What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-25 compared with 2024-10-25 · 130 added, 194 removed, 225 unchanged (59% of the section changed)

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("Oppenheimer") and Oppenheimer Asset Management Inc.

As of September 30, 2024, we provided our services from 89 offices in 25 states located throughout the United States and offices in Puerto Rico, Tel Aviv, Israel, Hong Kong, China, London, England, St.

As of March 31, 2025, we provided our services from 89 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 and Geneva, Switzerland.

The Company provides investment advisory services through OAM and Oppenheimer Investment Management LLC ("OIM") and Oppenheimer's financial advisor directed programs.

At September 30, 2024, client assets under management ("AUM") totaled $49.1 billion.

At March 31, 2025, client assets under management ("AUM") totaled $48.9 billion.

AUM includes the total market value of client investments in discretionary and non-discretionary advisory programs as well as the net asset value of private placements of alternative investments offered by and held by clients of the Firm.

Client assets under administration ("CAUA") as of September 30, 2024 totaled $129.8 billion.

Client assets under administration ("CAUA") as of March 31, 2025 totaled $129.9 billion.

CAUA includes AUM and the other assets held for which the Firm provides services.

We also provide trust services and products through Oppenheimer Trust Company of Delaware and limited discount brokerage services through Freedom Investments, Inc.

Through OPY Credit Corp., we conduct our secondary trading activities related to the purchase and sale of loans, primarily on a riskless principal basis.

At September 30, 2024, the Company employed 2,993 employees (2,951 full-time, 41 part-time and 1 intern), of whom 928 were financial advisors.

We are focused on growing our private client and asset management businesses through strategic additions of experienced financial advisors in our existing branch system and employment of experienced money management personnel in our asset management business as well as deploying our capital for expansion through targeted acquisitions.

Through OPY Credit Corp., we conduct our secondary trading activities related to the purchase and sale of loans and trade claims, primarily on a riskless principal basis.

At March 31, 2025, the Company employed 3,012 employees (2,974 full-time and 38 part-time), of whom 933 were financial advisors.

We are focused on growing our wealth management business through strategic additions of experienced financial advisors in our existing branch system and employment of experienced money management personnel in our asset management business as well as deploying our capital for expansion through targeted acquisitions or strategic partnerships.

We are increasingly creating and investing in private market opportunities on our own behalf and on behalf of qualified clients.

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In investment banking, we are committed to growing our footprint by adding experienced bankers within our existing industry practices as well as new industry practices where we believe we can be successful.

We continuously invest in and improve our technology platform to support client service and to remain competitive, while continuously managing expenses.

We continuously invest in and improve our technology platform to support client service and to remain competitive, while simultaneously managing expenses.

The Company's long-term growth plan is to continue to expand existing offices by hiring experienced professionals as well as expand through the purchase of operating branch offices from other broker-dealers or the opening of new branch offices in attractive locations, and to continue to grow and develop the existing trading, investment banking, investment advisory and other divisions.

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Equally important is the search for viable acquisition candidates.

Our long-term intention is to pursue growth by acquisition where we can find a comfortable match in terms of corporate goals and personnel at a price that would provide our shareholders with incremental value.

We review potential acquisition opportunities from time to time with the aim of fulfilling the Company's strategic goals, while evaluating and managing our existing businesses.

In addition, the Company may from time to time make an acquisition of 100% of a business or make minority private investments out of excess capital in allied or unrelated

businesses with the goal of either syndicating the investment to eligible clients or retaining ownership because we believe them to be an attractive investment.

Impact of Change in Short-term Interest Rates

After holding the target federal funds rate steady for nearly 14 months, the Federal Reserve (the “FED”) voted to cut rates by one half percent at its September 2024 meeting as their attention turned to addressing employment data, given the progress made on reducing underlying inflation in recent months.

Projections of the federal funds rate released by the FED in September indicate that the FED expects rate decreases through the end of 2024, with further reductions in the coming year.

Our long-term intention is to pursue growth by acquisition where we can find a comfortable match in terms of corporate goals and personnel at a price that would provide our stockholders with incremental value.

We review potential acquisition opportunities from time to time with the aim of fulfilling the Company's strategic goals,

while evaluating and managing our existing businesses.

In addition, the Company may from time to time acquire a controlling financial interest in a business or make minority private investments out of excess capital in allied or unrelated businesses with the goal of either syndicating the investment to eligible clients or retaining ownership because we believe them to be an attractive investment or offer products and services aligned with the Company's long-term business objectives.

Short-term Interest Rate Environment

After reducing the federal funds rate by 1 percentage point to a target range of 4.25% - 4.50% through a series of rate cuts in the latter half of 2024, the Federal Reserve (the “FED”) held rates steady at their first two meetings of 2025.

The current pause is driven by the FED’s desire to wait for further clarity on the economy, as uncertainty around the economic outlook has increased in light of recent policy changes impacting trade, immigration and government spending.

Recent announcements around the imposition of universal and targeted tariffs have significantly impacted investor sentiment leading to major declines in market averages.

Such disruption often leads to FED intervention.

The FED’s forecast continues to pencil in two rate cuts for 2025, though this is subject to change.

Potential decreases to the federal funds rate may impact our interest-based revenues.

While decreases in interest rates will lower fees the Company earns from FDIC-insured deposits of clients through a program offered by the Company, such decreases may be offset to a degree if the cash sweep balances increase as clients find fewer higher-yielding alternatives to deploy these balances.

Future rate decreases will also reduce the rates the Company charges on customer margin loans, which will have a negative impact on our earnings.

Future rate decreases will also reduce the rates the Company charges on customer margin loans and earns on other interest-sensitive assets, which will have a negative impact on our earnings.

Israel-Hamas War and Conflict with Hezbollah and Iran

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Israel formally declared war on Hamas in response to the attack and initiated several military operations in an effort to clear militants from the area.

The war is now in its second year and has seen a significant escalation in a longstanding conflict between Israel and Hezbollah, the Lebanese-based militant group.

The conflict was further intensified by the direct entry of Iran, which launched a missile attack on Israel.

There remains a risk that these conflicts could expand into a wider regional war which could have an adverse impact on the worldwide economy, financial markets and thus on our business.

The war has now finished its second year and has seen a significant escalation in a longstanding conflict between Israel and Hezbollah, the Lebanese-based militant group.

The conflict was further intensified in 2024 by the direct entry of Iran, which launched a missile attack on Israel.

The expiration of a cease-fire and the resumption of hostilities is likely to increase the calls for peace and may interfere with Israel’s relations with the rest of the world.

Given the continued unrest, there remains a risk that these conflicts could expand into a wider regional war which could have an adverse impact on the worldwide economy, financial markets and thus on our business.

At this time, these conflicts have not yet had a material impact on our business operations in Israel or elsewhere.

Impact of Hurricane Helene and Hurricane Milton

On September 26, 2024, Hurricane Helene ("Helene") made landfall in the Big Bend region of Florida and proceeded to cause widespread destruction across the southeastern United States for the next several days.

The storm resulted in hundreds of fatalities and caused billions of dollars in property damages, leaving many communities isolated and without power for weeks.

Helene was followed by Hurricane Milton ("Milton"), which caused widespread destruction across Florida.

Early estimates of damage from Milton exceed $60 billion.

While our offices in the impacted region remained closed throughout the storm, branch operations were largely unaffected given the back-up branch system we have in place as well as the ability of our key employees to work safely from a remote location.

The hurricanes did not cause significant damage to our branches in the region, most of which have now fully reopened.

Weather related incidents continue to increase and may cause disruptions to our normal business operations since they impact not only our employees, but also our clients.

EXECUTIVE SUMMARY

The Firm delivered strong operating results for the third quarter of 2024 in a still-resilient economic environment.

During the third quarter of 2024, all major indices reached new highs, mostly spurred by the FED’s long-awaited decision to reduce the federal funds rate by one half percent with the view that lower borrowing costs will slow the uptick in unemployment without rekindling higher inflation.

Based on recent economic indicators, it appears that the U.S.

economy is headed for a soft landing, amidst continued growth in the economy as we move into 2025.

The continued outperformance of the equity markets aided our Wealth Management franchise by driving better than expected retail trading volumes and related commission revenues during what is typically a seasonally slower summer trading period.

The markets also propelled our AUM to our third consecutive record, resulting in higher asset-based advisory fees.

Additionally, higher average margin loans drove a meaningful improvement in our interest revenues from the prior year, though our interest sensitive sweep income was somewhat reduced due to lower average sweep balances.

Our investment banking revenues also rose due to an uptick in our advisory fees, particularly in our restructuring practice.

Equity underwriting fees were adversely impacted by lower issuance levels as we have seen economic uncertainty restrict issuances despite the general improvement in market breadth and market averages.

We believe that that Firm is well positioned to benefit as issuance volumes improve.

Our results drove yet another fresh record in our book value per share levels and provided us with the opportunity to further strengthen our balance sheet as we announced our plans to redeem all outstanding senior secured notes ($113.05 million) at their par amounts, and we retired the Notes on October 10, 2024.

Access to capital for expansion will continue to be available as needed.

The Firm’s solid performance for the quarter underscores the ability of our diversified businesses to deliver profitable operating results in increasingly uncertain macroeconomic conditions.

During the quarter, all major indices receded from prior quarter highs as the financial markets digested the new administration’s swift policy changes on trade, immigration and government spending as well as initiatives on decreased regulation.

Concerns that recently enacted tariffs would likely provoke a wider trade war and spur “stagflation” – a combination of slower growth and higher inflation – produced increased volatility and lower valuations for equity securities as well as pressure on the U.S.

The likelihood of a recession has increased significantly, coupled with reduced consumer confidence and expectations for higher inflation resulting from increased import prices.

There are dimmed hopes for a resumption of active capital market activity with little probability of increased corporate issuances of common stock through IPOs or secondaries.

Should market declines persist, this will also negatively impact our assets under management ("AUM") and fees earned from that activity.

We hope that recent market turbulence will convince policy makers that recent “on-off” announcements of market-moving policy is significantly impacting likely economic outcomes and that they will significantly reduce such activity.

Notwithstanding the increasingly negative market sentiment, our Wealth Management business delivered strong results with a number of improvements over the prior year.

The volatile markets spurred robust trading by our clients, driving higher retail commissions.

Asset-based advisory fees also increased since AUM, while slightly reduced from recently established all-time highs, remained well above AUMs outstanding during the comparable period.

A decline in our interest-sensitive revenues, partially offset these improvements due to lower short term interest rates and reduced FDIC sweep balances.

Our Capital Markets revenues exceeded prior year levels despite challenging market conditions that saw lower underwriting activity amid postponed transactions by corporate clients owing to policy uncertainties and volatile markets that put a damper on deal making activities and new issuance levels.

Institutional trading volumes increased in the volatile markets seen during the latter part of the 1 st quarter, which were favorable to our sales and trading revenues.

RESULTS OF OPERATIONS

The Company reported net income of $24.5 million or $2.38 basic earnings per share for the third quarter of 2024, compared with net income of $13.9 million or $1.32 per share for the third quarter of 2023.

Revenue for the third quarter of 2024 was $373.4 million, an increase of 19.4%, compared to revenue of $312.7 million for the third quarter of 2023.

The Company reported net income of $30.7 million or $2.93 basic earnings per share for the first quarter of 2025, compared with net income of $26.1 million or $2.50 per share for the first quarter of 2024.

Revenue for the first quarter of 2025 was $367.8 million, an increase of 4.2%, compared to revenue of $353.1 million for the first quarter of 2024.

(Expressed in thousands, except Per Share Amounts or otherwise indicated)

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(2) Represents book value less goodwill and intangible assets divided by number of shares outstanding.

• Increased revenue for the third quarter of 2024 was primarily driven by significantly higher advisory fees attributable to a rise in billable AUM, an increase in transaction-based commissions as well as improved investment banking and interest revenues.

• Announced plans to further strengthen balance sheet through the redemption of all outstanding Senior Secured Notes which occurred on October 10, 2024.

• Assets under administration and under management were both at record levels at September 30, 2024, benefiting from market appreciation.

• Compensation expenses increased from the prior year quarter largely as a result of higher incentive compensation expenses, deferred compensation and production-related expenses.

• Non-compensation expenses increased from the prior year quarter primarily due to higher interest and technology related expenses partially offset by lower legal costs.

• Increased revenue for the first quarter of 2025 was primarily driven by significantly higher advisory fees attributable to a rise in billable AUM and an increase in transaction-based commissions as well as sales and trading revenue

• Assets under administration and under management at March 31, 2025 modestly decreased below recently established records

• Compensation expenses increased from the prior year quarter largely as a result of inflationary pressures on wages and higher production-related expenses

• Non-compensation expenses increased from the prior year quarter primarily due to higher interest and technology related expenses and higher clearing and exchange costs attributable to higher volumes

• Total stockholders' equity, book value and tangible book value per share reached new record highs as a result of positive earnings

BUSINESS SEGMENTS

The table below presents information about the reported revenue and pre-tax income (loss) of the Company's reportable business segments for the three and nine months ended September 30, 2024 and 2023:

The table below presents information about the reported revenue and pre-tax income (loss) of the Company's reportable business segments for the three months ended March 31, 2025 and 2024:

(Expressed in thousands)

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2024 2023 % Change 2024 2023 % Change

Private Client $ 218,787 $ 193,254 13.2 $ 640,521 $ 597,920 7.1

Asset Management 27,262 20,830 30.9 78,015 66,987 16.5

For the Three Months Ended March 31,

2025 2024 % Change

Wealth Management $ 241,986 $ 237,961 1.7

Capital Markets 123,261 112,083 10.0

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Pre-Tax Income (Loss)

Private Client $ 62,894 $ 65,249 (3.6) $ 186,582 $ 140,499 32.8

Asset Management 9,121 4,951 84.2 25,449 17,965 41.7

Wealth Management $ 67,864 $ 75,785 (10.5)

Capital Markets (5,097) (6,702) (23.9)

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Total $ 41,376 $ 37,455 10.5

Private Client

Private Client reported revenue for the current quarter of $218.8 million, 13.2% higher compared with a year ago mostly due to higher advisory fees driven by appreciation in AUM and an increase in commission revenue due to higher transactional volume.

Pre-tax income of $62.9 million in the current quarter resulted in a pre-tax margin of 28.8%.

Financial advisor headcount at the end of the current quarter was 928 compared to 946 at the end of the third quarter of 2023.

We saw improved adviser productivity throughout the period.

Wealth Management

Wealth Management reported revenue for the current quarter of $242.0 million, 1.7% higher compared with a year ago.

Pre-tax income was $67.9 million in the current quarter, a decrease of 10.5% compared with a year ago.

Financial advisor headcount at the end of the current quarter was 933, compared to 936 and 931 at the end of the first quarter of 2024 and fourth quarter of 2024, respectively.

('000s unless otherwise indicated)

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Asset Under Administration (billions) $ 129.9 $ 124.9 $ 5.0 4.0

Asset Under Management (billions) $ 48.9 $ 46.6 $ 2.3 4.9

Cash Sweep Balances (billions) $ 2.9 $ 3.2 $ (0.3) (9.4)

• Retail commissions increased 7.8% from a year ago primarily due to higher retail trading activity

• Advisory fees increased 13.8% due to higher AUM during the billing period for the current quarter when compared to the third quarter of last year.

• Bank deposit sweep income decreased $7.4 million from a year ago due to lower cash sweep balances.

• Interest revenue increased 14.5% from the prior year period due to higher interest earned from margin loans.

• Other revenue increased from a year ago primarily due to increases in the cash surrender value of Company-owned life insurance policies, which fluctuates based on changes in the fair value of the policies' underlying investments.

• Compensation expenses increased 28.5% from a year ago primarily due to higher production related expenses and deferred compensation costs.

• Non-compensation expenses increased 4.5% from a year ago primarily due to higher interest expense.

Asset Management

Asset Management reported revenue for the current quarter of $27.3 million, 30.9% higher compared with a year ago.

Pre-tax income was $9.1 million, an increase of 84.2% compared with the prior year period.

('000s unless otherwise indicated) 3Q-2024 3Q-2023 Change % Change

Revenue $ 27,262 $ 20,830 $ 6,432 30.9

Advisory fee revenue $ 27,432 $ 25,188 $ 2,244 8.9

Other $ (170) $ (4,358) $ 4,188 *

Total Expenses $ 18,141 $ 15,879 $ 2,262 14.2

Compensation $ 6,596 $ 5,585 $ 1,011 18.1

Non-compensation $ 11,545 $ 10,294 $ 1,251 12.2

Pre-tax Income $ 9,121 $ 4,951 $ 4,170 84.2

Compensation Ratio 24.2 % 26.8 % (2.6) % (9.7)

Non-compensation Ratio 42.3 % 49.4 % (7.1) % (14.4)

Pre-tax Margin 33.5 % 23.8 % 9.7 % 40.8

AUM (billions) $ 49.1 $ 40.4 $ 8.7 21.5

*Percentage not meaningful

• Advisory fee revenue increased 8.9% from a year ago due to increased management fees resulting from the higher net value of billable AUM during the current quarter.

• AUM increased to $49.1 billion at September 30, 2024, the third consecutive record high, which is the basis for advisory fee billings for October 2024.

• The increase in AUM was comprised of higher asset values of $9.4 billion on existing client holdings, partially offset by payments of $0.7 billion.

• Compensation expenses were up 18.1% from a year ago primarily resulting from increases in incentive compensation.

• Non-compensation expenses were up 12.2% when compared to the prior year period mostly due to higher external portfolio management costs which are directly related to the increase in AUM.

The following table provides a breakdown of the change in assets under management for the three months ended September 30, 2024:

• Advisory fees increased 12.2% due to higher AUM during the billing period

• Bank deposit sweep income decreased $6.6 million from a year ago due to lower cash sweep balances and lower short-term interest rates

• Interest revenue increased 6.4% from the prior year period due to higher average margin loan balances

• Other revenue decreased from a year ago primarily due to a decline in the cash surrender value of Company-owned life insurance policies, which fluctuates based on changes in the fair value of the policies' underlying investments

• Compensation expenses increased 3.5% from a year ago primarily due to higher production related expenses, partially offset by lower deferred compensation expenses and decreased costs associated with share appreciation rights

• Non-compensation expenses increased 16.9% from a year ago primarily due to an increase in legal expenses and higher external portfolio management costs, which are directly related to the increase in AUM

The following table provides a breakdown of the change in assets under management for the three months ended March 31, 2025:

(Expressed in millions)

For the Three Months Ended September 30, 2024

For the Three Months Ended March 31, 2025

Fund Type Beginning Balance Contributions Redemptions/Profit Distribution Appreciation (Depreciation) Ending Balance

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228 6 (3) 231

Other — $ 2 $ — $ — 2

$ 49,383 $ 2,462 $ (2,262) $ (652) $ 48,930

(1) Traditional investments include Unified Managed Accounts, third party investment managers, mutual funds and/or exchange-traded funds (ETFs), and Oppenheimer financial adviser managed advisory programs, as well as Oppenheimer Asset Management taxable and tax-exempt portfolio management strategies.

(1) Traditional investments include third party advisory programs, Oppenheimer financial advisor managed and advisory programs, and Oppenheimer Asset Management taxable and tax-exempt portfolio management strategies.

(2) Institutional fixed income provides solutions to institutional investors including:

Taft-Hartley Funds,

Public Pension Funds, Corporate Pension Funds, and Foundations and Endowments.

(3) Hedge funds represent strategies in areas including global equities, fixed income, diversifying

strategies, credit, real estate and special opportunities.

(4) Private equity funds represent single strategy, multi-strategy or direct investments in private investments across various sectors.

Taft-Hartley Funds, Public Pension Funds, Corporate Pension Funds, and Foundations and Endowments.

(3) Hedge funds represent investments in strategies including long/short equity, global macro, event driven, merger arbitrage, multi-strategy and credit.

They may be single manager or fund of funds.

(4) Private equity funds include portfolios focused on technology, infrastructure, real estate, natural resources and specific co-investment opportunities.

(5) The portfolio enhancement program sells uncovered, out-of-money puts and calls on the S&P 500 Index.

The program is intended to be market neutral and uncorrelated to the index.

The program is market neutral and uncorrelated to the index.

Valuation is based on collateral requirements for a series of contracts representing the investment strategy.

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('000s) 1Q-2025 1Q-2024 Change % Change

Revenues $ 124,030 $ 94,576 $ 29,454 31.1

Revenue $ 123,261 $ 112,083 $ 11,178 10.0

Investment Banking $ 44,980 $ 47,918 $ (2,938) (6.1)

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*Percentage not meaningful

• Advisory fees earned from investment banking activities increased 82.2% compared with a year ago primarily due to higher restructuring-related transaction activity.

• Equity underwriting fees decreased 17.4% when compared with a year ago due to lower new issuance levels.

• Fixed income underwriting fees were modestly higher than the prior year period.

• Equities sales and trading revenue increase 7.5% compared with the prior year period mostly due to higher volumes.

• Fixed income sales and trading revenue increased 45.5% compared with a year ago primarily due to an increase in trading income attributable to higher interest rates and volumes.

• Compensation expenses increased 20.2% compared with a year ago largely due to costs associated with opportunistic new hires and higher incentive compensation.

• Non-compensation expenses were 15.3% higher than a year ago primarily due to an increase in interest expense in financing trading inventories.

• Advisory fees earned from investment banking activities decreased 18.5% compared with a year ago primarily due to fewer private placement transactions

• Equities underwriting fees were flat when compared to the prior year period

• Fixed income underwriting fees increased 116.6% compared with prior year period primarily due to higher public finance transaction revenue

• Equities sales and trading revenue increased 37.9% compared with the prior year period mostly due to higher trading volumes and greater options-related revenue

• Fixed income sales and trading revenue increased 5.2% compared with a year ago largely due to higher interest income on trading inventory

• Compensation expenses increased 7.1% compared with a year ago largely due to costs associated with opportunistic new hires and greater production related expense

• Non-compensation expenses were 10.3% higher than a year ago primarily due to an increase in communication and technology expenses and execution-related fees

CRITICAL ACCOUNTING POLICIES

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Certain of those policies are considered to be particularly important to the presentation of the Company's financial results because they require management to make difficult, complex or subjective judgments, often as a result of matters that are inherently uncertain.

During the nine months ended September 30, 2024, there were no material changes to matters discussed under the heading "Critical Accounting Polices" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

During the three months ended March 31, 2025, there were no material changes to matters discussed under the heading "Critical Accounting Polices" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

New Accounting Pronouncements

The following Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board ("FASB") have not yet been adopted by the Company:

ASU 2023-09 – Income Taxes (Topic 740):

Improvements to Income Tax Disclosures

The FASB issued this ASU in December of 2023 to enhance the transparency and decision usefulness of income tax disclosures.

The amendments require certain entities to enhance the annual reconciliation of its statutory income tax rate to its effective tax rate by mandating the disclosure of the impact associated with specific categories and requiring separate disclosure for reconciling items exceeding certain quantitative thresholds.

The amendments also require entities to annually disclose the amount of taxes paid (net of refunds received) disaggregated by federal, state and foreign taxes, with separate disclosure of individual jurisdictions exceeding 5% of total income taxes paid.

The new guidance, which becomes effective in 2025, will not have an impact on our financial position or results of operations since it only amends certain disclosures.

ASU 2024-03 – Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses

The FASB issued this ASU in November of 2024 which will require public business entities to disclose specified information about certain costs and expenses, including employee compensation, depreciation and intangible asset amortization at each interim and annual reporting period.

The new guidance, which becomes effective in 2027, will not have an impact on our financial position or results of operations since it only amends certain disclosures.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2024, total assets increased by 17.1% from December 31, 2023.

The Company satisfies its need for short-term financing from internally generated funds and collateralized and uncollateralized borrowings, consisting primarily of bank call loans, stock loans, and uncommitted lines of credit.

At March 31, 2025, total assets increased by 5.6% from December 31, 2024.

The Company satisfies its need for financing from internally generated funds and collateralized and uncollateralized borrowings, consisting primarily of bank call loans, stock loans, and uncommitted lines of credit.

We finance our trading in government securities through the use of securities sold under repurchase agreements.

Oppenheimer has arrangements with banks for borrowings on a fully collateralized basis.

Oppenheimer has uncommitted arrangements with banks for borrowings on a fully collateralized basis.

The amount of Oppenheimer's bank borrowings fluctuates in response to changes in the level of the Company's securities inventories and customer margin debt, changes in notes receivable from employees, investment in furniture, equipment and leasehold improvements, and changes in stock loan balances and financing through repurchase agreements.

At September 30, 2024, the Company had bank call loans of $206.7 million compared to zero at December 31, 2023.

At March 31, 2025, the Company had an outstanding bank call loan balance of $439.6 million compared to $252.1 million at December 31, 2024.

The Company also has some availability of short-term bank financing on an unsecured basis.

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The regulatory capital requirements for Oppenheimer Europe Ltd.

and Oppenheimer Investments Asia Limited were $6.1 million and $386,133, respectively, at September 30, 2024.

and Oppenheimer Investments Asia Limited were $6.1 million and $385,718, respectively, at March 31, 2025.

The liquid assets at Oppenheimer Europe Ltd.

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We will continue to review our historical treatment of these earnings to determine whether our historical practice will continue or whether a change is warranted.

Senior Secured Notes

At September 30, 2024 the Company had $113.05 million outstanding in 5.50% Senior Secured Notes due in 2025 (the “Notes”).

On September 19, 2024, the Company issued a notice of redemption to the holders of its Notes stating that it intends to redeem all of the $113.05 million aggregate principal amount of the Notes outstanding on October 10, 2024.

The redemption price is equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest.

All of the Notes were redeemed on October 10, 2024 and none remain outstanding.

The Notes were jointly and severally and fully and unconditionally guaranteed on a senior secured basis by E.A.

Viner International Co.

and Viner Finance Inc.

(together, the "Subsidiary Guarantors").

The following tables present the required selected financial information as of September 30, 2024 and for the nine months ended September 30, 2024 for the Parent and Subsidiary Guarantors related to the previously outstanding Notes.

(Expressed in thousands) As of

September 30, 2024

Total Assets $ 2,312,705

Due From Non-Guarantor Subsidiary 17,222

Total Liabilities 577,822

Due To Non-Guarantor Subsidiary 77,476

For the Nine Months Ended

September 30, 2024

Total Revenue $ 7,991

Pre-Tax (Loss) (136)

Net (Loss) 344

As of September 30, 2024, S&P’s Corporate Family rating and rating on the Notes was a 'BB-' with a stable outlook.

Moody’s Corporate Family rating and the rating on the Notes was a “Ba3” with a stable outlook.

Subsequent to our redemption of the Notes on October 10, 2024, at the Company's request, both S&P and Moody 's withdrew the above mentioned ratings.

For the most part, the Company's assets consist of cash and cash equivalents and assets that it can readily convert into cash.

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Securities owned are mainly comprised of actively traded readily marketable securities.

We issued $1.8 million in forgivable notes (which are inherently illiquid) to employees for the three months ended September 30, 2024 ($4.5 million for the three months ended September 30, 2023) as upfront or backend inducements to commence or continue employment as the case may be.

The amount of funds allocated to such inducements will vary with hiring activity.

We satisfy our need for short-term liquidity from internally generated funds, collateralized and uncollateralized bank borrowings, stock loans and repurchase agreements.

Bank borrowings are, in most cases, collateralized by Firm and customer securities.

We issued $2.6 million in forgivable notes (which are inherently illiquid) to employees during the three months ended March 31, 2025 ($4.5 million for the three months ended March 31, 2024) as upfront or backend inducements to commence or continue employment as the case may be.

The amount of funds allocated to such inducements will vary with hiring activity and retention initiatives.

We satisfy our need for liquidity from internally generated funds, collateralized and uncollateralized bank borrowings, stock loans and repurchase agreements.

Bank borrowings are uncommitted in nature and, in most cases, collateralized by Firm and customer securities.

We obtain short-term borrowings primarily through bank call loans.

Bank call loans are generally payable on demand and bear interest at various rates.

At September 30, 2024, the Company had $206.7 million of bank call loans (zero at December 31, 2023).

The average daily bank loan outstanding for the three and nine months ended September 30, 2024 was $235.0 million and $147.5 million, respectively ($43.8 million and $59.7 million for the three and nine months ended September 30, 2023).

The largest daily bank loans outstanding for both the three and nine months ended September 30, 2024 was $346.9 million ($112.2 million and $167.3 million for the three and nine months ended September 30, 2023, respectively).

At September 30, 2024, securities loan balances totaled $272.0 million ($285.0 million at December 31, 2023 and $292.9 million at September 30, 2023).

The average daily securities loan balances outstanding for the three and nine months ended September 30, 2024 were $299.6 million and $296.6 million, respectively ($314.3 million and $339.4 million for the three and nine months ended September 30, 2023, respectively).

The largest daily stock loan balance for both of the three and nine months ended September 30, 2024 was $375.5 million ($359.0 million and $391.5 million for the three and nine months ended September 30, 2023, respectively).

Bank call loans are generally payable on demand, uncommitted in nature and bear interest at various rates.

At March 31, 2025, the Company had $359.5 million of bank call loans ($252.1 million at December 31, 2024).

The average daily bank loan outstanding for the three months ended March 31, 2025 was $277.3 million ($57.8 million for the three months ended March 31, 2024).

The largest daily bank loans outstanding for the three months ended March 31, 2025 was $491.7 million ($164.9 million for the three months ended March 31, 2024).

At March 31, 2025, securities loan balances totaled $360.9 million ($235.5 million at December 31, 2024 and $298.0 million at March 31, 2024).

The average daily securities loan balances outstanding for the three months ended March 31, 2025 were $359.2 million ($303.4 million for the three months ended March 31, 2024).

The largest daily stock loan balance for the three months ended March 31, 2025 was $436.8 million ($335.7 million for the three months ended March 31, 2024).

We finance our government trading operations through the use of securities purchased under reverse repurchase agreements and repurchase agreements.

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Repurchase and reverse repurchase agreements are presented on a net-by-counterparty basis, when the repurchase 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 and reverse repurchase agreements exist in "book entry" form and certain other requirements are met.

At September 30, 2024, the gross balances of reverse repurchase agreements and repurchase agreements were $244.4 million and $1,009.5 million, respectively.

The average daily balance of reverse repurchase agreements and repurchase agreements on a gross basis for the three months ended September 30, 2024 was $233.0 million and $915.8 million, respectively ($48.2 million and $720.8 million, respectively, for the three months ended September 30, 2023).

The largest amount of reverse repurchase agreements and repurchase agreements outstanding on a gross basis during the three months ended September 30, 2024 was $569.1 million and $1,035.9 million, respectively ($227.1 million and $801.2 million, respectively, for the three months ended September 30, 2023).

At March 31, 2025, the gross balances of reverse repurchase agreements and repurchase agreements were $292.9 million and $1,159.3 million, respectively.

The average daily balance of reverse repurchase agreements and repurchase agreements on a gross basis for the three months ended March 31, 2025 was $370.5 million and $1,044 million, respectively ($122.9 million and $809.3 million, respectively, for the three months ended March 31, 2024).

The largest amount of reverse repurchase agreements and repurchase agreements outstanding on a gross basis during the three

months ended March 31, 2025 was $633.5 million and $1,220 million, respectively ($578.4 million and $1.1 billion, respectively, for the three months ended March 31, 2024).

Liquidity Management

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We have Company-owned life insurance policies which are utilized to fund certain non-qualified deferred compensation plans.

Certain policies which could provide additional liquidity if needed had a cash surrender value of $98.1 million as of September 30, 2024.

We regularly review our sources of liquidity and financing and conduct internal stress analyses to determine the impact on the Company of events that could remove sources of liquidity or financing and to plan actions the Company could take in the case of such an eventuality.

Certain policies which could provide additional liquidity if needed had a cash surrender value of $97.0 million as of March 31, 2025.

We regularly review our sources of liquidity and financing, both on a short term and long term basis, and conduct internal stress analyses to determine the impact on the Company of events that could remove sources of liquidity or financing and to plan actions the Company could take in the case of such an eventuality.

Regulators are increasingly focused on liquidity management and we have seen increased regulatory scrutiny of liquidity management by our industry.

Should a disruption occur in our liquidity and financing sources, we have plans that we believe would result in a reduction of assets through liquidation that would significantly reduce the Company's need for external financing.

Our primary long-term cash requirements related to $167.4 million of operating lease obligations.

Should a disruption occur in our liquidity and financing sources, we have developed a contingency funding plan that we believe would result in a reduction of assets through liquidation that would significantly reduce the Company's need for external financing.

Our primary long-term cash requirements are related to $171.5 million of operating lease obligations.

The total cash requirement for interest expense related to operating lease obligations is estimated to be $8.8 million for the remainder of 2025.

(Expressed in thousands)

For the Nine Months Ended September 30,

Cash used in operating activities $ (182,880) $ (84,226)

For the Three Months Ended March 31,

Cash provided by (used in) operating activities $ (91,740) $ (79,048)

Cash used in investing activities (359) (258)

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We may or may not be able to pass such increased funding costs on to our clients.

During periods of high volatility, we have seen increased calls for deposits of collateral to offset perceived risk between the Company's settlement liability to industry clearinghouses such as the Options Clearing Corporation (“OCC”) and National Securities Clearing Corp.

During periods of high volatility such as the current environment, we see increased calls for deposits of collateral to offset perceived risk between the Company's settlement liability to industry clearinghouses such as the Options Clearing Corporation (“OCC”) and National Securities Clearing Corp.

(“NSCC”) as well as more stringent collateral arrangements with our bank lenders.

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These intruders sometimes use instructions that are seemingly from authorized parties but, in fact are from parties intent on attempting to steal.

In other instances, these intruders attempt to bypass normal safeguards and disrupt or steal significant amounts of information and then either release it to the Internet or hold it for ransom.

In other instances these intruders

attempt to bypass normal safeguards and disrupt or steal significant amounts of information and then either release it to the Internet or hold it for ransom.

Regulators are increasingly requiring companies to provide heightened levels of sophisticated defenses.

The Company maintains processes and systems with an aim to preventing any such attack from disrupting its services to clients as well as to prevent any loss of data concerning its clients, and their financial affairs, as well as Company privileged information.

The Company maintains processes and systems with an aim to preventing any such attack from disrupting its services to clients as well as to prevent any loss of data concerning its clients, their financial affairs, as well as Company privileged information.

Our management is actively involved in the oversight of our cybersecurity risk management program.

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• we engage third-party cybersecurity firms and tools to assist with network monitoring, endpoint protection, vulnerability assessments and penetration testing;

• we engage cyber security consultants, auditors, and other third parties to assess and enhance our cybersecurity practices, such as to perform tabletop exercises and evaluate our cyber processes including an assessment of our incident response procedures.

• we engage cyber security consultants and auditors to perform tabletop exercises and evaluate our cyber processes including an assessment of our incident response procedures.

Identified risks are formally tracked until mitigated or eliminated;

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The incident response plan includes standard processes for reporting and escalating cybersecurity incidents to senior management.

We have processes to evaluate third party service providers and vendors that have access to sensitive systems and Company and customer data, which may include the use of cybersecurity questionnaires and due diligence procedures such as assessments of that service provider’s cybersecurity posture.

We have processes to evaluate third party service providers and vendors that have access to sensitive systems and Company and customer data, which does include the use of cybersecurity questionnaires and due diligence procedures such as assessments of that service provider’s cybersecurity posture.

Management’s Role

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In particular, the Audit Committee assists the Board in its oversight of management’s responsibility to assess, manage and mitigate cybersecurity risks.

Recently the Audit Committee added a member with significant cybersecurity experience.

The Audit Committee receives a cybersecurity update at each regular meeting of the Board covering cybersecurity risks, cybersecurity staffing and staff development including certifications and training.

These updates are given either in person by the CIO and CISO or in written presentations created by them.

Like other U.S.

broker dealers, in May 2024 the Company began submitting client personal information to the Consolidated Audit Trail National Market System.

The CAT NMS is the world’s largest repository of securities transactions and client information and as a result, presents a significant cybersecurity threat to customer personally identifiable information.

As of the date of this filing, the Company has not identified any cybersecurity threats that have materially affected or are reasonably anticipated to have a material effect on the Company’s business strategy, results of operations or financial condition.

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Given the continuing reports of cyber incidents in general, we believe that the Company will most likely continue to be a target of cybersecurity attacks by bad actors.

There is no guarantee that the Company will be able to prevent any or all such attacks.

For additional information on how risks from cybersecurity threats may adversely affect the Company see “Item 1A.

Risk Factors-Risks Related to Our Business” in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

REGULATORY MATTERS AND DEVELOPMENTS

Regulation Best Interest (U.S.)

On June 5, 2019, the SEC adopted Regulation Best Interest (“Reg BI”) as Rule 151-1 under the Exchange Act.

Reg BI imposes a federal standard of conduct on registered broker-dealers and their associated persons when dealing with retail clients and requires that a broker-dealer and its representatives act in the best interest of clients and not place its own interests ahead of the customer’s interests.

Reg BI does not define the term “best interest” but instead sets forth four distinct obligations disclosure, care, conflict of interest and compliance that a broker-dealer must satisfy in each transaction.

Required compliance with Reg BI became effective on June 30, 2020.

In addition to adopting Reg BI, the SEC adopted rules (i) requiring broker-dealers and investment advisers to provide a written relationship summary to each client, and (ii) clarifying certain interpretations under the Investment Advisers Act of 1940 including but not limited to when a broker-dealer's activity is considered “solely incidental” to its broker-dealer business and is, therefore, not considered investment advisory activity (collectively, the “Reg BI Rules”).

Reg BI requires enhanced documentation for recommendations of securities transactions to broker-dealer retail clients as well as the cessation of certain practices and limitations on certain kinds of transactions previously conducted in the normal course of business.

The rules and processes required under Reg BI limit revenue and involve increased costs, including, but not limited to, compliance costs associated with enhanced technology as well as increased litigation risks.

The Company made significant structural, technological and operational changes to our business practices to comply with the requirements of the Reg BI Rules and it is likely that additional changes may be necessary to continue to comply as more experience with the Reg BI Rules is gained.

Regulators have commenced in-depth reviews of the industry’s compliance with the requirements of Reg BI, including that of the Company.

On December 18, 2020, the Department of Labor ("DOL") published its final prohibited transaction exemption (“PTE”) addressing investment advice for fiduciaries of ERISA plans and IRAs.

Similar to the proposal the DOL released in June of 2020, the final exemption takes a principles-based (rather than a prescriptive) approach to resolving conflicts that arise under ERISA when an investment advice fiduciary, its affiliate or a related party is paid certain types of compensation (such as commissions, trailing fees or revenue-sharing) or engages in certain principal transactions.

The final exemption should provide a new and more flexible approach to ERISA compliance for certain types of transactions, which financial institutions may choose to utilize in place of other existing exemptions.

Like the proposal (but in contrast to the precursor rule the DOL finalized in April 2016 that the U.S.

Court of Appeals for the Fifth Circuit later vacated in June 2018), the final exemption does not materially change the scope of fiduciary activities under ERISA, with the exception of including certain rollover-related advice as fiduciary advice.

The effective date for compliance with the PTE was February 1, 2022.

The Company believes many of the steps taken by the Company to achieve compliance with the Reg BI Rules have enabled and will enable the Company to comply with the PTE.

The Company implemented certain additional processes to accompany the actions taken to comply with the Reg BI Rules in order to ensure full compliance with the PTE.

On April 25, 2024, the DOL finalized a collection of regulatory changes in its ongoing quest to update the definition of a “fiduciary” under ERISA and Section 4975 of the Internal Revenue Code (the “2024 Fiduciary Rule”).

In finalizing the 2024 Fiduciary Rule, the DOL sought to confer ERISA fiduciary status on professional investment advisers and wealth managers, particularly with regard to participant-directed 401(k) plans and individual retirement accounts.

Along with the 2024 Fiduciary Rule, the DOL published amendments to a collection of prohibited transaction exemptions.

The 2024 Fiduciary Rule was set to become effective on September 23, 2024.

On July 25 and 26, 2024, the U.S.

District Court for the Eastern District of Texas and the U.S.

District Court for the Northern District of Texas, respectively, issued stays on the effective date of the fiduciary rulemaking package.

Both courts found that the challenges to the rulemaking package were likely to succeed on the merits because the rulemaking exceeds the DOL’s authority and is not consistent with the U.S.

Court of Appeals for the Fifth Circuit’s decision in Chamber of Commerce v.

Department of Labor, (5th Cir.

2018), which vacated the DOL’s 2016 fiduciary rulemaking.

Regulatory Environment

See the discussion of the regulatory environment in which we operate and the impact on our operations of certain rules and regulations in Item 1 “Business - Regulation” in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 for additional information.

Oppenheimer and many of its affiliates are each subject to various regulatory capital requirements.

As of September 30, 2024, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements.

As of March 31, 2025, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements.

See note 15 to the condensed consolidated financial statements in Item 1 for further information on regulatory capital requirements.

On December 20, 2024, the SEC adopted rule amendments to SEC Rule 15c3-3 (the customer protection rule) to require certain broker-dealers, including those with average total credits (amounts owed to customers) equal to or greater than $500 million, to increase the frequency with which they perform computation of the net cash they owe customers and proprietary accounts of other broker-dealers ("PAB") from weekly to daily.

Impacted entities must perform the customer and PAB reserve computations daily beginning no later than December 31, 2025.

We anticipate that the new amendments will impact our principal broker dealer and may result in an increase in required staffing levels.

The Organization for Economic Co-operation and Development (“OECD”) issued the Global Anti-Base Erosion Model Rules (“Pillar II”), which among its provisions, requires companies to pay a minimum corporate tax rate of 15% in each jurisdiction in which they do business.

While we have foreign affiliates that operate within the scope of Pillar II, we do not believe that it will have a material impact on our consolidated results of operations or effective income tax rate.

FACTORS AFFECTING "FORWARD-LOOKING STATEMENTS"

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These risks and uncertainties, many of which are beyond the Company’s control, include, but are not limited to:

the adoption and implementation of the SEC’s “Regulation Best Interest” and other regulations adopted in recent years, (xi) war, terrorist acts and nuclear confrontation as well as political unrest, including events relating to the Israel-Hamas war, the conflict with Hezbollah and Iran and related unrest in the Middle East and Russia's invasion of Ukraine and related Western sanctions, (xii) the Company’s ability to achieve its business plan, (xiii) the effects of the economy on the Company’s ability to find and maintain financing options and liquidity, (xiv) credit, operational, legal and regulatory risks, (xv) risks related to foreign operations, (xvi) the effect of technological innovation on the financial services industry and securities business, (xvii) risks related to election results, Congressional gridlock, political and social unrest, government shutdowns and investigations, trade wars, bank failures, changes in or uncertainty surrounding regulation, and the potential for default by the U.S.

(i) transaction volume in the securities markets, (ii) the volatility of the securities markets, (iii) fluctuations in interest rates, (iv) changes in regulatory requirements that could affect the cost and method of doing business, (v) general economic conditions, both domestic and international, including inflation, recession, stagflation, and changes in consumer confidence and spending, (vi) competition from existing financial institutions, new entrants and other participants in the securities markets and financial services industry, (vii) potential cybersecurity threats and attacks, (viii) legal developments affecting the litigation experience of the securities industry and the Company, (ix) changes in foreign, federal and state tax laws that could affect the popularity of products sold by the Company or impose taxes on securities transactions, (x) the adoption and implementation of the SEC’s “Regulation Best Interest” and other regulations adopted in recent years, (xi) war, terrorist acts and nuclear confrontation as well as political unrest, including events relating to the Israel-Hamas war, the conflict with Hezbollah and Iran and related unrest in the Middle East and Russia's invasion of Ukraine and related Western sanctions, (xii) the Company’s ability to achieve its business plan, (xiii) the effects of the economy on the Company’s ability to find and maintain financing options and liquidity, (xiv) credit, operational, legal and regulatory risks, (xv) risks related to foreign operations, (xvi) the effect of technological innovation on the financial services industry and securities business, (xvii) risks related to election results, Congressional gridlock, political and social unrest, government shutdowns and investigations, government spending, immigration, impact of tariffs and trade wars, bank failures, changes in or uncertainty surrounding regulation, and the potential for default by the U.S.

government on the nation's debt, (xviii) risks related to changes in capital requirements under international standards that may cause banks to back away from providing funding to the securities industry and (xix) economic, market, political and social impact of, and uncertainty relating to, any catastrophic events, including pandemics, epidemics or other outbreaks of disease, climate-related risks such as natural disasters and extreme weather events.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the nine months ended September 30, 2024, there were no material changes to the information contained in Part II, Item 7A of the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

During the three months ended March 31, 2025, there were no material changes to the information contained in Part II, Item 7A of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis