Cohen & Co Inc.

Previous wording

Our business in general and our Capital Markets business segment in particular do not produce predictable earnings. Our results can vary dramatically from year-to-year and quarter-to-quarter. Our business is materially affected by economic conditions in the financial markets, political conditions, broad trends in business and finance, the housing and mortgage markets, changes in volume and price levels of securities transactions, and changes in interest rates, including overnight funding rates, all of which can affect our profitability and are unpredictable and beyond our control. These factors may affect the financial decisions made by investors and companies, including their level of participation in the financial markets and their willingness to participate in corporate transactions. Severe market fluctuations or weak economic conditions could reduce our trading volume and revenues, negatively affect our ability to generate new issue and advisory revenue, and adversely affect our profitability.

Current wording

Our business in general and our Capital Markets business segment in particular do not produce predictable earnings. Our results can vary dramatically from year-to-year and quarter-to-quarter. Our business is materially affected by economic conditions in the financial markets, political conditions, broad trends in business and finance, the housing and mortgage markets, changes in volume and price levels of securities transactions, and changes in interest rates, including overnight funding rates, all of which can affect our profitability and are unpredictable and beyond our control. These factors may affect the financial decisions made by investors and companies, including their level of participation in the financial markets and their willingness to participate in corporate transactions. Severe market fluctuations or weak economic conditions could reduce our trading volume and revenues, negatively affect our ability to generate investment banking and new issue revenue, and adversely affect our profitability.

Previous wording

We try to address these challenges by (i) focusing our business on clients and asset classes that are underserved by the large firms, (ii) continuing to monitor our fixed costs to enhance operating leverage and limit our losses during periods of low volumes, and (iii) attempting to hire and retain entrepreneurial and effective traders, investment bankers, and salespeople. Our business environment is rapidly changing. New risks and uncertainties emerge continuously and it is not possible for us to predict all the risks we will face. This may negatively impact our operating performance.

Current wording

We try to address these challenges by (i) focusing our business on clients and asset classes that are underserved by the large firms, (ii) continuing to monitor our fixed costs to enhance operating leverage and limit our losses during periods of low volumes, and (iii) attempting to hire and retain entrepreneurial and effective traders, investment bankers, and salespeople. Our business environment is rapidly changing. New risks and uncertainties emerge continuously and it is not possible for us to predict all the risks we will face. New risks and uncertainties may negatively impact our operating performance.

Previous wording

A portion of our revenue is generated from new issue and advisory engagements. The fees charged and volume of these engagements are sensitive to the overall business environment. We provide origination services in Europe through our subsidiary CCFESA, and new issue and advisory services in the U.S. through our subsidiary JVB. A division of JVB, CCM is our full-service boutique investment bank that provides innovative strategic and financial advice in M&A, capital markets, and SPAC advisory services. In some cases, CCM will receive financial instruments in lieu of cash for its advisory transactions. In these cases, we record revenue equal to the fair value of the instruments received. Subsequent to receipt, the instruments are carried at fair value as a component of other investments, at fair value in our consolidated balance sheets. Any change in the fair value of these instruments subsequent to recording the new issue revenue will be recorded as principal transactions gain or loss in our consolidated statement of operations. 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.

Current wording

A portion of our revenue is generated from investment banking and new issue engagements. The fees charged and volume of these engagements are sensitive to the overall business environment. We provide origination services in Europe through our subsidiary CCFESA, and investment banking and new issue services in the U.S. through our subsidiary Cohen Securities. A division of Cohen Securities, CCM is our full-service boutique investment bank providing capital markets and SPAC advisory services to corporations, financial sponsors, investors, and institutions. In some cases, CCM will receive financial instruments in lieu of cash for its investment banking and new issue engagements. In these cases, we record revenue equal to the fair value of the instruments received. Subsequent to receipt, the instruments are carried at fair value as a component of other investments, at fair value in our consolidated balance sheets. Any change in the fair value of these instruments subsequent to recording the investment banking and new issue revenue will be recorded as an adjustment to investment banking and new issue revenue in our consolidated statement of operations. Currently, our primary source of investment banking and new issue 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.

Previous wording

A portion of our revenue is generated from management fees. Our ability to charge management fees and the amount of those fees is dependent upon the underlying investment performance and stability of the Investment Vehicles. If these types of investments do not provide attractive returns to investors, the demand for such instruments will likely fall, thereby reducing our opportunity to earn new management fees or maintain existing management fees. As of December 31, 2024, 42% of our existing AUM were in CDOs. The creation of CDOs has depended upon a vibrant securitization market. Since 2008, volumes within the securitization market have dropped significantly and have not fully recovered since that time. We have not completed a new securitization since 2008. The remaining portion of our AUM is from a diversified mix of other Investment Vehicles most of which were more recently formed.

Current wording

A portion of our revenue is generated from management fees. Our ability to charge management fees and the amount of those fees is dependent upon the underlying investment performance and stability of the Investment Vehicles. If these types of investments do not provide attractive returns to investors, the demand for such instruments will likely fall, thereby reducing our opportunity to earn new management fees or maintain existing management fees.

Previous wording

A portion of our revenues is generated from our principal investing activities. Therefore, our revenues are impacted by the overall market supply and demand of these investments as well as the individual performance of each investment. Our principal investments are included within other investments, at fair value; other investments sold, not yet purchased; and investments in equity method affiliates in our consolidated balance sheets. More recently, a significant component of our principal investment revenue has come from SPAC related equity investments, primarily in entities that have been the result of sponsored SPAC business combinations, share forward arrangements ("SFAs"), CCM engagements, or related party sponsored SPAC business combinations. Access to these investments is reliant on a robust SPAC market. Performance of the resulting principal investments can be materially impacted by overall performance of the equity markets. See note 8 to our consolidated financial statements included in this Annual Report on Form 10-K.

Current wording

A portion of our revenues is generated from our principal investing activities. Therefore, our revenues are impacted by the overall market supply and demand of these investments as well as the individual performance of each investment. Our principal investments are included within other investments, at fair value; other investments sold, not yet purchased; and investments in equity method affiliates in our consolidated balance sheets. More recently, a significant component of our principal investment revenue has come from SPAC related equity investments, primarily in entities that have been the result of sponsored SPAC business combinations or related party sponsored SPAC business combinations. Access to these investments is reliant on a robust SPAC market. Performance of the resulting principal investments can be materially impacted by overall performance of the equity markets. See note 8 to our consolidated financial statements included in this Annual Report on Form 10-K.

Previous wording

In 2018, we began sponsoring a series of SPACs. Each sponsored SPAC either completed or was seeking to complete a business combination with a company involved in the insurance market. In addition, we invest in other SPACs at various stages of their business life cycle. Beginning in 2019, these SPAC activities have become a significant portion of our Principal Investing business segment. In August 2018, we invested in and became the general partner of a newly formed investment fund (the “SPAC Fund”), which was created for the purpose of investing in the equity interests of SPACs and SPAC sponsor entities including SPACs sponsored by us, our affiliates, and third parties. Effective April 1, 2023, all of the investors in the SPAC Fund, other than the Vellar GP, redeemed all of their interests in the SPAC Fund. See recent events below for additional information regarding the consolidation of the SPAC Fund.

Current wording

In 2018, we began sponsoring a series of SPACs. In addition, we invest in other SPACs at various stages of their business life cycle. Beginning in 2019, these SPAC activities have become a significant portion of our Principal Investing business segment. In August 2018, we invested in and became the general partner of a newly formed investment fund (the “SPAC Fund”), which was created for the purpose of investing in the equity interests of SPACs and SPAC sponsor entities including SPACs sponsored by us, our affiliates, and third parties. Effective April 1, 2023, all of the investors in the SPAC Fund, other than the general partner of the SPAC Fund ("Vellar GP"), redeemed all of their interests in the SPAC Fund. In 2025, we sold our remaining interest in Vellar GP.

Previous wording

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. Generally, when a SPAC acquires or merges with a privately held target company, the target company winds up owning a majority of the resulting outstanding equity of the SPAC so the transaction is accounted for as a reverse merger. Private companies utilize reverse mergers with SPACs as a method of going public as an alternative to a traditional IPO. All of our business activity related to SPACs is highly sensitive to the volume of activity in the SPAC market. Volumes could be negatively impacted if target companies no longer see SPACs as an attractive alternative thereby reducing the number of suitable potential business combination targets. Also, investor demand for SPACs would be negatively impacted if the stock of SPACs that successfully complete a business combination underperform the market. If volumes of SPAC activity decline, our results of operations will likely be significantly negatively impacted.

Current wording

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 issued a separate series of interest for each investment portfolio, which typically consisted of investments in the sponsor entities of individual SPACs. We are not issuing any new SPAC Series Funds, and this business is winding down. Generally, when a SPAC acquires or merges with a privately held target company, the target company winds up owning a majority of the resulting outstanding equity of the SPAC so the transaction is accounted for as a reverse merger. Private companies utilize reverse mergers with SPACs as a method of going public as an alternative to a traditional IPO. All of our business activity related to SPACs is highly sensitive to the volume of activity in the SPAC market. Volumes could be negatively impacted if target companies no longer see SPACs as an attractive alternative thereby reducing the number of suitable potential business combination targets. Also, investor demand for SPACs would be negatively impacted if the stock of SPACs that successfully complete a business combination underperform the market. If volumes of SPAC activity decline, our results of operations will likely be significantly negatively impacted.

Previous wording

Equity prices of SPACs and post-business combination SPACs declined significantly during 2023 and 2024. We are exposed to public equity prices of SPACs and post-business combination SPACs both through our other investments, at fair value and investments in equity method affiliates as well as our other investments sold, not yet purchased. As a result, we recorded significant principal transaction losses and equity method losses during the years ended December 31, 2023 and 2024 in certain SPAC related investments. Continued declines in the equity prices of these companies will result in further losses for us.

Current wording

We are exposed to public equity prices of SPACs and post-business combination SPACs through our other investments, at fair value, investments in equity method affiliates, and other investments sold, not yet purchased. As a result, we recorded significant principal transaction losses and equity method losses in certain SPAC related investments. Continued declines in the equity prices of these companies will result in further losses for us.

Previous wording

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. However, there can be no certainty that these efforts will be sufficient. If insufficient, we will likely see a decline in profitability.

Current wording

Our response to this margin compression has included: (i) building a diversified 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. However, there can be no certainty that these efforts will be sufficient. If insufficient, we will likely see a decline in profitability.

Previous wording

In recent years, our mortgage group has grown in significance to our Capital Markets segment and our company overall. The mortgage group primarily earns revenue by providing hedging execution, securities financing, and trade execution services to mortgage originators and other investors in mortgage-backed securities. Therefore, this group’s revenue is highly dependent on the volume of mortgage originations in the U.S. Origination activity is highly sensitive to interest rates, the U.S. job market, housing starts, sale activity of existing housing stock, as well as the general health of the U.S. economy. In addition, any new regulation that impacts U.S. government agency mortgage-backed security issuance activity, residential mortgage underwriting standards, or otherwise impacts mortgage originators will impact our business. We have no control over these external factors and there is no effective way for us to hedge against these risks. Our mortgage group’s volumes and profitability will be highly impacted by these external factors.

Current wording

The mortgage group primarily earns revenue by providing hedging execution, securities financing, and trade execution services to mortgage originators and other investors in mortgage-backed securities. Therefore, this group’s revenue is highly dependent on the volume of mortgage originations in the U.S. Origination activity is highly sensitive to interest rates, the U.S. job market, housing starts, sale activity of existing housing stock, as well as the general health of the U.S. economy. In addition, any new regulation that impacts U.S. government agency mortgage-backed security issuance activity, residential mortgage underwriting standards, or otherwise impacts mortgage originators will impact our business. We have no control over these external factors and there is no effective way for us to hedge against these risks. Our mortgage group’s volumes and profitability will be highly impacted by these external factors.

Previous wording

On February 25, 2025, the Operating LLC entered into (i) a Limited Liability Company Interest Purchase Agreement with Jason Capone and Solomon Cohen, who is the son of our Executive Chairman, Daniel G. Cohen (the “Vellar Purchase Agreement”); and (ii) a Transition Services Agreement (the “Vellar Transition Services Agreement” and, together with the Vellar Purchase Agreement, the “Vellar Agreements”) with Vellar GP.

Current wording

On February 25, 2025, the Operating LLC entered into (i) a Limited Liability Company Interest Purchase Agreement (the “Vellar Purchase Agreement”) with Jason Capone and Solomon Cohen, who is the son of our executive chairman, Daniel G. Cohen, and (ii) a Transition Services Agreement (the “Vellar Transition Services Agreement” and, together with the Vellar Purchase Agreement, the “Vellar Agreements”) with Vellar Opportunities GP LLC, a Delaware limited liability company (“Vellar GP”). Prior to entering into the Vellar Agreements, the Operating LLC was the managing member and owner of 33.4% of Vellar GP.

Previous wording

Pursuant to the Vellar Purchase Agreement, the Operating LLC sold all of its 33.4% interest in Vellar GP for an aggregate of $10. As of February 25, 2025 and as a result of the consummation of the transactions contemplated by the Vellar Purchase Agreement, the Company no longer had any investment in Vellar GP. Pursuant to the Vellar Purchase Agreement, the Operating LLC resigned as the managing member of Vellar GP, effective February 25, 2025. In the first quarter of 2025, we expect to record a net loss of $404 related to Vellar GP which includes both the loss on sale and results of operations for the 2025 period prior to the sale.

Current wording

Pursuant to the Vellar Purchase Agreement, the Operating LLC sold all of its 33.4% interest in Vellar GP to each of Solomon Cohen and Jason Capone for an aggregate of $10. As of February 25, 2025 and as a result of the consummation of the transactions contemplated by the Vellar Purchase Agreement, we no longer had any investment in Vellar GP. Pursuant to the Vellar Purchase Agreement, the Operating LLC resigned as the managing member of Vellar GP, effective February 25, 2025. In the first quarter of 2025, we recorded a loss on sale of $836, which is included as component of principal transactions and other income in the Company's consolidated statement of operations.

Previous wording

Our revenue earned from new issue and advisory has been, and we expect will continue to be, volatile. We earn revenue from a limited number of engagements. Therefore, a small change in the number of engagements can result in large fluctuations in the revenue recognized. Further, even if the number of engagements remains consistent, the average revenue per engagement can fluctuate considerably. Finally, our revenue is generally earned when an underlying transaction closes (rather than on a monthly or quarterly basis). Therefore, the timing of underlying transactions increases the volatility of our revenue recognition.  In addition, we often incur certain costs related to new issue engagements. These costs are included as a component of either subscriptions, clearing and execution, or professional fees and other. All new issue revenue is included in our Capital Markets segment. See note 29 to our consolidated financial statements included in this Annual Report on Form 10-K.

Current wording

Our revenue earned from investment banking and new issue has been, and we expect will continue to be, volatile. We earn revenue from a limited number of engagements. Therefore, a small change in the number of engagements can result in large fluctuations in the revenue recognized. Further, even if the number of engagements remains consistent, the average revenue per engagement can fluctuate considerably. Finally, our revenue is generally earned when an underlying transaction closes (rather than on a monthly or quarterly basis). Therefore, the timing of underlying transactions increases the volatility of our revenue recognition.  In addition, we often incur certain costs related to investment banking and new issue engagements. For underwritings, any costs incurred are included as a component of subscriptions, clearing, and execution. For advisory and other new issue some expenses may be recorded in professional fees and other. Finally, the change in value of our financial instruments received as consideration will also impact revenue recognized and can be volatile. All investment banking and new issue revenue is included in our Capital Markets segment. See note 29 to our consolidated financial statements included in this Annual Report on Form 10-K.

Previous wording

CCM is our full-service boutique investment bank that provides innovative strategic and financial advice in M&A, capital markets, and SPAC advisory services. In addition, we generate new issue revenue by originating new assets for the U.S. Insurance JV, CREO JV, and our PriDe Funds in Europe.

Current wording

CCM is our full-service boutique investment bank providing capital markets and SPAC advisory services to corporations, financial sponsors, investors, and institutions. In addition, we generate investment banking and new issue revenue by originating new assets for the U.S. Insurance JV, CREO JV, and our PriDe Funds in Europe.

Previous wording

In some cases, CCM will receive financial instruments in lieu of cash for its advisory transactions. In these cases, we record advisory revenue equal to the fair value of the instruments received. Subsequent to receipt, the instruments are carried at fair value as a component of other investments, at fair value in our consolidated balance sheets. Any change in the fair value of these instruments subsequent to recording the new issue revenue will be recorded as principal transactions gain or loss in our consolidated statement of operations. Further, the financial instruments we receive in these cases are often either (i) common stock investments that are restricted for resale for some period of time; (ii) convertible or non-convertible debt investments that are not publicly traded; (iii) equity investments in special purpose entities that are not publicly traded; or (iv) unrestricted common stock investments in public companies with low trading volumes. As a result of the above, it may take us a significant period of time to liquidate these financial instruments. We may suffer significant principal transactions loss prior to final liquidation of these financial instruments. SeePrincipal Transactions and Other Income below.

Current wording

In some cases, CCM will receive financial instruments in lieu of cash for its investment banking and new issue engagements. In these cases, we record revenue equal to the fair value of the instruments received. Subsequent to receipt, the instruments are carried at fair value as a component of other investments, at fair value in our consolidated balance sheets. Any change in the fair value of these instruments subsequent to recording the investment banking and new issue revenue will be recorded as an adjustment to investment banking and new issue revenue in our consolidated statement of operations. Further, the financial instruments we receive in these cases are often (i) common stock investments that are restricted for resale for some period of time, (ii) convertible or non-convertible notes receivable that are not publicly traded, (iii) equity investments in special purpose entities that are not publicly traded, or (iv) unrestricted common stock investments in public companies with low trading volumes. As a result, it may take us a significant period of time to liquidate these financial instruments.

Previous wording

Net trading revenue decreased by $9,083, or 23%, to $30,926 for the year ended December 31, 2023, as compared to $40,009 for the year ended December 31, 2022. The following table shows the detail by trading group.

Current wording

Net trading revenue increased by $10,938, or 30%, to $47,347 for the year ended December 31, 2025, as compared to $36,409 for the year ended December 31, 2024. The following table shows the detail by trading group.

Previous wording

Our net trading revenue includes unrealized gains on our trading investments, as of the applicable measurement date, which may never be realized due to changes in market or other conditions not in our control. This may adversely affect the ultimate value realized from these investments. In addition, our net trading revenue also includes realized gains on certain proprietary trading positions. Our ability to derive trading gains from such trading positions is subject to overall market conditions. Due to 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. Level 3 assets are carried at fair value based on estimates derived using internal valuation models and other estimates. See notes 9 and 10 to our consolidated financial statements included in this Annual Report on Form 10-K. The fair value estimates made by us may not be indicative of the final sale price at which these assets may be sold. We consider our matched book repo business to be subject to significant concentration risk. See note 11 to our consolidated financial statements included in this Annual Report on Form 10-K. All net trading revenue is included in our Capital Markets segment. See note 29 to our consolidated financial statements included in this Annual Report on Form 10-K.

Current wording

Our net trading revenue includes unrealized gains on our trading investments, as of the applicable measurement date, which may never be realized due to changes in market or other conditions not in our control. This may adversely affect the ultimate value realized from these investments. In addition, our net trading revenue also includes realized gains on certain proprietary trading positions. Our ability to derive trading gains from such trading positions is subject to overall market conditions. Due to 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. Level 3 assets are carried at fair value based on estimates derived using internal valuation models and other estimates. See notes 9 and 10 to our consolidated financial statements included in this Annual Report on Form 10-K. The fair value estimates made by us may not be indicative of the final sale price at which these assets may be sold. We consider our gestation repo business to be subject to significant concentration risk. See note 11 to our consolidated financial statements included in this Annual Report on Form 10-K. All net trading revenue is included in our Capital Markets segment. See note 29 to our consolidated financial statements included in this Annual Report on Form 10-K.

Previous wording

All asset management revenue is included in our asset management segment. See note 29 to our consolidated financial statements included in this Annual Report on Form 10-K.

Current wording

Asset management fees decreased by $192, or 2%, to $8,817 for the year ended December 31, 2025, as compared to $9,009 for the year ended December 31, 2024. The decrease is primarily due to the sale of our legacy Alesco CDO agreements, which closed during 2025. During the twelve months ended December 2025 and 2024, we earned a total of $737 and $1,313 in revenue from these contracts, respectively. This was partially offset by an increase in revenue generated by the Pride Funds due to higher AUM and deferred performance fees related to the PriDe Funds. All asset management revenue is included in our asset management segment. See note 29 to our consolidated financial statements included in this Annual Report on Form 10-K.

Previous wording

Principal transactions and other income increased by $45,801 to $16,454 for the year ended December 31, 2023, as compared to ($29,347) for the year ended December 31, 2022.

Current wording

Principal transactions and other income increased by $38,390 to $31,792 for the year ended December 31, 2025, as compared to ($6,598) for the year ended December 31, 2024.

Previous wording

These investments represent our direct and indirect investments in certain public companies. These investments may be in the form of unrestricted common stock, restricted common stock, equity derivatives, convertible notes and non-convertible notes receivable, as well as equity interest in SPVs that have investments in these public companies. The name and stock symbol of each public company in which we have a direct or indirect investment is listed in the table above. The amounts shown represent the change in the fair value of our investment during each time period noted in the table. Many of the interests in the public companies listed above were acquired as non-cash compensation related to new issue and advisory engagements. When we received these investments, we recorded new issue and advisory revenue for the fair value of those instruments at that time.

Current wording

These investments represent our direct and indirect investments in certain public companies. These investments may be in the form of unrestricted common stock, restricted common stock, equity derivatives, convertible notes and non-convertible notes receivable, as well as equity interest in SPVs that have investments in these public companies. The name and stock symbol of each public company in which we have a direct or indirect investment is listed in the table above. The amounts shown represent the change in the fair value of our investment during each time period noted in the table.

Previous wording

We have engaged in several SFA transactions. In a typical SFA transaction, we acquire an interest in a publicly traded company and enter into an offsetting derivative with the same company. Both the interest in the public company and the offsetting derivative are carried at fair value. The amount shown in the table above represents the net change in fair value recorded during the periods presented. The interests we hold in SFA Counterparties are included as a component of other investments, at fair value. The derivatives are included as a component of other investments sold, not yet purchased, at fair value. See note 8 to our consolidated financial statements included in this Annual Report on Form 10-K for more information regarding our SFAs.

Current wording

We have also engaged in several transactions known as “share forward arrangements” (“SFAs”).. In a typical SFA transaction, we acquire an interest in a publicly traded company and enter into an offsetting derivative with the same company. Both the interest in the public company and the offsetting derivative are carried at fair value. The amount shown in the table above represents the net change in fair value recorded during the periods presented. The interests we hold in SFA Counterparties are included as a component of other investments, at fair value. The derivatives are included as a component of other investments sold, not yet purchased, at fair value. See note 8 to our consolidated financial statements included in this Annual Report on Form 10-K for more information regarding our SFAs.

Previous wording

Other income is comprised of an ongoing revenue share arrangement as well as other miscellaneous operating income items. The revenue share arrangement noted in the table above entitles us to a percentage of revenue earned by IIFC. The IIFC revenue share arrangement expires at the earlier of (i) the dissolution of IIFC or (ii) when we have earned a cumulative $20,000 in revenue share payments. To date, we have earned $8,175. Other income is recorded in all three of our segments. See note 29 to our consolidated financial statements included in our Annual Report on Form 10-K.

Current wording

Other income is comprised of an ongoing revenue share arrangement as well as other miscellaneous operating income items. The revenue share arrangement noted in the table above entitles us to a percentage of revenue earned by IIFC. The IIFC revenue share arrangement expires at the earlier of (i) the dissolution of IIFC or (ii) when we have earned a cumulative $20,000 in revenue share payments. To date, we have earned $10,042. Other income is recorded in all three of our segments. See note 29 to our consolidated financial statements included in our Annual Report on Form 10-K.

Previous wording

Operating expenses increased by $3,770, or 5%, to $76,120 for the year ended December 31, 2023, as compared to $72,350 for the year ended December 31, 2022. As discussed in more detail below, the change was comprised of (i) an increase of $1,802 in compensation and benefits; (ii) an increase of $128 in business development, occupancy, and equipment; (iii) an increase of $691 in subscriptions, clearing, and execution; (iv) an increase of $1,143 in professional fee and other operating; and (v) an increase of $6 in depreciation and amortization.

Current wording

Operating expenses increased by $128,536, or 147%, to $216,157 for the year ended December 31, 2025, as compared to $87,621 for the year ended December 31, 2024. As discussed in more detail below, the change was comprised of (i) an increase of $121,130 in compensation and benefits; (ii) an increase of $1,280 in business development, occupancy, and equipment; (iii) an increase of $6,288 in subscriptions, clearing, and execution; (iv) a decrease of $330 in professional fee and other operating; and (v) an increase of $168 in depreciation and amortization.

Previous wording

Cash compensation and benefits in the table above is primarily comprised of salary, incentive compensation, severance, employer portion of payroll taxes, and benefits. Cash compensation and benefits increased by $1,801 to $47,701 for the year ended December 31, 2023, as compared to $45,900 for the year ended December 31, 2022. Our headcount decreased to 118 as of December 31, 2023 from 121 as of December 31, 2022. Cash compensation increased primarily due to an increase in incentive compensation related to the increase in overall revenue and income from equity method affiliates.

Current wording

Cash compensation and benefits in the table above is primarily comprised of salary, incentive compensation, severance, employer portion of payroll taxes, and benefits. Cash compensation and benefits increased by $105,585 to $157,305 for the year ended December 31, 2025, as compared to $51,720 for the year ended December 31, 2024. Our headcount increased to 126 as of December 31, 2025 from 113 as of December 31, 2024. Cash compensation increased primarily due to an increase in incentive compensation related to the increase in investment banking and new issue revenue, as well as the year over year overall improvement in operating performance.

Previous wording

Business development, occupancy, and equipment increased by $128, or 3%, to $5,204 for the year ended December 31, 2023, as compared to $5,076 for the year ended December 31, 2022. This increase was comprised of an increase in occupancy and equipment of $297, partially offset by a decrease in business development of $169.

Current wording

Business development, occupancy, and equipment increased by $1,280, or 19%, to $7,897 for the year ended December 31, 2025, as compared to $6,617 for the year ended December 31, 2024. This increase was comprised of an increase in business development of $1,271 and an increase in other occupancy of $9. Increased business development expenditures were related to our increased investment banking and new issue activities.

Previous wording

Subscriptions, clearing, and execution increased by $691, or 8%, to $8,965 for the year ended December 31, 2023, as compared to $8,274 for the year ended December 31, 2022. The increase was comprised of an increase in subscriptions and dues of $573 and an increase in clearing and execution of $118.

Current wording

Subscriptions, clearing, and execution increased by $6,288, or 65%, to $15,927 for the year ended December 31, 2025, as compared to $9,639 for the year ended December 31, 2024. The increase was comprised of an increase in subscriptions and dues of $669 and an increase in clearing and execution of $5,619. The increase in clearing and execution was mainly due to the increase in costs incurred on the higher volume on investment banking and new issue engagements including firm underwritings.

Previous wording

Professional fee and other operating expenses increased by $1,143, or 14%, to $9,296 for the year ended December 31, 2023, as compared to $8,153 for the year ended December 31, 2022. The increase was comprised of an increase in professional fees of $1,001 and an increase in other operating expenses of $142.

Current wording

Professional fee and other operating expenses decreased by $330, or 2%, to $14,091 for the year ended December 31, 2025, as compared to $14,421 for the year ended December 31, 2024. The decrease was the result of a decrease in other operating expense of $806, partially offset by an increase in professional fees of $476.

Previous wording

Depreciation and amortization increased by $6, or 1%, to $563 for the year ended December 31, 2023, as compared to $557 for the year ended December 31, 2022.

Current wording

Depreciation and amortization increased by $168, or 30%, to $724 for the year ended December 31, 2025, as compared to $556 for the year ended December 31, 2024.

Previous wording

Interest expense, net increased by $1,544, or 31%, to $6,526 for the year ended December 31, 2023, as compared to $4,982 for the year ended December 31, 2022.

Current wording

Interest expense, net increased by $55 to $5,876 for the year ended December 31, 2025, as compared to $5,821 for the year ended December 31, 2024.

Previous wording

We have significant carryforward tax assets. As of December 31, 2024, the Company had a federal net operating loss (“NOL”) of approximately $92,543, which will be available to offset future taxable income, subject to limitations described below. 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 $57,239 as of December 31, 2024, which can be carried forward to offset future capital gains. If not used, this carryforward will begin to expire in 2025. ASC 746 requires that we record a valuation allowance against these assets so that the net asset recognized is, in management's judgment, more likely than not to be realized.

Current wording

We have significant carryforward tax assets. As of December 31, 2025, the Company had a federal net operating loss (“NOL”) of approximately $72,735, which will be available to offset future taxable income, subject to limitations described below. 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 $59,382 as of December 31, 2025, which can be carried forward to offset future capital gains. If not used, this carryforward will begin to expire in 2026. ASC 740 requires that we record a valuation allowance against these assets so that the net asset recognized is, in management's judgment, more likely than not to be realized.

Previous wording

Each reporting period, management determines the expected amount of taxable income it will generate in each jurisdiction where the Company has NOLs. Management then schedules this income against each carryforward asset and determines what portion of the asset it believes is more likely than not to be realized. 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. To the extent management's determination changes, an adjustment will be made to the valuation allowance resulting in deferred tax expense or benefit. We recorded deferred tax expense in 2023 because expectations of future income decreased and the Company increased the valuation allowance it had applied against carryforward assets. Due to the 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. These future adjustments may likewise result in material amounts of deferred tax benefit or expense going forward.

Current wording

Each reporting period, management determines the expected amount of taxable income it will generate in each jurisdiction where the Company has NOLs. Management then schedules this income against each carryforward asset and determines what portion of the asset it believes is more likely than not to be realized. 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. To the extent management's determination changes, an adjustment will be made to the valuation allowance resulting in deferred tax expense or benefit. In 2025, we recorded a reduction in the valuation allowance we had applied against our NOL assets because of our improved operating performance and future prospects. This resulted in a deferred tax benefit being recorded in 2025. Due to the 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. These future adjustments may likewise result in material amounts of deferred tax benefit or expense going forward.

Previous wording

Insurance SPAC III sponsor entities are the sponsor entities formed by us for our sponsored SPAC, Insurance SPAC III. Prior to March 31, 2023, Vellar GP was the general partner of the SPAC Fund but did not consolidate it. Effective April 1, 2023, Vellar GP began consolidating the SPAC Fund. Vellar GP primarily invests in share forward arrangements. On February 25, 2025, the Operating LLC sold its 33.4% interest in Vellar GP pursuant to the Vellar Purchase Agreement and will no longer consolidate Vellar GP. See notes 4, 10, and 21 to our consolidated financials included in this Annual Report on Form 10-K. Other SPAC related is mainly comprised of an entity that we consolidated but do not wholly own that invests in other SPAC sponsor entities.

Current wording

On February 25, 2025, the Operating LLC sold its 33.4% interest in the Vellar GP pursuant to the Vellar Purchase Agreement, and no longer consolidates Vellar GP. See notes 4, 10, and 21 to our consolidated financials included in this Annual Report on Form 10-K. Other SPAC related is mainly comprised of an entity that we consolidated but do not wholly own that invests in other SPAC sponsor entities.

Previous wording

Revenues decreased by $3,383, or 4%, to $79,598 for the year ended December 31, 2024, as compared to $82,981 for the year ended December 31, 2023. As discussed in more detail below, the change was comprised of (i) an increase of $5,483 in net trading revenue; (ii) an increase of $1,672 in asset management revenue; (iii) an increase of $35,158 in new issue and advisory revenue; and (iv) a decrease of $45,696 in principal transactions and other income.

Current wording

Revenues decreased by $3,383, or 4%, to $79,598 for the year ended December 31, 2024, as compared to $82,981 for the year ended December 31, 2023. As discussed in more detail below, the change was comprised of (i) an increase of $16,826 in investment banking and new issue revenue; (ii) an increase of $5,483 in net trading revenue; (iii) an increase of $1,672 in asset management revenue; and (iv) a decrease of $27,364 in principal transactions and other income.

Previous wording

Our revenue earned from new issue and advisory has been, and we expect will continue to be, volatile. We earn revenue from a limited number of engagements. Therefore, a small change in the number of engagements can result in large fluctuations in the revenue recognized. Further, even if the number of engagements remains consistent, the average revenue per engagement can fluctuate considerably. Finally, our revenue is generally earned when an underlying transaction closes (rather than on a monthly or quarterly basis). Therefore, the timing of underlying transactions increases the volatility of our revenue recognition.  In addition, we often incur certain costs related to new issue engagements. These costs are included as a component of either subscriptions, clearing and execution, or professional fees and other. All new issue revenue is included in our Capital Markets segment. See note 29 to our consolidated financial statements included in this Annual Report on Form 10-K.

Current wording

Our revenue earned from investment banking and new issue has been, and we expect will continue to be, volatile. We earn revenue from a limited number of engagements. Therefore, a small change in the number of engagements can result in large fluctuations in the revenue recognized. Further, even if the number of engagements remains consistent, the average revenue per engagement can fluctuate considerably. Finally, our revenue is generally earned when an underlying transaction closes (rather than on a monthly or quarterly basis). Therefore, the timing of underlying transactions increases the volatility of our revenue recognition. In addition, we often incur certain costs related to new issue engagements. For underwritings, any costs incurred are included as a component of subscriptions, clearing and execution. For advisory and other new issue some expenses may be recorded in professional fees and other. Finally, the change in value of our financial instruments received as consideration will also impact revenue recognized and can be volatile. All investment banking and new issue revenue is included in our Capital Markets segment. See note 29 to our consolidated financial statements included in this Annual Report on Form 10-K.

Previous wording

CCM is our full-service boutique investment bank that provides innovative strategic and financial advice in M&A, capital markets, and SPAC advisory services. In addition, we generate new issue revenue by originating new assets for the U.S. Insurance JV, CREO JV, and our PriDe Funds in Europe.

Current wording

CCM is our full-service boutique investment bank providing capital markets and SPAC advisory services to corporations, financial sponsors, investors, and institutions. In addition, we generate investment banking and new issue revenue by originating new assets for the U.S. Insurance JV, CREO JV, and our PriDe Funds in Europe.

Previous wording

In some cases, CCM will receive financial instruments in lieu of cash for its advisory transactions. In these cases, we record advisory revenue equal to the fair value of the instruments received. Subsequent to receipt, the instruments are carried at fair value as a component of other investments, at fair value in our consolidated balance sheets. Any change in the fair value of these instruments subsequent to recording the new issue revenue will be recorded as principal transactions gain or loss in our consolidated statement of operations. Further, the financial instruments we receive in these cases are often either (i) common stock investments that are restricted for resale for some period of time; (ii) convertible or non-convertible notes receivable that are not publicly traded; (iii) equity investments in special purpose entities that are not publicly traded; or (iv) unrestricted common stock investments in public companies with low trading volumes. As a result, it may take us a significant period of time to liquidate these financial instruments. We may suffer significant principal transactions loss prior to final liquidation of these financial instruments. SeePrincipal Transactions and Other Income below.

Current wording

In some cases, CCM will receive financial instruments in lieu of cash for its investment banking and new issue engagements. In these cases, we record revenue equal to the fair value of the instruments received. Subsequent to receipt, the instruments are carried at fair value as a component of other investments, at fair value in our consolidated balance sheets. Any subsequent change in the fair value of these instruments will be recorded as an adjustment to our investment banking and new issue revenue in our consolidated statement of operations. Further, the financial instruments we receive in these cases are often (i) common stock investments that are restricted for resale for some period of time, (ii) convertible or non-convertible notes receivable that are not publicly traded, (iii) equity investments in special purpose entities that are not publicly traded, or (iv) unrestricted common stock investments in public companies with low trading volumes. As a result, it may take us a significant period of time to liquidate these financial instruments. 

Previous wording

Our net trading revenue includes unrealized gains on our trading investments, as of the applicable measurement date, which may never be realized due to changes in market or other conditions not in our control. This may adversely affect the ultimate value realized from these investments. In addition, our net trading revenue also includes realized gains on certain proprietary trading positions. Our ability to derive trading gains from such trading positions is subject to overall market conditions. Due to 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. Level 3 assets are carried at fair value based on estimates derived using internal valuation models and other estimates. See notes 9 and 10 to our consolidated financial statements included in this Annual Report on Form 10-K. The fair value estimates made by us may not be indicative of the final sale price at which these assets may be sold. We consider our matched book repo business to be subject to significant concentration risk. See note 11 to our consolidated financial statements included in this Annual Report on Form 10-K. All net trading revenue is included in our Capital Markets segment. See note 29 to our consolidated financial statements included in this Annual Report on Form 10-K.

Current wording

Our net trading revenue includes unrealized gains on our trading investments, as of the applicable measurement date, which may never be realized due to changes in market or other conditions not in our control. This may adversely affect the ultimate value realized from these investments. In addition, our net trading revenue also includes realized gains on certain proprietary trading positions. Our ability to derive trading gains from such trading positions is subject to overall market conditions. Due to 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. Level 3 assets are carried at fair value based on estimates derived using internal valuation models and other estimates. See notes 9 and 10 to our consolidated financial statements included in this Annual Report on Form 10-K. The fair value estimates made by us may not be indicative of the final sale price at which these assets may be sold. We consider our gestation repo business to be subject to significant concentration risk. See note 11 to our consolidated financial statements included in this Annual Report on Form 10-K. All net trading revenue is included in our Capital Markets segment. See note 29 to our consolidated financial statements included in this Annual Report on Form 10-K.

Previous wording

Asset management fees from CDOs remained relatively unchanged. Asset management fees from other increased primarily due to the recognition in 2024 of deferred performance fees related to certain PriDe Funds and the portfolio servicing fee on the notional amount of loans owned by the CREO JV.

Current wording

Asset management fees increased by $1,672, or 23%, to $9,009 for the year ended December 31, 2024, as compared to $7,337 for the year ended December 31, 2023. The increase is primarily due to the recognition in 2024 of deferred performance fees related to certain PriDe Funds and the portfolio servicing fee on the notional amount of loans owned by the CREO JV. All asset management revenue is included in our asset management segment. See note 29 to our consolidated financial statements included in this Annual Report on Form 10-K.

Previous wording

Principal transactions and other income decreased by $45,696 to ($29,242) for the year ended December 31, 2024, as compared to $16,454 for the year ended December 31, 2023.

Current wording

Principal transactions and other income decreased by $27,364 to ($6,598) for the year ended December 31, 2024, as compared to $20,766 for the year ended December 31, 2023.

Previous wording

These investments represent our direct and indirect investments in certain public companies. These investments may be in the form of unrestricted common stock, restricted common stock, equity derivatives, convertible notes, non-convertible notes, fair value receivables, as well as equity interest in SPVs that have investments in these public companies. The name and stock symbol of each public company in which we have a direct or indirect investment is listed in the table above. The amounts shown represent the change in the fair value of our investment in each time period noted in the table. Many of the interests in the public companies listed above were acquired as non-cash compensation related to new issue and advisory engagements. When we received these investments, we recorded new issue and advisory revenue for the fair value of those instruments at that time.

Current wording

These investments represent our direct and indirect investments in certain public companies. These investments may be in the form of unrestricted common stock, restricted common stock, equity derivatives, convertible notes, non-convertible notes, fair value receivables, as well as equity interest in SPVs that have investments in these public companies. The name and stock symbol of each public company in which we have a direct or indirect investment is listed in the table above. The amounts shown represent the change in the fair value of our investment in each time period noted in the table.