equity funds and private equity fund of funds with diversified portfolios, focusing on but not limited to technology companies, venture capital and global natural resources. The Company owns an investment in a financial technologies firm. The Company elected the fair value option for this investment and it is included in other assets on the consolidated balance sheet. The Company determined the fair value of the investment based on an implied market-multiple approach and observable market data, including comparable company transactions. As of December 31, 2023, the fair value of the investment was $ 7.1 million and was categorized in Level 2 of the fair value hierarchy. Assets and Liabilities Measured at Fair Value The Company's assets and liabilities, recorded at fair value on a recurring basis, as of December 31, 2023 and 2022, have been categorized based upon the above fair value hierarchy as follows: 85 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements Assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 (Expressed in thousands) Fair Value Measurements as of December 31, 2023 Level 1 Level 2 Level 3 Total Assets Deposits with clearing organizations $ 34,789 $ — $ — $ 34,789 Securities owned: U.S. Treasury securities 695,346 — — 695,346 U.S. Agency securities — 2 — 2 Corporate debt and other obligations — 5,769 — 5,769 Mortgage and other asset-backed securities — 6,627 — 6,627 Municipal obligations — 35,333 — 35,333 Convertible bonds — 16,735 — 16,735 Corporate equities 27,170 — — 27,170 Money markets 5,400 217 — 5,617 Auction rate securities — — 2,713 2,713 Securities owned, at fair value 727,916 64,683 2,713 795,312 Investments (1) 1,872 16,913 — 18,785 Securities purchased under agreements to resell — 5,842 — 5,842 Derivative contracts: Futures 2 — — 2 TBAs — 11 — 11 Derivative contracts, total $ 2 $ 11 $ — $ 13 Total $ 764,579 $ 87,449 $ 2,713 $ 854,741 Liabilities U.S. Treasury securities $ 14,603 $ — $ — $ 14,603 Corporate debt and other obligations — 1,508 — 1,508 Mortgage and other asset-backed securities — 2 — 2 Convertible bonds — 2,136 — 2,136 Corporate equities 13,427 — — 13,427 Securities sold but not yet purchased, at fair value 28,030 3,646 — 31,676 Derivative contracts: Futures 735 — — 735 TBAs — 2 — 2 Derivative contracts, total 735 2 — 737 Total $ 28,765 $ 3,648 $ — $ 32,413 (1) Included in other assets on the consolidated balance sheet. 86 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements Assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 (Expressed in thousands) Fair Value Measurements as of December 31, 2022 Level 1 Level 2 Level 3 Total Assets Deposits with clearing organizations $ 24,937 $ — $ — $ 24,937 Securities owned: U.S. Treasury securities 362,815 — — 362,815 U.S. Agency securities — 6,012 — 6,012 Sovereign obligations — 9,502 — 9,502 Corporate debt and other obligations — 9,844 — 9,844 Mortgage and other asset-backed securities — 1,882 — 1,882 Municipal obligations — 30,126 — 30,126 Convertible bonds — 21,800 — 21,800 Corporate equities 24,837 — — 24,837 Auction rate securities — — 31,776 31,776 Securities owned, at fair value 387,652 79,166 31,776 498,594 Investments (1) — 7,068 — 7,068 Derivative contracts: TBAs — 1,762 — 1,762 Total $ 412,589 $ 87,996 $ 31,776 $ 532,361 Liabilities Securities sold but not yet purchased: U.S. Treasury securities $ 25,006 $ — $ — $ 25,006 U.S. Agency securities — 3 — 3 Sovereign obligations — 9,048 — 9,048 Corporate debt and other obligations — 2,905 — 2,905 Convertible bonds — 4,428 — 4,428 Corporate equities 11,378 — — 11,378 Securities sold but not yet purchased, at fair value 36,384 16,384 — 52,768 Derivative contracts: Futures 44 — — 44 TBAs — 1,761 — 1,761 Derivative contracts, total 44 1,761 — 1,805 Total $ 36,428 $ 18,145 $ — $ 54,573 (1) Included in other assets on the consolidated balance sheet. The following tables present changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2023 and 2022: (Expressed in thousands) Level 3 Assets and Liabilities For the Year Ended December 31, 2023 Beginning Balance Total Realized and Unrealized Gains (2) Purchases and Issuances Sales and Settlements Transfers In / (Out) Ending Balance Assets Auction rate securities (1) $ 31,776 $ 3,159 $ — $ ( 32,222 ) $ — $ 2,713 (1) Represents auction rate securities that failed in the auction rate market. (2) Included in principal transactions in the consolidated income statement. 87 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements 88 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements (Expressed in thousands) Level 3 Assets and Liabilities For the Year Ended December 31, 2022 Beginning Balance Total Realized and Unrealized Losses (2) Purchases and Issuances Sales and Settlements Transfers In / (Out) Ending Balance Assets Auction rate securities (1) $ 31,804 $ ( 28 ) $ 1,375 $ ( 1,375 ) $ — $ 31,776 (1) Represents auction rate securities that failed in the auction rate market. (2) Included in principal transactions in the consolidated income statement. Financial Instruments Not Measured at Fair Value The table below presents the carrying value, fair value and fair value hierarchy category of certain financial instruments that are not measured at fair value on the consolidated balance sheets. The table below excludes non-financial assets and liabilities (e.g., furniture, equipment and leasehold improvements and accrued compensation). The carrying value of financial instruments not measured at fair value categorized in the fair value hierarchy as Level 1 or Level 2 (e.g., cash and receivables from customers) approximates fair value because of the relatively short-term nature of the underlying assets. The fair value of the Company's senior secured notes, categorized in Level 2 of the fair value hierarchy, is based on quoted prices from the market in which the notes trade. Assets and liabilities not measured at fair value as of December 31, 2023 (Expressed in thousands) Fair Value Measurement: Assets Carrying Value Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 28,835 $ 28,835 $ — $ — $ 28,835 Deposits with clearing organization 43,917 43,917 — — 43,917 Receivable from brokers, dealers and clearing organizations: Securities borrowed 158,612 — 158,612 — 158,612 Receivables from brokers 65,639 — 65,639 — 65,639 Securities failed to deliver 29,656 — 29,656 — 29,656 Clearing organizations and Other 30,780 — 30,780 — 30,780 $ 284,687 — $ 284,687 — $ 284,687 Receivable from customers 1,059,892 — 1,059,892 — 1,059,892 Notes receivable, net 62,640 — 62,640 — 62,640 Investments (1) 90,999 — 90,999 — 90,999 (1) The cash surrender value of Company-owned life insurance policies, which fluctuates based on changes in fair value of the policies’ underlying investments, comprises approximately $ 89 million of this balance. This balance is included within other assets on the consolidated balance sheet. 89 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements (Expressed in thousands) Fair Value Measurement: Liabilities Carrying Value Level 1 Level 2 Level 3 Total Drafts payable $ 9,002 $ 9,002 $ — $ — $ 9,002 Payables to brokers, dealers and clearing organizations: Securities loaned $ 284,987 — $ 284,987 — $ 284,987 Payable to brokers 447 — 447 — 447 Securities failed to receive 23,809 — 23,809 — 23,809 Clearing Organizations and Other 51,912 — 51,912 — 51,912 $ 361,155 — $ 361,155 — $ 361,155 Payables to customers 369,287 — 369,287 — 369,287 Securities sold under agreements to repurchase 640,382 — 640,382 — 640,382 Senior secured notes 113,050 — 109,838 — 109,838 Assets and liabilities not measured at fair value as of December 31, 2022 (Expressed in thousands) Fair Value Measurement: Assets Carrying Value Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 112,433 $ 112,433 $ — $ — $ 112,433 Restricted cash 25,534 25,534 — — 25,534 Deposits with clearing organization 52,754 52,754 — — 52,754 Receivable from brokers, dealers and clearing organizations: Securities borrowed 127,817 — 127,817 — 127,817 Receivables from brokers 49,125 — 49,125 — 49,125 Securities failed to deliver 9,099 — 9,099 — 9,099 Clearing organizations 20,035 — 20,035 — 20,035 206,076 — 206,076 — 206,076 Receivable from customers 1,202,764 — 1,202,764 — 1,202,764 Notes receivable, net 57,495 — 57,495 — 57,495 Investments (1) 79,322 — 79,322 — 79,322 (1) The cash surrender value of Company-owned life insurance policies, which fluctuates based on changes in fair value of the policies’ underlying investments, comprises approximately $ 77 million of this balance. This balance is included within other assets on the consolidated balance sheet. 90 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements (Expressed in thousands) Fair Value Measurement: Liabilities Carrying Value Level 1 Level 2 Level 3 Total Payables to brokers, dealers and clearing organizations: Securities loaned $ 320,843 $ — $ 320,843 $ — $ 320,843 Payable to brokers 123 — 123 — 123 Securities failed to receive 62,646 — 62,646 — 62,646 Other 166,350 — 166,350 — 166,350 549,962 — 549,962 — 549,962 Payables to customers 456,475 — 456,475 — 456,475 Securities sold under agreements to repurchase 161,009 — 161,009 — 161,009 Senior secured notes 114,050 — 113,233 — 113,233 Derivative Instruments and Hedging Activities The Company transacts, on a limited basis, in exchange traded and over-the-counter derivatives for both asset and liability management as well as for trading and investment purposes. Risks managed using derivative instruments include interest rate risk and, to a lesser extent, foreign exchange risk. All derivative instruments are measured at fair value and are recognized as either assets or liabilities on the consolidated balance sheet. Foreign exchange hedges From time to time, the Company also utilizes forward and options contracts to hedge the foreign currency risk associated with compensation obligations to Oppenheimer Israel (OPCO) Ltd. employees denominated in New Israeli Shekel ("NIS"). Such hedges have not been designated as accounting hedges. Unrealized gains and losses on foreign exchange forward contracts are recorded in other assets or other liabilities on the consolidated balance sheet and other income in the consolidated income statement. Derivatives used for trading and investment purposes Futures contracts represent commitments to purchase or sell securities or other commodities at a future date and at a specified price. Market risk exists with respect to these instruments. Notional or contractual amounts are used to express the volume of these transactions and do not represent the amounts potentially subject to market risk. The Company uses futures contracts, including U.S. Treasury notes, Federal Funds, General Collateral futures and Eurodollar contracts primarily as an economic hedge of interest rate risk associated with government trading activities. Unrealized gains and losses on futures contracts are recorded on the consolidated balance sheet in payable to brokers, dealers and clearing organizations and in the consolidated income statement as principal transactions revenue, net. To-be-announced securities The Company also transacts in pass-through mortgage-backed securities eligible to be sold in the TBA market as economic hedges against mortgage-backed securities that it owns or has sold but not yet purchased. TBAs provide for the forward or delayed delivery of the underlying instrument with settlement up to 180 days. The contractual or notional amounts related to these financial instruments reflect the volume of activity and do not reflect the amounts at risk. Net unrealized gains and losses on TBAs are recorded on the consolidated balance sheet in receivable from brokers, dealers and clearing organizations or payable to brokers, dealers and clearing organizations and in the consolidated income statement as principal transactions revenue, net. 91 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements The notional amounts and fair values of the Company's derivatives as of December 31, 2023 and 2022 by product were as follows: (Expressed in thousands) Fair Value of Derivative Instruments as of December 31, 2023 Description Notional Fair Value Assets: Derivatives not designated as hedging instruments (1) Other contracts TBAs $ 3,700 $ 11 Commodity contracts Futures 5,000 2 $ 8,700 $ 13 Liabilities: Derivatives not designated as hedging instruments (1) Commodity contracts Futures $ 6,875,000 $ 735 Other contracts TBAs 3,700 2 $ 6,878,700 $ 737 (1) See "Derivative Instruments and Hedging Activities" above for a description of derivative financial instruments. Such derivative instruments are not subject to master netting agreements, thus the related amounts are not offset. (Expressed in thousands) Fair Value of Derivative Instruments as of December 31, 2022 Description Notional Fair Value Assets: Derivatives not designated as hedging instruments (1) Other contracts TBAs $ 1,775 $ 1,762 Forward reverse repurchase agreements 15,000 — Other 275 — $ 17,050 $ 1,762 Liabilities: Derivatives not designated as hedging instruments (1) Commodity contracts Futures $ 1,912,500 $ 44 Other contracts TBAs 1,775 1,761 $ 1,914,275 $ 1,805 (1) See "Derivative Instruments and Hedging Activities" above for a description of derivative financial instruments. Such derivative instruments are not subject to master netting agreements, thus the related amounts are not offset. 92 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements The following table presents the location and fair value amounts of the Company's derivative instruments and their effect in the consolidated income statements for the years ended December 31, 2023 and 2022: (Expressed in thousands) The Effect of Derivative Instruments in the Consolidated Income Statement For the Year Ended December 31, 2023 Types Description Location Net Gain Commodity contracts Futures Principal transactions revenue $ 2,842 Other contracts Foreign exchange forward contracts Other revenue 65 TBAs Principal transactions revenue 26 $ 2,933 (Expressed in thousands) The Effect of Derivative Instruments in the Consolidated Income Statement For the Year Ended December 31, 2022 Types Description Location Net Gain (Loss) Commodity contracts Futures Principal transactions revenue $ 4,652 Other contracts Foreign exchange forward contracts Other revenue ( 28 ) TBAs Principal transactions revenue 60 $ 4,684 9. Collateralized transactions The Company enters into collateralized borrowing and lending transactions in order to meet customers' needs and earn interest rate spreads, obtain securities for settlement and finance trading inventory positions. Under these transactions, the Company either receives or provides collateral, including U.S. Government and Agency, asset-backed, corporate debt, equity, and non-U.S. Government and Agency securities. The Company obtains short-term borrowings primarily through bank call loans. Bank call loans are generally payable on demand and bear interest at various rates. As of December 31, 2023 and 2022, the outstanding balance of bank call loans was zero . As of December 31, 2023, the Company had approximately $ 1.6 billion of customer securities under customer margin loans that are available to be pledged, of which the Company has re-pledged approximately $ 211.3 million under securities loan agreements. As of December 31, 2023, the Company had pledged $ 129.2 million of customer securities directly with the Options Clearing Corporation to secure obligations and margin requirements under option contracts written by customers. As of December 31, 2023, the Company had no outstanding letters of credit. The Company enters into reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions to, among other things, acquire securities to cover short positions and settle other securities obligations, to accommodate customers' needs and to finance the Company's inventory positions. Except as described below, repurchase and reverse repurchase agreements, principally involving U.S. Government and Agency securities, are carried at amounts at which the securities subsequently will be resold or reacquired as specified in the respective agreements and include accrued interest. Repurchase agreements and reverse repurchase agreements are presented on a net-by-counterparty basis, when the repurchase agreements and reverse repurchase agreements are executed with the same counterparty, have the same explicit settlement date, are executed in accordance with a master netting arrangement, the securities underlying the repurchase agreements and reverse repurchase agreements exist in "book entry" form and certain other requirements are met. 93 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements The following table presents a disaggregation of the gross obligation by the class of collateral pledged and the remaining contractual maturity of the repurchase agreements and securities loaned transactions as of December 31, 2023: (Expressed in thousands) Overnight and Open Repurchase agreements: U.S. Government and Agency securities $ 643,410 Securities loaned: Equity securities 284,987 Gross amount of recognized liabilities for repurchase agreements and securities loaned $ 928,397 The following tables present the gross amounts and the offsetting amounts of reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions as of December 31, 2023 and 2022: As of December 31, 2023 (Expressed in thousands) Gross Amounts Not Offset on the Balance Sheet Gross Amounts of Recognized Assets Gross Amounts Offset on the Balance Sheet Net Amounts of Assets Presented on the Balance Sheet Financial Instruments Cash Collateral Received Net Amount Reverse repurchase agreements $ 8,870 $ ( 3,028 ) $ 5,842 $ — $ — $ 5,842 Securities borrowed (1) 158,612 — 158,612 ( 149,946 ) — 8,666 Total $ 167,482 $ ( 3,028 ) $ 164,454 $ ( 149,946 ) $ — $ 14,508 (1) Included in receivable from brokers, dealers and clearing organizations on the consolidated balance sheet. Gross Amounts Not Offset on the Balance Sheet Gross Amounts of Recognized Liabilities Gross Amounts Offset on the Balance Sheet Net Amounts of Liabilities Presented on the Balance Sheet Financial Instruments Cash Collateral Pledged Net Amount Repurchase agreements $ 643,410 $ ( 3,028 ) $ 640,382 $ ( 632,521 ) $ — $ 7,861 Securities loaned (2) 284,987 — 284,987 ( 276,688 ) — 8,299 Total $ 928,397 $ ( 3,028 ) $ 925,369 $ ( 909,209 ) $ — $ 16,160 (2) Included in payable to brokers, dealers and clearing organizations on the consolidated balance sheet. As of December 31, 2022 (Expressed in thousands) Gross Amounts Not Offset on the Balance Sheet Gross Amounts of Recognized Assets Gross Amounts Offset on the Balance Sheet Net Amounts of Assets Presented on the Balance Sheet Financial Instruments Cash Collateral Received Net Amount Reverse repurchase agreements $ 28,012 $ ( 28,012 ) $ — $ — $ — $ — Securities borrowed (1) 127,817 — 127,817 ( 127,365 ) — 452 Total $ 155,829 $ ( 28,012 ) $ 127,817 $ ( 127,365 ) $ — $ 452 94 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements (1) Included in receivable from brokers, dealers and clearing organizations on the consolidated balance sheet. Gross Amounts Not Offset on the Balance Sheet Gross Amounts of Recognized Liabilities Gross Amounts Offset on the Balance Sheet Net Amounts of Liabilities Presented on the Balance Sheet Financial Instruments Cash Collateral Pledged Net Amount Repurchase agreements $ 189,021 $ ( 28,012 ) $ 161,009 $ ( 157,981 ) $ — $ 3,028 Securities loaned (2) 320,843 — 320,843 ( 308,535 ) — 12,308 Total $ 509,864 $ ( 28,012 ) $ 481,852 $ ( 466,516 ) $ — $ 15,336 (2) Included in payable to brokers, dealers and clearing organizations on the consolidated balance sheet. The Company receives collateral in connection with securities borrowed and reverse repurchase agreement transactions and customer margin loans. Under many agreements, the Company is permitted to sell or re-pledge the securities received (e.g., use the securities to enter into securities lending transactions, or deliver to counterparties to cover short positions). As of December 31, 2023, the fair value of securities received as collateral under securities borrowed transactions and reverse repurchase agreements was $ 151.9 million ($ 124.1 million as of December 31, 2022) and $ 8.8 million ($ 28.0 million as of December 31, 2022), respectively, of which the Company has sold and re-pledged approximately $ 61.5 million ($ 39.4 million as of December 31, 2022) under securities loaned transactions and $ 8.8 million under repurchase agreements ($ 28.0 million as of December 31, 2022). The Company pledges certain of its securities owned for securities lending and repurchase agreements and to collateralize bank call loan transactions. The carrying value of pledged securities owned that can be sold or re-pledged by the counterparty was $ 689.4 million, as presented on the face of the consolidated balance sheet as of December 31, 2023 ($ 175.7 million as of December 31, 2022). The Company manages credit exposure arising from repurchase and reverse repurchase agreements by, in appropriate circumstances, entering into master netting agreements and collateral arrangements with counterparties that provide the Company, in the event of a customer default, the right to liquidate securities and the right to offset a counterparty's rights and obligations. The Company manages market risk of repurchase agreements and securities loaned by monitoring the market value of collateral held and the market value of securities receivable from others. It is the Company's policy to request and obtain additional collateral when exposure to loss exists. In the event the counterparty is unable to meet its contractual obligation to return the securities, the Company may be exposed to off-balance sheet risk of acquiring securities at prevailing market prices. Credit Concentrations Credit concentrations may arise from trading, investing, underwriting and financing activities and may be impacted by changes in economic, industry or political factors. In the normal course of business, the Company may be exposed to credit risk in the event customers, counterparties including other brokers and dealers, issuers, banks, depositories or clearing organizations are unable to fulfill their contractual obligations. The Company seeks to mitigate these risks by actively monitoring exposures and obtaining collateral as deemed appropriate. Included in receivable from brokers, dealers and clearing organizations as of December 31, 2023 are receivables f ro m three major U.S. broker-dealers totaling approximately $ 107.6 million. The Company is obligated to settle transactions with brokers and other financial institutions even if its clients fail to meet their obligations to the Company. Clients are required to complete their transactions on the settlement date, generally one to two business days after the trade date. If clients do not fulfill their contractual obligations, the Company may incur losses. The Company has clearing/participating arrangements with the National Securities Clearing Corporation, the Fixed Income Clearing Corporation ("FICC"), the Mortgage-Backed Securities Division (a division of FICC) and others. With respect to its business in reverse repurchase and repurchase agreements, substantially all open contracts as of December 31, 2023 are with the FICC . In addition, the Company clears its non-U.S. international equities business carried on by Oppenheimer Europe Ltd. through Global Prime Partners, Ltd, a global clearing financial institution located in the United Kingdom. The clearing organizations have the right to charge the Company for losses that result from a client's failure to fulfill its contractual obligations. Accordingly, the Company has credit exposures with these clearing brokers. The clearing brokers can re-hypothecate the 95 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements securities held on behalf of the Company. As the right to charge the Company has no maximum amount and applies to all trades executed through the clearing brokers, the Company believes there is no maximum amount assignable to this right. As of December 31, 2023, the Company had recorded no liabilities with regard to this right. The Company's policy is to monitor the credit standing of the clearing brokers and banks with which it conducts business. 10. Variable interest entities ("VIEs") The Company's policy is to consolidate all subsidiaries in which it has a controlling financial interest, as well as any VIEs where the Company is deemed to be the primary beneficiary, when it has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb significant losses or the right to receive benefits that could potentially be significant to the VIE. The Company serves as general partner of hedge funds and private equity funds that were established for the purpose of providing alternative investments to both its institutional and qualified retail clients. The Company's investment in and additional capital commitments to these hedge funds and private equity funds are considered variable interests. The Company's additional capital commitments are subject to call at a later date and are limited to the amount committed. The Company assesses whether it is the primary beneficiary of the hedge funds and private equity funds in which it holds a variable interest in the form of general and limited partner interests. In each instance, the Company has determined that it is not the primary beneficiary and therefore need not consolidate the hedge funds or private equity funds. The subsidiaries' general and limited partnership interests and additional capital commitments represent its maximum exposure to loss. The subsidiaries' general partnership and limited partnership interests is included in other assets on the consolidated balance sheet. In addition, the Company serves as general partner of Oppenheimer Acquisition LLC I and Oppenheimer Acquisition LLC II (the "Sponsors"). They are sponsors of two special purpose acquisition companies, OHAA and Oppenheimer Acquisition Corp. II (the "SPACs”). Both the Sponsors and the SPACs are in the process of liquidating and dissolving, as indicated above. Until the liquidation and dissolutions are complete, the Sponsors and the SPACs will remain consolidated VIE's as the Company is the primary beneficiary. See note 2 for further details. The following table sets forth the total assets and liabilities of VIE's consolidated on our consolidated balance sheet: (Expressed in thousands) For the Years Ended December 31, 2023 2022 Asset Cash and cash equivalents $ 94 $ 1,694 Restricted Cash — 25,535 Other Assets 387 318 Total Assets $ 481 $ 27,547 Liabilities Other Liabilities 171 828 Total Liabilities $ 171 $ 828 96 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements 11. Furniture, equipment and leasehold improvements (Expressed in thousands) For the Years Ended December 31, 2023 2022 Furniture, fixtures and equipment $ 63,473 $ 76,070 Leasehold improvements 63,133 58,423 Total 126,606 134,493 Less accumulated depreciation ( 82,732 ) ( 97,751 ) Total $ 43,874 $ 36,742 Depreciation and amortization expense, included in occupancy and equipment costs in the consolidated income statements was $ 9.9 million, $ 7.6 million and $ 8.0 million for the years ended December 31, 2023, 2022 and 2021, respectively. 12. Bank call loans Bank call loans, primarily payable on demand, bear interest at various rates. Details of the bank call loans are as follows: (Expressed in thousands, except percentages) 2023 2022 Year-end balance $ — $ — Weighted interest rate (at end of year) — % — % Maximum balance (at any month-end) 131,900 179,200 Average amount outstanding (during the year) 49,387 79,366 Average interest rate (during the year) 4.20 % 2.18 % Interest expense for the year ended December 31, 2023 on bank call loans was $ 2.9 million ($ 1.8 million in 2022 and $ 0.7 million in 2021). 13. Long-term debt (Expressed in thousands) Issued Maturity Date December 31, 2023 December 31, 2022 5.50 % Senior Secured Notes 10/1/2025 $ 113,050 $ 114,050 Unamortized Debt Issuance Cost ( 392 ) ( 616 ) $ 112,658 $ 113,434 5.50 % Senior Secured Notes due 2025 (the "Notes") On September 22, 2020, in a private offering, the Company issued $ 125.0 million aggregate principal amount of 5.50 % Senior Secured Notes due 2025 (the "Unregistered Notes") under an Indenture at an issue price of 100 % of the principal amount. Interest on the Unregistered Notes is payable semi-annually on April 1st and October 1st. The Company used the net proceeds from the offering of the Unregistered Notes, along with cash on hand, to redeem in full our 6.75 % Senior Secured Notes due July 1, 2022 (the "Old Notes") in the principal amount of $ 150.0 million (the Company held $ 1.4 million in treasury for a net outstanding amount of $ 148.6 million), and pay all related fees and expenses in relation thereto. On November 23, 2020, we completed an exchange offer in which we exchanged 99.8 % of the Unregistered Notes for a like principal amount of Notes with identical terms, except that such new notes have been registered under the Securities Act. We 97 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements did not receive any proceeds in the exchange offer. The Notes will mature on October 1, 2025 and bear interest at a rate of 5.50 % per annum, payable semiannually on April 1st and October 1st, respectively, of each year. The Parent used the net proceeds from the offering of the Notes, along with cash on hand, to redeem in full its Old Notes, in the principal amount of $ 150.0 million (the Parent held $ 1.4 million in treasury for a net outstanding amount of $ 148.6 million), and pay all related fees and expenses in relation thereto. The cost to issue the Notes was $ 3.1 million, of which $ 1.9 million was paid to its subsidiary, (Oppenheimer & Co Inc., who served as the initial purchaser of the offering), and was eliminated in consolidation. The remaining $ 1.2 million was capitalized and is amortized over the term of the Notes. The Company has repurchased and may continue to seek to repurchase its Notes from time to time through, as applicable, tender offers, open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on a number of factors, including, but not limited to, the Company’s priorities for the use of cash, price, market and economic conditions, its liquidity requirements, and legal and contractual restrictions. During the year-ended December 31, 2022, the Company repurchased and cancelled $ 10.95 million aggregate principal amount of its Notes in the open market. During the first quarter of 2023, the Company repurchased and cancelled an additional $ 1.0 million aggregate principal amount of its Notes in the open market. As of December 31, 2023, $ 113.05 million aggregate principal amount of the Notes remain outstanding. The Indenture governing the Notes contains covenants which place restrictions on the incurrence of indebtedness, the payment of dividends, the repurchase of equity, the sale of assets, the issuance of guarantees, mergers and acquisitions and the granting of liens. These covenants are subject to a number of important exceptions and qualifications. These exceptions and qualifications include, among other things, a variety of provisions that are intended to allow the Company to continue to conduct its brokerage operations in the ordinary course of business. In addition, certain of the covenants will be suspended upon the Parent attaining an investment grade debt rating for the Notes from both S&P Global Ratings and Moody’s Investors Service, Inc. Pursuant to the Indenture, the following covenants apply to the Parent and its restricted subsidiaries, but generally do not apply, or apply only in part, to its Regulated Subsidiaries (as defined): • limitation on indebtedness and issuances of preferred stock, which restricts the Parent’s ability to incur additional indebtedness or to issue preferred stock; • limitation on restricted payments, which generally restricts the Parent’s ability to declare certain dividends or distributions, repurchase its capital stock or to make certain investments; • limitation on dividends and other payment restrictions affecting restricted subsidiaries or Regulated Subsidiaries, which generally limits the ability of certain of the Parent’s subsidiaries to pay dividends or make other transfers; • limitation on future Subsidiary Guarantors (as hereinafter defined), which prohibits certain of the Parent’s subsidiaries from guaranteeing its indebtedness or indebtedness of any restricted subsidiary unless the Notes are comparably guaranteed; • limitation on transactions with shareholders and affiliates, which generally requires transactions among the Parent’s affiliated entities to be conducted on an arm’s-length basis; • limitation on liens, which generally prohibits the Parent and its restricted subsidiaries from granting liens unless the Notes are comparably secured; and • limitation on asset sales, which generally prohibits the Parent and certain of its subsidiaries from selling assets or certain securities or property of significant subsidiaries. The Indenture also provides for events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the Notes to become or to be declared due and payable. As of December 31, 2023, we believe that the Parent was in compliance with all of its covenants. The Notes are jointly and severally and fully and unconditionally guaranteed on a senior secured basis by the Subsidiary Guarantors and future subsidiaries are required to guarantee the Notes pursuant to the indenture. The Notes are secured by a first-priority security interest in substantially all of the Parent’s and the Subsidiary Guarantors’ existing and future tangible and intangible assets, subject to certain exceptions and permitted liens. 98 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements Interest expense on the Notes for the year ended December 31, 2023 was $ 6.2 million ($ 6.8 million for the year ended December 31, 2022). Interest paid on the Notes for the year ended December 31, 2023 was $ 6.2 million ($ 6.7 million for the year ended December 31, 2022). 14. Stockholders' Equity The Company's authorized shares consists of (a) 50,000,000 shares of Preferred Stock, par value $ 0.001 per share; (b) 50,000,000 shares of Class A Stock, par value $ 0.001 per share; and (c) 99,665 shares of Class B Stock, par value $ 0.001 per share. No Preferred Stock has been issued. 99,665 shares of Class B Stock have been issued and are outstanding. The Class A Stock and the Class B Stock are equal in all respects except that the Class A Stock is non-voting. The following table reflects changes in the number of shares of Class A Stock outstanding for the years indicated: 2023 2022 Class A Stock outstanding, beginning of year 10,868,556 12,447,036 Issued pursuant to share-based compensation plans (note 17) 218,745 105,807 Repurchased and canceled ( 900,518 ) ( 1,684,287 ) Class A Stock outstanding, end of year 10,186,783 10,868,556 Stock buy-back On February 28, 2022, the Company announced that its Board of Directors approved a share repurchase program that authorizes the Company to purchase up to 518,000 shares of the Company's Class A Stock, representing approximately 4.2 % of its 12,322,073 then issued and outstanding shares of Class A Stock. This authorization supplemented the 12,407 shares that remained authorized and available under the Company's previous share repurchase program for a total of 530,407 shares authorized and available for repurchase at February 28, 2022. On May 24, 2022, the Company announced that its Board of Directors approved a share repurchase program that authorizes the Company to purchase up to 550,000 shares of the Company's Class A Stock, representing approximately 4.6 % of its 11,863,559 then issued and outstanding shares of Class A Stock. This authorization supplemented the 71,893 shares that remained authorized and available under the Company's previous share repurchase program for a total of 621,893 shares authorized and available for repurchase at May 24, 2022. On July 29, 2022, the Company's Board of Directors approved a share repurchase program that authorizes the Company to purchase up to 536,500 shares of the Company's Class A Stock, representing approximately 4.8 % of its 11,251,930 then issued and outstanding shares of Class A Stock. This authorization supplemented the 4,278 shares that remained authorized and available under the Company's previous share repurchase program for a total of 540,778 shares authorized. On December 13, 2022, the Company's Board of Directors approved a share repurchase program that authorizes the Company to purchase up to 543,000 shares of the Company's Class A Stock, representing approximately 5.0 % of its 10,867,660 then issued and outstanding shares of Class A Stock. This authorization supplemented the 144,034 shares that remained authorized and available under the Company's previous share repurchase program for a total of 687,034 shares authorized. On May 31, 2023, the Company announced the commencement of a modified “Dutch Auction” tender offer to purchase up to $ 30.0 million of its Class A Stock at a price not less than $ 34.00 per share or more than $ 40.00 per share. The Company completed its repurchases pursuant to the tender offer on July 6, 2023, when it successfully repurchased and cancelled 437,183 shares of Class A Stock at $ 40.00 per share for an aggregate purchase price of $ 17.49 million. As a result, the Company had 10,447,392 shares outstanding on July 6, 2023 after the purchase. During the year ended December 31, 2023, the Company purchased and canceled an aggregate of 463,335 shares of Class A Stock for a total consideration of $ 17.6 million ($ 38.07 per share) under its share repurchase program. As of December 31, 99 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements 2023, 223,699 shares remained available to be purchased under its share repurchase program. During the year ended December 31, 2022, the Company purchased and canceled an aggregate of 1,684,287 shares of Class A Stock for a total consideration of $ 60.6 million ($ 36.00 per share) under its share repurchase program. As of December 31, 2022, 687,034 shares remained available to be purchased under the share repurchase program. On March 1, 2024, the Company's Board of Directors approved a share repurchase program that authorizes the Company to purchase up to 442,711 shares of the Company's Class A Stock, representing approximately 5.0 % of its 10,357,376 then issued and outstanding shares of Class A Stock. This authorization supplemented the 223,699 shares that remained authorized and available under the Company's previous share repurchase program for a total of 666,410 shares authorized. Share purchases will be made by the Company from time to time in the open market at the prevailing open market price using cash on hand, in compliance with the applicable rules and regulations of the New York Stock Exchange and federal and state securities laws and the terms of the Company's Notes. All shares purchased will be canceled. The share repurchase program is expected to continue indefinitely. The timing and amounts of any purchases will be based on market conditions and other factors including price, regulatory requirements and capital availability. The share repurchase program does not obligate the Company to repurchase any dollar amount or number of shares of Class A Stock. Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice. Dividends The Company paid cash dividends of $ 0.60 per share in 2023 to holders of Class A and Class B Stock, in the aggregate amount of 6.5 million. The Company paid cash dividends of $ 0.60 per share in 2022 in the aggregate amount of $ 7.0 million. In 2021, the Company paid cash dividends of $ 1.54 per share which includes a special cash dividend of $ 1.00 per share paid on December 31, 2021 in the aggregate amount of $ 19.4 million. 15. Earnings per share Basic earnings per share is computed by dividing net income over the weighted average number of shares of Class A Stock and Class B Stock outstanding. Diluted earnings per share includes the weighted average number of shares of Class A Stock and Class B Stock outstanding and options to purchase Class A Stock and unvested restricted stock awards of Class A Stock using the treasury stock method. Earnings per share have been calculated as follows: (Expressed in thousands, except number of shares and per share amounts) For the Years Ended December 31, 2023 2022 2021 Basic weighted average number of shares outstanding 10,736,166 11,666,194 12,642,306 Net dilutive effect of share-based awards, treasury stock method (1) 909,542 941,558 940,522 Diluted weighted average number of shares outstanding 11,645,708 12,607,752 13,582,828 Net income attributable to Oppenheimer Holdings Inc. $ 30,179 $ 32,351 $ 158,964 Earnings per share attributable to Oppenheimer Holdings Inc. Basic $ 2.81 $ 2.77 $ 12.57 Diluted $ 2.59 $ 2.57 $ 11.70 (1) For the year ended December 31, 2023, the diluted net income per share computation did not include the anti-dilutive effect of 115,950 shares of Class A Stock granted under share-based compensation arrangements. For the year ended December 31, 2022, the diluted net income per share computation did not include the anti-dilutive 100 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements effect of 4,100 shares of Class A Stock granted under share-based compensation arrangements. For the year ended December 31, 2021, there was no Class A Stock granted under share-based compensation arrangements that were anti-dilutive. 16. Income taxes Income tax expenses shown in the consolidated income statements are reconciled to amounts of tax that would have been payable from the application of the federal tax rate to pre-tax profit, as follows: (Expressed in thousands) For the Years Ended December 31, 2023 2022 2021 Amount Percentage Amount Percentage Amount Percentage U.S. federal statutory income tax $ 9,806 21.0 % $ 9,497 21.0 % $ 47,176 21.0 % U.S. state and local income taxes, net of U.S. federal income tax benefits 4,150 8.9 % 3,110 6.8 % 13,585 6.0 % Unrecognized tax benefit 45 0.1 % 180 0.4 % 59 — % Valuation allowance 964 2.1 % 1,054 2.3 % 1,121 0.5 % Non-taxable income ( 964 ) ( 2.1 ) % ( 1,083 ) ( 2.4 ) % ( 430 ) ( 0.2 ) % Provision to return adjustments ( 812 ) ( 1.7 ) % ( 316 ) ( 0.7 ) % 281 0.1 % Change in state and foreign tax rates ( 514 ) ( 1.1 ) % ( 660 ) ( 1.4 ) % 1,384 0.6 % Foreign tax rate differentials ( 146 ) ( 0.3 ) % ( 285 ) ( 0.6 ) % ( 223 ) ( 0.1 ) % Excess tax benefits from share-based awards ( 1,378 ) ( 2.9 ) % ( 471 ) ( 1.0 ) % ( 1,542 ) ( 0.7 ) % Non-deductible executive compensation 1,514 3.2 % 1,605 3.5 % 3,956 1.8 % Other non-deductible expenses 3,833 8.1 % 813 1.6 % 310 0.2 % Total income taxes $ 16,498 35.3 % $ 13,444 29.5 % $ 65,677 29.2 % Income tax expenses included in the consolidated income statements represent the following: (Expressed in thousands) For the Years Ended December 31, 2023 2022 2021 Current: U.S. federal tax $ 6,967 $ 18,862 $ 47,880 State and local tax 2,137 8,068 18,331 Non-U.S. operations 937 1,129 258 Total Current 10,041 28,059 66,469 Deferred: U.S. federal tax 5,207 ( 10,420 ) ( 1,745 ) State and local tax 919 ( 4,538 ) 790 Non-U.S. operations 331 343 163 Total Deferred 6,457 ( 14,615 ) ( 792 ) Total $ 16,498 $ 13,444 $ 65,677 Pre-tax income with respect to non-U.S. operations was $ 4.8 million for the year ended December 31, 2023. Pre-tax income with respect to non-U.S. operation was $ 7.7 million for the year ended December 31, 2022. Pre-tax loss with respect to non-U.S. operations was $ 1.2 million for the year ended December 31, 2021. 101 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements The effective income tax rate for the year ended December 31, 2023 was 35.3 % compared with 29.5 % for the year ended December 31, 2022. The higher tax rate in the 2023 year was primarily due to the im pact of unfavorable permanent items. Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when such differences are expected to reverse. Significant components of the Company's deferred tax assets and liabilities as of December 31, 2023 and 2022 were as follows: (Expressed in thousands) As of December 31, 2023 2022 Deferred tax assets: Deferred compensation $ 27,780 $ 27,161 Deferred rent and lease incentives 8,772 9,877 Net operating losses and credits 12,124 9,593 Receivable reserves 1,259 1,294 Accrued expenses 4,762 13,121 Auction rate securities reserves 62 1,394 Involuntary conversion 1,671 1,704 Other 981 958 Total deferred tax assets 57,411 65,102 Valuation allowance ( 9,581 ) ( 7,036 ) Deferred tax assets after valuation allowance 47,830 58,066 Deferred tax liabilities: Goodwill 40,984 41,775 Partnership investments 27,181 32,679 Company-owned life insurance 14,180 11,527 Depreciation 1,517 1,617 Other 303 272 Total deferred tax liabilities 84,165 87,870 Deferred tax liabilities, net $ ( 36,335 ) $ ( 29,804 ) The Company recognized deferred tax assets of $ 2 million at December 31, 2023 within other assets arising from net operating losses incurred by Oppenheimer Israel (OPCO) Ltd. The Company believes that realization of the deferred tax assets is more likely than not based on expectations of future taxable income in Israel. These net operating losses carry forward indefinitely and are not subject to expiration, provided that these subsidiaries and their underlying businesses continue operating normally (as is anticipated). As of December 31, 2023, the Company had deferred tax assets of $ 8.6 million arising from net operating losses incurred by Oppenheimer Europe Ltd and had recorded full valuation allowances, although the net operating losses carry forward indefinitely, the Company believes it is more likely than not that the Company will not be able to realize its deferred tax assets in the future. The net change during the year in the total valuation allowance is $ 3.4 million. The Company and one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and in various states and foreign jurisdictions. The Company has closed tax years through 2017 in the U.S. federal jurisdiction. The Company has unrecognized tax benefits of $ 1.2 million, $ 1.1 million and $ 0.3 million as of December 31, 2023, 2022 and 2021, respectively (as shown on the table below). Included in the balance of unrecognized tax benefits as of December 31, 2023 and 2022 were $ 977,000 and $ 847,000 , respectively, of tax benefits for either year that, if recognized, would affect the effective tax rate. 102 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements During the year ended December 31, 2023, the Company adde d $ 0.2 million and released $ 0.1 million related to state and local tax matters. The Company does not believe any unrecognized tax benefit will significantly increase or decrease within twelve months. A reconciliation of the beginning and ending amount of unrecognized tax benefit follows: (Expressed in thousands) 2023 2022 2021 Balance at beginning of year $ 1,072 $ 343 $ 212 Additions for tax positions of prior years 224 729 343 Settlements with taxing authorities ( 60 ) — ( 212 ) Balance at end of year $ 1,236 $ 1,072 $ 343 In its consolidated income statements, the Company records interest and penalties accruing on unrecognized tax benefits in pre-tax income as interest expense and other expense, respectively. For the year ended December 31, 2023, the Company added tax-related interest expense of $ 107,000 , and for the years ended December 2022 and 2021, the Company released tax-related interest expense of $ 173,000 and $ 164,000 , respectively, in its consolidated income statement. As of December 31, 2023 and 2022, the Company had an income tax-related interest payable of $ 322,000 and $ 214,000 , respectively, on its consolidated balance sheets. 17. Employee compensation plans The Company maintains various employee compensation plans for the benefit of its employees. Two types of employee compensation are granted under share-based compensation and cash-based compensation plans. Share-based Compensation Plans Oppenheimer Holdings Inc. 2014 Incentive Plan On February 26, 2014, the Company adopted the Oppenheimer Holdings Inc. 2014 Incentive Plan (the "OIP"). Pursuant to the OIP, the Compensation Committee of the Board of Directors of the Company (the "Committee") is permitted to grant options to purchase Class A Stock ("stock options"), Class A Stock awards and restricted Class A Stock (collectively "restricted stock awards") to or for the benefit of employees and non-employee directors of the Company and its subsidiaries as part of their compensation. Stock o ptions are generally granted for a five-year term and generally vest at the rate of 25 % of the amount granted on the second anniversary of the grant, 25 % on the third anniversary of the grant, 25 % on the fourth anniversary of the grant and 25 % on the six months before expiration. Restricted stock awards are generally awarded for a three or five year term and fully vest at the end of the term. Restricted stock - The Company has granted restricted stock awards pursuant to the OIP. The following table summarizes the status of the Company's non-vested restricted Class A Stock awards under the OIP for the year ended December 31, 2023: Number of Class A Shares Subject to Restricted Stock Awards Weighted Average Fair Value Per Share Weighted Average Remaining Contractual Life Nonvested at beginning of year 1,690,006 $ 29.42 1.9 years Granted 293,222 45.66 2.6 years Vested ( 341,579 ) 25.79 — Forfeited ( 52,235 ) 37.98 — Nonvested at end of year 1,589,414 $ 32.92 1.6 years As of December 31, 2023, all outstanding restricted Class A Stock awards were non-vested. The aggregate intrinsic value of restricted Class A Stock awards outstanding as of December 31, 2023 was $ 65.7 million. During the year ended December 31, 103 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements 2023, the Company included $ 13.1 million ($ 11.5 million in 2022 and $ 10.5 million in 2021) of compensation expense in its consolidated income statements relating to restricted Class A Stock awards. As of December 31, 2023, there was $ 21.4 million of total unrecognized compensation cost related to unvested restricted Class A Stock awards. The cost is expected to be recognized over a weighted average period of 1.6 years. As of December 31, 2023, the number of shares of Class A Stock available under the share-based compensation plans, but not yet awarded, was 145,303 . On May 8, 2023, holders of the Class B voting common stock of the Company voted to approve increasing the number of shares of Class A Stock available to the 2014 Plan by 1,250,000 shares of Class A Stock. On January 24, 2024, the Company registered these additional shares of Class A Stock to be available under the 2014 Plan. As of January 24, 2024, the number of shares of Class A Stock available under the share-based compensation plans, but not yet awarded, was 1,395,303 . On January 25, 2024, the Company awarded a total of 311,140 restricted shares of Class A Stock to current employees pursuant to the OIP. Of these restricted shares, 184,790 shares will cliff vest in three years and 126,350 shares will cliff vest in five years . These awards will be expensed over the applicable three or five year vesting period. Stock options - The Company has granted stock options pursuant to the OIP. There were 2,447 and 5,233 options outstanding as of December 31, 2023 and 2022, respectively. During the year ended December 31, 2023, the Company included $ 8,195 ($ 15,702 in 2022 and $ 21,669 in 2021) of compensation expense in its consolidated income statements relating to the expensing of stock options. On February 26, 2024 the OIP expired by its terms. Awards issued prior to the expiration of the OIP survive the termination of the OIP. Authorized but unissued shares under the OIP not subject to awards were cancelled. On March 1, 2024 the Board of Directors of the Company approved the Company’s 2024 Incentive Plan (“2024 Plan”) subject to approval of the 2024 Plan at the Annual Meeting of Stockholders on May 6, 2024. Oppenheimer Holdings Inc. Stock Appreciation Right Plan Under the Oppenheimer Holdings Inc. Stock Appreciation Right Plan, the Company awards stock appreciation rights ("OARs") to certain employees as part of their compensation package based on a formula reflecting gross production and length of service. These awards are granted once per year in January with respect to the prior year's production. The OARs vest five years from grant date and settle in cash at vesting. OARs - The Company has awarded OARs pursuant to the Oppenheimer Holdings Inc. Stock Appreciation Right Plan. The following table summarizes the status of the Company's outstanding OARs awards as of December 31, 2023: Grant Date Number of OARs Outstanding Strike Price Remaining Contractual Life Fair Value as of December 31, 2023 January 11, 2019 473,956 $ 26.45 12 days $ 14.88 January 10, 2020 484,790 27.54 1 year 14.98 January 11, 2021 583,389 32.16 2 years 13.30 January 7, 2022 617,707 49.57 3 years 7.52 January 6, 2023 514,670 45.33 4 years 12.38 Total OARs Outstanding 2,674,512 Total weighted average values $ 36.87 2.9 years $ 12.37 The fair value as of December 31, 2023 for each of the OARs was estimated using the Black-Scholes model with the following assumptions: 104 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements Grant Date January 11, 2019 January 10, 2020 January 11, 2021 January 7, 2022 January 6, 2023 Expected term (1) 12 days 1 year 2 years 3 years 4 years Expected volatility factor (2) 17.096 % 33.244 % 34.355 % 33.422 % 40.315 % Risk-free interest rate (3) 1.741 % 4.750 % 4.244 % 4.008 % 3.927 % Quarterly dividends (4) $ 0.6 $ 0.6 $ 0.6 $ 0.6 $ 0.6 (1) The expected term was determined based on the remaining life of the actual awards. (2) The volatility factor was measured using the weighted average of historical daily price changes of the Company's Class A Stock over a historical period commensurate to the expected term of the awards. (3) The risk-free interest rate was based on periods equal to the expected term of the awards based on the U.S. Treasury yield curve in effect at December 31, 2023. (4) Quarterly dividends were used to compute the expected annual dividend yield. As of December 31, 2023, 2,674,512 of outstanding OARs were unvested. As of December 31, 2023, the aggregate intrinsic value of OARs outstanding was $ 19.1 million. In the year ended December 31, 2023, the Company included $ 3.9 million ($ 4.4 million in 2022 and $ 20.6 million in 2021) in compensation expense in its consolidated income statements relating to OARs awards. The liability related to the OARs was $ 20.6 million as of December 31, 2023. As of December 31, 2023, there was $ 12.6 million of total unrecognized compensation cost related to unvested OARs. The cost is expected to be recognized over a weighted average period of 2.9 years. On January 5, 2024, 488,700 OARs were awarded to Oppenheimer employees related to fiscal 2023 performance. These OARs will be expensed over 5 years (the vesting period). Cash-based Compensation Plans Defined Contribution Plan The Company, through its subsidiaries, maintains a defined contribution plan covering substantially all full-time U.S. employees. The Oppenheimer & Co. Inc. 401(k) Plan provides that Oppenheimer may make discretionary contributions. Eligible Oppenheimer employees could make voluntary contributions which could not exceed $ 22,500 , $ 20,500 and $ 19,500 per annum in 2023, 2022 and 2021, respectively. The Company made contributions to the 401(k) Plan of $ 4.4 million, $ 4.3 million and $ 4.3 million in 2023, 2022 and 2021, respectively. Deferred Compensation Plans The Company maintains an Executive Deferred Compensation Plan ("EDCP") and a Deferred Incentive Plan ("DIP") in order to offer certain qualified high-performing financial advisors a bonus based upon a formula reflecting years of service, production, net commissions and a valuation of their clients' assets. The bonus amounts resulted in deferrals for fiscal 2023 of $ 10.1 million ($ 11.1 million in 2022 and $ 12.8 million in 2021). These deferrals normally vest after five years . The liability is being recognized over the vesting period. The EDCP also includes voluntary deferrals by senior executives that are not subject to vesting. The Company maintains a Company-owned life insurance policy, which is designed to hedge a portion of the EDCP obligation. The EDCP liability is being tracked against the value of a benchmark investment portfolio held for this purpose. Additionally, the Company maintains the Oppenheimer & Co. Inc. Investment Banking and Capital Markets Deferred Compensation Plan ("CMDP") for eligible employees in the Capital Markets business segment. As of December 31, 2023, the Company's liability with respect to the EDCP, DIP and CMDP described below totaled $ 69.7 million and is included in accrued compensation on the consolidated balance sheet as of December 31, 2023. On October 26, 2023 the Company terminated the DIP. All deferrals made prior to October 26, 2023 survive the termination of the DIP. The Company also maintains a deferred compensation plan on behalf of certain employees who were formerly employed by CIBC World Markets. The Company hedges this deferred compensation obligation with a portfolio of mutual fund investments. As of December 31, 2023, the Company's liability with respect to this plan totaled $ 19.8 million. 105 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements An employee is eligible to participate in the CMDP if the employee (i) is an Investment Banking Division employee of Oppenheimer with a title of Associate or above whose previous year’s salary and bonus exceeded $ 200,000 , or (ii) is a professional working in the Oppenheimer Capital Markets Division (but not the Investment Banking Division) who is designated by the Plan Administrator (in its sole discretion) as eligible to participate in the Plan. The CMDP has both mandatory and elective contributions. The amount of compensation subject to mandatory deferral (“Bonus Deferral Credit”) is based on a schedule maintained by the Plan Administrator from time to time. The Bonus Deferral Credit vests ratably over a period of three years and is distributed upon vesting. For the elective portion, a participant is eligible if his or her base salary and bonus exceed $ 500,000 and he or she may elect to defer up to 50 % of the total of his or her base salary and bonus amounts (“Elective Deferral Credit”) for a 5 -year or 10 -year period. The Elective Deferral Credit is 100 % vested at all times. The Company provides a Matching Credit of 10 % of the Elective Deferral Credit which vests on last day of the Performance Year (as defined in the CMDP) attributable to the Matching Credit. The Elective Deferral Credit and the Matching Credit are distributed in lump sums in the year following the fifth or tenth anniversary of the last day of the Performance Year (as defined in the CMDP), depending on the participant’s election. For fiscal 2023, the Company’s deferral related to the CMDP totaled $ 9.9 million which is comprised of Bonus Deferral Credits. Eligibility for Elective Deferral Credits began in 2023 for elections made by December 31, 2021. The total amount expensed in 2023 for the Company's deferred compensation plans was $ 33.6 million ($ 5.3 million in 2022 and $ 18.4 million in 2021). 18. Commitments and contingencies Commitments The Company had capital commitments of $ 2.4 million with respect to unfunded obligation in private equity funds sponsored by the Company and $ 5.8 million of commitments related to additional operating leases that have not yet commenced. As of December 31, 2023, the Company had no collateralized or uncollateralized letters of credit outstanding. Contingencies Many aspects of the Company's business involve substantial risks of liability. In the normal course of business, the Company has been named as defendant or co-defendant in various legal actions, including arbitrations, class actions and other litigation, creating substantial exposure and periodic expenses. Certain of the actual or threatened legal matters include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. These proceedings arise primarily from securities brokerage, asset management and investment banking activities. The Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding the Company's business, which may result in expenses, adverse judgments, settlements, fines, penalties, injunctions or other relief. The investigations include inquiries from the SEC, the Financial Industry Regulatory Authority ("FINRA") and other regulators. The Company accrues for estimated loss contingencies related to legal and regulatory matters within Other Expenses in the consolidated income statement when available information indicates that it is probable a liability had been incurred and the Company can reasonably estimate the amount of that loss. In many proceedings, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where a loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is often not possible to reasonably estimate the size of the possible loss or range of loss or possible additional losses or range of additional losses. For certain legal and regulatory proceedings, the Company cannot reasonably estimate such losses, particularly for proceedings that are in their early stages of development or where plaintiffs seek substantial, indeterminate or special damages. Counsel may be required to review, analyze and resolve numerous issues, including through potentially lengthy discovery and determination of important factual matters, and by addressing novel or unsettled legal questions relevant to the proceedings in question, before the Company can reasonably estimate a loss or range of loss or additional loss for the proceeding. Even after lengthy review 106 Table of Contents OPPENHEIMER HOLDINGS INC. Notes to Consolidated Financial Statements and analysis, the Company, in many legal and regulatory proceedings, may not be able to reasonably estimate possible losses or range of losses. For certain other legal and regulatory proceedings, the Company can estimate possible losses, or range of loss in excess of amounts accrued, but does not believe, based on current knowledge and after consultation with counsel, that such losses individually, or in the aggregate, will have a material adverse effect on the Company's consolidated financial statements as a whole. For legal and regulatory proceedings where there is at least a reasonable possibility that a loss or an additional loss may be incurred, the Company estimates a range of aggregate loss in excess of amounts accrued of up to $ 23 million. This estimated aggregate range is based upon currently available information for those legal proceedings in which the Company is involved, where the Company can make an estimate for such losses. For certain cases, the Company does not believe that it can make an estimate. The foregoing aggregate estimate is based on various factors, including the varying stages of the proceedings (including the fact that some are currently in preliminary stages), the numerous yet-unresolved issues in many of the proceedings and the attendant uncertainty of the various potential outcomes of such proceedings. Accordingly, the Company's estimate will change from time to time, and actual losses may be more than the current estimate. On November 18, 2022, Oppenheimer received an information request from the SEC requesting information related to the use of text messaging and similar forms of electronic communications by employees of Oppenheimer and whether those communications were properly retained by Oppenheimer as part of its records preservation requirements relating to the broker-dealer business activities of Oppenheimer. Subsequently, Oppenheimer received a similar information request from the Commodity Futures Trading Commission (“CFTC”). On January 4, 2024, Oppenheimer submitted an Offer of Settlement to the SEC. On February 9, 2024, the SEC issued an order (the “Order”) pursuant to which Oppenheimer will pay a fine in the amount of $ 12 million and agree to certain undertakings. In addition to the Order Oppenheimer received a waiver of certain statutory disqualifications from the SEC. On February 7, 2024, Oppenheimer submitted an Offer of Settlement to the CFTC pursuant to which Oppenheimer offered to pay a fine of $ 1 million and agree to certain undertakings. Beginning on or about August 31, 2021, Oppenheimer was named as a respondent in forty-eight arbitrations, many containing multiple claimants, each filed before FINRA, relating to those claimants’ purported investment in Horizon Private Equity, III, LLC (“Horizon”). Horizon is alleged to be a fraudulent scheme involving, among others, a former Oppenheimer employee John Woods. John Woods left Oppenheimer’s employ in 2016 and Oppenheimer never received a complaint or question from any of the investors prior to the SEC bringing a complaint against Woods and his co-conspirators in 2021. Each investor who was an Oppenheimer client, signed a document acknowledging that Horizon was not an approved Oppenheimer product. Over a protracted period of time, Woods made multiple false statements to Oppenheimer, to regulators and to a state court. The claimants are seeking damages based on a number of legal theories, including, without limitation, violations of various state and federal statutes, breach of fiduciary duty, procurement of breach of fiduciary duty, negligent misrepresentation, aiding and abetting fraud, and unjust enrichment. Claimants do not allege Oppenheimer received any of the funds invested in Horizon, but rather that Oppenheimer’s purported failure to properly supervise its employees allowed the alleged scheme to occur and continue. Oppenheimer has settled, or settled in principle or an award has been rendered in forty-one of the Horizon-related arbitrations, with approximately one hundred thirty-eight individual complainants. The aggregate payments for those forty-one arbitrations total approximately $ 87.7 million. The seven arbitrations still pending claim specific monetary damages and allege losses of approximately $ 7.9 million in the aggregate. On June 16, 2023, Oppenheimer was served with a complaint in an action entitled John and Cynthia Kearney, John & Tera Sargent, Mike Hall, Individually and as Assignee of 6694 Dawson Blvd, LLC, Thomas and Beverly Crampton, Roy and Shirley Hill, Billy and Debra Lanter, Larry Lawson, Eugene Lyle, Scott Spence, and Dolores Willoughby v. Oppenheimer & Co. Inc., Anne Greene and Gordon Morse, filed in Georgia State Court, Fulton County. Plaintiffs allege that they were all investors in Horizon. However, all of the plaintiffs allege that they invested in Horizon after John Woods left Oppenheimer’s employ in 2016 and virtually all of the plaintiffs were not Oppenheimer customers. Plaintiffs further allege that Oppenheimer, through its inaction and/or misconduct, is responsible for their alleged losses and are seeking unspecified damages sounding in violations of the Georgia RICO statute and negligence per se. On September 5, 2023, Oppenheimer filed a motion to dismiss the complaint, which is pending before the court. That same day, Oppenheimer also filed a motion to transfer the case to the Metro 107 Table of Contents Atlanta Business Case Division, which motion was granted. Oppenheimer believes these claims to be without merit and intends to defend itself vigorously against these claims. Also, on July 17, 2023, Oppenheimer was served with a complaint in an action entitled Mark Del Pico, Elizabeth Del Pico and Surrey Lane Partners GP LLC, as general Partner of Surrey Lane Partners, Ltd. v. Oppenheimer & Co. Inc., and Michael Mooney , filed in Florida State Court, Sarasota County. Plaintiffs allege that they were all investors in Horizon; however, none of the plaintiffs were Oppenheimer customers. All of the plaintiffs allege that they invested in Horizon years after John Woods left Oppenheimer’s employ in 2016. Plaintiffs further allege that Oppenheimer, through its inaction and/or misconduct, is responsible for their alleged losses and are seeking unspecified damages from Oppenheimer sounding in negligence per se, Oppenheimer filed a motion to dismiss the complaint. Rather than respond to Oppenheimer’s motion to dismiss, on January 12, 2024, plaintiffs filed an amended complaint that includes an additional claim of fraud against Oppenheimer. On February 2, 2024 Oppenheimer filed a motion to dismiss the amended complaint which is pending before the Court. Oppenheimer believes these claims to be without merit and intends to defend itself vigorously against these claims. Finally, on August 25, 2023, Oppenheimer was served with a complaint in an action entitled Lisa Wright, Billy Ray Boaz, Sylvia Boyles, Donald and Gina Bryant, Alton Graviette, Gilbert and Felicia Hawks, Michael and Brenda Craig, Barbara and Russell Danley, Carolyn and Ronald Edwards, Pamela Goins, Amy Gordon, Susan Gregory, Timothy Hall, Ronald Jones, Douglas Lineberry, Marcia Martin, Bobby and Jo Simpson, Karen Stephens, Caroline Moser, Rebecca Tapp, Paul Vaughan, Brenda and Varner Vogler, and Peggie Thomas v. Oppenheimer & Co. Inc., Ann Greene and Gordon Morse , filed in Georgia State Court, Fulton County. Plaintiffs allege that they were all investors in Horizon. However, all of the plaintiffs allege that they invested in Horizon after John Woods left Oppenheimer’s employ in 2016 and virtually all of the plaintiffs were not Oppenheimer customers. Plaintiffs further allege that Oppenheimer, through its inaction and/or misconduct, is responsible for their alleged losses and are seeking unspecified damages sounding in violations of the Georgia RICO statute and negligence per se. On September 15, 2023, Oppenheimer filed a motion to transfer the case to the Metro Atlanta Business Case Division, which motion was granted. On October 31, 2023, Oppenheimer filed a motion to dismiss the complaint, which is pending before the court. Oppenheimer believes these claims to be without merit and intends to defend itself vigorously against these claims. On June 30, 2022, the Oppenheimer received a "Wells Notice" from the SEC requesting that Oppenheimer make a written submission to the SEC to explain why Oppenheimer should not be charged with violations of Section 15c2-12 of the Exchange Act, and Rule 15c2-12 thereunder as well as Municipal Securities Rulemaking Board Rules G-17 and G-27 in relation to its sales of municipal notes pursuant to an exemption from continuing disclosure contained in Rule 15c2-12. On September 13, 2022, the SEC filed a complaint against Oppenheimer in the United States District Court for the Southern District of New York (the “Court") alleging that Oppenheimer violated Section 15B(c)(1) of the Exchange Act and Rule 15c2-12 thereunder as well as Municipal Securities Rulemaking Board Rules G-17 and G-27 for not having fully complied with the exemption from the continuing disclosure obligations under Rule 15c2-12. The SEC asked the Court to enter an order enjoining Oppenheimer from violating the above-referenced rules and requiring it to disgorge approximately $ 1.9 million plus interest and pay a civil penalty. On January 30, 2024, Oppenheimer and the SEC reached an agreement in principle to settle the litigation pursuant to which Oppenheimer would pay a civil penalty of $ 1.2 million. The settlement is subject to Oppenheimer obtaining a waiver of certain statutory disqualifications. 19. Regulatory requirements The Company's U.S. broker dealer subsidiaries, Oppenheimer and Freedom, are subject to the uniform net capital requirements of the SEC under Rule 15c3-1 (the "Rule") promulgated under the Exchange Act. Oppenheimer computes its net capital requirements under the alternative method provided for in the Rule which requires that Oppenheimer maintain net capital equal to two percent of aggregate customer-related debit items, as defined in SEC Rule 15c3-3. As of December 31, 2023, the net capital of Oppenheimer as calculated under the Rule was $ 453.6 million or 48.86 % of Oppenheimer's aggregate debit items. This was $ 435.0 million in excess of the minimum required net capital at that date. Freedom computes its net capital requirement under the basic method provided for in the Rule, which requires that Freedom maintain net capital equal to the greater of $ 100,000 or 6-2/3% of aggregate indebtedness, as defined. As of December 31, 2023, Freedom had net capital of $ 4.1 million, which was $ 4.0 million in excess of the $ 100,000 required to be maintained at that date. 108 Table of Contents As of December 31, 2023, the capital required and held under the FCA's Investment Firms' Prudential Regime ("IFPR") for Oppenheimer Europe Ltd. was as follows: • Common Equity Tier 1 ratio 134.0 % (required 56.0 %); • Tier 1 Capital ratio 134.0 % (required 75.0 %); and • Total Capital ratio 182.0 % (required 100.0 %). Effective January 2022, IFPR changed its minimum capital requirement, which is now sterling 750,000 (previously it was Euro 730,000 ). Capital ratios are now expressed differently, but are effectively unchanged when comparing performance to required regulatory minimums. As of December 31, 2023, Oppenheimer Europe Ltd. was in compliance with its regulatory requirements. As of December 31, 2023, the regulatory capital of Oppenheimer Investments Asia Limited was $ 4.0 million, which was $ 3.6 million in excess of the $ 384,120 required to be maintained on that date. Oppenheimer Investments Asia Limited computes its regulatory capital pursuant to the requirements of the Securities and Futures Commission of Hong Kong. As of December 31, 2023, Oppenheimer Investments Asia Limited was in compliance with its regulatory requirements. As of December 31, 2023, Oppenheimer Trust is required to maintain minimal capital of $ 4.15 million. Oppenheimer Trust was in compliance with its capital requirements. 20. Goodwill and intangibles Goodwill The Company's goodwill of $ 142.2 million resides in its PCD reporting unit ($ 137.9 million) and Corporate/Other reporting unit ($ 4.3 million). The Company performed its annual test for goodwill impairment for the PCD reporting unit as of December 31, 2023 and 2022, which did not result in any impairment charges for either period. At each annual goodwill impairment testing date, the PCD reporting unit had a fair value that was substantially in excess of its carrying value. Goodwill within the Corporate/Other reporting unit relates to the Company’s acquisition of BondWave LLC, which closed on December 29, 2023. Because the valuation of goodwill associated with this transaction was determined on the last business day of 2023, no impairment testing was deemed necessary. Indefinite intangible assets are comprised of trademarks, trade names and an Internet domain name. These intangible assets are carried at $ 32.7 million, are not amortized, and are subject to at least an annual test for impairment to determine if the estimated fair value is less than their carrying amount. Trademarks and trade names recorded as of December 31, 2023 and 2022 have been tested for impairment and it has been determined that no impairment has occurred. At each annual intangible assets impairment testing date, the trademarks and trade names had a fair value that was substantially in excess of their carrying value. Defined-lived intangible assets are comprised of developed technology and customer relationships. These intangible assets carried at $ 1.6 million are amortized over their estimated lives and are periodically evaluated for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable from future undiscounted cash flows. 21. Segment information The Company has determined its reportable segments based on the Company's method of internal reporting, which disaggregates its retail business by branch and its proprietary and investment banking businesses by product. The Company evaluates the performance of its segments and allocates resources to them based upon profitability. The Company's reportable segments are: Private Client — includes commissions and a proportionate amount of fee income earned on assets under management ("AUM"), net interest earnings on client margin loans and cash balances, fees from money market funds, custodian fees, net contributions from stock loan activities and financing activities, and direct expenses associated with this segment; 109 Table of Contents Asset Management — includes a proportionate amount of fee income earned on AUM from investment management services of Oppenheimer Asset Management Inc. Oppenheimer's asset management divisions employ various programs to manage client assets either in individual accounts or in funds, and includes direct expenses associated with this segment; and Capital Markets — includes investment banking, institutional equities sales, trading, and research, taxable fixed income sales, trading, and research, public finance and municipal trading, as well as the Company's operations in the United Kingdom, Hong Kong and Israel, and direct expenses associated with this segment. The Company does not allocate costs associated with certain infrastructure support groups that are centrally managed for its reportable segments. These areas include, but are not limited to, legal, compliance, operations, accounting, and internal audit. Costs associated with these groups are separately reported in a Corporate/Other category and primarily include compensation and benefits. The Company also includes activities associated with BondWave, LLC in Corporate/Other. The table below presents information about the reported revenue and pre-tax income (loss) of the Company for the years ended December 31, 2023, 2022 and 2021. Asset information by reportable segment is not reported, since the Company does not produce such information for internal use by the chief operating decision maker. (Expressed in thousands) For the Years Ended December 31, 2023 2022 2021 Revenue Private client (1) $ 801,754 $ 675,680 $ 665,060 Asset management (1) 88,433 99,242 104,598 Capital markets 345,897 337,821 625,704 Corporate/Other 12,741 ( 1,802 ) ( 1,327 ) Total $ 1,248,825 $ 1,110,941 $ 1,394,035 Pre-Tax Income (Loss) Private client (1) $ 194,444 $ 142,250 $ 101,146 Asset management (1) 24,091 35,753 35,874 Capital markets ( 62,961 ) ( 25,696 ) 204,090 Corporate/Other ( 108,804 ) ( 106,753 ) ( 116,469 ) Total $ 46,770 $ 45,554 $ 224,641 (1) Clients investing in the OAM advisory program are charged fees based on the value of AUM. Advisory fees were allocated 10.0 % to the Asset Management and 90.0 % to the Private Client segments. Revenue, classified by the major geographic areas in which it was earned for the years ended December 31, 2023, 2022 and 2021 was as follows: (Expressed in thousands) For the Years Ended December 31, 2023 2022 2021 Americas $ 1,199,558 $ 1,058,188 $ 1,336,628 Europe/Middle East 46,490 47,080 51,698 Asia 2,777 5,673 5,709 Total $ 1,248,825 $ 1,110,941 $ 1,394,035 110 Table of Contents 22. Subsequent events On January 26, 2024, the Company announced a quarterly dividend in the amount of $ 0.15 per share, payable on February 23, 2024 to holders of Class A Stock and Class B Stock of record on February 9, 2024. 111 Table of Contents Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.