Company: COHN
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0001437749-25-007158
Chunk: 1730

Company: Cohen & Co Inc.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 2
Chunk 1730
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 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. 

   Rising Interest Rates and Inflation

   During 2022 and 2023, the U.S. Federal Reserve began a process of raising the federal funds rate and quantitative tightening to address rising inflation.  Recently, the U.S. Federal Reserve reduced interest rates for the first time in several years.  It is unclear as to whether or how quickly interest rates will continue to decline, if at all.  For most of the periods presented herein, rates were rising or elevated versus historical lows, which negatively impacted our business in the following ways:

     1.
     Rising rates reduced the fair value of the fixed income securities we hold on our balance sheet.

     2.
     Rising rates created instability in the equity markets, which has reduced equity financing and business combination volumes and negatively impacted CCM.

     3.
     Rising rates reduced the volumes of new issue fixed income instruments, which has negatively impacted our CREO JV.

     4.
     Rising rates significantly reduced mortgage activity. Our mortgage group's profitability is mainly impacted by the volume of mortgage activity in the U.S. (both mortgages for new home purchases as well as refinancing). Furthermore, our mortgage group engages in repo lending to mortgage originators. Reduced mortgage volumes impose financial pressures on mortgage originators and may increase the risk that originators default on their repo obligations to us. See note 11 to our consolidated financial statements included in Item 1 of this Annual Report on Form 10-K.

     5.
     Rising rates may ultimately push the U.S. into recession, which may further reduce overall transaction volumes in the financial markets negatively impacting our business generally.

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Recent Events and Transactions

Redemption of Redeemable Financial Instrument and Issuance of the 2024 Note

Effective September