Cohen & Company Inc. (COHN) Q4 2009 Earnings Report, Transcript and Summary

Daniel Cohen – Chairman, Chief Executive Officer Christopher Ricciardi – President Joseph Pooler – Chief Financial Officer

Welcome to the fourth quarter 2009 Cohen & Company Inc. earning conference call. (Operator Instructions) Before we begin, the company has asked to me read the following statement. You are cautioned that many statements during the call are forward-looking statements that are based on assumptions regarding the economy and financial markets and that are subject to a number of risks and uncertainties as set forth in our earnings release and our SEC filings. Please read the statement in today’s release regarding forward-looking statement information. I would now like to hand the call over to your host for today’s call, Mr. Daniel Cohen, Chairman and CEO.

Welcome everybody to Cohen & Company’s first quarterly investors call. With me are Chris Ricciardi, President and Joe Pooler, our Chief Financial Officer. 2009 was a transition year for the company as we built a significant platform in the debt capital markets business which Chris will describe. Our platform is now robust. In the fourth quarter we generated $600,000 of adjusted operating income and $2.6 million of adjusted pre tax income excluding non cash items while we added significant personnel in each quarter of last year including the fourth, and now have several new silos of capacity that should start to perform and generate revenue in 2010. Notably, we had capacities in high yield sales, trading and investment banking with a team led by experienced professionals, and we have continued to build out our ABS trading and sales business. We expanded substantially our European business under new leadership and will continue to do so. We launched a new business raising money for companies for acquisition in China and elsewhere and completed in this business our first IPO. We expect to reap the rewards of our investment in this space over the next two years and consolidate our position in these businesses going forward. Our Asset Management business launched new products in the fourth quarter of last year and we expect to see robust growth in our Alternative Assets products with new and old key managers. We are committed to continue building this platform as we’ve seen opportunity to become a world class institution over the next two years in the fixed income and alternative spaces. The company is ten years old now, built strongly through the last cycle and we expect to be able to build robustly as we continue to reposition ourselves due to changes over the last two years in the financial markets. Chris Ricciardi, our President and CEO of our Broker Dealer will go over our strategic vision for the company and Joe Pooler, our CFO will go over the financial highlights, and then we will open the line for questions.

Thank you Daniel. In today’s call which is our first as a new emerged company, I thought it would be helpful to provide a big picture overview of our strategic thinking behind the company and I apologize in advance if it’s a somewhat long presentation, but again I think it’s helpful as we introduce this new emerged company. We don’t make our strategic plans in a vacuum, but continually monitor the opportunities presented to us by the marketplace in a competitive landscape in which we operate. By now, everyone realizes that events over the past two years have created some fundamental changes in the global financial markets. The events have caused market participants to rework their business models and strategies. The conditions have also opened the door for unprecedented opportunities for those who can move quickly and aggressively to seize them. Given the understanding of these opportunities, our mission for the company is to be the premier boutique investment bank within 10 years. By boutique, we mean that we will not be a universal bank; rather we will focus on areas where we believe we can be a top competitor. The primary focus area that we have had and will continue to have is credit products and credit markets. There are several reasons why we believe we should focus on the credit markets. The first is that credit markets are enormous and diverse and offer many opportunities. There are fewer bigger competitors than in the past and those competitors have been going up market by focusing their efforts on larger transactions and larger clients. We’re not unrealistic about our ability to compete with large and extremely well resourced banks, but we believe there is significant market share being left behind by the biggest banks. Relative to other competitors we believe…

Thank you Chris. We will have some brief remarks on both our statement of operations for the fourth quarter as well as our balance sheet at year end including some comments about our accounting for the merger. During our discussion, keep in mind that our consolidated financial statements include the operations of only Cohen Brothers through December 16, and the combined operations of the merged company from December 17, the day after the merger through the end of the year. The impact of the merger on our statement of operations for 2009 was not meaningful. However, the impact of the merger was material to our year end balance sheet. In terms of the statement of operations, our net trading revenue for the fourth quarter was $12.2 million, an increase of 35% from the 2008 quarter. Our net trading revenue included $11.9 million of riskless trading earned from 833 trades of $3.7 billion notional securities with 240 counter-parties. Our risk net trading revenue was only $300,000 for the quarter. We expect risk trading to become a more meaningful component of our results as we utilize the capital in the combined company after the merger. Our Asset Management revenue was $7.4 million in the quarter, a decrease of $8.5 million or 53% from the prior year quarter. The decrease is a result of declines in both the asset management revenue generated by collateralized debt obligation as well as by our investment fund. The CDO revenue decreased due to continued defaults in deferrals of underlying assets as well as the fact that we sold certain asset management contracts in the first quarter of 2009. Investment Fund revenue decreased primarily due to the significant redemption in our Brigadier hedge fund. These declines were partially offset by higher revenue generated from the management of our…

You’ve heard a lot about our strategic vision, how we are building a specialist investment banking and trading firm. As we continue through this year and next year, the results should become apparent. We have built an infrastructure for growth. Could you open the line now for institutional investors and analysts?

There are no questions at this time.

Let me thank everyone for listening to our long narration and I’ll look forward to reporting to you on our next quarter’s results on the next earnings call. Thank you very much.