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What changed in Cohen & Co Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Cohen & Co Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+828 added−931 removedSource: 10-K (2024-03-06) vs 10-K (2023-03-09)

Top changes in Cohen & Co Inc.'s 2023 10-K

828 paragraphs added · 931 removed · 638 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

350 edited+103 added−200 removed402 unchanged
Biggest changeSEGMENT INFORMATION Statement of Operations Information For the Year Ended December 31, 2022 (Dollars in Thousands) Capital Asset Principal Segment Markets Management Investing Total Unallocated (1) Total Net trading $ 40,009 $ - $ - $ 40,009 $ - $ 40,009 Asset management - 9,004 - 9,004 - 9,004 New issue and advisory 24,721 - - 24,721 - 24,721 Principal transactions and other income 2 854 (30,203 ) (29,347 ) - (29,347 ) Total revenues 64,732 9,858 (30,203 ) 44,387 - 44,387 Compensation and benefits 32,434 7,612 1,086 41,132 9,158 50,290 Other operating expense 14,539 2,173 728 17,440 4,620 22,060 Total operating expenses 46,973 9,785 1,814 58,572 13,778 72,350 Operating income / (loss) 17,759 73 (32,017 ) (14,185 ) (13,778 ) (27,963 ) Interest income (expense) (247 ) - - (247 ) (4,735 ) (4,982 ) Income / (loss) from equity method affiliates - - (20,931 ) (20,931 ) - (20,931 ) Other non-operating income - - - - - - Income / (loss) before income taxes 17,512 73 (52,948 ) (35,363 ) (18,513 ) (53,876 ) Income tax expense / (benefit) - - - - 4,794 4,794 Net income / (loss) 17,512 73 (52,948 ) (35,363 ) (23,307 ) (58,670 ) Less: Net income (loss) attributable to the non-convertible non-controlling interest of the Operating LLC - - (23,203 ) (23,203 ) - (23,203 ) Enterprise net income (loss) 17,512 73 (29,745 ) (12,160 ) (23,307 ) (35,467 ) Less: Net income (loss) attributable to the convertible non-controlling interest of Cohen & Company Inc. - - - - (22,078 ) (22,078 ) Net income / (loss) attributable to Cohen & Company Inc. $ 17,512 $ 73 $ (29,745 ) $ (12,160 ) $ (1,229 ) $ (13,389 ) Other statement of operations data Depreciation and amortization (included in total operating expense) $ - $ 5 $ - $ 5 $ 552 $ 557 F- 75 Table of Contents SEGMENT INFORMATION Statement of Operations Information For the Year Ended December 31, 2021 (Dollars in Thousands) Capital Asset Principal Segment Markets Management Investing Total Unallocated (1) Total Net trading $ 69,385 $ - $ - $ 69,385 $ - $ 69,385 Asset management - 10,923 - 10,923 - 10,923 New issue and advisory 28,736 - - 28,736 - 28,736 Principal transactions and other income (3 ) 768 36,559 37,324 - 37,324 Total revenues 98,118 11,691 36,559 146,368 - 146,368 Compensation and benefits 42,064 6,630 16,546 65,240 19,808 85,048 Other operating expense 13,914 2,151 387 16,452 5,275 21,727 Total operating expenses 55,978 8,781 16,933 81,692 25,083 106,775 Operating income / (loss) 42,140 2,910 19,626 64,676 (25,083 ) 39,593 Interest income (expense) (435 ) - - (435 ) (6,798 ) (7,233 ) Income / (loss) from equity method affiliates - - 36,010 36,010 - 36,010 Other non-operating income - - - - 2,127 2,127 Income / (loss) before income taxes 41,705 2,910 55,636 100,251 (29,754 ) 70,497 Income tax expense / (benefit) - - - - (3,541 ) (3,541 ) Net income / (loss) 41,705 2,910 55,636 100,251 (26,213 ) 74,038 Less: Net income (loss) attributable to the non-convertible non-controlling interest of the Operating LLC - 1,878 33,696 35,574 - 35,574 Enterprise net income (loss) 41,705 1,032 21,940 64,677 (26,213 ) 38,464 Less: Net income (loss) attributable to the convertible non-controlling interest of Cohen & Company Inc. - - - - 26,656 26,656 Net income / (loss) attributable to Cohen & Company Inc. $ 41,705 $ 1,032 $ 21,940 $ 64,677 $ (52,869 ) $ 11,808 Other statement of operations data Depreciation and amortization (included in total operating expense) $ 1 $ 2 $ - $ 3 $ 368 $ 371 F- 76 Table of Contents SEGMENT INFORMATION Statement of Operations Information For the Year Ended December 31, 2020 (Dollars in Thousands) Capital Asset Principal Segment Markets Management Investing Total Unallocated (1) Total Net trading $ 73,611 $ - $ - $ 73,611 $ - $ 73,611 Asset management - 8,759 - 8,759 - 8,759 New issue and advisory 2,234 - - 2,234 - 2,234 Principal transactions and other income 3 639 44,864 45,506 - 45,506 Total revenues 75,848 9,398 44,864 130,110 - 130,110 Salaries/Wages 36,092 5,309 11,700 53,101 6,801 59,902 Other Operating Expense 12,546 2,042 168 14,756 5,241 19,997 Impairment of goodwill 7,883 - - 7,883 - 7,883 Total operating expenses 56,521 7,351 11,868 75,740 12,042 87,782 Operating income / (loss) 19,327 2,047 32,996 54,370 (12,042 ) 42,328 Interest income (expense) (997 ) - - (997 ) (8,592 ) (9,589 ) Income / (loss) from equity method affiliates - - (2,955 ) (2,955 ) - (2,955 ) Income / (loss) before income taxes 18,330 2,047 30,041 50,418 (20,634 ) 29,784 Income tax expense / (benefit) - - - - (8,669 ) (8,669 ) Net income / (loss) 18,330 2,047 30,041 50,418 (11,965 ) 38,453 Less: Net income (loss) attributable to the non-convertible non-controlling interest of the Operating LLC - 1,408 8,640 10,048 - 10,048 Enterprise net income (loss) 18,330 639 21,401 40,370 (11,965 ) 28,405 Less: Net income (loss) attributable to the convertible non-controlling interest of Cohen & Company Inc. - - - - 14,200 14,200 Net income / (loss) attributable to Cohen & Company Inc. $ 18,330 $ 639 $ 21,401 $ 40,370 $ (26,165 ) $ 14,205 Other statement of operations data Depreciation and amortization (included in total operating expense) $ 18 $ 3 $ - $ 21 $ 313 $ 334 ( 1 ) Unallocated includes certain expenses incurred by indirect overhead and support departments (such as the executive, finance, legal, information technology, human resources, risk, compliance and other similar overhead and support departments).
Biggest changeSEGMENT INFORMATION Statement of Operations Information For the Year Ended December 31, 2023 (Dollars in Thousands) Capital Asset Principal Segment Markets Management Investing Total Unallocated (1) Total Net trading $ 30,926 $ - $ - $ 30,926 $ - $ 30,926 Asset management - 7,337 - 7,337 - 7,337 New issue and advisory 28,264 - - 28,264 - 28,264 Principal transactions and other income 1 1,071 15,382 16,454 - 16,454 Total revenues 59,191 8,408 15,382 82,981 - 82,981 Compensation and benefits 31,156 5,883 2,335 39,374 12,718 52,092 Other operating expense 15,746 2,218 1,117 19,081 4,947 24,028 Total operating expenses 46,902 8,101 3,452 58,455 17,665 76,120 Operating income / (loss) 12,289 307 11,930 24,526 (17,665 ) 6,861 Interest income (expense) (338 ) - - (338 ) (6,188 ) (6,526 ) Income / (loss) from equity method affiliates - - 15,609 15,609 - 15,609 Other non-operating income - - - - - - Income / (loss) before income taxes 11,951 307 27,539 39,797 (23,853 ) 15,944 Income tax expense / (benefit) - - - - 5,545 5,545 Net income / (loss) 11,951 307 27,539 39,797 (29,398 ) 10,399 Less: Net income (loss) attributable to the non-convertible non-controlling interest of the Operating LLC - 17 19,573 19,590 - 19,590 Enterprise net income (loss) 11,951 290 7,966 20,207 (29,398 ) (9,191 ) Less: Net income (loss) attributable to the convertible non-controlling interest of Cohen & Company Inc. - - - - (4,078 ) (4,078 ) Net income / (loss) attributable to Cohen & Company Inc. $ 11,951 $ 290 $ 7,966 $ 20,207 $ (25,320 ) $ (5,113 ) Other statement of operations data Depreciation and amortization (included in total operating expense) $ - $ 6 $ - $ 6 $ 557 $ 563 F- 69 Table of Contents SEGMENT INFORMATION Statement of Operations Information For the Year Ended December 31, 2022 (Dollars in Thousands) Capital Asset Principal Segment Markets Management Investing Total Unallocated (1) Total Net trading $ 40,009 $ - $ - $ 40,009 $ - $ 40,009 Asset management - 9,004 - 9,004 - 9,004 New issue and advisory 24,721 - - 24,721 - 24,721 Principal transactions and other income 2 854 (30,203 ) (29,347 ) - (29,347 ) Total revenues 64,732 9,858 (30,203 ) 44,387 - 44,387 Compensation and benefits 32,434 7,612 1,086 41,132 9,158 50,290 Other operating expense 14,539 2,173 728 17,440 4,620 22,060 Total operating expenses 46,973 9,785 1,814 58,572 13,778 72,350 Operating income / (loss) 17,759 73 (32,017 ) (14,185 ) (13,778 ) (27,963 ) Interest income (expense) (247 ) - - (247 ) (4,735 ) (4,982 ) Income / (loss) from equity method affiliates - - (20,931 ) (20,931 ) - (20,931 ) Other non-operating income - - - - - - Income / (loss) before income taxes 17,512 73 (52,948 ) (35,363 ) (18,513 ) (53,876 ) Income tax expense / (benefit) - - - - 4,794 4,794 Net income / (loss) 17,512 73 (52,948 ) (35,363 ) (23,307 ) (58,670 ) Less: Net income (loss) attributable to the non-convertible non-controlling interest of the Operating LLC - - (23,203 ) (23,203 ) - (23,203 ) Enterprise net income (loss) 17,512 73 (29,745 ) (12,160 ) (23,307 ) (35,467 ) Less: Net income (loss) attributable to the convertible non-controlling interest of Cohen & Company Inc. - - - - (22,078 ) (22,078 ) Net income / (loss) attributable to Cohen & Company Inc. $ 17,512 $ 73 $ (29,745 ) $ (12,160 ) $ (1,229 ) $ (13,389 ) Other statement of operations data Depreciation and amortization (included in total operating expense) $ - $ 5 $ - $ 5 $ 552 $ 557 F- 70 Table of Contents SEGMENT INFORMATION Statement of Operations Information For the Year Ended December 31, 2021 (Dollars in Thousands) Capital Asset Principal Segment Markets Management Investing Total Unallocated (1) Total Net trading $ 69,385 $ - $ - $ 69,385 $ - $ 69,385 Asset management - 10,923 - 10,923 - 10,923 New issue and advisory 28,736 - - 28,736 - 28,736 Principal transactions and other income (3 ) 768 36,559 37,324 - 37,324 Total revenues 98,118 11,691 36,559 146,368 - 146,368 Salaries/Wages 42,064 6,630 16,546 65,240 19,808 85,048 Other Operating Expense 13,914 2,151 387 16,452 5,275 21,727 Total operating expenses 55,978 8,781 16,933 81,692 25,083 106,775 Operating income / (loss) 42,140 2,910 19,626 64,676 (25,083 ) 39,593 Interest income (expense) (435 ) - - (435 ) (6,798 ) (7,233 ) Income / (loss) from equity method affiliates - - 36,010 36,010 - 36,010 Other non operating income / (expense) - - - - 2,127 2,127 Income / (loss) before income taxes 41,705 2,910 55,636 100,251 (29,754 ) 70,497 Income tax expense / (benefit) - - - - (3,541 ) (3,541 ) Net income / (loss) 41,705 2,910 55,636 100,251 (26,213 ) 74,038 Less: Net income (loss) attributable to the non-convertible non-controlling interest of the Operating LLC - 1,878 33,696 35,574 - 35,574 Enterprise net income (loss) 41,705 1,032 21,940 64,677 (26,213 ) 38,464 Less: Net income (loss) attributable to the convertible non-controlling interest of Cohen & Company Inc. - - - - 26,656 26,656 Net income / (loss) attributable to Cohen & Company Inc. $ 41,705 $ 1,032 $ 21,940 $ 64,677 $ (52,869 ) $ 11,808 Other statement of operations data Depreciation and amortization (included in total operating expense) $ 1 $ 2 $ - $ 3 $ 368 $ 371 ( 1 ) Unallocated includes certain expenses incurred by indirect overhead and support departments (such as the executive, finance, legal, information technology, human resources, risk, compliance and other similar overhead and support departments).
CCFEL was regulated by Central Bank of Ireland (“CBI”), and performed asset management and capital markets activities in Ireland and the European Union. In 2021, the Company transferred CCFEL's activities to CCFESA and began the process of withdrawing from regulation under CBI.
CCFEL was regulated by the Central Bank of Ireland (“CBI”), and performed asset management and capital markets activities in Ireland and the European Union. In 2021, the Company transferred CCFEL's activities to CCFESA and began the process of withdrawing from regulation under CBI.
In the periods presented herein, the Company had three different types of grants that fall under ASC 718. First, the Company may grant to employees and directors restricted common stock in Cohen & Company Inc. These grants vest over a period of time and only have service based vesting criteria.
In the periods presented herein, the Company had three different types of grants that fall under ASC 718. First, the Company may grant restricted common stock in Cohen & Company Inc. to employees and directors. These grants vest over a period of time and only have service based vesting criteria.
The Company assumes no forfeitures up front and records forfeitures as they occur by reducing expense. Second, the Company may grant to employees operating units of the Operating LLC. These grants also vest over a period of time and only have service based vesting criteria.
The Company assumes no forfeitures up front and records forfeitures as they occur by reducing expense. Second, the Company may grant operating units of the Operating LLC to employees. These grants also vest over a period of time and only have service based vesting criteria.
However, in the periods presented, the Operating LLC or its subsidiaries have been subject to entity level income taxes in certain foreign jurisdictions as well as New York City and Philadelphia.
However, in the periods presented, the Operating LLC or its subsidiaries have been subject to entity level income taxes in certain foreign jurisdictions as well as in New York City and Philadelphia.
See equity-based compensation section above. The Company will continue to mark the sponsor entity's investment in the SPAC to market and record principal transactions income or loss and offsetting non-controlling interest income or expense until the sponsor entity itself distributes all of the SPAC shares it owns to its members and liquidates.
See the equity-based compensation section above. The Company will continue to mark the sponsor entity's investment in the SPAC to market and record principal transactions income or loss and offsetting non-controlling interest income or expense until the sponsor entity itself distributes all of the SPAC shares it owns to its members and liquidates.
INVESTMENTS IN EQUITY METHOD AFFILIATES Equity method accounting requires that the Company record its investments in equity method affiliates on the consolidated balance sheets and recognize its share of the equity method affiliates’ net income as earnings each reporting period. The Company elected to use the cumulative earnings approach for the distributions it receives from its equity method investments.
INVESTMENTS IN EQUITY METHOD AFFILIATES Equity method accounting requires that the Company record its investments in equity method affiliates on the consolidated balance sheets and recognize its share of the equity method affiliates’ net income as earnings in each reporting period. The Company elected to use the cumulative earnings approach for the distributions it receives from its equity method investments.
Notwithstanding any of the foregoing, following the occurrence of a person or entity becoming an Acquiring Person (the “Flip-In Event”), all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by such Acquiring Person will be null and void.
Notwithstanding any of the foregoing, following the occurrence of a person or entity becoming an Acquiring Person (a “Flip-In Event”), all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by such Acquiring Person will be null and void.
Generally, the employee's investment will be worthless if the SPAC in which the sponsor entity has invested is liquidated and it will become worth something if the SPAC completes its business combination. Therefore, the Company treats these grants as having a performance condition (i.e. the completion of the SPAC business combination).
Generally, the employee's investment will be worthless if the SPAC in which the sponsor entity has invested is liquidated and it will become worth something if the SPAC completes its business combination. Therefore, the Company treats these grants as having a performance condition (i.e. the completion of the SPAC business combination).
Further, at the time of the investments, the Company treats this performance condition as being non-probable. The effect of this is that the Company records no expense related to these investments until (and only if) the business combination is completed.
Further, at the time of the investments, the Company treats this performance condition as being non-probable. The effect of this is that the Company records no expense related to these investments until (and only if) the business combination is completed.
Upon completion of the business combination, the Company records compensation expense in an amount equal to the fair value of the grant.
Upon completion of the business combination, the Company records compensation expense in an amount equal to the fair value of the grant.
On January 31, 2022, the Operating LLC and JKD Investor entered into the 2022 Note Purchase Agreement, pursuant to which, among other things, on such date, (i) JKD Investor paid to the Operating LLC an additional $2,250 and (ii) in consideration for such funds, the Operating LLC issued to JKD Investor the Amended and Restated Note in the aggregate principal amount of $4,500.
On January 31, 2022, the Operating LLC and JKD Investor entered into the 2022 Purchase Agreement, pursuant to which, among other things, on such date, (i) JKD Investor paid to the Operating LLC an additional $2,250 and (ii) in consideration for such funds, the Operating LLC issued to JKD Investor the Amended and Restated Note in the aggregate principal amount of $4,500.
FTAC VI liquidated in 2022. FTAC Olympus Acquisition Corp ("FTAC Olympus") was a SPAC. The sponsor of FTAC Olympus ("FTAC Olympus Sponsor") is a related party as it is an equity method investment of the Company. The Company made a sponsor investment in FTAC Olympus Sponsor, receiving a final allocation of 399,741 founder shares of FTAC Olympus stock.
FTAC VI liquidated in 2022. FTAC Olympus Acquisition Corp. ("FTAC Olympus") was a SPAC. The sponsor of FTAC Olympus ("FTAC Olympus Sponsor") is a related party as it was an equity method investment of the Company. The Company made a sponsor investment in FTAC Olympus Sponsor, receiving a final allocation of 399,741 founder shares of FTAC Olympus stock.
Insurance JV is considered a related party because it is an equity method investment. The Company has an investment in and a management contract with the U.S. Insurance JV. Income earned or loss incurred on the investment are included as part of principal transactions and other income.
Insurance JV is considered a related party because it is an equity method investment of the Company. The Company has an investment in and a management contract with the U.S. Insurance JV. Income earned or loss incurred on the investment are included as part of principal transactions and other income.
The Company specializes in a variety of products, including but not limited to: corporate bonds, asset backed securities (“ABS”), mortgage backed securities (“MBS”), residential mortgage backed securities (“RMBS”), CDO s, collateralized loan obligations (“CLOs”), collateralized bond obligations (“CBOs”), co llateralized mortgage obligations (“CMOs”), municipal securities, to-be-announced securities (“TBAs”) and other forward agency MBS contracts, U.S. government bonds, U.S. government agency securities, brokered deposits and certificates of deposit (“CDs”) for small banks, and hybrid capital of financial institutions including trust preferred securities (“TruPS”), whole loan, and other structured financial instruments.
The Company specializes in a variety of products, including but not limited to: corporate bonds, asset backed securities (“ABS”), mortgage backed securities (“MBS”), residential mortgage backed securities (“RMBS”), CDO s, collateralized loan obligations (“CLOs”), collateralized bond obligations (“CBOs”), co llateralized mortgage obligations (“CMOs”), municipal securities, to-be-announced securities (“TBAs”) and other forward agency MBS contracts, U.S. government bonds, U.S. government agency securities, brokered deposits and certificates of deposit (“CDs”) for small banks, and hybrid capital of financial institutions including trust preferred securities (“TruPS”), whole loans, and other structured financial instruments.
As consideration for these services, the Company received an allocation of 35,000 founder shares of FTAC Athena stock to the Operating LLC and recorded an equity method investment of $40 for the valuation of these services. The revenue earned on this arrangement is disclosed in Principal transactions and other income, SPAC Sponsor Entities in the tables below.
As consideration for these services, the Company received an allocation of 35,000 founder shares of FTAC Athena stock to the Operating LLC and recorded an equity method investment of $40 for the valuation of these services. The revenue earned on this arrangement is disclosed in principal transactions and other income, other SPAC entities in the tables below.
As consideration for these services, the Company received an allocation of 35,000 founder shares of FTAC Hera stock to the Operating LLC and recorded an equity method investment of $40 for the valuation of these services. The revenue earned on this arrangement is disclosed in Principal transactions and other income, SPAC Sponsor Entities in the tables below.
As consideration for these services, the Company received an allocation of 35,000 founder shares of FTAC Hera stock to the Operating LLC and recorded an equity method investment of $40 for the valuation of these services. The revenue earned on this arrangement is disclosed in principal transactions and other income, other SPAC entities in the tables below.
As consideration for these services, the Company received an allocation of 35,000 founder shares of FTAC Parnassus stock to the Operating LLC and recorded an equity method investment of $40 for the valuation of these services. The revenue earned on this arrangement is disclosed in Principal transactions and other income, SPAC Sponsor Entities in the tables below.
As consideration for these services, the Company received an allocation of 35,000 founder shares of FTAC Parnassus stock to the Operating LLC and recorded an equity method investment of $40 for the valuation of these services. The revenue earned on this arrangement is disclosed in principal transactions and other income, other SPAC entities in the tables below.
In addition, receivables or payables arising from unsettled regular way trades is reflected on a net basis either as a component of receivables from or payables to brokers, dealers, and clearing agencies. These receivables are subject to the requirements of ASU 2016 - 13, which potentially may require the recording of credit losses.
In addition, receivables or payables arising from unsettled regular way trades are reflected on a net basis either as a component of receivables from or payables to brokers, dealers, and clearing agencies. These receivables are subject to the requirements of ASU 2016 - 13, which potentially may require the recording of credit losses.
When the Company is able to obtain independent market quotations from at least two broker-dealers and where a price within the range of at least two broker-dealers is used or market price quotations from third -party pricing services is used, these interests in securitizations will generally be classified within level 2 of the valuation hierarchy.
When the Company is able to obtain independent market quotations from at least two broker-dealers and where a price within the range of at least two broker-dealers is used or market price quotations from third -party pricing services are used, these interests in securitizations will generally be classified within level 2 of the valuation hierarchy.
As a result, the unrealized gains and losses for assets and liabilities within the level 3 category presented in the tables below may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.
As a result, the unrealized gains and losses for assets and liabilities within the level 3 category that may be presented in the tables below may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.
In those cases, the Company utilizes the measurement alternative of ASC 321 - 10 - 35 - 2. This alternative allows the Company to carry the investment at cost minus impairment. If the Company observes a market transaction for identical or similar instrument, it will adjust the carrying value of the equity security.
In those cases, the Company utilizes the measurement alternative of ASC 321 - 10 - 35 - 2. This alternative allows the Company to carry the investment at cost minus impairment. If the Company observes a market transaction for an identical or similar instrument, it will adjust the carrying value of the equity security.
The PPP Loan bore interest at a fixed rate of 1% per year, with the first six months of interest deferred, had a term of two year and could be prepaid at any time without payment of any premium. The PPP Loan was unsecured but guaranteed by the U.S. Small Business Association.
The PPP Loan bore interest at a fixed rate of 1% per year, with the first six months of interest deferred, had a term of two years, and could be prepaid at any time without payment of any premium. The PPP Loan was unsecured but guaranteed by the U.S. Small Business Association.
(“AFN”), a publicly traded real estate investment trust. As a result of the AFN Merger, AFN contributed substantially all of its assets into Cohen Brothers in exchange for newly issued units of membership interests directly from Cohen Brothers. In addition, AFN received additional Cohen Brothers membership interests directly from its members in exchange for AFN common stock.
(“AFN”), a publicly traded real estate investment trust ("REIT"). As a result of the AFN Merger, AFN contributed substantially all of its assets into Cohen Brothers in exchange for newly issued units of membership interests directly from Cohen Brothers. In addition, AFN received additional Cohen Brothers membership interests directly from its members in exchange for AFN common stock.
The Company recorded deferred tax expense in 2022 because expectations of future income decreased and the Company increased the valuation allowance it had applied against carryforward assets. Because of magnitude of the Company's carryforward assets as well as the volatility of the Company's operating results, significant adjustments to the valuation allowance are likely going forward.
The Company recorded deferred tax expense in 2022 and 2023 because expectations of future income decreased and the Company increased the valuation allowance it had applied against carryforward assets. Because of magnitude of the Company's carryforward assets as well as the volatility of the Company's operating results, significant adjustments to the valuation allowance are likely going forward.
In such instances, the Company would record the receivable as a component of other assets in its consolidated balance sheet and record the equity component as an embedded derivative. All equity derivatives are carried at fair value as a component of other investments, at fair value or other investments sold, not yet purchased in the Company’s consolidated balance sheets.
In such instances, the Company would record the receivable as a component of other assets in its consolidated balance sheets and record the equity component as an embedded derivative. All equity derivatives are carried at fair value as a component of other investments, at fair value or other investments sold, not yet purchased in the Company’s consolidated balance sheets.
The Trusts are not consolidated by the Company and, therefore, the Company’s consolidated financial statements include the junior subordinated notes issued to the Trusts as a liability, and the investment in the Trusts’ common securities as an asset. The common securities were deemed to have a fair value of $0 as of the Merger Date.
The Trusts are not consolidated by the Company and, therefore, the Company’s consolidated financial statements include the junior subordinated notes issued to the Trusts as a liability, and the investment in the Trusts’ common securities as an asset. The common securities were deemed to have a fair value of $0 as of the AFN Merger Date.
These amounts were initially recorded as a discount on debt and are amortized to interest expense over the life of the notes under the effective interest method. The Company also incurred $410 o f deferred financing costs associated with the Byline Credit Facility.
These amounts were initially recorded as a discount on debt and were amortized to interest expense over the life of the notes under the effective interest method. The Company also incurred $410 o f deferred financing costs associated with the Byline Credit Facility.
To the extent management's determination changes, an adjustment will be made to the valuation allowance resulting in deferred tax expense or benefit. The Company recorded deferred tax benefit in 2020 and 2021 because expectations of future income increased and the Company reduced the valuation allowance it had applied against carryforward assets.
To the extent management's determination changes, an adjustment will be made to the valuation allowance resulting in deferred tax expense or benefit. The Company recorded deferred tax benefit in 2021 because expectations of future income increased and the Company reduced the valuation allowance it had applied against carryforward assets.
The fair value is based on either quoted market prices of an active exchange, independent broker market quotations, market price quotations from third -party pricing services, or valuation models when quotations are not available. Other investments, at fair value : These amounts are carried at fair value.
Investments-trading : These amounts are carried at fair value. The fair value is based on either quoted market prices of an active exchange, independent broker market quotations, market price quotations from third -party pricing services, or valuation models when quotations are not available. Other investments, at fair value : These amounts are carried at fair value.
Bankruptcy of Gestation Counterparty As of June 30, 2022, the Company had an outstanding reverse repo balance with First Guaranty Mortgage Corporation (“FGMC”) totaling $269,228. Also, effective June 30, 2022, FGMC filed for bankruptcy. Subsequent to June 30, 2022, the Company issued a default notice to FGMC under the reverse repo.
Bankruptcy of Gestation Counterparty As of June 30, 2022, the Company had an outstanding reverse repo balance with First Guaranty Mortgage Corporation (“FGMC”) totaling $269,228. Effective June 30, 2022, FGMC filed for bankruptcy. Subsequent to June 30, 2022, the Company issued a default notice to FGMC under the reverse repo.
The impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, any loss recognized would not exceed the total amount of goodwill, allocated to the reporting unit.
The impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, any loss recognized could not exceed the total amount of goodwill allocated to the reporting unit.
Since the Merger, Cohen & Company Inc. has been in violation of one covenant of Alesco Capital Trust I. As a result of this violation, Cohen & Company Inc. is prohibited from issuing additional debt that is either subordinated to or pari passu with Alesco Capital Trust I debt.
Since the AFN Merger, Cohen & Company Inc. has been in violation of one covenant of Alesco Capital Trust I. As a result of this violation, Cohen & Company Inc. is prohibited from issuing additional debt that is either subordinated to or pari passu with Alesco Capital Trust I debt.
CCFM also manages the SPAC Fund and SPAC Series Funds. 2. Dekania Capital Management, LLC (“DCM”) is a wholly owned subsidiary of the Operating LLC and acts as asset manager and investment adviser to the Company’s Dekania Europe II and Dekania Europe III CDOs.
CCFM also manages the SPAC Series Funds and managed the SPAC Fund. 2. Dekania Capital Management, LLC (“DCM”) is a wholly owned subsidiary of the Operating LLC and acts as asset manager and investment adviser to the Company’s Dekania Europe II and Dekania Europe III CDOs.
Government Agency Debt Securities : Callable and non-callable U.S. government agency debt securities are measured primarily based on quoted market prices obtained from third -party pricing services. Non-callable U.S. government agency debt securities are generally classified within level 1 and callable U.S. government agency debt securities are classified within level 2 of the valuation hierarchy.
Government Agency Debt Securities : Callable and non-callable U.S. government agency debt securities are measured primarily based on quoted market prices obtained from third -party pricing services. Non-callable U.S. government agency debt securities are generally classified within level 1 and callable U.S. government agency debt securities are classified within level 2 of the valuation hierarchy. U.S. Treasury Securities : U.S.
At this point (assuming the Company consolidated the sponsor entity), the Company accounted for the shares received at fair value. It reclassified any remaining equity method investment to other investments, at fair value and recorded principal transactions income for the difference.
At this point (assuming the Company consolidated the sponsor entity), the Company accounted for the shares received at fair value. The Company reclassified any remaining equity method investment to other investments, at fair value and recorded principal transactions income for the difference.
In addition, the Rights Agreement defines the term “Exempted Person” to also include any person or entity who, together with all affiliates and associates of such person or entity, is the beneficial owner of Common Stock and/or other securities exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock outstanding, and whose beneficial ownership would not, as determined by the Company’s board of directors, jeopardize or endanger the availability of the Company of its deferred tax assets.
In addition, the Rights Agreement defined the term “Exempted Person” to also include any person or entity who, together with all affiliates and associates of such person or entity, is the beneficial owner of Common Stock and/or other securities exercisable for shares of Common Stock representing 4.95% or more of the shares of Common Stock outstanding, and whose beneficial ownership would not, as determined by the Company’s board of directors, jeopardize or endanger the availability of the Company of its deferred tax assets.
Each outstanding share of Series F Preferred Stock entitles the holder to ( 1 ) vote for every ten ( 10 ) shares of Series F Preferred Stock on each matter submitted to the Holders for their vote. The Series F Preferred Stock held by Daniel G.
Each outstanding share of Series F Preferred Stock entitles the holder to one ( 1 ) vote for every ten ( 10 ) shares of Series F Preferred Stock on each matter submitted to the Holders for their vote. The Series F Preferred Stock held by Daniel G.
On January 31, 2022, the Operating LLC and JKD Investor entered into a note purchase agreement (the “2022 Purchase Agreement”), pursuant to which, among other things, on such date, (i) JKD Investor paid to the Operating LLC an additional $2,250 and (ii) in consideration for such funds, the Operating LLC issued to JKD Investor an Amended and Restated Senior Promissory Note in the aggregate principal amount of $4,500 (the “Amended and Restated Note”), which Amended and Restated Note amended and restated the JKD Note in its entirety.
On January 31, 2022, the Operating LLC and JKD Investor entered into a note purchase agreement (the "2022 Purchase Agreement"), pursuant to which, among other things, on such date, (i) JKD Investor paid to the Operating LLC an additional $2,250 and (ii) in consideration for such funds, the Operating LLC issued to JKD Investor an amended and restated senior promissory note in the aggregate principal amount of $4,500 (the “Amended and Restated Note”), which Amended and Restated Note amended and restated the JKD Note in its entirety.
At December 31, 2022 , the Company had open TBA and other forward MBS purchase agreements in the notional amount of $535,000 and open TBA and other forward MBS sale agreements in the notional amount of $556,780.
At December 31, 2022 , the Company had open TBA and other forward agency MBS purchase agreements in the notional amount of $535,000 and open TBA and other forward agency MBS sale agreements in the notional amount of $556,780.
Because these entities are consolidated and the employees are investing in the consolidated company's non-controlling interest, these equity interests fall under FASB ASC 718. Generally, the employee invests a de-minimus amount and receives an allocation of the founder shares held by the sponsor entity. The investment generally does not have any explicit vesting criteria associated with it.
Because these entities are consolidated and the employees are investing in the consolidated company's non-controlling interest, these equity interests fall under FASB ASC 718. Generally, the employee invests a de minimis amount and receives an allocation of the founder shares held by the sponsor entity. The investment generally does not have any explicit vesting criteria associated with it.
FTAC V liquidated in 2022. Fintech Acquisition Corp. VI ("FTAC VI") is a SPAC. The sponsor of FTAC VI ("FTAC VI Sponsor") is a related party as it is an equity method investment of the Company.
FTAC V liquidated in 2022. Fintech Acquisition Corp. VI ("FTAC VI") was a SPAC. The sponsor of FTAC VI ("FTAC VI Sponsor") is a related party as it was an equity method investment of the Company.
Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability. Level 3 Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.
Pricing models with inputs that are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability. Level 3 Financial assets and liabilities with values that are based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.
CCFL in the past acted as asset manager and investment adviser to the Company’s Dekania Europe III CDO. CCFL also carried out certain of the Company’s Capital Markets business segment activities in Europe including brokerage, advisory, and new issue services. During 2020, CCFL reduced its permissions with the FCA and no longer is a regulated entity.
CCFL in the past acted as asset manager and investment adviser to the Company’s Dekania Europe III CDO. CCFL also carried out certain of the Company’s Capital Markets business segment activities in Europe including brokerage, advisory, and new issue services. During 2020, CCFL reduced its permissions with the FCA and was no longer a regulated entity.
F- 74 Table of Contents 29. SEGMENT AND GEOGRAPHIC INFORMATION Segment Information The Company operates within three business segments: Capital Markets, Asset Management, and Principal Investing. See note 1. The Company’s business segment information was prepared using the following methodologies and generally represents the information that is relied upon by management in its decision-making processes.
F- 68 Table of Contents 29. SEGMENT AND GEOGRAPHIC INFORMATION Segment Information The Company operates within three business segments: Capital Markets, Asset Management, and Principal Investing. See note 1. The Company’s business segment information was prepared using the following methodologies and generally represents the information that is relied upon by management in its decision-making processes.
F-6 Table of Contents COHEN & COMPANY INC. Notes to Consolidated Financial Statements December 31, 2022 (Dollars in thousands, except share and per share information) 1. ORGANIZATION AND NATURE OF OPERATIONS Organizational History Cohen Brothers, LLC (“Cohen Brothers”) was formed on October 7, 2004 by Cohen Bros. Financial, LLC (“CBF”).
F-6 Table of Contents COHEN & COMPANY INC. Notes to Consolidated Financial Statements December 31, 2023 (Dollars in thousands, except share and per share information) 1. ORGANIZATION AND NATURE OF OPERATIONS Organizational History Cohen Brothers, LLC (“Cohen Brothers”) was formed on October 7, 2004 by Cohen Bros. Financial, LLC (“CBF”).
For derivative instruments, such as TBAs and other extended settlement trades, the fair value is generally based on market price quotations from third -party pricing services. F- 18 Table of Contents X. Investments in Special Purpose Acquisition Companies ("SPACs") Sponsor Entities The Company invested in the sponsor entities of SPACs.
For derivative instruments, such as TBAs and other extended settlement trades, the fair value is generally based on market price quotations from third -party pricing services. F- 17 Table of Contents X. Investments in Special Purpose Acquisition Companies ("SPACs") Sponsor Entities The Company invested in the sponsor entities of SPACs.
Margin payable represents amounts borrowed from Pershing, LLC and Cantor Fitzgerald to finance the Company’s trading portfolio. See note 5 for interest expense incurred on margin payable. All of the Company's securities included in investments-trading and a portion of the Company's securities included in other investments, at fair value serve as collateral for this margin loan. See note 8.
Margin payable represents amounts borrowed from Pershing, LLC to finance the Company’s trading portfolio. See note 5 for interest expense incurred on margin payable. All of the Company's securities included in investments-trading and a portion of the Company's securities included in other investments, at fair value serve as collateral for this margin loan. See note 8.
Second, JVB qualifies for an exemption under Footnote 74 of the SEC Release No. 34 - 70073 because it limits its business activities to certain activities allowed under this exemption and it does not hold customer funds or securities, carry customer accounts, and does not carry PAB accounts. F- 72 Table of Contents 28.
Second, JVB qualifies for an exemption under Footnote 74 of the SEC Release No. 34 - 70073 because it limits its business activities to certain activities allowed under this exemption and it does not hold customer funds or securities, carry customer accounts, and does not carry PAB accounts. F- 67 Table of Contents 28.
For every 10 shares of Series E Preferred Stock, the holders thereof are entitled to one vote on any such matter. Daniel G. Cohen, the Company’s Executive Chairman, is the sole holder of all 4,983,557 shares of Series E Preferred Stock outstanding as of December 31, 2022 . The Series E Preferred Stock held by Daniel G.
For every 10 shares of Series E Preferred Stock, the holders thereof are entitled to one vote on any such matter. Daniel G. Cohen, the Company’s executive chairman, is the sole holder of all 4,983,557 shares of Series E Preferred Stock outstanding as of December 31, 2023 . The Series E Preferred Stock held by Daniel G.
On November 18, 2022, Insurance SPAC III announced that, because it will not consummate an initial business combination within the time period required, it would dissolve and liquidate, effective as of the close of business on December 22, 2022. Prior to November 18, 2022, Insurance SPAC III Sponsor Entities owned 47.3% of the equity in Insurance SPAC III Sponsor Entities.
On November 18, 2022, Insurance SPAC III announced that, as it would not consummate an initial business combination within the time period required, it would dissolve and liquidate, effective as of the close of business on December 22, 2022. Prior to November 18, 2022, Insurance SPAC III Sponsor Entities owned 47.3% of the equity in Insurance SPAC III Sponsor Entities.
F- 13 Table of Contents In addition to TBAs and other forward agency MBS contracts as part of the Company’s broker-dealer operations, the Company may from time to time enter into other securities or loan trades that do not settle within the normal securities settlement period.
F- 12 Table of Contents In addition to TBAs and other forward agency MBS contracts as part of the Company’s broker-dealer operations, the Company may from time to time enter into other securities or loan trades that do not settle within the normal securities settlement period.
The Company's accounting policy is to present repo transactions on a gross basis even if netting thresholds are met. F- 14 Table of Contents The Company classifies reverse repurchase agreements as a separate line item within the assets section of the Company’s consolidated balance sheets.
The Company's accounting policy is to present repo transactions on a gross basis even if netting thresholds are met. F- 13 Table of Contents The Company classifies reverse repurchase agreements as a separate line item within the assets section of the Company’s consolidated balance sheets.
From that point forward, the shares received by the employee are treated as part of the non-controlling interest and allocated income, expense, gains, and losses accordingly until the applicable sponsor entity is liquidated or otherwise de-consolidated. F- 16 Table of Contents S.
From that point forward, the shares received by the employee are treated as part of the non-controlling interest and allocated income, expense, gains, and losses accordingly until the applicable sponsor entity is liquidated or otherwise de-consolidated. F- 15 Table of Contents S.
Other equity derivatives (where the underlying equity instrument is publicly traded but the derivative itself is not ) are classified within level 2 of the valuation hierarchy. See footnote 10. Foreign Currency Forward Contracts Foreign currency forward contracts are exchange-traded derivatives, which transact on an exchange that is deemed to be active.
Other equity derivatives (where the underlying equity instrument is publicly traded but the derivative itself is not ) are classified within level 2 of the valuation hierarchy. See note 10. Foreign Currency Forward Contracts Foreign currency forward contracts are exchange-traded derivatives, which transact on an exchange that is deemed to be active.
The Company will record an unrealized gain or unrealized loss on the derivative for the difference between the fair value of the underlying financial instrument as of the reporting date and the agreed upon transaction price. As of December 31, 2022 and December 31, 2021 , the Company had no open forward purchase or sale commitments.
The Company will record an unrealized gain or unrealized loss on the derivative for the difference between the fair value of the underlying financial instrument as of the reporting date and the agreed upon transaction price. As of December 31, 2023 and December 31, 2022 , the Company had no open forward purchase or sale commitments.
F- 65 Table of Contents 23. INCOME TAXES Cohen & Company Inc. is treated as a C corporation for United States federal income tax purposes. The components of income tax expense (benefit) included in the consolidated statements of operations for each year presented herein are shown in the table below.
F- 60 Table of Contents 23. INCOME TAXES Cohen & Company Inc. is treated as a C corporation for United States federal income tax purposes. The components of income tax expense (benefit) included in the consolidated statements of operations for each year presented herein are shown in the table below.
The Company may, from time to time, enter into derivatives to manage its risk exposures arising from (i) fluctuations in foreign currency rates with respect to the Company’s investments in foreign currency denominated investments; (ii) the Company’s investments in interest sensitive investments; (iii) the Company's investments in equities; and (iv) the Company’s facilitation of mortgage-backed trading.
The Company may, from time to time, enter into derivatives as investments or to manage its risk exposures arising from (i) fluctuations in foreign currency rates with respect to the Company’s investments in foreign currency denominated investments; (ii) the Company’s investments in interest sensitive investments; (iii) the Company's investments in equities; and (iv) the Company’s facilitation of mortgage-backed trading.
Furthermore, because of the difficulty of determining the fair value of such an investment in the SPAC's pre-business combination period, the Company has chosen to not elect the fair value option. • If a SPAC completed its business combination, the sponsor entity's investment in the SPAC was converted to a combination of unrestricted and restricted shares in the post-business combination SPAC.
Furthermore, due to the difficulty of determining the fair value of such an investment in the SPAC's pre-business combination period, the Company has chosen to not elect the fair value option. • If a SPAC completed its business combination, the sponsor entity's investment in the SPAC was converted to a combination of unrestricted and restricted shares in the post-business combination SPAC.
F- 12 Table of Contents When the Company acquires an investment that is required to be accounted for under the equity method, the Company will elect the fair value option when the fair value of the investment is either readily determinable or is eligible to be accounted for at NAV under the practical expedient of ASC 946.
F- 11 Table of Contents When the Company acquires an investment that is required to be accounted for under the equity method, the Company will elect the fair value option when the fair value of the investment is either readily determinable or is eligible to be accounted for at NAV under the practical expedient of ASC 946.
Other than its investment in these entities, the Company did not provide financial support to these VIEs during the years ended December 31, 2022 and 2021 and had no liabilities, contingent liabilities, or guarantees (implicit or explicit) related to these VIEs at December 31, 2022 and 2021 . See table below.
Other than its investment in these entities, the Company did not provide financial support to these VIEs during the years ended December 31, 2023 and 2022 and had no liabilities, contingent liabilities, or guarantees (implicit or explicit) related to these VIEs at December 31, 2023 and 2022 . See table below.
During the periods presented, all leases to which the Company was a party are classified as operating leases and rent expense was recognized on a straight-line basis and included as a component of business development, occupancy, and equipment in the consolidated statements of operations. Q.
During the periods presented, all leases to which the Company was a party were classified as operating leases and rent expense was recognized on a straight-line basis and included as a component of business development, occupancy, and equipment in the consolidated statements of operations. Q.
F- 38 Table of Contents The following tables show certain summary financial data of all the Company's equity method investees. These amounts include all equity method investees whether accounted for under the equity method or at fair value. All information is presented on a combined basis.
F- 37 Table of Contents The following tables show certain summary financial data of all the Company's equity method investees. These amounts include all equity method investees whether accounted for under the equity method or at fair value. All information is presented on a combined basis.
On January 31, 2020, the Operating LLC entered into a Note Purchase Agreement (the “Original Purchase Agreement”) with JKD Capital Partners I LTD, a New York corporation (“JKD Investor”), and RN Capital Solutions LLC, a Delaware limited liability company (“RNCS”).
The 2020 Senior Note s On January 31, 2020, the Operating LLC entered into a note purchase agreement (the “Original Purchase Agreement”) with JKD Capital Partners I LTD, a New York corporation (“JKD Investor”), and RN Capital Solutions LLC, a Delaware limited liability company (“RNCS”).
The 2022 Purchase Agreement contains customary representations and warranties on the part of each of JKD Investor and the Operating LLC. The Company used these proceeds to retire $2,250 of existing 2020 Senior Notes held by RNCS. See note 20 and 31.
The 2022 Purchase Agreement contains customary representations and warranties on the part of each of JKD Investor and the Operating LLC. The Company used these proceeds to retire the $2,250 of 2020 Senior Notes held by RNCS. See notes 20 and 31.
F- 15 Table of Contents Principal transactions and other income Principal transactions include all gains, losses, and income from financial instruments classified as other investments, at fair value and other investments sold, not yet purchased in the consolidated balance sheets. Investments classified as other investments, at fair value and other investments sold, not yet purchased are carried at fair value.
F- 14 Table of Contents Principal transactions and other income Principal transactions include all gains, losses, and income from financial instruments classified as other investments, at fair value and other investments sold, not yet purchased in the consolidated balance sheets. Investments classified as other investments, at fair value and other investments sold, not yet purchased are carried at fair value.
The fair value of the restricted shares received was adjusted downwards from the public trading price for certain sale restrictions imposed (generally, they are restricted for sale for some time period and subject to certain hurdle prices before they became freely tradeable).
The fair value of the restricted shares received was adjusted downwards from the public trading price for certain sale restrictions imposed (generally, they are restricted for sale for some time period and subject to certain hurdle prices before they become freely tradeable).
Cohen and the DGC Trust voting rights at the Company in the same proportion as their economic interest (as units of membership interests of the Operating LLC do not carry voting rights at the Company level). The Series F Preferred Stock effectively enables Daniel G.
Cohen and the DGC Trust voting rights at the Company in the same proportion as their economic interest (as units of membership interests of the Operating LLC do not carry voting rights at the Company level). The Series F Preferred Stock effectively enable Daniel G.
These derivative positions are carried at fair value as a component of other investments, at fair value and other investments sold, not yet purchased in the Company’s consolidated balance sheets. As of December 31, 2022 and December 31, 2021 , the Company had no options.
These derivative positions are carried at fair value as a component of other investments, at fair value and other investments sold, not yet purchased in the Company’s consolidated balance sheets. As of December 31, 2023 and December 31, 2022 , the Company had no options.
The Company presents all repo and reverse repo transactions as well as counterparty cash collateral (see note 7 and 17 ) on a gross basis even if the underlying netting conditions are met. The amounts in the table below are presented on a gross basis.
The Company presents all repo and reverse repo transactions as well as counterparty cash collateral (see notes 7 and 17 ) on a gross basis even if the underlying netting conditions are met. The amounts in the table below are presented on a gross basis.
The Company’s trades and contracts are cleared through a clearing organization and settled daily between the clearing organization and the Company. Because of this daily settlement, the amount of unsettled credit exposures is limited to the amount owed the Company for a very short period of time.
The Company’s trades and contracts are cleared through a clearing organization and settled daily between the clearing organization and the Company. Due to this daily settlement, the amount of unsettled credit exposures is limited to the amount owed the Company for a very short period of time.
The Company has an investment in and a management contract with CREO JV. Income earned or loss incurred on the investment are included as part of principal transactions and other income. Revenue earned on the management contract are included as part of asset management in the table below.
The Company has an investment in and a servicing agreement with CREO JV. Income earned or loss incurred on the investment are included as part of principal transactions and other income. Revenue earned on the servicing contract are included as part of asset management in the table below.
The Company carries the foreign currency forward contracts at fair value and includes them as a component of other investments, at fair value in the Company’s consolidated balance sheets. As of December 31, 2022 and 2021 , the Company had no outstanding foreign currency forward contracts.
The Company carries the foreign currency forward contracts at fair value and includes them as a component of other investments, at fair value in the Company’s consolidated balance sheets. As of December 31, 2023 and 2022 , the Company had no outstanding foreign currency forward contracts.
In some cases, the repo counterparty will return cash instead of securities. In that case, the Company includes the cash returned as a component of other liabilities in the table above. See note 11. F- 44 Table of Contents 18.
In some cases, the repo counterparty will return cash instead of securities. In that case, the Company includes the cash returned as a component of other liabilities in the table above. See note 11. F- 43 Table of Contents 18.
In all cases where the Company was a the managing member of a sponsor entity, it has also had a significant economic interest in such sponsor entity and therefore consolidates such sponsor entity. • In all cases where the Company had consolidated a sponsor entity, it has determined that the sponsor entity's private placement investment in the SPAC that it sponsors should be treated as an equity method investment during the SPAC's pre-business combination period.
In all cases where the Company was the managing member of a sponsor entity, it also had a significant economic interest in such sponsor entity and therefore consolidated such sponsor entity. • In all cases where the Company consolidated a sponsor entity, it has determined that the sponsor entity's private placement investment in the SPAC that it sponsored should be treated as an equity method investment during the SPAC's pre-business combination period.
These future adjustments will likewise result in material amounts of deferred tax benefit or expense going forward. The Company files tax returns in the U.S. federal jurisdiction, various states or local jurisdictions, the United Kingdom, Ireland, and France. With few exceptions, the Company is no longer subject to examination for years prior to 2017.
These future adjustments will likewise result in material amounts of deferred tax benefit or expense going forward. The Company files tax returns in the U.S. federal jurisdiction, various states or local jurisdictions, and France. With few exceptions, the Company is no longer subject to examination for years prior to 2017.
As consideration for these services, the Company received an allocation of an additional 19,987 founder shares of FTAC Olympus stock to the Operating LLC and recorded an equity method investment of $40 for the valuation of these services. The revenue earned on this arrangement is disclosed in Principle transactions and other income, SPAC Sponsor Entities in the tables below.
As consideration for these services, the Company received an allocation of an additional 19,987 founder shares of FTAC Olympus stock to the Operating LLC and recorded an equity method investment of $40 for the valuation of these services. The revenue earned on this arrangement is disclosed in principal transactions and other income, other SPAC entities in the tables below.
Generally, the employee invests a de-minimus amount and receives an allocation of the founder shares held by the sponsor entity. The investment generally does not have any explicit vesting criteria associated with it.
Generally, the employee invests a de minimis amount and receives an allocation of the founder shares held by the sponsor entity. The investment generally does not have any explicit vesting criteria associated with it.
If the business combination is completed, the sponsor entities private placement in the SPAC entitles them to a combination of unrestricted common stock, restricted common stock, and (in some cases) warrants of the post-business combination SPAC (which is a publicly traded company).
If the business combination is completed, the sponsor entities' private placement in the SPAC entitles them to a combination of unrestricted common stock, restricted common stock, and (in some cases) warrants of the post-business combination SPAC (which is a publicly traded company).
The expected income tax expense /(benefit) using the federal statutory rate differs from income tax expense / (benefit) pertaining to pre-tax income / (loss) as a result of the following for the years ended December 31, 2022 , 2021 , and 2020 .
The expected income tax expense /(benefit) using the federal statutory rate differs from income tax expense / (benefit) pertaining to pre-tax income / (loss) as a result of the following for the years ended December 31, 2023 , 2022 , and 2021 .

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Our Business and Our Industry : ● Difficult market conditions have adversely affected our business and may continue to do so. ● Economic slowdown, market volatility, a recession and increasing interest rates may impair investments and operating results. ● We may experience write downs of financial instruments and other losses due to the volatile and illiquid market conditions. ● We have incurred losses for certain periods covered by this report and in the recent past and may incur losses in the future. ● Continued difficulties in our Capital Markets segment due to intense competition has resulted in significant strain on our administrative, operational and financial resources and these difficulties may continue in the future. ● The incurrence of additional debt could adversely effect on our financial condition and results of operation. ● Our gestation repo business serves a narrow market and is likely subject to highly volatile demand. ● Our mortgage group’s revenue is highly dependent on the U.S. housing market, generally. ● Our matched book repo financing is facilitated through JVB which is subject to various broker-dealer regulations. ● We may not be successful in achieving our strategic goals with respect to our matched book repo business. ● Our Capital Markets segment depends significantly on a limited group of customers. ● Failure to retain senior management and qualified personnel may result in our not being able to execute our business strategy. ● Payment of severance could strain our cash flow. ● If additional cash is not available, our business and financial performance will be significantly harmed. ● Failure to obtain or maintain adequate capital and funding would adversely affect the growth and results of our operations. ● The lack of liquidity in certain investments may adversely affect our business, financial condition and results of operations. ● If we are unable to manage the risks of international operations effectively, our business could be adversely affected. ● The securities settlement process exposes us to risks that may adversely affect our business. ● We are exposed to the risk that third parties that are indebted to us will not perform their obligations. ● We are exposed to various risks related to margin requirements under repurchase agreements and securities financing arrangements and are highly dependent on our clearing relationships. ● We have market risk exposure from unmatched principal transactions entered into by our brokerage desks. ● Pricing and other competitive pressures may impair the revenues and profitability of our brokerage business. ● Increase in capital commitments in our trading business increases the potential for significant losses. ● Our principal trading and investments expose us to risk of loss. ● Our principal investments are subject to various risks and expose us to a significant risk of capital loss. ● Transition away from LIBOR may adversely affect our business. ● Historical returns of our funds and managed accounts may not be indicative of their future results. ● There is increasing regulatory supervision of alternative asset management companies. ● Asset management clients generally may redeem their investments, which could reduce our asset management fee revenues. ● The investment management business is intensely competitive, which could have a material adverse impact on our business. ● Poor performance of our investment funds’ and separately managed accounts’ investments could result in a decline in our asset management revenue and earnings and investors terminating our management agreements. ● If the investments we have made on behalf of our CDOs perform poorly, we will suffer a decline in our asset management revenue and earnings and the investors in our CDOs may seek to terminate our management agreements. ● Our investments in SPAC Sponsor Entities are speculative, subject to total loss, and illiquid prior to business combination. ● Our investments in post-business combination SPACs are carried at fair value but are subject to sale restrictions which could result in significant losses to our business. ● Our strategic relationship with Cohen Circle, LLC ("Cohen Circle"), formerly Fintech Masala, LLC could result in conflicts of interest and a termination of such relationship could result in losses to our business. ● Our management may allocate some portion of their time to the business of the SPAC, which may create conflicts of interest. ● Any agreement to indemnify a SPAC against certain claims could negatively affect our financial results. ● We may make future loans to SPACs which may not be repaid. ● If our risk management systems for our businesses are ineffective, we may be exposed to material unanticipated losses. ● Failures in our information and communications systems could significantly disrupt our business. ● We may not be able to keep pace with continuing changes in technology. ● Failure to protect client data or prevent breaches of our information systems could expose us to liability/reputational damage. ● We are largely dependent on Pershing LLC to provide clearing services and margin financing. ● Our substantial level of indebtedness could adversely affect our financial health and ability to compete. ● Changes in accounting interpretations or assumptions could adversely impact our financial statements. ● Any change of our investment strategy, hedging strategy, asset allocation and operational policies may result in riskier investments and adversely affect the market value of our Common Stock. ● Maintenance of our Investment Company Act exemption imposes limits on our operations. ● The soundness of other financial institutions and intermediaries affects us. 16 Table of Contents ● We operate in a highly regulated industry and may face increasing restrictions on, and examination of, the conduct of our operations. ● Substantial legal liability or significant regulatory action could materially affect our business. ● Highly competitive markets could have a material effect on our business. ● Employee misconduct or error could harm our business. ● We operate in a highly regulated industry and may face increasing restrictions on, and examination of, the conduct of our operations. ● Substantial legal liability or significant regulatory action could materially affect our business. ● Highly competitive markets could have a material adverse effect on our business. ● Employee misconduct or error could harm our business.
Biggest changeRisks Related to Our Business and Our Industry : ● Difficult market conditions have adversely affected our business and may continue to do so. ● Economic slowdown, market volatility, a recession and increasing interest rates may impair investments and operating results. ● We may experience write downs of financial instruments and other losses due to the volatile and illiquid market conditions. ● We have incurred losses for certain periods covered by this report and in the recent past and may incur losses in the future. ● Continued difficulties in our Capital Markets segment due to intense competition has resulted in significant strain on our administrative, operational and financial resources and these difficulties may continue in the future. ● The incurrence of additional debt could adversely effect on our financial condition and results of operation. ● Our gestation repo business serves a narrow market and is likely subject to highly volatile demand. ● Our mortgage group’s revenue is highly dependent on the U.S. housing market, generally. ● Our Capital Markets segment depends significantly on a limited group of customers. ● Failure to retain senior management and qualified personnel may result in our not being able to execute our business strategy. ● Payment of severance could strain our cash flow. ● If additional cash is not available, our business and financial performance will be significantly harmed. ● Failure to obtain or maintain adequate capital and funding would adversely affect the growth and results of our operations. ● The lack of liquidity in certain investments may adversely affect our business, financial condition and results of operations. ● If we are unable to manage the risks of international operations effectively, our business could be adversely affected. ● The securities settlement process exposes us to risks that may adversely affect our business. ● We are exposed to the risk that third parties that are indebted to us will not perform their obligations. ● We are exposed to various risks related to margin requirements under repurchase agreements and securities financing arrangements and are highly dependent on our clearing relationships. ● We have market risk exposure from unmatched principal transactions entered into by our brokerage desks. ● Pricing and other competitive pressures may impair the revenues and profitability of our brokerage business. ● Increase in capital commitments in our trading business increases the potential for significant losses. ● Our principal trading and investments expose us to risk of loss. ● Our principal investments are subject to various risks and expose us to a significant risk of capital loss. ● Transition away from LIBOR may adversely affect our business. ● Historical returns of our funds and managed accounts may not be indicative of their future results. ● There is increasing regulatory supervision of alternative asset management companies. ● Asset management clients generally may redeem their investments, which could reduce our asset management fee revenues. ● The investment management business is intensely competitive, which could have a material adverse impact on our business. ● Poor performance of our investment funds’ and separately managed accounts’ investments could result in a decline in our asset management revenue and earnings and investors terminating our management agreements. ● If the investments we have made on behalf of our CDOs perform poorly, we will suffer a decline in our asset management revenue and earnings and the investors in our CDOs may seek to terminate our management agreements. ● Our investments in SPAC Sponsor Entities are speculative, subject to total loss, and illiquid prior to business combination. ● Our investments in post-business combination SPACs are carried at fair value but are subject to sale restrictions which could result in significant losses to our business. ● Our strategic relationship with Cohen Circle, LLC ("Cohen Circle"), formerly Fintech Masala, LLC could result in conflicts of interest and a termination of such relationship could result in losses to our business. ● Our management may allocate some portion of their time to the business of the SPAC, which may create conflicts of interest. ● Any agreement to indemnify a SPAC against certain claims could negatively affect our financial results. ● We may make future loans to SPACs which may not be repaid. ● If our risk management systems for our businesses are ineffective, we may be exposed to material unanticipated losses. ● Failures in our information and communications systems could significantly disrupt our business. ● We may not be able to keep pace with continuing changes in technology. ● Failure to protect client data or prevent breaches of our information systems could expose us to liability/reputational damage. ● We are largely dependent on Pershing LLC to provide clearing services and margin financing. ● Our substantial level of indebtedness could adversely affect our financial health and ability to compete. ● Changes in accounting interpretations or assumptions could adversely impact our financial statements. ● Any change of our investment strategy, hedging strategy, asset allocation and operational policies may result in riskier investments and adversely affect the market value of our Common Stock. ● Maintenance of our Investment Company Act exemption imposes limits on our operations. ● The soundness of other financial institutions and intermediaries affects us. 16 Table of Contents ● We operate in a highly regulated industry and may face increasing restrictions on, and examination of, the conduct of our operations. ● Substantial legal liability or significant regulatory action could materially affect our business. ● Highly competitive markets could have a material effect on our business. ● Employee misconduct or error could harm our business. ● We receive financial instruments instead of cash as consideration for some of our services, which may be illiquid, and the price we ultimately realize may be materially lower than current fair value. ● SFA transactions may obligate us to make payments on certain payments upon or subsequent to maturity which may adversely impact our liquidity.
It may take more than a year for us to determine whether we have successfully integrated new individuals, lines of business and capabilities into our operations. During that time, we may incur significant expenses and expend significant time and resources toward training, integration and business development.
It may take more than a year for us to determine whether we have successfully integrated new individuals, and lines of business and capabilities into our operations. During that time, we may incur significant expenses and expend significant time and resources toward training, integration and business development.
The value of our investments is determined using fair value methodologies described in valuation policies, which may take into consideration, among other things, the nature of the investment, the expected cash flows from the investment, bid or ask prices provided by third parties for the investment, the trading price of recent sales of securities (in the case of publicly traded securities), restrictions on transfer, and other recognized valuation methodologies.
The value of our investments is determined using fair value methodologies described in our valuation policies, which may take into consideration, among other things, the nature of the investment, the expected cash flows from the investment, bid or ask prices provided by third parties for the investment, the trading price of recent sales of securities (in the case of publicly traded securities), restrictions on transfer, and other recognized valuation methodologies.
In connection with our investments in SPACs in which we sponsor, we have agreed to and may continue to agree in the future to, indemnify the SPAC for all claims by third parties for services rendered or products sold to the SPAC, or claims by any prospective target business with which the SPAC discusses entering into a transaction agreement, subject to certain limitations.
In connection with our investments in SPACs in which we sponsor, we have agreed to and may continue to agree in the future to, indemnify a SPAC for all claims by third parties for services rendered or products sold to the SPAC, or claims by any prospective target business with which the SPAC discusses entering into a transaction agreement, subject to certain limitations.
Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions. ● If we fail to maintain effective internal control over financial reporting and disclosure controls and procedures in the future, we may not be able to accurately report our financial results, which could have an adverse effect on our business. ● Future sales of our Common Stock could lower the price of our Common Stock and harm our future securities offerings. ● Our stockholders’ percentage ownership in the Company may be diluted in the future. ● If we fail to control our costs effectively, our business could be disrupted and adversely affected. ● We may need to offer new investment strategies and products in order to continue to generate revenue. ● Our failure to deal appropriately with conflicts of interest could damage our reputation and adversely affect our business. ● Insurance may be inadequate to cover risks facing the Company. ● We depend on third-party software licenses and the loss of key licenses could adversely affect our brokerage services. ● Failure to maintain effective internal control over financial reporting and disclosure controls could harm our business. ● The market price of our Common Stock may be volatile and may be affected by market conditions beyond our control. ● Our Common Stock may be delisted, which may have a material adverse effect on the liquidity and our Common Stock value. 17 Table of Contents Risks Related to Our Business and Our Industry Difficult market conditions have adversely affected our business in many ways and may continue to adversely affect our business in a manner which could materially reduce our revenues.
Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflicts in Ukraine, Israel, or any other geopolitical tensions. ● If we fail to maintain effective internal control over financial reporting and disclosure controls and procedures in the future, we may not be able to accurately report our financial results, which could have an adverse effect on our business. ● Future sales of our Common Stock could lower the price of our Common Stock and harm our future securities offerings. ● Our stockholders’ percentage ownership in the Company may be diluted in the future. ● If we fail to control our costs effectively, our business could be disrupted and adversely affected. ● We may need to offer new investment strategies and products in order to continue to generate revenue. ● Our failure to deal appropriately with conflicts of interest could damage our reputation and adversely affect our business. ● Insurance may be inadequate to cover risks facing the Company. ● We depend on third-party software licenses and the loss of key licenses could adversely affect our brokerage services. ● Failure to maintain effective internal control over financial reporting and disclosure controls could harm our business. ● The market price of our Common Stock may be volatile and may be affected by market conditions beyond our control. ● Our Common Stock may be delisted, which may have a material adverse effect on the liquidity and our Common Stock value. 17 Table of Contents Risks Related to Our Business and Our Industry Difficult market conditions have adversely affected our business in many ways and may continue to adversely affect our business in a manner which could materially reduce our revenues.
Insurance may be inadequate to cover risks facing the Company Our operations and financial results are subject to risks and uncertainties related to our use of a combination of insurance, self-insured retention and self-insurance for a number of risks, including most significantly: property and casualty, workers’ compensation, errors and omissions liability, general liability and the portion of employee-related health care benefits plans we fund, among others.
Our Insurance coverage may be inadequate to cover the risks facing the Company Our operations and financial results are subject to risks and uncertainties related to our use of a combination of insurance, self-insured retention and self-insurance for a number of risks, including most significantly: property and casualty, workers’ compensation, errors and omissions liability, general liability and the portion of employee-related health care benefits plans we fund, among others.
Although the management agreements generally include broad indemnities and provisions designed to limit our exposure to legal claims relating to our services, these provisions may not protect us or may not be enforced in all cases. In addition, we are exposed to risks of litigation or investigation relating to transactions which present conflicts of interest that are not properly addressed.
Although our management agreements generally include broad indemnities and provisions designed to limit our exposure to legal claims relating to our services, these provisions may not protect us or may not be enforced in all cases. In addition, we are exposed to risks of litigation or investigation relating to transactions which present conflicts of interest that are not properly addressed.
The equity securities of any privately held entity in which we make a principal investment are likely to be restricted as to resale and may otherwise be highly illiquid. In the case of fund, SPAC-related or similar investments, our investments may be illiquid until such investment vehicles are liquidated.
The equity securities of any privately held entity in which we make a principal investment are likely to be restricted as to resale and may otherwise be highly illiquid. In the case of SPAC-related or similar investments, our investments may be illiquid until such investment vehicles are liquidated.
We operate a matched gestation repo program. Gestation repo involves entering into repo and reverse repo where the underlying collateral security represents a pool of newly issued mortgages. Our reverse repo counterparties are mortgage originators. This type of financing would only be of interest to mortgage originators.
We operate a matched gestation repo program. Gestation repo involves entering into repo and reverse repo transactions where the underlying collateral security represents a pool of newly issued mortgages. Our reverse repo counterparties are mortgage originators. This type of financing would only be of interest to mortgage originators.
Global economic conditions and global financial markets remain vulnerable to the potential risks posed by certain events, which could include, among other things, level and volatility of interest rates, economic growth or its sustainability, unforeseen changes to gross domestic product, inflation, fluctuations or other changes in both debt and equity capital markets and currencies, political and financial uncertainty in the United States and the European Union, ongoing concern about Asia’s economies, global supply disruptions, complications involving terrorism and armed conflicts around the world (including the conflict between Russia and Ukraine), or other challenges to global trade or travel, such as those that have occurred due to the COVID-19 pandemic.
Global economic conditions and global financial markets remain vulnerable to the potential risks posed by certain events, which could include, among other things, level and volatility of interest rates, economic growth or its sustainability, unforeseen changes to gross domestic product, inflation, fluctuations or other changes in both debt and equity capital markets and currencies, political and financial uncertainty in the United States and the European Union, ongoing concern about Asia’s economies, global supply disruptions, complications involving terrorism and armed conflicts around the world (including the conflict between Russia and Ukraine and in Israel and the surrounding areas), or other challenges to global trade or travel, such as those that have occurred due to the COVID-19 pandemic.
Our indemnification of the SPAC with respect to any such claims could negatively affect our financial results. In addition, if the SPAC liquidates, we may be liable to the SPAC under these indemnification obligations.
Our indemnification of a SPAC with respect to any such claims could negatively affect our financial results. In addition, if the SPAC liquidates, we may be liable to a SPAC under these indemnification obligations.
We are a holding company whose primary asset is units of membership interests in the Operating LLC, and we are dependent on distributions from the Operating LLC to pay taxes and other obligations. We are a holding company whose primary asset is units of membership interests in the Operating LLC.
We are a holding company whose primary asset is units of membership interests in the Operating LLC, and we are dependent on distributions from the Operating LLC to pay taxes and other obligations. We are a holding company whose primary assets are units of membership interests in the Operating LLC.
These arrangements generally require us to transfer additional securities or cash to the clearing broker in the event that the value of the securities then held by the clearing broker in the margin account falls below specified levels and contain events of default that would be triggered if we were to breach our obligations under such agreements.
These arrangements generally require us to (i) transfer additional securities or cash to the clearing broker in the event that the value of the securities then held by the clearing broker in the margin account falls below specified levels and (ii) contain events of default that would be triggered if we were to breach our obligations under such agreements.
Daniel G. Cohen, our Executive Chairman, has significant ownership interests in the Operating LLC and competing duties to other entities (including Cohen Circle) that could create potential conflicts of interest and may result in decisions that are not in the best interests of other Cohen & Company Inc. stockholders. As of December 31, 2022, Daniel G.
Daniel G. Cohen, our Executive Chairman, has significant ownership interests in the Operating LLC and competing duties to other entities (including Cohen Circle) that could create potential conflicts of interest and may result in decisions that are not in the best interests of other Cohen & Company Inc. stockholders. As of December 31, 2023, Daniel G.
If our internal controls over financial reporting and disclosure controls and procedures are not effective, we may not be able to provide reliable financial information. Because we are a smaller reporting company, we are not required to obtain, nor have we voluntarily obtained, an auditor attestation regarding the effectiveness of our controls as of December 31, 2022.
If our internal controls over financial reporting and disclosure controls and procedures are not effective, we may not be able to provide reliable financial information. Because we are a smaller reporting company, we are not required to obtain, nor have we voluntarily obtained, an auditor attestation regarding the effectiveness of our controls as of December 31, 2023.
Therefore, as of December 31, 2022, we have only performed management’s assessment of the effectiveness of our internal controls and management has determined that our internal controls are effective as of December 31, 2022. Any failure to maintain effective controls in the future could adversely affect our business or cause us to fail to meet our reporting obligations.
Therefore, as of December 31, 2023, we have only performed management’s assessment of the effectiveness of our internal controls and management has determined that our internal controls are effective as of December 31, 2023. Any failure to maintain effective controls in the future could adversely affect our business or cause us to fail to meet our reporting obligations.
From time to time, based on market conditions, a small number of our customers may account for a significant portion of the revenues earned in our Capital Markets segment. None of our customers is obligated contractually to use our services. Accordingly, these customers may direct their activities to other firms at any time.
From time to time, based on market conditions, a small number of our customers may account for a significant portion of the revenues earned in our Capital Markets segment. None of our customers are obligated contractually to use our services. Accordingly, these customers may direct their activities to other firms at any time.
Realizations at values significantly lower than the values at which investments have been previously held would result in loses of potential incentive income and principal investments. In addition, in our principal investment activities, our concentrated holdings, illiquidity and market volatility may make it difficult to value certain of our investment securities.
Realizations at values significantly lower than the values at which investments have been previously held would result in losses of potential incentive income and principal investments. In addition, in our principal investment activities, our concentrated holdings, illiquidity and market volatility may make it difficult to value certain of our investment securities.
Additionally, Russia’s prior annexation of Crimea, the recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system.
Additionally, Russia’s prior annexation of Crimea, the recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including the removal of certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system.
Such limitations could have a material adverse effect on our business and operations. As of December 31, 2022, we are in compliance with and meet the Section 3(a)(1)(C) exclusion. The soundness of other financial institutions and intermediaries affects us .
Such limitations could have a material adverse effect on our business and operations. As of December 31, 2023, we are in compliance with and meet the Section 3(a)(1)(C) exclusion. The soundness of other financial institutions and intermediaries affects us .
Cohen could be deemed to be the beneficial owner of additional shares of our Common Stock representing 4.5%, which is owned by EBC 2013 Family Trust (“EBC”) as the result of Mr. Cohen’s position as trustee of the trust and as a result of the fact that Mr.
Cohen could be deemed to be the beneficial owner of additional shares of our Common Stock representing 4.2%, which is owned by EBC 2013 Family Trust (“EBC”) as the result of Mr. Cohen’s position as trustee of the trust and as a result of the fact that Mr.
The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this Annual Report on Form 10-K.
The extent and duration of the military action, sanctions and resulting market disruptions are difficult to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this Annual Report on Form 10-K.
Cohen, at any time, could become the owner of the membership interests in the Operating LLC currently held by the DGC Trust and, in turn, an additional 21.9% of the voting power of the Company. As a result of Mr. Cohen’s voting control of the Company, Mr.
Cohen, at any time, could become the owner of the membership interests in the Operating LLC currently held by the DGC Trust and, in turn, an additional 21.3% of the voting power of the Company. As a result of Mr. Cohen’s voting control of the Company, Mr.
Any such termination would have a significant negative impact on our dealings and relationship with our customers and there is no guarantee we would be able to replace any such clearing broker on similar terms.
Any such termination would have a significant negative impact on our dealings and relationships with our customers and there is no guarantee we would be able to replace any such clearing broker on similar terms.
With respect to our broker-dealer activities, our revenues could be adversely affected if large institutional clients that we have increase the amount of trading they do directly with each other rather than through our broker-dealer, decrease the amount of trading they do with our broker-dealer because they decide to trade more with our competitors, decrease their trading of certain over-the-counter (“OTC”) products in favor of exchange-traded products, or hire in-house professionals to handle trading that our broker-dealer would otherwise be engaged to do.
With respect to our broker-dealer activities, our revenues could be adversely affected if large institutional clients that we have (i) increase the amount of trading they do directly with each other rather than through our broker-dealer, (ii) decrease the amount of trading they do with our broker-dealer because they decide to trade more with our competitors, (iii) decrease their trading of certain over-the-counter (“OTC”) products in favor of exchange-traded products, or (iv) hire in-house professionals to handle trading that our broker-dealer would otherwise be engaged to do.
As of December 31, 2022, we have a substantial amount of debt with variable interest rates. We may experience material increases in our interest expense as a result of increases in general interest rate levels.
As of December 31, 2023, we have a substantial amount of debt with variable interest rates. We may experience material increases in our interest expense as a result of increases in general interest rate levels.
Cohen currently owns approximately 42.9% of the voting power of the Company as a result of his ownership of Common Stock, Series E Preferred Stock and Series F Preferred Stock. Further, the DGC Family Fintech Trust (the “DGC Trust”), a trust formed by Mr. Cohen, owns 9,880,268 shares of our Series F Preferred Stock.
Cohen currently owns approximately 41.8% of the voting power of the Company as a result of his ownership of Common Stock, Series E Preferred Stock and Series F Preferred Stock. Further, the DGC Family Fintech Trust (the “DGC Trust”), a trust formed by Mr. Cohen, owns 9,880,268 shares of our Series F Preferred Stock.
Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets. Any of the abovementioned factors could affect our business, prospects, financial condition, and operating results.
Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets. Any of the above-mentioned factors could affect our business, prospects, financial condition, and operating results.
Risks Related to General and Global Factors : ● The COVID-19 pandemic has caused severe disruptions in the U.S. and global economy and is expected to continue to impact our business, financial condition and results of operations. ● We may incur losses as a result of unforeseen events, including further spread of the COVID-19 pandemic, cybersecurity incidents and events, terrorist attacks, climate-related incidents, or other natural disasters. ● We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine.
Risks Related to General and Global Factors : ● The COVID-19 pandemic has caused severe disruptions in the U.S. and global economy and is expected to continue to impact our business, financial condition and results of operations. ● We may incur losses as a result of unforeseen events, including further spread of the COVID-19 pandemic, cybersecurity incidents and events, terrorist attacks, climate-related incidents, or other natural disasters. ● We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflicts in Ukraine and in Israel and the surrounding areas.
We may not be able to generate sufficient taxable income to fully realize our deferred tax asset, which would also have to be reduced if U.S. federal income tax rates are lowered. As of December 31, 2022, we have recorded a deferred tax asset of $6.9 million.
We may not be able to generate sufficient taxable income to fully realize our deferred tax asset, which would also have to be reduced if U.S. federal income tax rates are lowered. As of December 31, 2023, we have recorded a deferred tax asset of $1.6 million.
Cohen and/or his affiliates cease to beneficially own a majority of the voting securities of the Company. See notes 21 and 31. Additionally, as of December 31, 2022, Daniel G. Cohen owns 5.8% of our Common Stock. Further, as of such date, Mr.
Cohen and/or his affiliates cease to beneficially own a majority of the voting securities of the Company. See notes 21 and 31. Additionally, as of December 31, 2023, Daniel G. Cohen owns 5.4% of our Common Stock. Further, as of such date, Mr.
As of December 31, 2022, of the Company’s $8.9 million balance of investment in equity method affiliates, $3.4 million represents direct or indirect investments in SPAC sponsor entities. These investments are subject to transfer restrictions (as described in greater detail below), are completely illiquid and could be worthless if the underlying sponsor entities liquidate without completing a business combination.
As of December 31, 2023, of the Company’s $14.2 million balance of investment in equity method affiliates, $8.4 million represents direct or indirect investments in SPAC sponsor entities. These investments are subject to transfer restrictions (as described in greater detail below), are completely illiquid and could be worthless if the underlying sponsor entities liquidate without completing a business combination.
In addition, our current international operations expose us to the risk of fluctuations in currency exchange rates generally and fluctuations in the exchange rates for the Euro and the British Pound Sterling in particular.
In addition, our current international operations expose us to the risk of fluctuations in currency exchange rates generally and fluctuations in the exchange rates for the Euro in particular.
In addition, as of December 31, 2022, the DGC Trust owns 20,225,095 or 33.4% units of the membership interests in the Operating LLC. The DGC Trust was formed by Daniel G. Cohen. Although Daniel G.
In addition, as of December 31, 2023, the DGC Trust owns 20,225,095 or 33.2% units of the membership interests in the Operating LLC. The DGC Trust was formed by Daniel G. Cohen. Although Daniel G.
Our broker-dealer relies on Pershing LLC to provide clearing services, as well as other operational and support functions that cannot be provided for internally. In addition, currently all of our margin financing is obtained from Pershing LLC. As of December 31, 2022, our total margin loan payable to Pershing LLC is $135.0 million.
Our broker-dealer relies on Pershing LLC to provide clearing services, as well as other operational and support functions that cannot be provided for internally. In addition, currently all of our margin financing is obtained from Pershing LLC. As of December 31, 2023, our total margin loan payable to Pershing LLC is $111.1 million.
As of December 31, 2022, we had $28.0 million in other investments, at fair value. We may use our capital, including on a leveraged basis, for principal investments in both private and public company securities that may be illiquid and volatile.
As of December 31, 2023, we had $72.2 million in other investments, at fair value. We may use our capital, including on a leveraged basis, for principal investments in both private and public company securities that may be illiquid and volatile.
Cohen, our Executive Chairman, individually and through an entity he wholly owns, Cohen Bros. Financial, LLC (“CBF”), owns 23,476,355 units of membership interests (including both unrestricted and restricted units), or 38.8% of the membership interests in the Operating LLC.
Cohen, our Executive Chairman, individually and through an entity he wholly owns, Cohen Bros. Financial, LLC (“CBF”), owns 23,207,975 units of membership interests (including both unrestricted and restricted units), or 38.1% of the membership interests in the Operating LLC.
We have incurred losses for certain periods covered by this report and in the recent past and may incur losses in the future. The Company recorded net loss of $58.7 million for the year ended December 31, 2022. We may incur additional losses in future periods.
We have incurred losses for certain periods covered by this report and in the recent past and may incur losses in the future. Although the Company recorded net income of $10.4 million for the year ended December 31, 2023, it recorded net loss of $58.7 million for the year ended December 31, 2022.
There are no regularly quoted market prices for a number of the investments we make.
There are no regularly quoted market prices for some of the investments we make.
To be successful, we must adapt to this rapidly changing environment by continually improving the performance, features, and reliability of our services. We could incur substantial costs if we need to modify our services or infrastructure or adapt our technology to respond to these changes.
To be successful, we must adapt to this rapidly changing environment by continually improving the performance, features, and reliability of our services. We could incur substantial costs if we need to modify our services or infrastructure or adapt our technology to respond to these changes (including in response to artificial intelligence or other emerging technologies).
There are 60,528,362 units of membership interests in the Operating LLC issued and outstanding, including 23,476,355 units of membership interests in the Operating LLC beneficially owned by Daniel G. Cohen.
There are 60,930,382 units of membership interests in the Operating LLC issued and outstanding, including 23,207,975 units of membership interests in the Operating LLC beneficially owned by Daniel G. Cohen.
If our revenue does not increase sufficiently, or even if our revenue does increase but we are unable to manage our expenses, we will not achieve and maintain profitability in future periods.
Accordingly, we may need to increase our revenue at a rate greater than our expenses in order to achieve and maintain our profitability. If our revenue does not increase sufficiently, or even if our revenue does increase but we are unable to manage our expenses, we will not achieve and maintain profitability in future periods.
Any future distributions to our stockholders will depend upon certain factors affecting our operating results, some of which are beyond our control. Our board of directors has not declared cash dividends recently. Any future distributions to our stockholders will depend upon certain factors affecting our operating results, some of which are beyond our control.
Any future distributions to our stockholders will depend upon certain factors affecting our operating results, some of which are beyond our control. Any future distributions to our stockholders will depend upon certain factors affecting our operating results, some of which are beyond our control.
Any of these factors could require us to take write-downs in the value of our investment and securities portfolio, which may have an adverse effect on our results of operations in future periods. If we are unable to manage any of these risks effectively, our results of operations and cash flows could be materially and adversely affected.
Any of these factors could require us to take write-downs in the value of our investment and securities portfolio, which may have an adverse effect on our results of operations in future periods.
At December 31, 2022, we had 341,059 shares of restricted stock outstanding to employees and directors of the Company and there were 761,324 shares available for future awards under our equity compensation plans. The Operating LLC also has issued 6,541,490 units that are restricted.
At December 31, 2023, we had 367,491 shares of restricted stock outstanding to employees and directors of the Company and there were 579,391 shares available for future awards under our equity compensation plans. The Operating LLC also has issued 5,525,330 units that are restricted.
We also anticipate that our executive officers and members of our senior management team will serve as key employees for future SPACs of which we are the sponsors.
Our executive officers and members of our senior management team have served key roles in the SPACs of which we are a sponsor. Our executive officers and members of our senior management team may serve as key employees for future SPACs of which we are the sponsors.
There can be no assurance that we will continue our practice of repurchasing shares of our Common Stock or that we will have the financial resources to repurchase shares of our Common Stock in the future. See note 21 to our consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding the 10b5-1 Plan.
There can be no assurance that we will continue our practice of repurchasing shares of our Common Stock or that we will have the financial resources to repurchase shares of our Common Stock in the future.
If we are unable to finance future losses, those losses may have a significant effect on our liquidity as well as our ability to operate our business. In addition, the Company has incurred and may continue to incur significant expenses in connection with initiating new business activities or in connection with any expansion or reorganization of our businesses.
In addition, the Company has incurred and may continue to incur significant expenses in connection with initiating new business activities or in connection with any expansion or reorganization of our businesses. We may also engage in strategic acquisitions and investments for which we may incur significant expenses.
The risk of employee error or miscommunication may be greater for products that are new or have non-standardized terms. 31 Table of Contents Risks Related to Our Organizational Structure and Ownership of Our Common Stock We could repurchase shares of our Common Stock at price levels considered excessive, the amount of our Common Stock we repurchase may decrease from historical levels, or we may not repurchase any additional shares of our Common Stock in the future.
We may need to incur additional indebtedness to finance these payments to the extent our cash resources are insufficient to meet our obligations under the SFAs as a result of timing discrepancies or otherwise, and these obligations could negatively effect our business, financial condition, and results of operations. 31 Table of Contents Risks Related to Our Organizational Structure and Ownership of Our Common Stock We could repurchase shares of our Common Stock at price levels considered excessive, the amount of our Common Stock we repurchase may decrease from historical levels, or we may not repurchase any additional shares of our Common Stock in the future.
However, we are limited in our ability to enter into these because of capital and financing requirements associated with such trades. As of December 31, 2022, of our $28.0 million reported as other investments, at fair value, $3.1 million represented restricted shares of post-business combination SPACs that were subject to transfer restrictions and could not be sold.
As of December 31, 2023, of our $72.2 million reported as other investments, at fair value, $12.5 million represented restricted shares of post-business combination SPACs that were subject to transfer restrictions and could not be sold and $23.6 million related to interest in SPVs and other receivables which have no ready market.
Any increased costs or reduced profits as a result of the foregoing may adversely affect our liquidity, results of operations and financial condition. The historical returns of our funds and managed accounts may not be indicative of the future results of our funds and managed accounts.
If we are unable to manage any of these risks effectively, our results of operations and cash flows could be materially and adversely affected. 24 Table of Contents The historical returns of our funds and managed accounts may not be indicative of the future results of our funds and managed accounts.
Removed
We may also engage in strategic acquisitions and investments for which we may incur significant expenses. Accordingly, we may need to increase our revenue at a rate greater than our expenses in order to achieve and maintain our profitability.
Added
We may incur additional losses in future periods. If we are unable to finance future losses, those losses may have a significant effect on our liquidity as well as our ability to operate our business.
Removed
Transition away from LIBOR as a benchmark reference for interest rates may affect the cost of capital and may require amending or restructuring existing debt instruments and related hedging arrangements for us, our investment funds and our separately managed accounts, and may impact the value of floating rate securities based on LIBOR we, our investment funds or our separately managed accounts hold or may hold in the future, which may result in additional costs or adversely affect our, our funds’ or our separately managed accounts’ liquidity, results of operations and financial condition.
Added
However, we are limited in our ability to enter into these because of capital and financing requirements associated with such trades.
Removed
We currently have $48,125 of par value debt which incurs interest based on the London interbank offered rate (“LIBOR”). The U.K. Financial Conduct Authority (the authority that regulates LIBOR) announced that it will cease publication of the most commonly used U.S. dollar LIBOR tenors after June 30, 2023, though the less commonly used tenors ceased publication after December 31, 2021.
Added
The risk of employee error or miscommunication may be greater for products that are new or have non-standardized terms. We receive financial instruments instead of cash as consideration for some of our services, which may be illiquid, and the price we ultimately realize may be materially lower than their current fair value.
Removed
U.S. federal banking agencies have issued guidance to strongly encourage institutions to cease entering into contracts that reference LIBOR by December 31, 2021. Central banks and regulators in the U.S. and other jurisdictions are working to implement the transition to suitable replacements for LIBOR. As an alternative to LIBOR, for example, the U.S.
Added
The value of the financial instruments which we receive as consideration for our services may be subject to transfer or other restrictions, which may render such securities or financial instruments to be illiquid. Further, the financial instruments may be materially affected by market fluctuations.
Removed
Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, has recommended replacing U.S. dollar LIBOR with the Secured Overnight Financing Rate (“SOFR”), a new index calculated based on short-term repurchase agreements, backed by Treasury securities.
Added
Market volatility, illiquid market conditions and disruptions in the markets may make it difficult to value and monetize certain of our securities or financial instruments, particularly during periods of market uncertainty. Subsequent valuations in future periods may result in significant changes in the value of these financial instruments.
Removed
Although there have been a number of issuances utilizing different variants of SOFR, or the Sterling Over Night Index Average, an alternative reference rate that is used for transactions based on Pounds Sterling, many existing loans based on LIBOR remain to be transitioned to a replacement rate, and market participants are still working to develop workable transition mechanisms, including coordination with related hedging arrangements.
Added
In addition, at the time of any sales and settlements of these financial instruments, the price we ultimately realize will depend on the demand and liquidity in the market at that time and may be materially lower than the fair value at the time we receive them.
Removed
As such, it is not possible to predict all potential effects of these changes on U.S. and global credit markets. 24 Table of Contents The administrator of LIBOR announced its intention to extend the publication of U.S. dollar LIBOR (except for the one-week and two-month tenors) until June 30, 2023, subject to a consultation process, and the Federal Reserve Board, the Alternative Reference Rates Committee and the International Swaps and Derivatives Association also issued concurrent statements agreeing with such announcement.
Added
Any of these factors could cause a decline in the value of financial instruments which we hold. SFA transactions may obligate the Company to make payments on a certain payments at, or subsequent to, maturity which may be made in cash, by returning the acquired interests in kind, or through a combination of both, which could affect our liquidity.
Removed
Our investments funds and our separately managed accounts may need to amend or restructure our existing LIBOR-based debt instruments and any related hedging arrangements that extend beyond June 30, 2023, which may be difficult, costly and time consuming.
Added
A significant component of our principal investment revenue has come from SFAs. SFAs stipulate that we must make a payment to the SFA Counterparty on or subsequent to a certain maturity date, which may be in cash, by returning the acquired assets in kind, or a combination of both.
Removed
In addition, from time to time our investment funds and separately managed accounts invest in floating rate loans and investment securities whose interest rates are indexed to LIBOR.
Added
Payment to the SFA Counterparty pursuant to the SFAs may have an adverse impact on our liquidity.
Removed
Uncertainty as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR, or any changes announced with respect to such reforms, may result in a sudden or prolonged increase or decrease in the reported LIBOR rates and the value of LIBOR-based loans and securities, including those of other issuers we or our funds currently own or may in the future own, and may impact the availability and cost of hedging instruments and borrowings, including potentially, an increase to our and our funds’ and separately managed accounts’ interest expense and cost of capital.
Removed
Our executive officers and members of our senior management team serve key roles in the SPACs of which we are a sponsor. For example, John Butler, our Managing Director of U.S.
Removed
Insurance Strategy, serves as the Chief Executive Officer and President of the Insurance SPAC III and Joseph Pooler, our Chief Financial Officer, serves as the Chief Financial Officer of the Insurance SPAC III.
Removed
Furthermore, although we do not hold any European sovereign debt, we may do business with and be exposed to financial institutions that have been affected by the recent European sovereign debt crisis.
Removed
During 2021 and 2022, 49,544 and 0 shares of Common Stock, respectively, were repurchased and retired by us both in accordance with our Rule 10b5-1 trading plan (the “10b5-1 Plan”).
Removed
For further information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - COVID 19 / Impairment of Goodwill” in Part II, Item 7 of this Annual Report on Form 10-K.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
Biggest changeCity Description Square Feet Expiration Date Status (1) New York, NY 3 Columbus Circle- 24th Floor 11,166 2/28/2029 Partially Occupied / Partially Subleased New York, NY 3 Columbus Circle- 17th Floor 8,409 3/31/2024 Occupied Philadelphia, PA 2929 Arch Street 9,501 11/30/2029 Partially Occupied / Partially Subleased Boca Raton, FL 1825 NW Corporate Blvd 5,208 6/30/2024 Occupied Paris, France 17 avenue de l'Opera 1,830 5/31/2030 Occupied Locust Valley, NY 63 Forest Avenue 288 9/30/2025 Occupied Menlo Park, CA 2727 Sandy Hill Road 2,735 8/31/2025 Occupied Jupiter, FL 601 Heritage Drive 290 9/30/2023 Occupied (1) For purposes of this table, the term “Partially Occupied / Partially Subleased” means we occupy a portion of the space and sublease the remaining portion to a third-party or third parties; and “Occupied” means we fully utilize the space for our operations.
Biggest changeCity Description Square Feet Expiration Date Status (1) New York, NY 3 Columbus Circle- 24th Floor 21,390 4/30/2035 Partially Occupied / Partially Subleased New York, NY 3 Columbus Circle- 17th Floor 8,409 3/31/2024 Occupied Philadelphia, PA 2929 Arch Street 9,501 11/30/2029 Partially Occupied / Partially Subleased Boca Raton, FL 1825 NW Corporate Blvd 5,208 6/30/2024 Occupied Paris, France 17 avenue de l'Opera 1,830 5/31/2030 Occupied Locust Valley, NY 63 Forest Avenue 288 9/30/2025 Occupied Menlo Park, CA 2727 Sandy Hill Road 2,735 8/31/2025 Occupied Jupiter, FL 601 Heritage Drive 290 9/30/2024 Occupied (1) For purposes of this table, the term “Partially Occupied / Partially Subleased” means we occupy a portion of the space and sublease the remaining portion to a third-party or third parties; and “Occupied” means we fully utilize the space for our operations.
ITEM 2. PROPERTIES. The following table lists our current leases as of December 31, 2022.
ITEM 2. PROPERTIES. The following table lists our current leases as of December 31, 2023.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−4 removed2 unchanged
Biggest changeOther than legal fees incurred which are included in the Company's financial statements, the Company incurred no loss related to this case. From time to time, the Company is a party to various routine legal proceedings, claims, and regulatory inquiries arising out of the ordinary course of the Company’s business.
Biggest changeITEM 3. LEGAL PROCEEDINGS. From time to time, the Company is a party to various routine legal proceedings, claims, and regulatory inquiries arising out of the ordinary course of the Company’s business.
MINE SAFETY DISCLOSURES. Not Applicable. 37 Table of Contents PART II
MINE SAFETY DISCLOSURES. Not applicable. 38 Table of Contents PART II
Removed
ITEM 3. LEGAL PROCEEDINGS. On October 8, 2021, Cohen & Company, Ltd., an Ohio limited liability company, as plaintiff, filed a complaint with the United States District Court, Eastern District of Pennsylvania, under the caption Cohen & Company, Ltd. v.
Removed
Cohen & Company Inc. , alleging that Cohen & Company Inc., as defendant, has been using the “Cohen & Company” trademark and business name, which allegedly infringes and unfairly competes with the plaintiff’s registered trademarks “Cohen & Company” and “Cohen & Co,” in violation of applicable federal and state trademark laws and regulations.
Removed
Pursuant to the complaint, the plaintiff has demanded that the defendant be permanently enjoined from using the “Cohen & Company” trademark and business name in connection with its business, pay to the plaintiff statutory damages, attorneys’ fees and costs and other damages, and pay over to plaintiff all gains, profits and advantages realized by the defendant from its allegedly unlawful acts and omissions.
Removed
The Company filed a partial motion on April 18, 2022, and on October 6, 2022, the Court granted the Company's motion and dismissed the plaintiff's counterfeiting claim with prejudice. On October 27, 2022, the parties executed a confidential settlement agreement and all the plaintiff's claims were dismissed with prejudice on October 31, 2022, ending the case.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

2 edited+0 added−1 removed0 unchanged
Biggest changeFinancial Statements and Supplementary Data. 79 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 79 Item 9A. Controls and Procedures. 79 Item 9B. Other Information. 80 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 80 PART III Item 10. Directors, Executive Officers and Corporate Governance. 81 Item 11. Executive Compensation. 81 Item 12.
Biggest changeFinancial Statements and Supplementary Data. 82 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 82 Item 9A. Controls and Procedures. 82
Item 4. Mine Safety Disclosures. 37 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 38 Item 6. Selected Financial Data. 38 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 39 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 77 Item 8.
Item 4. Mine Safety Disclosures. 38 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 39 Item 6. Selected Financial Data. 39 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 40 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 80 Item 8.
Removed
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 81 Item 13. Certain Relationships and Related Transactions, and Director Independence. 81 Item 14. Principal Accounting Fees and Services. 81 PART IV Item 15. Exhibit and Financial Statement Schedules. 82

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed8 unchanged
Biggest changeUnregistered Sales of Equity Securities None Issuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet be Purchased under the Plans or Programs (1) October 1, 2022 - October 31, 2022 - $- - $- November 1, 2022 - November 30, 2022 - $- - $- December 1, 2022 - December 31, 2022 - $- - $- Total - - (1) Dollar amounts in thousands.
Biggest changeUnregistered Sales of Equity Securities None Issuer Purchases of Equity Securities Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet be Purchased under the Plans or Programs (1) October 1, 2023 - October 31, 2023 - $ - - $ - November 1, 2023 - November 30, 2023 - $ - - $ - December 1, 2023 - December 31, 2023 - $ - - $ - Total - - (1) Dollar amounts in thousands.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information for Our Common Stock and Dividends Our Common Stock trades under the symbol "COHN" on the NYSE American Stock Exchange. The closing price of our Common Stock was $8.99 on March 6, 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information for Our Common Stock and Dividends Our Common Stock trades under the symbol "COHN" on the NYSE American Stock Exchange. The closing price of our Common Stock was $6.90 on March 1, 2024.
We had 1,819,866 shares of Common Stock outstanding held by 35 holders of record as of March 6, 2023.
We had 1,928,172 shares of Common Stock outstanding held by 39 holders of record as of March 6, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

219 edited+78 added−73 removed184 unchanged
Biggest changeCONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands) Year Ended December 31, Favorable / (Unfavorable) 2021 2020 $ Change % Change Revenues Net trading $ 69,385 $ 73,611 $ (4,226 ) (6 )% Asset management 10,923 8,759 2,164 25 % New issue and advisory 28,736 2,234 26,502 1186 % Principal transactions and other income 37,324 45,506 (8,182 ) (18 )% Total revenues 146,368 130,110 16,258 12 % Operating expenses Compensation and benefits 85,048 59,902 (25,146 ) (42 )% Business development, occupancy, equipment 3,365 2,708 (657 ) (24 )% Subscriptions, clearing, and execution 10,307 9,887 (420 ) (4 )% Professional fee and other operating 7,684 7,068 (616 ) (9 )% Depreciation and amortization 371 334 (37 ) (11 )% Impairment of goodwill - 7,883 7,883 NM Total operating expenses 106,775 87,782 (18,993 ) (22 )% Operating income / (loss) 39,593 42,328 (2,735 ) (6 )% Non-operating income / (expense) Interest expense, net (7,233 ) (9,589 ) 2,356 25 % Income / (loss) from equity method affiliates 36,010 (2,955 ) 38,965 1319 % Other non-operating income 2,127 - 2,127 NM Income / (loss) before income taxes 70,497 29,784 40,713 137 % Income tax expense / (benefit) (3,541 ) (8,669 ) (5,128 ) (59 )% Net income / (loss) 74,038 38,453 35,585 93 % Less: Net income (loss) attributable to the non-convertible non-controlling interest 35,574 10,048 (25,526 ) (254 )% Enterprise net income (loss) 38,464 28,405 10,059 35 % Less: Net income (loss) attributable to the convertible non-controlling interest 26,656 14,200 (12,456 ) (88 )% Net income / (loss) attributable to Cohen & Company Inc. $ 11,808 $ 14,205 $ (2,397 ) (17 )% Revenues Revenues increased by $16,258, or 12%, to $146,368 for the year ended December 31, 2021, as compared to $130,110 for the year ended December 31, 2020.
Biggest changeCONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands) Year Ended December 31, Favorable / (Unfavorable) 2023 2022 $ Change % Change Revenues Net trading $ 30,926 $ 40,009 $ (9,083 ) (23 )% Asset management 7,337 9,004 (1,667 ) (19 )% New issue and advisory 28,264 24,721 3,543 14 % Principal transactions and other income 16,454 (29,347 ) 45,801 (156 )% Total revenues 82,981 44,387 38,594 87 % Operating expenses Compensation and benefits 52,092 50,290 (1,802 ) (4 )% Business development, occupancy, equipment 5,204 5,076 (128 ) (3 )% Subscriptions, clearing, and execution 8,965 8,274 (691 ) (8 )% Professional fee and other operating 9,296 8,153 (1,143 ) (14 )% Depreciation and amortization 563 557 (6 ) (1 )% Total operating expenses 76,120 72,350 (3,770 ) (5 )% Operating income / (loss) 6,861 (27,963 ) 34,824 (125 )% Non-operating income / (expense) Interest expense, net (6,526 ) (4,982 ) (1,544 ) (31 )% Income / (loss) from equity method affiliates 15,609 (20,931 ) 36,540 175 % Other non operating income - - - NM Income / (loss) before income taxes 15,944 (53,876 ) 69,820 130 % Income tax expense / (benefit) 5,545 4,794 (751 ) (16 )% Net income / (loss) 10,399 (58,670 ) 69,069 118 % Less: Net income (loss) attributable to the non-convertible non-controlling interest 19,590 (23,203 ) (42,793 ) (184 )% Enterprise net income (loss) (9,191 ) (35,467 ) 26,276 74 % Less: Net income (loss) attributable to the convertible non-controlling interest (4,078 ) (22,078 ) (18,000 ) (82 )% Net income / (loss) attributable to Cohen & Company Inc. $ (5,113 ) $ (13,389 ) $ 8,276 62 % Revenues Revenues increased by $38,594, or 87%, to $82,981 for the year ended December 31, 2023, as compared to $44,387 for the year ended December 31, 2022.
Currently, our primary source of new issue and advisory revenue is from originating assets for our U.S. and European insurance asset management business including our U.S. Insurance JV and our CREO JV, as well and from investment banking and advisory services through CCM. A portion of our revenue is generated from management fees.
Currently, our primary source of new issue and advisory revenue is from investment banking and advisory services through CCM, as well as originating assets for our U.S. and European insurance asset management business including our U.S. Insurance JV and for our CREO JV. A portion of our revenue is generated from management fees.
Our ability to complete securitizations in the future will depend upon, among other things, our asset origination capacity and success, our ability to arrange warehouse financing to originate assets, our willingness and capacity to fund required amounts to obtain warehouse financing and securitized financings, and the demand in the markets for such securitizations.
Our ability to complete securitizations in the future will depend upon, among other things, our asset origination capacity and success, our ability to arrange warehouse financing to originate assets, our willingness and capacity to fund required amounts to obtain warehouse financing and securitized financings, and the demand in the markets for such securitizations.
Federal Reserve began a process of raising the federal funds rate and quantitative tightening to address rising inflation. These actions have the effect of increasing interest rates which negatively impacts our business in several ways: 1. Rising rates reduce the fair value of fixed income securities we hold on our balance sheet. 2.
Federal Reserve began a process of raising the federal funds rate and quantitative tightening to address rising inflation. These actions have the effect of increasing interest rates, which negatively impacts our business in several ways: 1. Rising rates reduce the fair value of the fixed income securities we hold on our balance sheet. 2.
Our ability to complete securitizations in the future will depend upon, among other things, our asset origination capacity and success, our ability to arrange warehouse financing to originate assets, our willingness and capacity to fund required amounts to obtain warehouse financing and securitized financings, and the demand in the markets for such securitizations.
Our ability to complete securitizations in the future will depend upon, among other things, our asset origination capacity and success, our ability to arrange warehouse financing to originate assets, our willingness and capacity to fund required amounts to obtain warehouse financing and securitized financings, and the demand in the markets for such securitizations.
No equity compensation expense was recognized on these units in 2021 or 2022, and no compensation expense will be recognized in the future. The remaining equity-based compensation recognized during 2022 and 2021 relates to restricted grants of the Company's Common Stock and Operating LLC units.
No equity compensation expense was recognized on these units in 2021 or 2022, and no compensation expense will be recognized in the future. The remaining equity-based compensation expense recognized during 2022 and 2021 relates to restricted grants of the Company's Common Stock and Operating LLC units.
This determination is subjective and subject to many assumptions and factors including: profitability of our business in the future, the timing of that future income as compared to carryforward asset expiration, the character of future income (ordinary or capital), and the jurisdiction in which the income will be generated in.
This determination is subjective and subject to many assumptions and factors including: profitability of our business in the future, the timing of that future income as compared to carryforward asset expiration, the character of future income (ordinary or capital), and the jurisdiction in which the income will be generated.
The Company recorded deferred tax expense in 2022 because of expectations of future income decreased and the Company increased the valuation allowance it had applied against carryforward assets. Because of magnitude of the Company's carryforward assets as well as the volatility of the Company's operating results, significant adjustments to the valuation allowance are likely going forward.
The Company recorded deferred tax expense in 2022 because expectations of future income decreased and the Company increased the valuation allowance it had applied against carryforward assets. Because of magnitude of the Company's carryforward assets as well as the volatility of the Company's operating results, significant adjustments to the valuation allowance are likely going forward.
The following table shows the detail by trading group.
The following table shows the detail by trading group.
This may adversely affect the ultimate value realized from these investments. In addition, our net trading revenue also includes realized gains on certain proprietary trading positions. Our ability to derive trading gains from such trading positions is subject to overall market conditions.
This may adversely affect the ultimate value realized from these investments. In addition, our net trading revenue also includes realized gains on certain proprietary trading positions. Our ability to derive trading gains from such trading positions is subject to overall market conditions.
Our ability to complete securitizations in the future will depend upon, among other things, our asset origination capacity and success, our ability to arrange warehouse financing to originate assets, our willingness and capacity to fund required amounts to obtain warehouse financing and securitized financings, and the demand in the markets for such securitizations.
Our ability to complete securitizations in the future will depend upon, among other things, our asset origination capacity and success, our ability to arrange warehouse financing to originate assets, our willingness and capacity to fund required amounts to obtain warehouse financing and securitized financings, and the demand in the markets for such securitizations.
See note 12 to our consolidated financial statements included in this Annual Report on Form 10-K.
See note 12 to our consolidated financial statements included in this Annual Report on Form 10-K.
For several of the investments described below, we also had an investment in the same company accounted for at fair value as a component of other investments, at fair value during the periods presented. See discussion of principal transactions above.
For several of the investments described below, we also had an investment in the same company accounted for at fair value as a component of other investments, at fair value during the periods presented. See discussion of principal transactions above.
These interests are not convertible into Common Stock.
These interests are not convertible into Common Stock.
The decrease was attributable to the cash used in operating activities of $23,488, the cash provided by investing activities of $13,798, the cash used in financing activities of $11,504, and the decrease in cash resulting from a change in exchange rates of $272.
The decrease was attributable to cash used in operating activities of $23,488, cash provided by investing activities of $13,798, cash used in financing activities of $11,504, and the decrease in cash resulting from a change in exchange rates of $272.
The increase was attributable to the cash provided by operating activities of $18,321, the cash used in investing activities of $22,534, the cash provided by financing activities of $13,161, and the decrease in cash resulting from a change in exchange rates of $377.
The increase was attributable to cash provided by operating activities of $18,321, cash used in investing activities of $22,534, cash provided by financing activities of $13,161, and the decrease in cash resulting from a change in exchange rates of $377.
If the derivative is expected to be managed by employees of our Capital Markets business segment or is a hedge for an investment classified as investments-trading, the derivative will be carried as a component of investments-trading if it is an asset or securities sold, not yet purchased if a liability.
If the derivative is expected to be managed by employees of our Capital Markets business segment or is a hedge for an investment classified as investments-trading, the derivative will be carried as a component of investments-trading if it is an asset or securities sold, not yet purchased if it is a liability.
Second, we sometimes grant to employees operating units of the Operating LLC. These grants also vest over a period of time and only have service based vesting criteria.
Second, we sometimes grant operating units of the Operating LLC to employees. These grants also vest over a period of time and only have service based vesting criteria.
We will then record principal transactions income and loss until the SPAC shares themselves are liquidated. • If a SPAC liquidates and we have an investment in it (either directly in the case of consolidated sponsor entities or indirectly in the case of equity method sponsor entities), we will write off our remaining equity method balance and record loss on equity method investment.
We will then record principal transactions income and loss until the SPAC shares themselves are liquidated. • If a SPAC liquidates and we have an investment in it (either directly in the case of consolidated sponsor entities or indirectly in the case of equity method sponsor entities), we will write-off our remaining equity method balance and record a loss on the equity method investment.
ASSET MANAGEMENT (Dollars in Thousands) Year Ended December 31, 2022 2021 Change CDOs $ 3,454 $ 2,484 $ 970 Other 5,550 8,439 (2,889 ) Total $ 9,004 $ 10,923 $ (1,919 ) A significant portion of our asset management fees are earned from the management of CDOs. We have not completed a new securitization since 2008.
ASSET MANAGEMENT (Dollars in Thousands) For the Year Ended December 31, 2022 2021 Change CDOs $ 3,454 $ 2,484 $ 970 Other 5,550 8,439 (2,889 ) Total $ 9,004 $ 10,923 $ (1,919 ) A significant portion of our asset management fees are earned from the management of CDOs. We have not completed a new securitization since 2008.
COMPENSATION AND BENEFITS (Dollars in Thousands) Year Ended December 31, 2022 2021 Change Cash compensation and benefits $ 45,900 $ 69,330 $ (23,430 ) Equity-based compensation 4,390 15,718 (11,328 ) Total $ 50,290 $ 85,048 $ (34,758 ) Cash compensation and benefits in the table above is primarily comprised of salary, incentive compensation, severance, employer portion of payroll taxes, and benefits.
COMPENSATION AND BENEFITS (Dollars in Thousands) For the Year Ended December 31, 2022 2021 Change Cash compensation and benefits $ 45,900 $ 69,330 $ (23,430 ) Equity-based compensation 4,390 15,718 (11,328 ) Total $ 50,290 $ 85,048 $ (34,758 ) Cash compensation and benefits in the table above is primarily comprised of salary, incentive compensation, severance, employer portion of payroll taxes, and benefits.
In all cases where we are the managing member of a sponsor entity, we also have had a significant economic interest in such sponsor entity and therefore consolidate such sponsor entity. • In all cases where we have consolidated a sponsor entity, we have determined that the sponsor entity's private placement investment in the SPAC which it sponsors should be treated as an equity method investment during the SPAC's pre-business combination period.
In all cases where we are the managing member of a sponsor entity, we also have had a significant economic interest in such sponsor entity and therefore consolidate such sponsor entity. • In all cases where we consolidated a sponsor entity, we determined that the sponsor entity's private placement investment in the SPAC that it sponsors should be treated as an equity method investment during the SPAC's pre-business combination period.
Also, these new Investment Vehicles often require warehouse and other third-party financing to fund the acquisition of investments. Finally, we generally will hire employees to manage new Investment Vehicles and will operate at a loss for a startup period. (3) To fund investments. We make principal investments (including sponsor and other investments in SPACs) to generate returns.
Also, the new Investment Vehicles often require warehouse and other third-party financing to fund the acquisition of investments. Finally, we generally will hire employees to manage new Investment Vehicles and will operate at a loss for a startup period. (3) To fund investments. We make principal investments (including sponsor and other investments in SPACs) to generate returns.
We have no control over these external factors and there is no effective way for us to hedge against these risks. Our mortgage group’s volumes and profitability will be highly impacted by these external factors. Rising Interest Rates and Inflation During 2022, the U.S.
We have no control over these external factors and there is no effective way for us to hedge against these risks. Our mortgage group’s volumes and profitability will be highly impacted by these external factors. Rising Interest Rates and Inflation During 2022 and 2023, the U.S.
The revenue share arrangement noted in the table above entitles us to a percentage of revenue earned by IIFC. The IIFC revenue share arrangement expires at the earlier of (i) the dissolution of IIFC or (ii) when we have earned a cumulative $20,000 in revenue share payments. As of December 31, 2022, we have earned $4,513.
The revenue share arrangement noted in the table above entitles us to a percentage of revenue earned by IIFC. The IIFC revenue share arrangement expires at the earlier of (i) the dissolution of IIFC or (ii) when we have earned a cumulative $20,000 in revenue share payments. As of December 31, 2022, we had earned $4,513.
Stock Compensation We account for stock compensation according to FASB ASC 718, Stock Compensation (“ASC 718”). In the periods presented herein, we have had three different types of grants that fall under ASC 718. First, we sometimes grant to employees and directors restricted common stock in Cohen & Company Inc.
Stock Compensation We account for stock compensation according to FASB ASC 718, Stock Compensation (“ASC 718”). In the periods presented herein, we had three different types of grants that fall under ASC 718. First, we sometimes grant restricted common stock in Cohen & Company Inc. to employees and directors.
The 2022 Purchase Agreement contains customary representations and warranties on the part of each of JKD Investor and the Operating LLC. We used these proceeds to retire $2,250 of existing 2020 Senior Notes held by RNCS. See note 20 and 31.
The 2022 Purchase Agreement contains customary representations and warranties on the part of each of JKD Investor and the Operating LLC. We used these proceeds to retire the $2,250 of 2020 Senior Notes held by RNCS. See note 20 and 31.
Of the $15,718 of equity compensation recognized in 2021, $13,068 was due to equity compensation related to the issuance of membership units of the Insurance SPAC II Sponsor Entities to employees of the Company. The expense was recognized upon the completion of the merger between Insurance SPAC II and MetroMile on February 9, 2021.
Of the $15,718 of equity compensation recognized in 2021, $13,068 was due to equity compensation related to the issuance of membership units of the Insurance SPAC II Sponsor Entities to employees of the Company. The expense was recognized upon the completion of the merger between Insurance SPAC II and Metromile, Inc. on February 9, 2021.
Several of these SPAC Sponsor Entities are invested in SPACs that have completed their respective business combinations. Those SPAC Sponsor Entities hold restricted and unrestricted equity interests in the public post-merger entities. We account for our investments in SPAC Sponsor Entities under the equity method of accounting.
Several of these SPAC Sponsor Entities are invested in SPACs that have completed their business combinations. Those SPAC Sponsor Entities hold restricted and unrestricted equity interests in the public post-merger entities. We account for our investments in SPAC Sponsor Entities under the equity method of accounting.
The cash used in financing activities of $11,504 was comprised of (a) $2,250 of cash used to repay debt; (b) $234 of cash used to settle equity awards; (c) $2,558 of cash used to pay dividends on Common Stock; (d) $6,485 in cash used for distributions to the convertible non-controlling interest; and (e) $2,236 in cash used for distributions to the non-convertible non-controlling interests; partially offset by (f) $2,250 in proceeds from the issuance of debt and (g) $9 in cash proceeds from investments in the non-convertible non-controlling interests. 64 Table of Contents 2021 Cash Flows As of December 31, 2021, our cash and cash equivalents were $50,567, representing an increase of $8,571 from December 31, 2020.
The cash used in financing activities of $11,504 was comprised of (a) $2,250 of cash used to repay debt; (b) $234 of cash used to settle equity awards; (c) $2,558 of cash used to pay dividends on Common Stock; (d) $6,485 in cash used for distributions to the convertible non-controlling interest; and (e) $2,236 in cash used for distributions to the non-convertible non-controlling interests; partially offset by (f) $2,250 in proceeds from the issuance of debt and (g) $9 in cash proceeds from investments in the non-convertible non-controlling interests. 67 Table of Contents 2021 Cash Flows As of December 31, 2021, our cash and cash equivalents were $50,567, representing an increase of $8,571 from December 31, 2020.
In the periods presented, the shares of LMND we held were comprised of both unrestricted and restricted shares and were carried at fair value. For a portion of the period we have held these shares, they were held in majority owned consolidated subsidiaries (the "Insurance SPAC II Sponsor Entities").
In the periods presented, the shares of LMND we held were comprised of both unrestricted and restricted shares and were carried at fair value. For a portion of the period we held these shares, they were held in majority owned consolidated subsidiaries (the "Insurance SPAC II Sponsor Entities").
No further equity-based compensation expense will be recognized related to membership units of the Insurance SPAC II Sponsor Entities in the future. The Insurance SPAC III Sponsor Entities had issued membership units to employees of the Company. Insurance SPAC III was liquidated in 2022 and therefore these units became worthless.
No further equity-based compensation expense will be recognized related to membership units of the Insurance SPAC II Sponsor Entities in the future. The Insurance SPAC III Sponsor Entities issued membership units to employees of the Company. Insurance SPAC III was liquidated in 2022 and therefore these units became worthless.
This determination is subjective and subject to many assumptions and factors including: profitability of our business in the future, the timing of that future income as compared to carryforward asset expiration, the character of future income (ordinary or capital), and the jurisdiction the income will be generated in.
This determination is subjective and subject to many assumptions and factors including: profitability of our business in the future, the timing of that future income as compared to carryforward asset expiration, the character of future income (ordinary or capital), and the jurisdiction in which the income will be generated.
In the periods presented, the shares of SFT we held were comprised of both unrestricted and restricted shares and were carried at fair value. For a portion of the period we have held these shares, they were held in majority owned consolidated subsidiaries (the "Insurance SPAC Sponsor Entities").
In the periods presented, the shares of SFT we held were comprised of both unrestricted and restricted shares and were carried at fair value. For a portion of the period we held these shares, they were held in majority owned consolidated subsidiaries (the "Insurance SPAC Sponsor Entities").
Because earnings are recognized unevenly throughout the year and the non-controlling interest percentage may change during the period, the average effective non-controlling interest percentage may not equal the percentage at the end of any period or the simple average of the beginning and ending percentages. 61 Table of Contents Liquidity and Capital Resources Liquidity is a measurement of our ability to meet potential cash requirements including ongoing commitments to repay debt borrowings, make interest payments on outstanding borrowings, fund investments, and support other general business purposes.
Because earnings are recognized unevenly throughout the year and the non-controlling interest percentage may change during the period, the average effective non-controlling interest percentage may not equal the percentage at the end of any period or the simple average of the beginning and ending percentages. 63 Table of Contents Liquidity and Capital Resources Liquidity is a measurement of our ability to meet potential cash requirements including ongoing commitments to repay debt borrowings, make interest payments on outstanding borrowings, fund investments, and support other general business purposes.
(2) In some cases, accounts we manage may employ leverage. In some cases, our fees are based on gross assets and in some cases on net assets. Finally, in the case of the SPAC Series Funds there are no management fees earned.
(2) The accounts we manage may employ leverage. In some cases, our fees are based on gross assets and in other cases on net assets. Finally, in the case of the SPAC Series Funds, there are no management fees earned.
A portion of our revenues is generated from our principal investing activities. Therefore, our revenues are impacted by the overall market supply of and demand for these investments as well as the individual performance of each investment.
A portion of our revenues is generated from our principal investing activities. Therefore, our revenues are impacted by the overall market supply and demand of these investments as well as the individual performance of each investment.
As discussed in more detail below, the change was comprised of (i) a decrease of $29,376 in net trading revenue; (ii) a decrease of $1,919 in asset management revenue; (iii) a decrease of $4,015 in new issue and advisory revenue; and (iv) a decrease of $66,671 in principal transactions and other income. 44 Table of Contents Net Trading Net trading revenue decreased by $29,376, or 42%, to $40,009 for the year ended December 31, 2022, as compared to $69,385 for the year ended December 31, 2021.
As discussed in more detail below, the change was comprised of (i) a decrease of $29,376 in net trading revenue; (ii) a decrease of $1,919 in asset management revenue; (iii) a decrease of $4,015 in new issue and advisory revenue; and (iv) a decrease of $66,671 in principal transactions and other income. 54 Table of Contents Net Trading Net trading revenue decreased by $29,376, or 42%, to $40,009 for the year ended December 31, 2022, as compared to $69,385 for the year ended December 31, 2021.
As a result, our asset management revenue from CDOs has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, and defaults.
As a result, our asset management revenue has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, liquidations, and defaults.
As a result, our asset management revenue from CDOs has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, and defaults.
As a result, our asset management revenue from CDOs has declined from its historical highs as the assets of the CDOs decline due to maturities, repayments, auction call redemptions, liquidations, and defaults.
Non-Operating Income and Expense Interest Expense, net Interest expense, net decreased by $2,251 to $4,982 for the year ended December 31, 2022, as compared to $7,233 for the year ended December 31, 2021.
Non-Operating Income and Expense Interest Expense, net Interest expense, net decreased by $2,251, or 31%, to $4,982 for the year ended December 31, 2022, as compared to $7,233 for the year ended December 31, 2021.
Because earnings are recognized unevenly throughout the year and the non-controlling interest percentage may change during the period, the average effective non-controlling interest percentage may not equal the percentage at the end of any period or the simple average of the beginning and ending percentages. 53 Table of Contents Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020 The following table sets forth information regarding our consolidated results of operations for the years ended December 31, 2021 and 2020.
Because earnings are recognized unevenly throughout the year and the non-controlling interest percentage may change during the period, the average effective non-controlling interest percentage may not equal the percentage at the end of any period or the simple average of the beginning and ending percentages. 53 Table of Contents Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 The following table sets forth information regarding our consolidated results of operations for the years ended December 31, 2022 and 2021.
See note 20 to our consolidated financial statements included in this Annual Report on Form 10-K. 63 Table of Contents If we are unable to raise sufficient capital on economically favorable terms, we may need to reduce the amount of capital invested for the uses described above, which may adversely impact earnings and our ability to pay dividends.
See note 20 to our consolidated financial statements included in this Annual Report on Form 10-K. 65 Table of Contents If we are unable to raise sufficient capital on economically favorable terms, we may need to reduce the amount of capital invested for the uses described above, which may adversely impact earnings and our ability to pay dividends.
Because these entities are consolidated and the employees are investing in the consolidated company's non-controlling interest, these equity interests fall under ASC 718. Generally, the employee invests a de-minimus amount and receives an allocation of the founder shares held by the sponsor entity. The investment does not have any explicit vesting criteria associated with it.
Because these entities are consolidated and the employees are investing in the consolidated company's non-controlling interest, these equity interests fall under ASC 718. Generally, the employee invests a de minimis amount and receives an allocation of the founder shares held by the sponsor entity. The investment does not have any explicit vesting criteria associated with it.
Furthermore, because of the difficulty of determining the fair value of such an investment in the applicable SPAC's pre-business combination period, we have chosen to not elect the fair value option. • If a SPAC completes a business combination and we have an equity method investment in the associated sponsor entity, the sponsor entity will record income equal to the difference between the fair value of the restricted and unrestricted shares it will receive and the carrying value of its equity method investment in the SPAC.
Furthermore, due to the difficulty of determining the fair value of such an investment in the applicable SPAC's pre-business combination period, we have chosen to not elect the fair value option. • If a SPAC completes a business combination and we have an equity method investment in the associated sponsor entity, the sponsor entity will record income equal to the difference between the fair value of the restricted and unrestricted shares it will receive and the carrying value of its equity method investment in the SPAC.
Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. 71 Table of Contents Financial instruments carried at contract amounts with short-term maturities (one year or less) are repriced frequently or bear market interest rates.
Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. 73 Table of Contents Financial instruments carried at contract amounts with short-term maturities (one year or less) are repriced frequently or bear market interest rates.
The remaining portion of our AUM is from a diversified mix of other Investment Vehicles that were more recently formed. • Principal Investing : Our Principal Investing business segment is comprised of investments that we hold related to our SPAC franchise and other investments we have made for the purpose of earning an investment return rather than investments to support our trading or other Capital Markets business segment activities.
The remaining portion of our AUM is from a diversified mix of other Investment Vehicles that were more recently formed. • Principal Investing : Our Principal Investing business segment is comprised of investments that we hold related to our SPAC franchise and other investments we have made for the purpose of earning an investment return rather than investments to support our Capital Markets business segment activities.
Furthermore, a termination of any of our clearing arrangements would result in a significant disruption to our business and would have a significant negative impact on our dealings and relationship with our customers. 67 Table of Contents The following table presents our period end balance, average monthly balance, and maximum balance at any month end for receivables under resale agreements and securities sold under agreements to repurchase.
Furthermore, a termination of any of our clearing arrangements would result in a significant disruption to our business and would have a significant negative impact on our dealings and relationship with our customers. 69 Table of Contents The following table presents our period end balance, average monthly balance, and maximum balance at any month end for receivables under resale agreements and securities sold under agreements to repurchase.
The fluctuations in the balances of our receivables under resale agreements over the periods presented were impacted by our clients’ desires to execute collateralized financing arrangements through the repurchase market or other financing products. Average balances and period end balances will fluctuate based on market and liquidity conditions and we consider such intraperiod fluctuations as typical for the repurchase market.
The fluctuations in the balances of our receivables under resale agreements over the periods presented were impacted by our clients’ desires to execute collateralized financing arrangements through the repurchase market or other financing products. Average balances and period end balances will fluctuate based on market and liquidity conditions and we consider such intra-period fluctuations as typical for the repurchase market.
However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. 70 Table of Contents We consider the accounting policies discussed below to be the policies that are the most impactful to our financial statements and also subject to significant management judgment.
However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. 72 Table of Contents We consider the accounting policies discussed below to be the policies that are the most impactful to our financial statements and also subject to significant management judgment.
Our policy is to record penalties and interest as a component of provision for income taxes in our consolidated statements of operations. 72 Table of Contents Our voting-controlled subsidiary, the Operating LLC, is treated as a pass-through entity for U.S. federal income tax purposes and in most of the states in which we do business.
Our policy is to record penalties and interest as a component of provision for income taxes in our consolidated statements of operations. 74 Table of Contents Our voting-controlled subsidiary, the Operating LLC, is treated as a pass-through entity for U.S. federal income tax purposes and in most of the states in which we do business.
Principal Investing: • Gains and losses (unrealized and realized) and income and expense earned on securities classified as other investments, at fair value and other investments sold, not yet purchased; and • Income and loss earned on equity method investments. 39 Table of Contents Business Environment Our business in general and our Capital Markets business segment in particular, do not produce predictable earnings.
Principal Investing: • Gains and losses (unrealized and realized) and income and expense earned on securities classified as other investments, at fair value and other investments sold, not yet purchased; and • Income and loss earned on equity method investments. 40 Table of Contents Business Environment Our business in general and our Capital Markets business segment in particular do not produce predictable earnings.
Our response to this margin compression has included: (i) building a diversified fixed income trading platform; (ii) acquiring or building out new product lines and expanding existing product lines; (iii) building a hedging execution and funding operation to service mortgage originators; and (iv) monitoring our fixed costs. Our cost management initiatives are ongoing.
Our response to this margin compression has included: (i) building a diversified fixed income trading platform; (ii) acquiring or building out new product lines and expanding existing product lines; (iii) building a hedging execution and funding operation to service mortgage originators; (iv) building out CCM, and (v) monitoring our fixed costs. Our cost management initiatives are ongoing.
Due to volatility and uncertainty in the capital markets, the net trading revenue recognized during any year may not be indicative of future results. Furthermore, from time to time, some of the assets included in the Investments-trading line of our consolidated balance sheets represent level 3 valuations within the FASB valuation hierarchy.
Due to the volatility and uncertainty in the capital markets generally, the net trading revenue recognized during the year may not be indicative of future results. Furthermore, from time to time, some of the assets included in the Investments-trading line of our consolidated balance sheets represent level 3 valuations within the FASB valuation hierarchy.
Accordingly, we have concluded that the sponsor entities are VIEs and the managing member has the power to direct its most important economic activities.
Accordingly, we concluded that the sponsor entities are VIEs and the managing member has the power to direct its most important economic activities.
(NASDAQ: WEJO), a publicly traded company that closed its business combination with Virtuoso Acquisition Corp. As of December 31, 2022, we had a total investment in WEJO carried at fair value of $175, which was included as a component of other investment's at fair value. REE represents equity positions of REE Automotive Ltd.
(NASDAQ: WEJO), a publicly traded company that closed its business combination with Virtuoso Acquisition Corp. As of December 31, 2022, we had a total investment in WEJO carried at fair value of $175, which was included as a component of other investments, at fair value. REE represents equity positions of REE Automotive Ltd.
Accordingly, there were significant non-controlling interest and equity compensation expense associated with these. See discussion of non-convertible non-controlling interest and equity below. As of December 31, 2022, the total carrying value of our investment in LMND was $561. IMXI represents equity positions of International Money Express, Inc.
Accordingly, there were significant non-controlling interest and equity compensation expenses associated with these shares. See discussion of non-convertible non-controlling interest and equity compensation expense below. As of December 31, 2022, the total carrying value of our investment in LMND was $561. IMXI represents equity positions of International Money Express, Inc.
As of December 31, 2022, our equity method investment in sponsor entity of the predecessor SPAC of WEJO was $0. As of December 31, 2022, our equity method investment in sponsor entity of the predecessor SPAC of DRTS was $379. As of December 31, 2022, our equity method investment in sponsor entity of the predecessor SPAC of REE was $0.
As of December 31, 2022, our equity method investment in the sponsor entity of the predecessor SPAC of WEJO was $0. As of December 31, 2022, our equity method investment in the sponsor entity of the predecessor SPAC of DRTS was $379.
As of December 31, 2022, our equity method investment in sponsor entity of the predecessor SPAC of PAYO was $0. As of December 31, 2022, our equity method investment in sponsor entity of the predecessor SPAC of PWP was $121. As of December 31, 2022, our equity method investment in sponsor entity of the predecessor SPAC of ACHR was $0.
As of December 31, 2022, our equity method investment in the sponsor entity of the predecessor SPAC of PWP was $121. As of December 31, 2022, our equity method investment in the sponsor entity of the predecessor SPAC of ACHR was $0.
Level 3 Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.
Level 3 Financial assets and liabilities with values that are based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.
The recipient is entitled to distributions that are declared and paid during the vesting period but they are paid only if (and to the extent) the unit grant ultimately vests. 74 Table of Contents Third, employees sometimes invest in the membership interests of consolidated SPAC sponsor entities (the Insurance SPAC Sponsor Entities, the Insurance SPAC II Sponsor Entities, and the Insurance SPAC III Sponsor Entities).
The recipient is entitled to distributions that are declared and paid during the vesting period but they are paid only if (and to the extent) the unit grant ultimately vests. 76 Table of Contents Third, employees sometimes invest in the membership interests of consolidated SPAC sponsor entities (the Insurance SPAC Sponsor Entities, the Insurance SPAC II Sponsor Entities, and the Insurance SPAC III Sponsor Entities).
As a complement to the SPAC Fund, we established and became manager of two newly formed umbrella limited liability companies (the “SPAC Series Funds”) that issue a separate series of interest for each investment portfolio, which typically consists of investments in the sponsor entities of individual SPACs.
As a complement to the SPAC Fund, we established and became manager of two newly formed umbrella limited liability companies (the “SPAC Series Funds”) that issue a separate series of interest for each investment portfolio, which typically consist of investments in the sponsor entities of individual SPACs.
Accordingly, there were significant non-controlling interest and equity compensation expense associated with these. See discussion of non-convertible non-controlling interest and equity compensation expense below. As of December 31, 2022, the total carrying value of our investment in SFT was $231. LMND is a publicly traded company.
Accordingly, there were significant non-controlling interest and equity compensation expenses associated with these shares. See discussion of non-convertible non-controlling interest and equity compensation expense below. As of December 31, 2022, the total carrying value of our investment in SFT was $231. LMND is a publicly traded company.
Furthermore, because of the difficulty of determining the fair value of such an investment in the SPAC's pre-business combination period, we have chosen to not elect the fair value option. • If a SPAC completes its business combination, the sponsor entity's investment in the SPAC will be converted to a combination of unrestricted and restricted shares in the post-business combination SPAC.
Furthermore, due to the difficulty of determining the fair value of such an investment in the SPAC's pre-business combination period, we have chosen to not elect the fair value option. • If a SPAC completes its business combination, the sponsor entity's investment in the SPAC will be converted to a combination of unrestricted and restricted shares in the post-business combination SPAC.
We may, from time to time, enter into derivatives to manage our risk exposures arising from (i) fluctuations in foreign currency rates with respect to our investments in foreign currency denominated investments; (ii) our investments in interest sensitive investments; (iii) our investments in various equity instruments; and (iv) our facilitation of mortgage-backed trading.
We may, from time to time, enter into derivatives as investments or to manage our risk exposures arising from (i) fluctuations in foreign currency rates with respect to our investments in foreign currency denominated investments; (ii) our investments in interest sensitive investments; (iii) our investments in various equity instruments; and (iv) our facilitation of mortgage-backed trading.
Derivatives entered into by us, from time to time, may include (i) foreign currency forward contracts; (ii) purchase and sale agreements of TBAs and other forward agency MBS contracts; (iii) other extended settlement trades; and (iv) equity options such as calls and puts.
Derivatives entered into by us, from time to time, may include (i) foreign currency forward contracts; (ii) purchase and sale agreements of TBAs and other forward agency MBS contracts; (iii) other extended settlement trades; (iv) equity options such as calls and puts; and (v) SFAs.
If not used, this NOL will begin to expire in 2028. The Company also had net capital losses (“NCLs”) in excess of capital gains of $70,457 as of December 31, 2022, which can be carried forward to offset future capital gains. If not used, this carryforward will begin to expire in 2023.
The Company also had net capital losses (“NCLs”) in excess of capital gains of $70,457 as of December 31, 2022, which can be carried forward to offset future capital gains. If not used, this carryforward will begin to expire in 2023.
Net Income/ (Loss) Attributable to the Non-Convertible Non-Controlling Interest Net income / (loss) attributable to the non-convertible non-controlling interest for the years ended December 31, 2022 and 2021 was comprised of the non-controlling interest related to member interests in consolidated subsidiaries of the Operating LLC other than interests held by us for the relevant periods.
Net Income/ (Loss) Attributable to the Non-Convertible Non-Controlling Interest Net income / (loss) attributable to the non-convertible non-controlling interest for the years ended December 31, 2023 and 2022 was comprised of the non-controlling interest related to member interests in consolidated subsidiaries of the Operating LLC other than interests held by us for the relevant periods.
The three levels of the hierarchy under ASC 820 are described below. Level 1 Financial assets and liabilities whose values are based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
The three levels of the hierarchy under ASC 820 are described below. Level 1 Financial assets and liabilities with values that are based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
On January 31, 2020, the Operating LLC entered into a Note Purchase Agreement (the “Original Purchase Agreement”) with JKD Capital Partners I LTD, a New York corporation (“JKD Investor”), and RN Capital Solutions LLC, a Delaware limited liability company (“RNCS”).
The 2020 Senior Note s On January 31, 2020, the Operating LLC entered into a note purchase agreement (the “Original Purchase Agreement”) with JKD Capital Partners I LTD, a New York corporation (“JKD Investor”), and RN Capital Solutions LLC, a Delaware limited liability company (“RNCS”).
As of December 31, 2022, our equity method investment in sponsor entity of the predecessor SPAC of FOXO was $0. The remaining other investments in SPAC Sponsor Entities represent direct and indirect investments in sponsor entities who have not yet completed a business combination.
As of December 31, 2022, our equity method investment in the sponsor entity of the predecessor SPAC of FOXO was $0. The remaining other investments in SPAC Sponsor Entities represent direct and indirect investments in sponsor entities that have not yet completed a business combination.
Net Income / (Loss) Attributable to the Convertible Non-Controlling Interest Net income / (loss) attributable to the convertible non-controlling interest for the years ended December 31, 2021 and 2020 was comprised of the non-controlling interest related to member interests in the Operating LLC other than interests held by us for the relevant periods.
Net Income / (Loss) Attributable to the Convertible Non-Controlling Interest Net income / (loss) attributable to the convertible non-controlling interest for the years ended December 31, 2022 and 2021 was comprised of the non-controlling interest related to member interests in the Operating LLC other than interests held by us for the relevant periods.
Level 3 assets are carried at fair value based on estimates derived using internal valuation models and other estimates. See notes 8 and 9 to our consolidated financial statements included in this Annual Report on Form 10-K. The fair value estimates determined by us may not be indicative of the final sale price at which these assets may be sold.
Level 3 assets are carried at fair value based on estimates derived using internal valuation models and other estimates. See notes 9 and 10 to our consolidated financial statements included in this Annual Report on Form 10-K. The fair value estimates made by us may not be indicative of the final sale price at which these assets may be sold.
Redeemable Financial Instruments As of December 31, 2022, we have the following sources of financing, which we account for as redeemable financial instruments. See note 19 to our consolidated financial statements included in this Annual Report on Form 10-K.
Redeemable Financial Instruments As of December 31, 2023, we have the following sources of financing, which we account for as redeemable financial instruments. See note 19 to our consolidated financial statements included in this Annual Report on Form 10-K.
Asset Management: • Asset management fees for our on-going asset management services provided to certain Investment Vehicles, which may include fees both senior and subordinate to the securities issued by the Investment Vehicle; and • Incentive management fees earned based on the performance of the certain Investment Vehicles.
Asset Management: • Asset management fees for our on-going asset management services provided to certain Investment Vehicles, which may include fees both senior and subordinate to the securities issued in the Investment Vehicle; and • Incentive management fees earned based on the performance of Investment Vehicles.
If the derivative is a hedge for an investment carried as a component of other investments, at fair value, the derivative will be recorded in other investments, at fair value if it is an asset or other investments sold, not yet purchase if it is a liability.
If the derivative is a hedge for an investment carried as a component of other investments, at fair value, the derivative will be recorded in other investments, at fair value if it is an asset or other investments sold, not yet purchased if it is a liability.
If the business combination is completed, the sponsor entities private placement in the SPAC will entitle them to a combination of unrestricted common, restricted common, and (in some cases) warrants of the post-business combination SPAC (which is a publicly traded company).
If the business combination is completed, the sponsor entities' private placement in the SPAC will entitle them to a combination of unrestricted common, restricted common, and (in some cases) warrants of the post-business combination SPAC (which is a publicly traded company).
(NYSE: ML), a publicly traded company that closed its business combination with Fusion Acquisition Corp. As of December 31, 2022, we had a total investment in ML carried at fair value of $25, which was included as a component of other investments, at fair value. 47 Table of Contents BKSY represents equity positions of BlackSky Technology Inc.
(NYSE: ML), a publicly traded company that closed its business combination with Fusion Acquisition Corp. As of December 31, 2022, we had a total investment in ML carried at fair value of $25, which was included as a component of other investments, at fair value. BKSY represents equity positions of BlackSky Technology Inc.
Year Ended December 31, 2022 2021 Change Insurance SPAC Sponsor Entities $ - $ 3,560 $ (3,560 ) Insurance SPAC II Sponsor Entities - 17,644 (17,644 ) Insurance SPAC III Sponsor Entities (4,808 ) (615 ) (4,193 ) Other (18,395 ) 14,985 (33,380 ) $ (23,203 ) $ 35,574 $ (58,777 ) Insurance SPAC Sponsor Entities, Insurance SPAC II Sponsor Entities, and Insurance SPAC III Sponsor Entities are the Sponsor Entities formed by us for our sponsored SPACs.
Year Ended December 31, 2022 2021 Change Insurance SPAC Sponsor Entities $ - $ 3,560 $ (3,560 ) Insurance SPAC II Sponsor Entities - 17,644 (17,644 ) Insurance SPAC III Sponsor Entities (4,808 ) (615 ) (4,193 ) Other SPAC related (18,395 ) 14,985 (33,380 ) $ (23,203 ) $ 35,574 $ (58,777 ) Insurance SPAC Sponsor Entities, Insurance SPAC II Sponsor Entities, and Insurance SPAC III Sponsor Entities were the sponsor entities formed by us for our sponsored SPACs.
INTEREST EXPENSE (Dollars in Thousands) Year Ended December 31, 2022 2021 Change Junior subordinated notes $ 3,442 $ 2,601 $ 841 2020 Senior Notes 458 540 (82 ) 2013 Convertible Notes / 2019 Senior Notes - 211 (211 ) 2017 Convertible Note 327 1,534 (1,207 ) Line of Credit (Byline) 247 435 (188 ) Redeemable Financial Instrument - DGC Trust / CBF - 197 (197 ) Redeemable Financial Instrument - JKD Capital Partners I LTD 508 1,715 (1,207 ) $ 4,982 $ 7,233 $ (2,251 ) See notes 19 and 20 to our consolidated financial statements included in this Annual Report on Form 10-K. 50 Table of Contents Income / (loss) from Equity Method Affiliates Income / (loss) from equity method affiliates decreased by $56,941 to ($20,931) for the year ended December 31, 2022 from $36,010 for the year ended December 31, 2021.
INTEREST EXPENSE (Dollars in Thousands) For the Year Ended December 31, 2022 2021 Change Junior subordinated notes $ 3,442 $ 2,601 $ 841 2020 Senior Notes 458 540 (82 ) 2013 Convertible Notes / 2019 Senior Notes - 211 (211 ) 2017 Convertible Note 327 1,534 (1,207 ) Byline Bank 247 435 (188 ) Redeemable Financial Instrument - DGC Trust / CBF - 197 (197 ) Redeemable Financial Instrument - JKD Capital Partners I LTD 508 1,715 (1,207 ) $ 4,982 $ 7,233 $ (2,251 ) See notes 19 and 20 to our consolidated financial statements included in this Annual Report on Form 10-K. 60 Table of Contents Income / (loss) from Equity Method Affiliates Income / (loss) from equity method affiliates decreased by $56,941 to ($20,931) for the year ended December 31, 2022, as compared to $36,010 for the year ended December 31, 2021.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBased on this analysis, as of December 31, 2022, our equity price sensitivity was $1,695 and our foreign exchange currency sensitivity was $0. As of December 31, 2021, our equity price sensitivity was $3,068 and our foreign exchange currency sensitivity was $0. Other Securities: These investments are primarily made up of residual interests in securitization entities.
Biggest changeBased on this analysis, as of December 31, 2023, our equity price sensitivity was $1,383 and our foreign exchange currency sensitivity was $0. As of December 31, 2022, our equity price sensitivity was $1,695 and our foreign exchange currency sensitivity was $0. Other Securities: These investments are primarily made up of residual interests in securitization entities.
If the counterparty fails to post margin, we will sell the underlying security. The haircut serves as a buffer against market movements to prevent or minimize a loss. In the case of TBA and other forward agency MBS activities, we sometimes require counterparties to post margin with us in the case the market value of the underlying TBA trade declines.
If the counterparty fails to post margin, we will sell the underlying security. The haircut serves as a buffer against market movements to prevent or minimize a loss. In the case of TBA and other forward agency MBS activities, we sometimes require counterparties to post margin with us in case the market value of the underlying TBA trade declines.
If the counterparty fails to post margin, we will close out the underlying trade. In the case of TBA and other forward agency MBS activities, we will sometimes obtain initial margin or a cash deposit from the counterparty which serves a purpose similar to the haircut as an additional buffer against losses.
If the counterparty fails to post margin, we will close out the underlying trade. In the case of TBA and other forward agency MBS activities, we will sometimes obtain initial margin or a cash deposit from the counterparty that serves a purpose similar to the haircut as an additional buffer against losses.
We seek to earn net interest income on these matched transactions. 78 Table of Contents In our gestation repo business, we will generally ensure that the maturity dates of our reverse repurchase agreements match the maturity dates of the matched repurchase agreements.
We seek to earn net interest income on these matched transactions. 81 Table of Contents In our gestation repo business, we will generally ensure that the maturity dates of our reverse repurchase agreements match the maturity dates of the matched repurchase agreements.
Because they generally accrue interest income at a variable rate, the movement in interest rates typically does not impact their fair value. Fluctuations in their current income due to variations in interest rates are generally not material to us.
As they generally accrue interest income at a variable rate, the movement in interest rates typically does not impact their fair value. Fluctuations in their current income due to variations in interest rates are generally not material to us.
A 100-bps adverse change in the market yield to maturity would have resulted in an increase in the fair value of the debt in the amount of $3,318 as of December 31, 2022. 77 Table of Contents Counterparty Risk and Settlement Risk We are subject to counterparty risk primarily in two areas: (1) our collateralized securities transactions described in note 11 to our consolidated financial statements included in this Annual Report on Form 10-K and (2) our TBA and other forward agency MBS activities described in note 10 to our consolidated financial statements included in this Annual Report on Form 10-K.
A 100-bps adverse change in the market yield to maturity would have resulted in an increase in the fair value of the debt in the amount of $2,261 as of December 31, 2023. 80 Table of Contents Counterparty Risk and Settlement Risk We are subject to counterparty risk primarily in two areas: (1) our collateralized securities transactions described in note 11 to our consolidated financial statements included in this Annual Report on Form 10-K and (2) our TBA and other forward agency MBS activities described in note 10 to our consolidated financial statements included in this Annual Report on Form 10-K.
As of December 31, 2021, we would have incurred a loss of $1,638 if the yield curve rose 100 bps across all maturities and a gain of $1,638 if the yield curve fell 100 bps across all maturities. Equity Securities : We hold equity interests in both public and private entities. These investments are subject to equity price risk.
As of December 31, 2022, we would have incurred a loss of $1,610 if the yield curve rose 100 bps across all maturities and a gain of $1,605 if the yield curve fell 100 bps across all maturities. Equity Securities : We hold equity interests in both public and private entities. These investments are subject to equity price risk.
As of December 31, 2022, a 100-bps change in the three-month LIBOR would have resulted in a change in our annual cash to be paid for interest in the amount of $481.
As of December 31, 2023, a 100-bps change in the three-month SOFR would have resulted in a change in our annual cash to be paid for interest in the amount of $481.
Based on this analysis, as of December 31, 2022, we would have incurred a loss of $1,610 if the yield curve rose 100 bps across all maturities and a gain of $1,605 if the yield curve fell 100 bps across all maturities.
Based on this analysis, as of December 31, 2023, we would have incurred a loss of $1,368 if the yield curve rose 100 bps across all maturities and a gain of $1,364 if the yield curve fell 100 bps across all maturities.

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