20150331 10Q Q1

INSTITUTIONAL FINANCIAL MARKETS, INC.

Consolidated Statements of Cash Flows

(Dollars in Thousands)

(Unaudited)


	Three Months Ended March 31,
	2015		2014
Operating activities
Net income (loss)	$	(756)	$	(2,805)
Adjustments to reconcile net income / (loss) to net cash provided by (used in) operating activities:
Equity-based compensation		563		673
Accretion of income on other investments, at fair value		(715)		(44)
Realized loss / (gain) on other investments		(261)		79
Change in unrealized (gain) loss on other investments, at fair value		577		(985)
Depreciation and amortization		234		331
Amortization of discount on debt		259		334
(Income) / loss from equity method affiliates		-		(26)
Change in operating assets and liabilities, net:
(Increase) decrease in other receivables		1,908		815
(Increase) decrease in investments-trading		(24,759)		(34,889)
(Increase) decrease in other assets		610		302
(Increase) decrease in receivables under resale agreement		(9,238)		(34,784)
Change in receivables from / payables to related parties, net		257		83
Increase (decrease) in accrued compensation		(2,320)		(2,724)
Increase (decrease) in accounts payable and other liabilities		(301)		(2,024)
Increase (decrease) in trading securities sold, not yet purchased, net		31,744		617
Change in receivables from/ payables to brokers, dealers, and clearing agencies, net		(16,482)		40,309
Increase (decrease) in securities sold under agreement to repurchase		9,262		36,182
Increase (decrease) in deferred income taxes		26		-
Net cash provided by (used in) operating activities		(9,392)		1,444
Investing activities
Purchase of investments-other investments, at fair value		(1)		(7,222)
Sales and returns of other investments, at fair value		2,976		1,336
Proceeds from sale of Star Asia Finance ("Star Asia") and related entities, net		-		19,924
Return from equity method affiliates		-		50
Purchase of furniture, equipment, and leasehold improvements		(85)		-
Net cash provided by (used in) investing activities		2,890		14,088
Financing activities
Cash used to net share settle equity awards		-		(79)
IFMI non-controlling interest distributions		(106)		-
IFMI dividends		(305)		(331)
Net cash provided by (used in) financing activities		(411)		(410)
Effect of exchange rate on cash		(258)		3
Net increase (decrease) in cash and cash equivalents		(7,171)		15,125

Cash and cash equivalents, beginning of period		12,253		13,161
Cash and cash equivalents, end of period	$	5,082	$	28,286

See accompanying notes to unaudited consolidated financial statements.

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INSTITUTIONAL FINANCIAL MARKETS, INC.

Notes to Consolidated Financial Statements

(Dollars in Thousands, except share or per share information)

(Unaudited)

1. ORGANIZATION AND NATURE OF OPERATIONS

The Formation Transaction

Cohen Brothers was formed on October 7, 2004 by Cohen Bros. Financial, LLC (“CBF”). Cohen Brothers was established to acquire the net assets of CBF’s subsidiaries (the “Formation Transaction”): Cohen Bros. & Company, Inc.; Cohen Frères SAS; Dekania Investors, LLC; Emporia Capital Management, LLC; and the majority interest in Cohen Bros. & Toroian Investment Management, Inc. The Formation Transaction was accomplished through a series of transactions occurring between March 4, 2005 and May 31, 2005.

The Company

From its formation until December 16, 2009, Cohen Brothers operated as a privately owned limited liability company. On December 16, 2009, Cohen Brothers completed its merger (the “Merger”) with a subsidiary of Alesco Financial Inc. (“AFN”) a publicly traded real estate investment trust.

As a result of the Merger, AFN contributed substantially all of its assets into Cohen Brothers in exchange for newly issued membership units directly from Cohen Brothers. In addition, AFN received additional Cohen Brothers membership interests directly from its members in exchange for AFN common stock. In accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), the Merger was accounted for as a reverse acquisition, and Cohen Brothers was deemed to be the accounting acquirer. As a result, all of AFN’s assets and liabilities were required to be revalued at fair value as of the acquisition date. The remaining membership interests of Cohen Brothers that are not held by AFN are included as a component of non-controlling interest in the consolidated balance sheet.

Subsequent to the Merger, AFN was renamed Cohen & Company Inc. In January 2011, it was renamed again as Institutional Financial Markets, Inc. (“IFMI”). Effective January 1, 2010, the Company ceased to qualify as a real estate investment trust, or a REIT. The Company trades on the NYSE MKT LLC (formerly known as the NYSE Amex LLC) under the ticker symbol “IFMI.” The Company is a financial services company specializing in credit related fixed income investments. As of March 31, 2015, the Company had $4.10 billion in assets under management (“AUM”), of which 99.0% was in collateralized debt obligations (“CDOs”).

In these financial statements, the “Company” refers to IFMI and its subsidiaries on a consolidated basis; “IFMI, LLC” or the “Operating LLC” refers to the main operating subsidiary of the Company, IFMI LLC (formerly Cohen Brothers, LLC); “Cohen Brothers” refers to the pre-Merger Cohen Brothers, LLC and its subsidiaries; “AFN” refers to the pre-merger Alesco Financial Inc. and its subsidiaries. When the term “IFMI” is used, it is referring to the parent company itself, Institutional Financial Markets, Inc. “JVB Holdings” refers to JVB Financial Holdings, L.L.C.; “JVB” refers to JVB Financial Group LLC, a broker dealer subsidiary; “CCFL” refers to Cohen & Company Financial Limited (formerly known as EuroDekania Management LTD), a subsidiary regulated by the Financial Conduct Authority (formerly known as Financial Services Authority) in the United Kingdom; “CCPRH” refers to C&Co/PrinceRidge Holdings LP (formerly known as PrinceRidge Holdings LP) and its subsidiaries; “PrinceRidge GP” refers to C&Co/PrinceRidge Partners LLC, (formerly known as PrinceRidge Partners LLC); “PrinceRidge” refers to CCPRH together with PrinceRidge GP; and “CCPR” refers to C&Co/PrinceRidge LLC (formerly known as The PrinceRidge Group LLC), a broker dealer subsidiary. “EuroDekania” refers to EuroDekania (Cayman) Ltd., a Cayman Islands exempted company that is externally managed by CCFL.

On January 31, 2014, JVB merged into CCPR. In connection with this merger CCPRH changed its name from C&Co/PrinceRidge Holdings LP to J.V.B. Financial Group Holdings and CCPR changed its name from C&Co/PrinceRidge LLC to J.V.B. Financial Group, LLC. Further, on January 31, 2014, CCPR began to do business under the JVB brand. Therefore, when discussing the operations of CCPR on or subsequent to January 31, 2014, CCPR is referred to as JVB.

The Company’s business is organized into the following three business segments:

Capital Markets: The Company’s Capital Markets business segment consists primarily of credit-related fixed income sales, trading, and financing, as well as new issue placements in corporate and securitized products and advisory services. The Company’s fixed income sales and trading group provides trade execution to corporate investors, institutional investors and other smaller broker-dealers. The Company specializes in a variety of products, including but not limited to: corporate bonds and loans, asset backed securities (“ABS”), mortgage backed securities (“MBS”), residential mortgage backed securities (“RMBS”), CDOs, collateralized loan obligations (“CLOs”), collateralized bond obligations (“CBOs”), collateralized mortgage obligations (“CMOs”), municipal

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securities, to-be-announced securities (“TBAs”) and other forward agency MBS contracts, Small Business Administration (“SBA”) loans, U.S. government bonds, U.S. government agency securities, brokered deposits and certificates of deposits (“CDs”) for small banks, and hybrid capital of financial institutions including trust preferred securities (“TruPS”), whole loans, and other structured financial instruments. As of March 31, 2015, the Company carried out its capital market activities primarily through its subsidiaries: JVB in the United States and CCFL in Europe.

Principal Investing: The Company’s Principal Investing business segment is comprised of investments that it has made using its own capital, excluding investments that the Company makes to support its Capital Market business segment. Historically, the Company generally made principal investments in the entities that it managed. Beginning in the first quarter of 2014, the Company refocused its principal investing portfolio on products that it does not manage, which has consisted primarily of investments in CLOs. The focus on CLO investments capitalizes on the Company’s strengths in structured credit and leveraged finance.

Asset Management: The Company’s Asset Management business segment manages assets within CDOs, permanent capital vehicles, managed accounts, and investment funds (collectively referred to as “Investment Vehicles”). A CDO is a form of secured borrowing. The borrowing is secured by different types of fixed income assets such as corporate or mortgage loans or bonds. The borrowing is in the form of a securitization, which means that the lenders are actually investing in notes backed by the assets. In the event of default, the lenders will have recourse only to the assets securing the loan. The Company’s Asset Management business segment includes its fee-based asset management operations, which include ongoing base and incentive management fees.

The Company generates its revenue by business segment primarily through the following activities:

Capital Markets

•trading activities of the Company, which include execution and brokerage services, securities lending activities, riskless trading activities as well as gains and losses (unrealized and realized) and income and expense earned on securities classified as trading;

•new issue and advisory revenue comprised primarily of (i) origination fees for corporate debt issues originated by the Company; (ii) revenue from advisory services; and (iii) new issue revenue associated with arranging and placing the issuance of newly created financial instruments;

Principal Investing

•gains and losses (unrealized and realized) and income and expense earned on investments classified as other investments, at fair value;

•income or loss from equity method affiliates;

Asset Management

•asset management fees for the Company’s on-going asset management services provided to certain Investment Vehicles, which may include fees both senior and subordinate to the securities in the Investment Vehicles, and incentive management fees earned based on the performance of the various Investment Vehicles; and

•income or loss from equity method affiliates.

2. BASIS OF PRESENTATION

The financial statements of the Company included herein were prepared in conformity with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim month periods. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three months ended March 31, 2015 and 2014 are not necessarily indicative of the results for the entire year or any subsequent interim period. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Capitalized terms used herein without definition have the meanings ascribed to them in the Annual Report on Form 10-K for the year ended December 31, 2014.

Certain prior period amounts have been reclassified to conform to the current period presentation.

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Adoption of New Accounting Standards

In April 2014, the Financial Accounting Standards Board (the “FASB“) issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”), which changes the criteria for reporting discontinued operations and requires additional disclosures about discontinued operations. The guidance in this ASU raises the threshold for a disposal to qualify as a discontinued operation and certain other disposals that do not meet the definition of a discontinued operation. Under the new provisions, only disposals representing a strategic shift in operations - that is or will have a major effect on an entity’s operations and financial results should be presented as a discontinued operation. Examples include a disposal of a major line of business, a major geographical area, a major equity method investment, or other major parts of an entity. The new provisions also require new disclosures related to individually material disposals that do not meet the definition of a discontinued operation, an entity’s continuing involvement with a discontinued operation following the disposal date and retained equity method investments in a discontinued operation. The provisions of this ASU are effective for annual periods beginning on or after December 15, 2014 and interim periods within that year. The ASU is applied prospectively. Early adoption is permitted but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued. The Company’s adoption of the provisions of ASU 2014-08 effective January 1, 2015 did not have an effect on the Company’s consolidated financial position, results of operations, or cash flows.

In June 2014, the FASB issued ASU No. 2014-11, Transfers and Servicing (Topic 860): Repurchase to Maturity Transactions, Repurchase Financings, and Disclosures, which changes the accounting for repurchase-to-maturity transactions that are repurchase agreements where the maturity of the security transferred as collateral matches the maturity of the repurchase agreement. According to the new guidance, all repurchase-to-maturity transactions will be accounted for as secured borrowing transactions in the same way as other repurchase agreements rather than as sales of a financial asset and forward commitment to repurchase. The amendments also change the accounting for repurchase financing arrangements, which are transactions involving the transfer of a financial asset to a counterparty executed contemporaneously with a reverse repurchase agreement with the same counterparty. Under the new guidance, all repurchase financings will now be accounted for separately, which will result in secured lending accounting for the reverse repurchase agreement. The guidance also requires new disclosures about transfers that are accounted for as sales in transactions that are economically similar to repurchase agreements and increased transparency about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The provisions of this ASU are effective for interim and annual periods beginning after December 15, 2014 with early adoption prohibited. An entity will be required to present changes in accounting for all outstanding repurchase-to-maturity transactions and repurchase financing arrangements as a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The disclosures for certain transactions accounted for as a sale is required to be presented for interim and annual periods beginning after December 15, 2014, and the disclosure for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. The Company’s adoption of the provisions of this ASU effective January 1, 2015 did not have an effect on the Company’s consolidated financial position, results of operations, or cash flows. The Company will present the new disclosures for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings in periods beginning after March 15, 2015.

In November 2014, the FASB issued ASU No, 2014-17, Pushdown Accounting, which provides guidance on whether and at what threshold an acquired entity can apply pushdown accounting in its separate financial statements. The amendment gives the acquired entity the option of applying pushdown accounting in the reporting period in which the change-in-control event occurs. The decision to apply pushdown accounting is made for each individual change-in-control event. Once the election is made for a particular event, it is irrevocable. Furthermore, an entity may elect to apply push down accounting in a period subsequent to the change-in-control event but must treat such application as a change in accounting principle and apply the guidance of Accounting Changes and Error Corrections (Topic 250). The amendment is effective on November 18, 2014. The adoption of this ASU did not have an effect on the consolidated financial statements of the Company and it did not have an effect on the separately issued subsidiary statements.

B. Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments. These determinations were based on available market information and appropriate valuation methodologies. Considerable judgment is required to interpret market data to develop the estimates and, therefore, these estimates may not necessarily be indicative of the amount the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Refer to note 7 for a discussion of the fair value hierarchy with respect to investments-trading; other investments, at fair value; and the derivatives held by the Company.

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Cash and cash equivalents: Cash is carried at historical cost, which is assumed to approximate fair value. The estimated fair value measurement of cash and cash equivalents is classified within level 1 of the valuation hierarchy.

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. See note 7 for disclosures about the categorization of the fair value measurements of investments-trading within the three level fair value hierarchy.

Other investments, at fair value: These amounts are carried at fair value. The fair value is based on quoted market prices of an active exchange, independent broker market quotations, or valuation models when quotations are not available. In the case of investments in alternative investment funds, fair value is generally based on the reported net asset value of the underlying fund. See note 7 for disclosures concerning the categorization of the fair value measurements of other investments, at fair value within the three level fair value hierarchy.

Receivables under resale agreements: Receivables under resale agreements are carried at their contracted resale price, have short-term maturities, and are repriced frequently or bear market interest rates and, accordingly, these contracts are at amounts that approximate fair value. The estimated fair value measurements of receivables under resale agreements are based on observations of actual market activity and are generally classified within level 2 of the fair value hierarchy.

Trading securities sold, not yet purchased: These amounts are carried at fair value. The fair value is based on quoted market prices of an active exchange, independent market quotations, market price quotations from third party pricing services, or valuation models when quotations are not available. See note 7 for disclosures concerning the categorization of the fair value measurements of trading securities sold, not yet purchased within the three level fair value hierarchy.

Securities sold under agreement to repurchase: The liabilities for securities sold under agreement to repurchase are carried at their contracted repurchase price, have short-term maturities, and are repriced frequently with amounts normally due in one month or less and, accordingly, these contracts are at amounts that approximate fair value. The estimated fair value measurements of securities sold under agreement to repurchase are based on observations of actual market activity and are generally classified within level 2 of the fair value hierarchy.

Debt: These amounts are carried at outstanding principal less unamortized discount. However, a substantial portion of the debt was assumed in the Merger and recorded at fair value as of that date. As of March 31, 2015 and December 31, 2014, the fair value of the Company’s debt was estimated to be $34.7 million and $39.3 million, respectively. The estimated fair value measurements of the debt are generally based on discounted cash flow models prepared by the Company’s management primarily using discount rates for similar instruments issued to companies with similar credit risks to the Company and are generally classified within level 3 of the fair value hierarchy.

Derivatives: These amounts are carried at fair value. Derivatives may be included as a component of investments-trading; trading securities sold, not yet purchased; and other investments, at fair value. See notes 7 and 8. The fair value is generally based on quoted market prices on an exchange that is deemed to be active for derivative instruments such as foreign currency forward contracts. For derivative instruments, such as TBAs and other forward agency MBS contracts, the fair value is generally based on market price quotations from third party pricing services. See note 7 for disclosures concerning the categorization of the fair value measurements within the three level fair value hierarchy.

C. Recent Accounting Developments

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which replaces existing revenue recognition guidance in Topic 605, Revenue Recognition, replaces certain other industry-specific revenue recognition guidance, specifies the accounting for certain costs to obtain or fulfill a contract with a customer and provides recognition and measurement guidance in relation to sales of non-financial assets. The core principle of this ASU is to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU provides guidance on how to achieve this core principle, including how to identify contracts with customers and separate performance obligations in the contract, how to determine and allocate the transaction price to such performance obligations and how to recognize revenue when a performance obligation has been satisfied. The ASU is effective for annual reporting periods, and interim periods within those reporting periods, beginning after December 15, 2016 with early adoption prohibited. The Company will be required to apply the amendments in this ASU using one of the following two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within the ASU; or (ii) retrospective with the cumulative effect of initially applying the ASU recognized at the date of the initial application and providing certain additional disclosures as defined in the ASU. The Company will adopt the provisions of this ASU effective January 1, 2017 and is currently evaluating the new guidance to determine the impact it will have on the Company’s consolidated financial statements.

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In June 2014, the FASB issued ASU No. 2014-12, Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target could be Achieved After the Requisite Service Period, which requires a performance target that affects vesting and that could be achieved after the requisite service period be accounted for as a performance condition rather than as a non-vesting condition that affects the grant-date fair value of the award. A reporting entity should apply existing guidance in Topic 718, Compensation-Stock Compensation, as it relates to such awards. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015 with early adoption permitted using either of two methods: (i) prospective to all awards granted or modified after the effective date; or (ii) retrospective to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter, with the cumulative effect applying this ASU as an adjustment to the opening retained earnings balance as of the beginning of the earliest annual period presented in the financial statements. The Company will adopt the provisions of this ASU effective January 1, 2016 and is currently evaluating the new guidance to determine the impact, if any, that it will have on the Company’s consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-13, Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity, which provides a measurement alternative for an entity that consolidates collateralized financing entities. A collateralized financing entity is a variable interest entity with nominal or no equity that holds financial assets and issues beneficial interests in those financial assets. The beneficial interests, which are financial liabilities of the collateralized financing entity, have contractual recourse only to the related assets of the collateralized financing entity. If elected, the alternative method results in the reporting entity measuring both the financial assets and financial liabilities of the collateralized financing entity using the more observable of the two fair value measurements, which effectively removes measurement differences between the financial assets and financial liabilities of the collateralized financing entity previously recorded as net income (loss) attributable to non-controlling and other beneficial interests and as an adjustment to appropriated retained earnings. The reporting entity continues to measure its own beneficial interests in the collateralized financing entity (other than those that represent compensation for services) at fair value. The ASU is effective for annual periods and interim periods with those annual periods beginning after December 15, 2015. A reporting entity may apply the ASU using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the annual period of adoption. A reporting entity may also apply the ASU retrospectively to all relevant prior periods beginning with the annual period in which ASU No. 2009-17, Consolidation (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, was adopted. Early adoption is permitted. The Company is currently evaluating the potential impact of the provisions of this ASU on the Company’s consolidated financial statements and related disclosures.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20), Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, which eliminates from U.S. GAAP the requirement of extraordinary items to be separately classified on the income statement. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The Company will adopt the provisions of this ASU effective January 1, 2016 and is currently evaluating the new guidance to determine the impact it may have on the Company’s consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis, which makes targeted amendments to the current consolidation guidance and ends the deferral granted to investment companies from applying the Variable Interest Entity (“VIE”) guidance. The revised consolidation guidance, among other things, (i) modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, (ii) eliminated the presumption that a general partner should consolidate a limited partnership, and (iii) modifies the consolidation analysis of reporting entities that are involved with VIEs through fee arrangements and related party relationships. The standard is effective for the Company beginning on January 1, 2016, however, early adoption is allowed, including in any interim period. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement for debt issuance costs are not affected by the amendments in this Update. The amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of these amendments is permitted for financial statements that have not been previously issued. An entity should apply the new guidance on a retrospective basis, and the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. The Company is currently evaluating the impact of these amendments on the presentation in its consolidated financial statements.

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4. DISPOSITIONS

Sale of European Operations

On August 19, 2014, the Operating LLC entered into a definitive agreement to sell its European operations (the “Europe Sale Agreement”) to C&Co Europe Acquisition LLC, an entity controlled by Daniel G. Cohen, the Vice Chairman of the Company’s Board of Directors and of the board of managers of the Operating LLC, President and Chief Executive of the Company’s European Business, and the President of CCFL for approximately $8,700. The purchase price for the Company’s European operations consists of an upfront payment at closing of $4,750 (subject to adjustment) and up to $3,950 to be paid over the four years following the closing of the sale.

Upon closing, the Operating LLC will also enter into a non-cancellable trust deed agreement with one of the entities included in the sale of the Company’s European operations (the manager of the Munda CLO I), which will result in the Operating LLC retaining the right to substantially all revenues from the management of Munda CLO I, as well as the proceeds from any potential future sale of the Munda CLO I management agreement. Revenues generated from the Munda CLO for the three months March 31, 2015 and for the three months ended March 31, 2014 were $674 and $847 respectively.

Under the terms of Europe Sale Agreement, the Operating LLC will divest its European operations, including asset management and capital market activities through offices located in London, Paris, and Madrid, and approximately 30 employees will transition from the Operating LLC to C&Co Europe Acquisition LLC. Upon the closing of the transaction, Mr. Cohen will be deemed to have voluntarily terminated employment with the Company and its affiliates and will resign from all other positions and offices that he holds with the Company and its affiliates. Notwithstanding the foregoing, Mr. Cohen will receive no severance or other compensation related to such termination and resignation and Mr. Cohen will remain Vice Chairman of the Company’s Board of Directors and IFMI’s largest shareholder (including voting only shares).

The Operating LLC’s European asset management business to be sold pursuant to the Europe Sale Agreement includes management agreements for the Dekania Europe I, II, and III CDOs and the management agreements for several European managed accounts. As of March 31, 2015, these European assets under management totaled approximately $768,071, which represented 19% of the Company’s total AUM. Although the manager of Munda CLO I will be part of the transferred business, the Munda CLO I management agreement will be held in trust for the benefit of the Operating LLC. As of March 31, 2015, the Munda CLO I assets under management totaled approximately $572,103, which represented 14% of the Company’s total AUM. The Operating LLC’s European capital markets business consists of credit-related fixed income sales, trading, and financing as well as new issue placements in corporate and securitized products and advisory services, operating primarily through the Operating LLC’s subsidiary, CCFL.

The combined European business to be sold, excluding the revenues and expenses related to Munda CLO I, accounted for approximately $1,386 of revenue for the three months ended March 31, 2015, and $1,064 of operating loss for the three months ended March 31, 2015, and included approximately $172 of net assets as of March 31, 2015.

Under the terms of the Europe Sale Agreement, the Operating LLC had the right to initiate, solicit, facilitate, and encourage alternative acquisition proposals from third parties for a “go shop” period of up to 90 days from the signing of the purchase agreement. On October 29, 2014, the special committee of the board of directors elected to end the “go shop” period. The “go shop” period did not result in the Operating LLC receiving a superior proposal from a third party, and the Operating LLC intends to pursue the transaction with the entity controlled by Daniel G. Cohen, which is expected to close in the first half of 2015.

The sale of the European business is subject to customary closing conditions and regulatory approval from the United Kingdom Financial Conduct Authority.

On March 26, 2015, the parties to the Europe Sale Agreement entered into an amendment to (i) extend the deadline for the closing of the transaction from March 31, 2015 to June 30, 2015, and (ii) extend the date on which C&Co Europe Acquisition LLC will be obligated to cause the settlement of intercompany accounts of CCFL, Cohen & Compagnie, SAS, a wholly owned subsidiary of IFMI, LLC, and Unicum Capital, S.L., a wholly owned subsidiary of CCFL, owed to IFMI, LLC from March 31, 2015 to June 30, 2015.

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5. RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS, AND CLEARING AGENCIES

Amounts receivable from brokers, dealers, and clearing agencies consisted of the following at March 31, 2015 and December 31, 2014, respectively.



RECEIVABLES FROM BROKERS, DEALERS, AND CLEARING AGENCIES
(Dollars in Thousands)

	March 31, 2015		December 31, 2014
Deposits with clearing organizations	$	1,271	$	1,296
Receivable from clearing organizations		491		340
Receivables from brokers, dealers, and clearing agencies	$	1,762	$	1,636

Receivable from clearing organizations represents un-invested cash held by the clearing organization, which includes cash proceeds from short sales.

Amounts payable to brokers, dealers, and clearing agencies consisted of the following at March 31, 2015 and December 31, 2014, respectively.



PAYABLES TO BROKERS, DEALERS, AND CLEARING AGENCIES
(Dollars in Thousands)

	March 31, 2015		December 31, 2014
Unsettled regular way trades, net	$	19,861	$	4,971
Margin payable		11,796		43,042
Payables to brokers, dealers, and clearing agencies	$	31,657	$	48,013

Securities transactions that settle in the regular way are recorded on the trade date, as if they had settled. The related amounts receivable and payable for unsettled securities transactions are recorded net in receivables from or payables to brokers, dealers, and clearing agencies on the Company’s consolidated balance sheets. Effectively, all of the Company’s trading assets and deposits with clearing organizations serve as collateral for the margin payable. These assets are held by the Company’s clearing broker. The Company incurred interest on margin payable of $122 and $66 for the three months ended March 31, 2015 and 2014, respectively.

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6. FINANCIAL INSTRUMENTS

Investments—Trading

The following table provides detail of the investments classified as investments-trading as of the periods indicated.



INVESTMENTS - TRADING
(Dollars in Thousands)

	March 31, 2015		December 31, 2014
U.S. government agency MBS and CMOs (1)	$	9,773	$	11,647
U.S. government agency debt securities		32,215		25,785
RMBS		378		358
Commercial mortgage backed securities ("CMBS")		20		-
U.S. Treasury securities		1,340		1,131
CLOs		952		952
Other ABS		109		112
SBA loans		45,869		29,681
Corporate bonds and redeemable preferred stock		38,979		22,142
Foreign government bonds		6		-
Municipal bonds		20,627		33,664
Certificates of deposit		1,239		985
Equity securities		-		291
Investments-trading	$	151,507	$	126,748

(1)Includes TBAs and other forward agency MBS contracts. See note 8.

Trading Securities Sold, Not Yet Purchased

The following table provides detail of the trading securities sold, not yet purchased as of the periods indicated.



TRADING SECURITIES SOLD, NOT YET PURCHASED
(Dollars in Thousands)

	March 31, 2015		December 31, 2014
U.S. government agency MBS (1)	$	3,673	$	1,666
U.S. Treasury securities		48,948		15,644
RMBS		4		-
SBA loans		-		4
Corporate bonds and redeemable preferred stock		27,839		31,406
Municipal bonds		20		20
Trading securities sold, not yet purchased	$	80,484	$	48,740

(1)Includes TBAs and other forward agency MBS contracts. See note 8.

The Company tries to manage its exposure to changes in interest rates for the interest rate sensitive securities it holds by entering into offsetting short positions for similar fixed rate securities.

The Company included the change in unrealized (losses) gains in the amount of $ (24) and $ (1,154) for the three months ended March 31, 2015 and 2014, respectively, in net trading revenue in the Company’s consolidated statements of operations.

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Other Investments, at fair value

The following table provides detail of the investments included within other investments, at fair value.



OTHER INVESTMENTS, AT FAIR VALUE
(Dollars in Thousands)

	March 31, 2015
	Cost		Carrying Value		Unrealized Gain(Loss)
CLOs	$	21,840	$	20,446	$	(1,394)
CDOs		193		28		(165)
Equity Securities:
EuroDekania		5,812		2,797		(3,015)
Tiptree Financial, Inc. ("Tiptree")		5,454		2,024		(3,430)
Other securities		176		33		(143)
Total equity securities		11,442		4,854		(6,588)
Residential loans		110		557		447
Foreign currency forward contracts		-		(62)		(62)
Other investments, at fair value	$	33,585	$	25,823	$	(7,762)



	December 31, 2014
	Cost		Carrying Value		Unrealized Gain(Loss)
CLOs	$	23,139	$	21,518	$	(1,621)
CDOs		193		11		(182)
Equity Securities:
EuroDekania		6,503		3,717		(2,786)
Tiptree		5,455		2,472		(2,983)
Other securities		176		33		(143)
Total equity securities		12,134		6,222		(5,912)
Residential loans		118		565		447
Foreign currency forward contracts		-		83		83
Other investments, at fair value	$	35,584	$	28,399	$	(7,185)

7. FAIR VALUE DISCLOSURES

Fair Value Option

The Company has elected to account for certain of its other financial assets at fair value under the fair value option provisions of FASB ASC 825, Financial Instruments (“FASB ASC 825”). The primary reason for electing the fair value option when it first became available in 2008, was to reduce the burden of monitoring the differences between the cost and the fair value of the Company’s investments, previously classified as available for sale securities, including the assessment as to whether the declines are temporary in nature and to further remove an element of management judgment. In addition, the election was made for certain investments that were previously required to be accounted for under the equity method because their fair value measurements were readily obtainable.

Such financial assets accounted for at fair value include:

•in general, securities that would otherwise qualify for available for sale treatment;

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•in general, investments in equity method affiliates where the affiliate has all of the attributes in FASB ASC 946-10-15-2 (commonly referred to as investment companies); and

•in general, investments in residential loans.

The changes in fair value (realized and unrealized gains and losses) of these instruments for which the Company has elected the fair value option are recorded in principal transactions and other income in the consolidated statements of operations. All of the investments for which the Company has elected the fair value option are included as a component of other investments, at fair value in the consolidated balance sheets. The Company recognized net gains (losses) of $(316) and $906 related to changes in fair value of investments that are included as a component of other investments, at fair value during the three months ended March 31, 2015 and 2014, respectively.

Fair Value Measurements

In accordance with FASB ASC 820, Fair Value Measurements and Disclosures (“FASB ASC 820”), the Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level fair value hierarchy. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the hierarchy under FASB ASC 820 are described below.

Level 1Financial 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.

Level 2Financial assets and liabilities whose values are based on one or more of the following:

1. Quoted prices for similar assets or liabilities in active markets;

2. Quoted prices for identical or similar assets or liabilities in non-active markets;

3. Pricing models whose inputs, other than quoted prices, are observable for substantially the full term of the asset or liability; or

4. 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 3Financial 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.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s 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.

Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the level 3 category. 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.

A review of the fair value hierarchy classifications is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain financial assets or liabilities. There were no transfers between level 1 and level 2 of the fair value hierarchy during the three months ended March 31, 2015 and 2014. Reclassifications impacting level 3 of the fair value hierarchy are reported as transfers in or transfers out of the level 3 category as of the beginning of the quarter in which reclassifications occur.

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The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.



FAIR VALUE MEASUREMENTS ON A RECURRING BASIS
March 31, 2015
(Dollars in Thousands)
					Significant		Significant
			Quoted Prices in		Other Observable		Unobservable
			Active Markets		Inputs		Inputs
Assets	Fair Value		(Level 1)		(Level 2)		(Level 3)
Investments-trading:
U.S. government agency MBS and CMOs	$	9,773	$	-	$	9,773	$	-
U.S. government agency debt securities		32,215		-		32,215		-
RMBS		378		-		378		-
CMBS		20		-		20		-
U.S. Treasury securities		1,340		1,340		-		-
CLOs		952		-		952		-
Other ABS		109		-		109		-
SBA loans		45,869		-		45,869		-
Corporate bonds and redeemable preferred stock		38,979		-		38,979		-
Foreign government bonds		6		-		6		-
Municipal bonds		20,627		-		20,627		-
Certificates of deposit		1,239		-		1,239		-
Total investments - trading	$	151,507	$	1,340	$	150,167	$	-

Other investments, at fair value:
EuroDekania (1)	$	2,797	$	-	$	-	$	2,797
Tiptree (2)		2,024		2,024		-		-
Other equity securities		33		24		9		-
CLOs		20,446		-		-		20,446
CDOs		28		-		-		28
Residential loans		557		-		557		-
Foreign currency forward contracts		(62)		(62)		-		-
Total other investments, at fair value	$	25,823	$	1,986	$	566	$	23,271

Liabilities
Trading securities sold, not yet purchased:
U.S. government agency MBS	$	3,673	$	-	$	3,673	$	-
U.S. Treasury securities		48,948		48,948		-		-
RMBS		4		-		4		-
Corporate bonds and redeemable preferred stock		27,839		-		27,839		-
Municipal bonds		20		-		20		-
Total trading securities sold, not yet purchased	$	80,484	$	48,948	$	31,536	$	-

(1)Hybrid Securities Fund—European.

(2)Diversified Holding Company.

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FAIR VALUE MEASUREMENTS ON A RECURRING BASIS
December 31, 2014
(Dollars in Thousands)
					Significant		Significant
			Quoted Prices in		Other Observable		Unobservable
			Active Markets		Inputs		Inputs
Assets	Fair Value		(Level 1)		(Level 2)		(Level 3)
Investments-trading:
U.S. government agency MBS and CMOs	$	11,647	$	-	$	11,647	$	-
U.S. government agency debt securities		25,785		-		25,785		-
RMBS		358		-		358		-
U.S. Treasury securities		1,131		1,131		-		-
CLOs		952		-		952		-
Other ABS		112		-		112		-
SBA loans		29,681		-		29,681		-
Corporate bonds and redeemable preferred stock		22,142		-		22,142		-
Municipal bonds		33,664		-		33,664		-
Certificates of deposit		985		-		985		-
Equity securities		291		233		58		-
Total investments - trading	$	126,748	$	1,364	$	125,384	$	-

Other investments, at fair value:
EuroDekania (1)	$	3,717	$	-	$	-	$	3,717
Tiptree (2)		2,472		2,472		-		-
Other equity securities		33		23		10		-
CLOs		21,518		-		-		21,518
CDOs		11		-		-		11
Residential loans		565		-		565		-
Foreign currency forward contracts		83		83		-		-
Total other investments, at fair value	$	28,399	$	2,578	$	575	$	25,246

Liabilities
Trading securities sold, not yet purchased:
U.S. government agency MBS	$	1,666	$	-	$	1,666	$	-
U.S. Treasury securities		15,644		15,644		-		-
SBA loans		4		-		4		-
Corporate bonds and redeemable preferred stock		31,406		-		31,406		-
Municipal bonds		20		-		20		-
Total trading securities sold, not yet purchased	$	48,740	$	15,644	$	33,096	$	-

(1)Hybrid Securities Fund—European.

(2)Diversified Holding Company.

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The following provides a brief description of the types of financial instruments the Company holds, the methodology for estimating fair value, and the level within the hierarchy of the estimate. The discussion that follows applies regardless of whether the instrument is included in investments-trading; other investments, at fair value; or trading securities sold, not yet purchased.

U.S. Government Agency MBS and CMOs: These are securities that are generally traded over-the-counter. The Company generally values these securities using third party quotations such as unadjusted broker-dealer quoted prices or market price quotations from third party pricing services. These valuations are based on a market approach. This is considered a level 2 valuation in the hierarchy.

U.S. 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.

RMBS and CMBS: The Company generally values these securities using third party quotations such as unadjusted broker-dealer quoted prices or market price quotations from third party pricing services. These valuations are based on a market approach. The Company generally classifies the fair value of these securities based on third party quotations within level 2 of the valuation hierarchy.

U.S. Treasury Securities: U.S. Treasury securities include U.S. Treasury bonds and notes and the fair values of the U.S. Treasury securities are based on quoted prices in active markets. Valuation adjustments are not applied. The Company classifies the fair value of these securities within level 1 of the valuation hierarchy.

CLOs, CDOs, and ABS: CLOs, CDOs, and ABS are interests in securitizations. ABS may include, but are not limited to, securities backed by auto loans, credit card receivables, or student loans. Where 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 as level 2 of the valuation hierarchy. These valuations are based on a market approach. The independent market quotations from broker-dealers are generally nonbinding. The Company seeks quotations from broker-dealers that historically have actively traded, monitored, issued, and been knowledgeable about the interests in securitizations. The Company generally believes that to the extent that it (1) receives two quotations in a similar range from broker-dealers knowledgeable about these interests in securitizations, and (2) believes the broker-dealers gather and utilize observable market information such as new issue activity in the primary market, trading activity in the secondary market, credit spreads versus historical levels, bid-ask spreads, and price consensus among market participants and sources, then classification as level 2 of the valuation hierarchy is appropriate. In the absence of two broker-dealer market quotations, a single broker-dealer market quotation may be used without corroboration of the quote in which case the Company generally classifies the fair value within level 3 of the valuation hierarchy.

If quotations are unavailable, prices observed by the Company for recently executed market transactions may be used or valuation models prepared by the Company’s management may be used, which are based on an income approach. These models prepared by the Company’s management include estimates and the valuations derived from them could differ materially from amounts realizable in an open market exchange. Each CLO and CDO position is evaluated independently taking into consideration available comparable market levels, underlying collateral performance and pricing, deal structures, and liquidity. Fair values based on internal valuation models prepared by the Company’s management are generally classified within level 3 of the valuation hierarchy.

Establishing fair value is inherently subjective (given the volatile and sometimes illiquid markets for certain interests in securitizations) and requires management to make a number of assumptions, including assumptions about the future of interest rates, discount rates and the timing of cash flows. The assumptions the Company applies are specific to each security. Although the Company may rely on internal calculations to compute the fair value of certain interest in securitizations, the Company requests and considers indications of fair value from third party pricing services to assist in the valuation process.

SBA Loans: SBA loans include loans and SBA interest only strips. In the case of loans, the Company generally values these securities using third party quotations such as unadjusted broker-dealer quoted prices, internal valuation models using observable inputs, or market price quotations from third party pricing services. The Company generally classifies these investments within level 2 of the valuation hierarchy. These valuations are based on a market approach. SBA interest only strips do not trade in an active market with readily available prices. Accordingly, the Company generally uses valuation models to determine fair value and classifies the fair value of the SBA interest only strips within level 2 or level 3 of the valuation hierarchy depending on if the model inputs are observable or not.

Corporate Bonds, Redeemable Preferred Stock, and Foreign Government Bonds: The Company uses recently executed transactions or third party quotations from independent pricing services to arrive at the fair value of its investments in corporate bonds, redeemable preferred stock, and foreign government bonds. These valuations are based on a market approach. The Company generally

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classifies the fair value of these bonds within level 2 of the valuation hierarchy. In instances where the fair values of securities are based on quoted prices in active markets (for example with redeemable preferred stock), the Company classifies the fair value of these securities within level 1 of the valuation hierarchy.

Municipal Bonds: Municipal bonds, which include obligations of U.S. states, municipalities, and political subdivisions, primarily include bonds or notes issued by U.S. municipalities. The Company generally values these securities using third party quotations such as market price quotations from third party pricing services. The Company generally classifies the fair value of these bonds within level 2 of the valuation hierarchy. The valuations are based on a market approach. In instances where the Company is unable to obtain reliable market price quotations from third party pricing services, the Company will use its own internal valuation models. In these cases, the Company will classify such securities as level 3 within the hierarchy until it is able to obtain third party pricing.

Equity Securities: The fair value of equity securities that represent investments in publicly traded companies (common or preferred shares, options, warrants, and other equity investments) are determined using the closing price of the security as of the reporting date. These are securities that are traded on a recognized liquid exchange. This is considered a level 1 value in the valuation hierarchy.

In some cases, the Company has owned options or warrants in newly publicly traded companies when the option or warrant itself is not publicly traded. In those cases, the Company used an internal valuation model and classified the investment within level 3 of the valuation hierarchy. The non-exchange traded equity options and warrants were measured using the Black-Scholes model with key inputs impacting the valuation including the underlying security price, implied volatility, dividend yield, interest rate curve, strike price, and maturity date. Once the securities underlying the options or warrants (not the options or warrants themselves) have quoted prices available in an active market, the Company attributes a value to the warrants using the Black-Scholes model based on the respective price of the options or warrants and the quoted prices of the securities underlying the options or warrants and key observable inputs. In this case, the Company will generally classify the options or warrants as level 2 within the valuation hierarchy because the inputs to the valuation model are now observable. If the option or warrant itself begins to trade on a liquid exchange, the Company will discontinue using a valuation model and will begin to use the public exchange price at which point it will be classified as level 1 in the valuation hierarchy.

Other equity securities represent investments in investment funds and other non-publicly traded entities. Substantially all of these other entities have the attributes of investment companies as described in FASB ASC 946-15-2. The Company estimates the fair value of these entities using the reported net asset value per share as of the reporting date in accordance with the “practical expedient” provisions related to investments in certain entities that calculate net asset value per share (or its equivalent) included in FASB ASC 820 for all entities. The Company generally classifies these estimates within either level 2 of the valuation hierarchy if its investment in the entity is currently redeemable or level 3 if its investment is not currently redeemable.

Residential Loans: Management utilizes home price indices or market indications to value the residential loans. These are considered level 2 in the hierarchy.

Certificates of Deposit: The fair value of certificates of deposit is estimated using valuations provided by third party pricing services. Certificates of deposit are generally categorized in level 2 of the valuation hierarchy.

Derivatives:

Foreign Currency Forward Contracts

Foreign currency forward contracts are exchange-traded derivatives, which transact on an exchange that is deemed to be active. The fair value of the foreign currency forward contracts is based on current quoted market prices. Valuation adjustments are not applied. These are considered a level 1 value in the hierarchy. See note 8.

TBAs and other forward agency MBS contracts

The Company generally values these securities using third party quotations such as unadjusted broker-dealer quoted prices or market price quotations from third party pricing services. TBAs and other forward agency MBS contracts are generally classified within level 2 of the fair value hierarchy. If there is limited transaction activity or less transparency to observe market based inputs to valuation models, TBAs and other forward agency MBS contracts are classified in level 3 of the fair value hierarchy. U.S. government agency MBS and CMOs include TBAs and other forward agency MBS contracts. Unrealized gains on TBAs and other forward agency MBS contracts are included in investments-trading on the Company’s consolidated balance sheets and unrealized losses on TBAs and other forward agency MBS contracts are included in trading securities sold, not yet purchased on the Company’s consolidated balance sheets. See note 8.

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Other Extended Settlement Trades

When the Company buys or sells a financial instrument that will not settle in the regular time frame, the Company will account for that purchase and sale on the settlement date rather than the trade date. In those cases, the Company accounts for the transaction between trade date and settlement date as a derivative (as either a purchase commitment or sale commitment). 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. The Company will determine the fair value of the financial instrument using the methodologies described above.

Level 3 Financial Assets and Liabilities

Financial Instruments Measured at Fair Value on a Recurring Basis

The following table presents additional information about assets and liabilities measured at fair value on a recurring basis and for which the Company has utilized level 3 inputs to determine fair value.



LEVEL 3 INPUTS
Three Months Ended March 31, 2015
(Dollars in Thousands)

	December 31, 2014		Net trading		Gains and losses (3)		Transfers out of Level 3		Accretion of income ( 3)		Purchases		Sales and returns of capital		March 31, 2015		Change in unrealized gains /(losses) (1)
Assets
Other investments, at fair value:
Equity Securities:
EuroDekania (2)	$	3,717	$	-	$	(229)	$	-	$	-	$	-	$	(691)	$	2,797	$	(229)
Total equity securities		3,717		-		(229)		-		-		-		(691)		2,797		(229)
CLOs		21,518		-		(66)		-		715		-		(1,721)		20,446		227
CDOs		11		-		17		-		-		-		-		28		17
Total other investments, fair value	$	25,246	$	-	$	(278)	$	-	$	715	$	-	$	(2,412)	$	23,271	$	15

(1)Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(2)Hybrid Securities Funds—European.

(3) Recorded as a component of principal transactions and other income in the consolidated statement of operations.

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LEVEL 3 INPUTS
Three Months Ended March 31, 2014
(Dollars in Thousands)

	December 31, 2013		Net trading		Gains and losses (4)		Transfers out of Level 3		Accretion of income (4)		Purchases		Sales and returns of capital		March 31, 2014		Change in unrealized gains /(losses) (1)
Assets
Investments-trading:
CLOs	$	186	$	(22)	$	-	$	-	$	-	$	-	$	(30)	$	134	$	(52)
Total investments-trading	$	186	$	(22)	$	-	$	-	$	-	$	-	$	(30)	$	134	$	(52)

Other investments, at fair value:
Equity Securities:
EuroDekania (2)	$	4,192	$	-	$	1,131	$	-	$	-	$	-	$	(1,326)	$	3,997	$	1,131
Star Asia (3)		17,104		-		78		-		-		-		(17,182)		-		-
Star Asia Special Situations Fund (3)		2,747		-		-		-		-		-		(2,747)		-		-
Total equity securities		24,043		-		1,209		-		-		-		(21,255)		3,997		1,131
CLOs		-		-		-		-		44		7,065		-		7,109		-
CDOs		35		-		(10)		-		-		-		-		25		(10)
Total other investments, fair value	$	24,078	$	-	$	1,199	$	-	$	44	$	7,065	$	(21,255)	$	11,131	$	1,121

(1) Represents the change in unrealized gains and losses for the period included in earnings for assets held at the end of the reporting period.

(2)Hybrid Securities Funds—European.

(3) Real Estate Funds – Asian. The Company sold its investment in Star Asia and Star Asia Special Situations Fund on February 20, 2014 along with its investment in certain other related entities. According to ASC 820, when a sale is considered probable as of the measurement date at an amount other than the underlying net asset value (“NAV”) per share, the reporting entity should not use the practical expedient in determining fair value. Therefore, the Company determined the fair value of its investment in Star Asia and Star Asia Special Situations Fund as of December 31, 2013 by utilizing a valuation model that took into account the terms and conditions of the sale on February 20, 2014.

(4) Recorded as a component of principal transactions and other income in the consolidated statement of operations.

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The circumstances that would result in transferring certain financial instruments from level 2 to level 3 of the valuation hierarchy would typically include what the Company believes to be a decrease in the availability, utility, and reliability of observable market information such as new issue activity in the primary market, trading activity in the secondary market, credit spreads versus historical levels, bid-ask spreads, and price consensus among market participants and sources.

Investments-trading: During the three months ended March 31, 2015 and 2014, there were no transfers into or out of level 3 of the valuation hierarchy.

Other investments, at fair value: During the three months ended March 31, 2015 and 2014, there were no transfers into or out of level 3 of the valuation hierarchy.

The following tables provide the quantitative information about level 3 fair value measurements as of March 31, 2015 and December 31, 2014, respectively.

QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS

(Dollars in Thousands)

Significant

Range of

Fair Value

Valuation

Unobservable

Weighted

Significant

March 31, 2015

Technique

Inputs

Average

Inputs

Assets

Other investments, at fair value

CLOs

20,446

Discounted Cash Flow Model

Yield

16.4%

12.7% - 18.5%

Duration (years)

5.2

3.6 - 9.8

Default rate

1.0%

QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS

(Dollars in Thousands)

Significant

Range of

Fair Value

Valuation

Unobservable

Weighted

Significant

December 31, 2014

Technique

Inputs

Average

Inputs

Assets

Other investments, at fair value

CLOs

21,518

Discounted Cash Flow Model

Yield

16.2%

12.4% - 18.3%

Duration (years)

4.1

2.6 - 4.5

Default rate

1.0%

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Sensitivity of Fair Value to Changes in Significant Unobservable Inputs

For recurring fair value measurements categorized within level 3 of the fair value hierarchy, the sensitivity of the fair value measurement to changes in significant unobservable inputs and interrelationships between those unobservable inputs (if any) are described below.

•CLOs - With respect to the fair value measurement of CLOs for which the Company uses a discounted cash flow model, changes in yield, duration, and default rate would impact the fair value measurement.

•Equity investments in investment funds and other non-publicly traded entities - With respect to the fair value measurement of investment funds and other non-publicly traded entities for which the Company uses the underlying net asset value per share to determine the fair value of the Company’s respective investment, a significant increase (decrease) in the net asset value per share, which is linked to the underlying financial performance of the respective entity, would result in a significantly higher (lower) fair value measurement.

Investments in Certain Entities that Calculate Net Asset Value Per Share (or its Equivalent)

The following table presents additional information about investments in certain entities that calculate net asset value per share (regardless of whether the “practical expedient” provisions of FASB ASC 820 have been applied) which are measured at fair value on a recurring basis at March 31, 2015 and December 31, 2014

FAIR VALUE MEASUREMENTS OF INVESTMENTS IN CERTAIN ENTITIES

THAT CALCULATE NET ASSET VALUE PER SHARE (OR ITS EQUIVALENT)

(Dollars in Thousands)

Fair Value March 31, 2015

Unfunded Commitments

Redemption Frequency

Redemption Notice Period

Other investments, at fair value

EuroDekania (a)

2,797

N/A

2,797

Fair Value December 31, 2014

Unfunded Commitments

Redemption Frequency

Redemption Notice Period

Other investments, at fair value

EuroDekania (a)

3,717

N/A

3,717

N/A – Not applicable.

(a)EuroDekania’s investment strategy is to make investments in hybrid capital securities that have attributes of debt and equity, primarily in the form of subordinated debt issued by insurance companies, banks and bank holding companies based primarily in Western Europe; widely syndicated leveraged loans issued by European corporations; CMBS, including subordinated interests in first mortgage real estate loans; and RMBS and other ABS backed by consumer and commercial receivables. The majority of the assets are denominated in Euros and U.K. Pounds Sterling. The fair value of the investment in this category has been estimated using the NAV per share of the investment in accordance with the “practical expedient” provisions of FASB ASC 820.

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8. DERIVATIVE FINANCIAL INSTRUMENTS

FASB ASC 815, Derivatives and Hedging (“FASB ASC 815”), provides for optional hedge accounting. When a derivative is deemed to be a hedge and certain documentation and effectiveness testing requirements are met, reporting entities are allowed to record all or a portion of the change in the fair value of a designated hedge as an adjustment to other comprehensive income (“OCI”) rather than as a gain or loss in the statements of operations. To date, the Company has not designated any derivatives as hedges under the provisions included in FASB ASC 815.

Derivative financial instruments are recorded at fair value. If the derivative was entered into as part of the Company’s broker-dealer operations, it will be included as a component of investments-trading or trading securities sold, not yet purchased. If it is entered into to hedge for another financial instrument included in other investments, at fair value then the derivative will be included as a component of other investments, at fair value.

The Company may, from time to time, enter into derivatives to manage its risk exposures (i) arising from fluctuations in foreign currency rates with respect to the Company’s investments in foreign currency denominated investments; (ii) arising from the Company’s investments in interest sensitive investments; and (iii) arising from the Company’s facilitation of mortgage-backed trading. Derivatives entered into by the Company, from time to time, may include (i) foreign currency forward contracts; (ii) purchase and sale agreements of TBAs and other forward agency MBS contracts and (iii) other extended settlement trades.

TBAs are forward contracts to purchase or sell mortgage-backed securities whose collateral remain “to be announced” until just prior to the trade settlement. In addition to TBAs, the Company sometimes enters into forward purchases or sales of agency mortgage-backed securities where the underlying collateral has been identified referred to as other forward agency MBS contracts. TBAs and other forward agency MBS contracts are accounted for as derivatives by the Company under FASB ASC 815. The settlement of these transactions is not expected to have a material effect on the Company’s consolidated financial statements.

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. In those cases, the purchase or sale of the security or loan is not recorded until the settlement date. However, from the trade date until the settlement date, the Company’s interest in the security is accounted for as a derivative as either a forward purchase commitment or forward sale commitment.

Derivatives involve varying degrees of off-balance sheet risk, whereby changes in the level or volatility of interest rates or market values of the underlying financial instruments may result in changes in the value of a particular financial instrument in excess of its carrying amount. Depending on the Company’s investment strategy, realized and unrealized gains and losses are recognized in principal transactions and other income or in net trading in the Company’s consolidated statements of operations on a trade date basis.

The Company may, from time to time, enter into the following derivative instruments:

Foreign Currency Forward Contracts

The Company invests in foreign currency denominated investments that expose it to fluctuations in foreign currency rates, and, therefore, the Company may, from time to time, hedge such exposure by using 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 March 31, 2015 and December 31, 2014, the Company had outstanding foreign currency forward contracts with a notional amount of 3 million Euros.

TBAs and other forward agency MBS contracts

The Company enters into TBAs and other forward agency MBS transactions for three main reasons:

(i) The Company trades U.S. government agency obligations. In connection with these activities, the Company may be required to maintain inventory in order to facilitate customer transactions. In order to mitigate exposure to market risk, the Company may enter into the purchase and sale of TBAs and other forward agency MBS contracts;

(ii) The Company also enters into TBAs and other forward agency MBS contracts in order to assist clients (generally small to mid-size mortgage loan originators) in hedging the interest rate risk associated with the mortgages owned by these clients.

(iii) Finally, the Company may enter into TBAs and other forward agency MBS contracts on a speculative basis.

The Company carries the TBAs and other forward agency MBS contracts at fair value and includes them as a component of investments—trading or trading securities sold, not yet purchased in the Company’s consolidated balance sheets. At March 31, 2015,

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the Company had open forward agency MBS sale agreements in the notional amount of $620,001 and open TBA and other forward agency MBS purchase agreements in the notional amount of $650,663. At December 31, 2014, the Company had open forward agency MBS sale agreements in the notional amount of $318,463 and open TBA and other forward agency MBS purchase agreements in the notional amount of $318,463.

Other Extended Settlement Trades

When the Company buys or sells a financial instrument that will not settle in the regular time frame, the Company will account for that purchase and sale on the settlement date rather than the trade date. In those cases, the Company accounts for the transaction between trade date and settlement date as a derivative as either a forward purchase commitment or a forward sale commitment. 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. At March 31, 2015, the Company had open forward purchase commitments of $8,032 and open forward sale commitments of $0. At December 31, 2014, the Company had open forward purchase commitments of $3,517 and open forward sale commitments of $0.

The following table presents the Company’s derivative financial instruments and the amount and location of the fair value (unrealized gain / (loss)) recognized in the consolidated balance sheets as of March 31, 2015 and December 31, 2014.



DERIVATIVE FINANCIAL INSTRUMENTS-BALANCE SHEET INFORMATION
(Dollars in Thousands)

Derivative Financial Instruments Not Designated as Hedging Instruments Under FASB ASC 815	Balance Sheet Classification		March 31, 2015		December 31, 2014

TBAs and other forward agency MBS contracts	Investments-trading	$	3,905	$	1,928
Other extended settlement trades	Investments-trading		-		2
Foreign currency forward contracts	Other investments, at fair value		(62)		83
TBAs and other forward agency MBS contracts	Trading securities sold, not yet purchased		(3,673)		(1,666)
Other extended settlement trades	Trading securities sold, not yet purchased		-		(4)
		$	170	$	343

The following table presents the Company’s derivative financial instruments and the amount and location of the net gain (loss) recognized in the consolidated statement of operations.



DERIVATIVE FINANCIAL INSTRUMENTS-STATEMENT OF OPERATIONS INFORMATION
(Dollars in Thousands)

Derivative Financial Instruments Not Designated as Hedging Instruments Under FASB ASC 815	Income Statement Classification		Three Months Ended March 31, 2015		Three Months Ended March 31, 2014

Foreign currency forward contracts	Revenues-principal transactions and other income	$	409	$	(347)
Other extended settlement trades	Revenue-net trading		2		-
TBAs and other forward agency MBS contracts	Revenues-net trading		761		474
		$	1,172	$	127

9. COLLATERALIZED SECURITIES TRANSACTIONS

Securities purchased under agreements to resell (“reverse repurchase agreements” or “receivables under resale agreements”) or sales of securities under agreements to repurchase (“repurchase agreements”), principally U.S. government and federal agency obligations and MBS, are treated as collateralized financing transactions and are recorded at their contracted resale or repurchase

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amounts plus accrued interest. The resulting interest income and expense are included in net trading in the consolidated statements of operations.

In the case of reverse repurchase agreements, the Company generally takes possession of securities as collateral. Likewise, in the case of repurchase agreements, the Company is required to provide the counterparty with securities.

In certain cases a repurchase agreement and a reverse repurchase agreement may be entered into with the same counterparty. If certain requirements are met, the offsetting provisions included in FASB ASC 210, Balance Sheet (“FASB ASC 210”), allow (but do not require) the reporting entity to net the asset and liability on the balance sheet. It is the Company’s policy to present the assets and liabilities on a gross basis even if the conditions described in offsetting provisions included in FASB ASC 210 are met.

The Company classifies reverse repurchase agreements as a separate line item within the assets section of the Company’s consolidated balance sheets. The Company classifies repurchase agreements as a separate line item within the liabilities section of the Company’s consolidated balance sheets.

In the case of reverse repurchase agreements, if the counterparty does not meet its contractual obligation to return securities used as collateral, or does not deposit additional securities or cash for margin when required, the Company may be exposed to the risk of reacquiring the securities or selling the securities at unfavorable market prices in order to satisfy its obligations to its customers or counterparties. The Company’s policy to control this risk is monitoring the market value of securities pledged or used as collateral on a daily basis and requiring adjustments in the event of excess market exposure.

In the case of repurchase agreements, if the counterparty makes a margin call and the Company is unable or unwilling to meet the margin call, the counterparty can sell the securities to repay the obligation. The Company is at risk that the counterparty may sell the securities at unfavorable market prices and the Company may sustain significant loss. The Company controls this risk by monitoring its liquidity position to ensure it has sufficient cash or liquid securities to meet margin calls.

In the normal course of doing business, the Company enters into reverse repurchase agreements that permit it to re-pledge or resell the securities to others.

The Company enters into reverse repurchase agreements to acquire securities to cover short positions or as an investment. The Company enters into repurchase agreements to finance the Company’s securities positions held in inventory or to finance reverse repurchase agreements entered into as an investment.

At March 31, 2015 and December 31, 2014, the Company held reverse repurchase agreements of $110,913 and $101,675, respectively, and the fair value of securities received as collateral under reverse repurchase agreements was $117,246 and $107,931, respectively.

At March 31, 2015 and December 31, 2014, the Company had repurchase agreements of $111,118 and $101,856, respectively, and the fair value of securities pledged as collateral under repurchase agreements was $117,446 and $108,065, respectively. These amounts include collateral for reverse repurchase agreements that were re-pledged as collateral for repurchase agreements.

As of March 31, 2015 and December 31, 2014, the Company’s reverse repurchase agreements and repurchase agreements were predominantly collateralized securities in the following asset classes: Agency Specified Pools, Agency Hybrid Arms, other MBS, and Fixed Rate Agency CMOs.

10. OTHER ASSETS AND ACCOUNTS PAYABLE AND OTHER LIABILITIES

Other assets included:



OTHER ASSETS
(Dollars in Thousands)

	March 31, 2015		December 31, 2014
Deferred costs	$	1,666	$	1,665
Prepaid expenses		1,807		1,835
Security deposits		1,843		2,417
Miscellaneous other assets		181		190

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Cost method investment		11		11
Furniture, equipment, and leasehold improvements, net		1,001		1,150
Intangible assets		166		166
Other assets	$	6,675	$	7,434

Accounts payable and other liabilities included:



ACCOUNTS PAYABLE AND OTHER LIABILITIES
(Dollars in Thousands)

	March 31, 2015		December 31, 2014
Accounts payable	$	509	$	512
Rent payable		490		626
Accrued interest payable		307		318
Accrued interest on securities sold, not yet purchased		648		626
Payroll taxes payable		684		754
Accrued income taxes		82		63
Other general accrued expenses		2,062		2,204
Accounts payable and other liabilities	$	4,782	$	5,103

11. VARIABLE INTEREST ENTITIES

FASB ASC 810, Consolidation (“FASB ASC 810”), contains the guidance surrounding the definition of variable interest entities (“VIEs”), the definition of VIEs, and the consolidation rules surrounding VIEs. See note 3 for a discussion about ASU 2015-02.

In general, VIEs are entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The Company has variable interests in VIEs through its management contracts and investments in various securitization entities including CLOs and CDOs.

Once it is determined that the Company holds a variable interest in a VIE, FASB ASC 810 requires that the Company perform a qualitative analysis to determine (i) which entity has the power to direct the matters that most significantly impact the VIE’s financial performance and (ii) if the Company has the obligation to absorb the losses of the VIE that could potentially be significant to the VIE or the right to receive the benefits of the VIE that could potentially be significant to the VIE. The entity that has both of these characteristics is deemed to be the primary beneficiary and required to consolidate the VIE. This assessment must be done on an ongoing basis.

The Company classifies the VIEs it is involved with into two groups: (i) VIEs managed by the Company and (ii) VIEs managed by third parties. In the case of the VIEs that the Company has been involved with, the Company has generally concluded that the entity that manages the VIE has the power to direct the matters that most significantly impact the VIEs financial performance. This is not a blanket conclusion as it is possible for an entity other than the manager to have the power to direct such matters. However, for all the VIEs the Company is involved with as of March 31, 2015, the Company has drawn this conclusion.

In the case where the Company has an interest in a VIE managed by a third party, the Company has concluded that it is not the primary beneficiary because the Company does not have the power to direct its activities. In the case of an interest in a VIE managed by the Company, the Company performs an additional qualitative analysis to determine if its interest (including any investment as well as any management fees that qualify as variable interests) could absorb losses or receive benefits that could potentially be significant to the VIE. This analysis considers the most optimistic and pessimistic scenarios of potential economic results that could reasonably be experienced by the VIE. Then, the Company compares the benefits it would receive (in the optimistic scenario) or the losses it would absorb (in the pessimistic scenario) as compared to all benefits and losses absorbed by the VIE in the aggregate. If the benefits or losses absorbed by the Company were significant as compared to total benefits and losses absorbed by all variable interest holders, then the Company would conclude it is the primary beneficiary.

As of March 31, 2015, the Company had variable interests in various securitization VIEs, but determined that it is not the primary beneficiary thereof, and, therefore, the Company is not consolidating the securitization VIEs. The maximum potential

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financial statement loss the Company could incur if the securitization vehicles were to default on all of their obligations is (i) the loss of value of the interests in securitizations that the Company holds in its inventory at the time and (ii) any management fee receivables in the case of managed VIEs. The Company has not provided financial support to these VIEs during the three months ended March 31, 2015 and 2014 and had no liabilities, contingent liabilities, guarantees (implicit or explicit) related to these VIEs at March 31, 2015 and December 31, 2014.

The table below presents the carrying amounts of the assets in the Company’s consolidated balance sheets that relate to the Company’s variable interest in identified VIEs with the exception of (i) the two trusts VIEs that hold the Company’s junior subordinated notes (see note 14) and (ii) any security that represents an interest in a VIE that is included in investments-trading or securities sold but not yet purchased in the Company’s consolidated balance sheets. The table below shows the Company’s maximum exposure to loss associated with these identified nonconsolidated VIEs in which it held variable interests at March 31, 2015 and December 31, 2014.



NON-CONSOLIDATED VARIABLE INTEREST ENTITIES
(Dollars in Thousands)

	March 31, 2015

	Other Receivable		Other Investments, at fair value		Maximum Exposure to loss in non-consolidated VIEs
Managed VIEs	$	975	$	-	$	975
Third party managed VIEs		157		20,473		20,630
Total	$	1,132	$	20,473	$	21,605

	December 31, 2014

	Other Receivable		Other Investments, at fair value		Maximum Exposure to loss in non-consolidated VIEs
Managed VIEs	$	1,829	$	-	$	1,829
Third party managed VIEs		73		21,528		21,601
Total	$	1,902	$	21,528	$	23,430

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12. DEBT

The Company had the following debt outstanding:



DETAIL OF DEBT
(Dollars in Thousands)

Description	Current Outstanding Par			March 31, 2015		December 31, 2014		Interest Rate Terms	Interest (3)		Maturity
Convertible senior notes:
8.00% convertible senior notes (the "8.0% Convertible Notes")	$	8,248		$	8,248	$	8,248	8.00%	8.00	%	September 2018 (1)

Junior subordinated notes:
Alesco Capital Trust I		28,125	(2)		11,650		11,499	4.25%	4.25	%	July 2037
Sunset Financial Statutory Trust I		20,000	(2)		8,300		8,192	4.42%	4.42	%	March 2035
	$	48,125			19,950		19,691
Total				$	28,198	$	27,939

(1) The holders of the 8.0% Convertible Notes may convert all or any part of the outstanding principal amount of the 8.0% Convertible Notes at any time prior to maturity into shares of the Company’s common stock at a conversion price of $3.00 per share, subject to customary anti-dilution adjustments.

(2)The outstanding par represents the total par amount of the junior subordinated notes held by two separate trusts. The Company does not consolidate these trusts. The Company holds $1,489 par value of these junior subordinated notes, comprised of $870 par value of junior subordinated notes related to Alesco Capital Trust I and $619 par value of junior subordinated notes related to Sunset Financial Statutory Trust I. These notes have a carrying value of $0. Therefore, the net par value held by third parties is $48,125.

(3)Represents the interest rate in effect as of the last day of the reporting period.

Refer to note 17 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for a discussion of the Company’s debt.

13. EQUITY

Stockholders’ Equity

Common Equity: The following table reflects the activity for the three months ended March 31, 2015 related to the number of shares of unrestricted common stock that the Company had issued as of March 31, 2015


			Common Stock
			Shares
December 31, 2014			14,858,781
Vesting of shares			158,438
March 31, 2015			15,017,219

Acquisition and Surrender of Additional Units of the Operating LLC, net: Effective January 1, 2011, IFMI and the Operating LLC entered into a Unit Issuance and Surrender Agreement (the “UIS Agreement”), which was approved by IFMI’s Board of Directors and the board of managers of the Operating LLC. In an effort to maintain a 1:1 ratio of IFMI’s common stock to the number of membership units IFMI holds in the Operating LLC, the UIS Agreement calls for the issuance of additional membership units of the Operating LLC to IFMI when IFMI issues its common stock to employees under existing equity compensation plans. In certain cases, the UIS Agreement calls for IFMI to surrender units to the Operating LLC when certain restricted shares are forfeited by the employee or repurchased.

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During the three months ended March 31, 2015, IFMI received and surrendered units of the Operating LLC. The following table displays the amount of units received (net of surrenders) by IFMI pursuant to the UIS Agreement.


			Operating LLC
			Membership Units
Units related to UIS Agreement			212,121
Total			212,121

The Company recognized a net increase in additional paid in capital of $90 and a net decrease in accumulated other comprehensive income of $6 with an offsetting decrease in non-controlling interest of $84 in connection with the acquisition and surrender of additional units of the Operating LLC. The following schedule presents the effects of changes in IFMI’s ownership interest in the Operating LLC on the equity attributable to IFMI for the three months ended:



	March 31, 2015		March 31, 2014
Net income / (loss) attributable to IFMI	$	(558)	$	(2,098)
Transfers (to) from the non-controlling interest:
Increase / (decrease) in IFMI's paid in capital for the
acquisition / (surrender) of additional units in consolidated
subsidiary, net		90		250
Changes from net income / (loss) attributable to IFMI and transfers (to) from the non-controlling interest	$	(468)	$	(1,848)

14. NET CAPITAL REQUIREMENTS

JVB is subject to the net capital provision of Rule 15c3-1 under the Exchange Act, which requires the maintenance of minimum net capital, as defined therein.

As of March 31, 2015, JVB’s adjusted net capital was $10,405 which exceeded the minimum requirements by $10,138.

CCFL, a subsidiary of the Company regulated by the Financial Conduct Authority (formerly known as the Financial Services Authority) in the United Kingdom, is subject to the net liquid capital provision of the Financial Services and Markets Act 2000, GENPRU 2.140R to 2.1.57R, relating to financial prudence with regards to the European Investment Services Directive and the European Capital Adequacy Directive, which requires the maintenance of minimum liquid capital, as defined therein. As of March 31, 2015, the total minimum required net liquid capital was $1,747, and net liquid capital in CCFL was $2,502, which exceeded the minimum requirements by $755 and was in compliance with the net liquid capital provisions. See note 4.

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15. EARNINGS / (Loss) PER COMMON SHARE

The following table presents a reconciliation of basic and diluted earnings / (loss) per common share for the periods indicated.



EARNINGS / (LOSS) PER COMMON SHARE
(Dollars in Thousands, except share or per share information)

	Three Months Ended March 31,
	2015		2014
Net income / (loss) attributable to IFMI	$	(558)	$	(2,098)
Add/ (deduct): Income / (loss) attributable to non-controlling interest attributable to Operating LLC membership units exchangeable into IFMI shares (1)		(198)		(707)
Add / (deduct): Adjustment (2)		2		(32)
Net income / (loss) on a fully converted basis	$	(754)	$	(2,837)

Weighted average common shares outstanding - Basic		15,149,205		14,868,407
Unrestricted Operating LLC membership units exchangeable into IFMI shares (1)		5,324,090		5,324,133
Dilutive Impact of restricted units or shares		-		-
Weighted average common shares outstanding - Diluted (3)		20,473,295		20,192,540

Net income / (loss) per common share - Basic	$	(0.04)	$	(0.14)

Net income / (loss) per common share - Diluted	$	(0.04)	$	(0.14)

(1)The Operating LLC membership units not held by IFMI (that is, those held by the non-controlling interest for the three months ended March 31, 2015 and 2014) may be redeemed and exchanged into shares of the Company on a one-to-one basis. The Operating LLC membership units not held by IFMI are redeemable at each IFMI member’s option, at any time, for (i) cash in an amount equal to the average of the per share closing prices of the Company’s common stock for the ten consecutive trading days immediately preceding the date the Company receives the member’s redemption notice, or (ii) at the Company’s option, one share of the Company’s common stock, subject, in each case, to appropriate adjustment upon the occurrence of an issuance of additional shares of the Company’s common stock as a dividend or other distribution on the Company’s outstanding common stock, or a further subdivision or combination of the outstanding shares of the Company’s common stock. These membership units are not included in the computation of basic earnings per share. These membership units enter into the computation of diluted net income / (loss) per common share when the effect is not anti-dilutive using the if-converted method.

(2)An adjustment is included for the following: (i) if the Operating LLC membership units had been converted at the beginning of the period, the Company would have incurred a higher income tax expense or realized a higher income tax benefit, as applicable; and (ii) to adjust the non-controlling interest amount to be consistent with the weighted average share calculation.

(3)For the three months ended March 31, 2015 and 2014, weighted average common shares outstanding excludes a total of 1,423 shares and 220,514 shares, respectively, representing restricted Operating LLC membership units, restricted IFMI common stock, and restricted units of IFMI common stock that would be anti-dilutive because of the Company’s net loss. For the three months ended March 31, 2015 and 2014, weighted average common shares outstanding also excludes 2,749,167 shares from the assumed conversion of the 8.0% Convertibles Notes because the inclusion of the converted shares would be anti-dilutive.

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16. COMMITMENTS AND CONTINGENCIES

Legal and Regulatory Proceedings

The Company’s former U.S. broker-dealer subsidiary, Cohen & Company Securities, LLC (“CCS”), and one of its registered investment adviser subsidiaries, Cira SCM, LLC (“CIRA”), are parties to litigation that was commenced on June 7, 2013 in the Supreme Court of the State of New York, currently captioned NRAM PLC (f/k/a Northern Rock (Asset Management) PLC) v. Societe Generale Corporate and Investment Banking, et al. NRAM PLC, Plaintiff, served the Summons with Notice on Defendants on October 3, 2013, and filed its complaint relating to an investment in Kleros Preferred Funding VIII, Ltd., a collateralized debt obligation on November 12, 2013. CCS and CIRA filed a motion to dismiss the complaint on January 27, 2014. On October 31, 2014, the Court ruled on the motion, dismissing certain of the Plaintiff’s theories. The litigation is ongoing and the Company intends to defend the action vigorously.

In October 2013, the Company received a Pennsylvania corporate net income tax assessment from the Pennsylvania Department of Revenue in the amount of $4,683 (including penalties) plus interest related to a subsidiary of AFN for the 2009 tax year. The assessment denied this subsidiary’s Keystone Opportunity Zone (“KOZ”) credit for that year. The Company filed an administrative appeal of this assessment with the Pennsylvania Department of Revenue Board of Appeals, which was denied in June 2014. The Company filed an appeal with the Pennsylvania Board of Finance and Revenue. A hearing has been scheduled for May 12, 2015. If the Pennsylvania Board of Finance and Revenue were to uphold the assessment, the Company could then seek relief in Pennsylvania Commonwealth Court. The Company has evaluated the assessment in accordance with the provisions of ASC 740 and determined not to record any reserve for this assessment.

In addition to the matters set forth above, 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. Management believes that the results of these routine legal proceedings, claims, and regulatory matters will not have a material adverse effect on the Company’s financial condition, or on the Company’s operations and cash flows. However, the Company cannot estimate the legal fees and expenses to be incurred in connection with these routine matters and, therefore, is unable to determine whether these future legal fees and expenses will have a material impact on the Company’s operations and cash flows. It is the Company’s policy to expense legal and other fees as incurred.

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17. 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 for the three months ended March 31, 2015 and 2014 was prepared using the following methodologies and generally represents the information that is relied upon by management in its decision making processes:

(a) Revenues and expenses directly associated with each business segment are included in determining net income / (loss) by segment; and

(b) Indirect expenses (such as general and administrative expenses including executive and indirect overhead costs) not directly associated with specific business segments are not allocated to the business segments’ statements of operations.

Accordingly, the Company presents segment information consistent with internal management reporting. See notes (1) in the tables below for more detail on unallocated items. The following tables present the financial information for the Company’s segments for the periods indicated:



SEGMENT INFORMATION
Statement of Operations Information
Three Months Ended March 31, 2015

	Capital		Asset		Principal		Segment		Unallocated
	Markets		Management		Investing		Total		(1)		Total
Net trading	$	7,271	$	-	$	-	$	7,271	$	-	$	7,271
Asset management		-		2,298		-		2,298		-		2,298
New issue and advisory		1,498		-		-		1,498		-		1,498
Principal transactions and other income		78		1,471		178		1,727		-		1,727
Total revenues		8,847		3,769		178		12,794		-		12,794
Total operating expenses		8,407		1,006		176		9,589		2,924		12,513
Operating income / (loss)		440		2,763		2		3,205		(2,924)		281
Interest expense		-		-		-		-		(976)		(976)
Income / (loss) from equity method affiliates		-		-		-		-		-		-
Income / (loss) before income taxes		440		2,763		2		3,205		(3,900)		(695)
Income tax expense / (benefit)		-		-		-		-		61		61
Net income / (loss)		440		2,763		2		3,205		(3,961)		(756)
Less: Net income / (loss) attributable to the
non-controlling interest		-		-		-		-		(198)		(198)
Net income / (loss) attributable to IFMI	$	440	$	2,763	$	2	$	3,205	$	(3,763)	$	(558)

Other statement of operations data
Depreciation and amortization (included in
total operating expense)	$	167	$	6	$	-	$	173	$	61	$	234

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SEGMENT INFORMATION
Statement of Operations Information
Three Months Ended March 31, 2014

	Capital		Asset		Principal		Segment		Unallocated
	Markets		Management		Investing		Total		(1)		Total
Net trading	$	6,929	$	-	$	-	$	6,929	$	-	$	6,929
Asset management		-		4,069		-		4,069		-		4,069
New issue and advisory		330		-		-		330		-		330
Principal transactions and other income		364		571		924		1,859		-		1,859
Total revenues		7,623		4,640		924		13,187		-		13,187
Total operating expenses		8,953		2,118		47		11,118		3,761		14,879
Operating income / (loss)		(1,330)		2,522		877		2,069		(3,761)		(1,692)
Interest expense		-		-		-		-		(1,129)		(1,129)
Income / (loss) from equity method affiliates		-		27		(1)		26		-		26
Income / (loss) before income taxes		(1,330)		2,549		876		2,095		(4,890)		(2,795)
Income tax expense / (benefit)		-		-		-		-		10		10
Net income / (loss)		(1,330)		2,549		876		2,095		(4,900)		(2,805)
Less: Net income / (loss) attributable to the
non-controlling interest		-		-		-		-		(707)		(707)
Net income / (loss) attributable to IFMI	$	(1,330)	$	2,549	$	876	$	2,095	$	(4,193)	$	(2,098)

Other statement of operations data
Depreciation and amortization (included in
total operating expense)	$	226	$	38	$	-	$	264	$	67	$	331

(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). Some of the items not allocated include: (1) operating expenses (such as cash compensation and benefits, equity-based compensation expense, professional fees, travel and entertainment, consulting fees, and rent) related to support departments excluding certain departments that directly support the Capital Markets business segment; (2) interest expense on debt; and (3) income taxes. Management does not consider these items necessary for an understanding of the operating results of these business segments and such amounts are excluded in business segment reporting to the Chief Operating Decision Maker.



Balance Sheet Data
As of March 31, 2015

	Capital		Asset		Principal		Segment		Unallocated
	Markets		Management		Investing		Total		(1)		Total
Total Assets	$	278,503	$	3,724	$	26,031	$	308,258	$	9,339	$	317,597

Included within total assets:
Goodwill (2)	$	7,937	$	55	$	-	$	7,992	$	-	$	7,992
Intangible assets (2)	$	166	$	-	$	-	$	166	$	-	$	166

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Balance Sheet Data
As of March 31, 2014

	Capital		Asset		Principal		Segment		Unallocated
	Markets		Management		Investing		Total		(1)		Total
Total Assets	$	257,833	$	7,603	$	13,802	$	279,238	$	7,948	$	287,186

Included within total assets:
Investment in equity method affiliates	$	-	$	-	$	16	$	16	$	-	$	16
Goodwill (2)	$	7,937	$	3,176	$	-	$	11,113	$	-	$	11,113
Intangible assets (2)	$	166	$	-	$	-	$	166	$	-	$	166

(1)Unallocated assets primarily include (1) amounts due from related parties; (2) furniture and equipment, net; and (3) other assets that are not considered necessary for an understanding of business segment assets and such amounts are excluded in business segment reporting to the Chief Operating Decision Maker.

(2)Goodwill and intangible assets as of March 31, 2015 and 2014 are allocated to the Capital Markets and Asset Management business segments as indicated in the table from above.

Geographic Information

The Company conducts its business activities through offices in the following locations: (1) United States; (2) United Kingdom and other; and (3) Asia for the period prior to February 20, 2014 (effective with the sale of Star Asia and certain related entities), Asia. Total revenues by geographic area are summarized as follows.



GEOGRAPHIC DATA
(Dollars in Thousands)

	Three Months Ended March 31,
	2015		2014
Total Revenues:
United States	$	10,677	$	10,689
United Kingdom & Other		2,117		2,374
Asia		-		124
Total	$	12,794	$	13,187

Long-lived assets attributable to an individual country, other than the United States, are not material.

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18. SUPPLEMENTAL CASH FLOW DISCLOSURE

Interest paid by the Company on its debt was $700 and $700 for the three months ended March 31, 2015 and 2014, respectively.

The Company paid income taxes of $3 and $20 for the three months ended March 31, 2015 and 2014, respectively. The Company received no income tax refunds for the three months ended March 31, 2015 and 2014.

For the three months ended March 31, 2015, the Company had the following significant non-cash transactions that are not reflected on the statement of cash flows:

• The Company acquired additional units of the Operating LLC pursuant to the UIS Agreement. The Company recognized a net increase in additional paid-in capital of $90, a net decrease of $6 in accumulated other comprehensive income, and a decrease of $84 in non-controlling interest. See note 13.

For the three months ended March 31, 2014, the Company had the following significant non-cash transactions that are not reflected on the statement of cash flows:

• The Company recognized a net increase in additional paid-in capital of $250, a net decrease of $14 in accumulated other comprehensive income, and a decrease of $236 in non-controlling interest as a result of additional units of the Operating LLC issued to IFMI as a result of the UIS agreement, and the redemption of vested Operating LLC units by IFMI.

19. RELATED PARTY TRANSACTIONS

The Company has identified the following related party transactions for the three months ended March 31, 2015 and 2014. The transactions are listed by related party and, unless otherwise noted in the text of the description, the amounts are disclosed in the tables at the end of this section.

A. Cohen Bros. Financial, LLC (“CBF”) and EBC 2013 Family Trust (“EBC”)

In September 2013, EBC, as an assignee of CBF, made a $4,000 investment in the Company. Daniel G. Cohen is a trustee of EBC. The Company issued $2,400 in principal amount of the 8.0% Convertible Notes to EBC. See paragraph C below and notes 4 and 17 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The Company incurred interest expense on this debt, which is disclosed as part of interest expense incurred in the tables at the end of this section.

CBF has been identified as a related party because (i) CBF is a non-controlling interest of the Company and (ii) CBF is wholly owned by Mr. Cohen.

See the discussion of the sale of European Operations in note 4.

B. The Bancorp, Inc.

The Bancorp, Inc. (“TBBK”) is identified as a related party because Mr. Cohen is TBBK’s Chairman.

TBBK maintained deposits for the Company in the amount of $55 and $86 as of March 31, 2015 and December 31, 2014, respectively. These amounts are not disclosed in the tables at the end of this section.

As part of the Company’s broker-dealer operations, the Company from time to time purchases securities from third parties and sells those securities to TBBK. The Company may purchase securities from TBBK and ultimately sell those securities to third parties. In either of the cases listed above, the Company includes the trading revenue earned (i.e. the gain or loss realized, or commission earned) by the Company for the entire transaction in the amounts disclosed as part of net trading in the tables at the end of this section.

From time to time, the Company will enter into repurchase agreements with TBBK as its counterparty. As of March 31, 2015 and December 31, 2014, the Company had repurchase agreements in the amount of $46,266 and $46,275, respectively, with TBBK as its counterparty. These amounts are included as a component of securities sold under agreement to repurchase in the Company’s consolidated balance sheet. The Company incurred interest expense related to repurchase agreements with TBBK as its counterparty in the amount of $162 and $106 for the three months ended March 31, 2015 and 2014, respectively, which was included as a component of net trading revenue in the Company’s consolidated statements of operations. These amounts are not disclosed in the tables at the end this section.

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C. Mead Park Capital Partners LLC (“Mead Park Capital”) and Mead Park Advisors LLC (“Mead Park”)

Investment in IFMI by Mead Park Capital

In September 2013, Mead Park Capital made a $9,746 investment in the Company. The Company issued $5,848 in principal amount of the 8.0% Convertible Notes to Mead Park Capital. Mead Park Capital is a vehicle advised by Mead Park (a registered investment advisor) and controlled by Jack J. DiMaio Jr., Chief Executive Officer and founder of Mead Park. In connection with the September 25, 2013 closing of the transactions contemplated by the definitive agreements relating to Mead Park Capital’s investment in the Company, Messrs. DiMaio and Ricciardi were elected to the Company’s Board of Directors. Mr. DiMaio was also named the Chairman of the Company’s Board of Directors. See notes 4 and 17 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The Company incurred interest expense on this debt, which is disclosed as part of interest expense incurred in the tables at the end of this section.

CDO Sub-Advisory Agreement with Mead Park

In July 2014, IFMI’s majority owned subsidiaries, Cohen & Company Financial Management LLC (“CCFM”) and Dekania Capital Management, LLC (“DCM”), entered into a CDO sub-advisory agreement with Mead Park whereby Mead Park will render investment advice and provide assistance to CCFM and DCM with respect to their management of certain CDOs. The Company incurred consulting fee expense related to this agreement, which is disclosed as part of professional fee and other operating in the tables at the end of this section.

D. Advisory Agreement with Woodlea Consulting, LLC

In March 2015, the Operating LLC entered into an advisory agreement with Woodlea Consulting, LLC (“Woodlea”), a Delaware limited liability company of which Mr. Ricciardi is the sole owner. Woodlea will render advisory services on the execution of strategic alternatives to the Operating LLC. The Company incurred consulting fee expense related to this agreement, which is disclosed as part of professional fee and other operating in the tables at the end of this section.

E. Transactions between the Star Asia Group and the Company

Star Asia Management Ltd. (“Star Asia Manager”) serves as external manager of Star Asia and Star Asia Special Purpose Vehicle (“Star Asia SPV”) (see paragraphs E-1 and F-1 below). The Company owned 50% of Star Asia Manager prior to Star Asia Manager repurchasing its outstanding equity units held by Star Asia Mercury LLC (formerly Mecury Partners, LLC) and, as a result, the Company obtaining 100% voting control of Star Asia Manager on March 1, 2013 (the “Star Asia Manager Repurchase Transaction”). Following the Star Asia Manager Repurchase Transaction, the Company owned 100% of Star Asia Manager and included Star Asia Manager in its consolidated financial statements. Prior to March 1, 2013, Star Asia Manager had been identified as a related party because it was an equity method investee of the Company. The Company had recognized its share of the income or loss of Star Asia Manager as income or loss from equity method affiliates in the consolidated statements of operations during the pre-acquisition period. Income or loss recognized under the equity method is disclosed in the table at the end of this section.

Effective February 20, 2014, the Company sold its interest in Star Asia, Star Asia Special Situations Fund, Star Asia Capital Management, LLC (“Star Asia Capital Management”), Star Asia Manager, Star Asia Advisors Ltd. (“SAA Manager”), and Star Asia Partners, Ltd. (“SAP GP’) (collectively, the “Star Asia Group”). The Company recognized a gain on the sale in amount of $78, which was included as a component of principal transactions and other income in the Company’s consolidated statements of operations.

Prior to February 20, 2014, the Star Asia Group entities were identified as related parties. The amounts with respect to the transactions identified below are summarized in the tables at the end of this section.

1. Star Asia invests primarily in Asian commercial real estate structured finance products, including CMBS, corporate debt of REITs and real estate operating companies, whole loans, mezzanine loans and other commercial real estate fixed income investments, and in real property in Japan. Star Asia had been identified as a related party because in the absence of the fair value option of FASB ASC 825, Star Asia would have been treated as an equity method affiliate, and because Daniel G. Cohen, the Vice Chairman of the Company’s Board of Directors and of the board of managers of the Operating LLC, President and Chief Executive of the Company’s European Business, and President of CCFL (formerly the Company’s Chairman and Chief Executive Officer) was a member of Star Asia’s board of directors until the sale of the entity on February 20, 2014. The Company, through Star Asia Manager, had an asset management contract with Star Asia. Gains or losses recognized from this investment for the three months ended March 31, 2014 are disclosed as part of principal transactions in the tables at the end of this section. Amounts earned from the management contract are disclosed as part of management fee revenue in the tables at the end of this section.

2. Star Asia Capital Management serves as the external manager of Star Asia Opportunity (see paragraph F-2 below). Star Asia Capital Management had been identified as a related party because it was an equity method investee of the Company. The Company recognized its share of the income or loss of Star Asia Capital Management as income or loss from equity method affiliates in the consolidated statements of operations. Income or loss recognized under the equity method is disclosed in the table at the end of this section. On February 20, 2014, the Company completed the sale of its interests in the Star Asia Group, including Star Asia Capital Management.

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3. In December 2012, the Company, along with two other parties, sponsored the creation of a new investment fund, the Star Asia Special Situations Fund, which primarily invests in real estate and securities backed by real estate in Japan. The Star Asia Special Situations Fund is a closed-end fund that does not offer investor redemptions. It has an initial life of three years, which can be extended under certain circumstances for a total of two years. The Star Asia Special Situations Fund consummated its closing on December 20, 2012. The Star Asia Special Situations Fund had been identified as a related party because in the absence of the fair value option of FASB ASC 825, the Company’s investment in the Star Asia Special Situations Fund would be treated as an equity method affiliate of the Company. Gains and losses recognized from this investment are disclosed as part of principal transactions in the tables at the end of this section.

On February 20, 2014, the Company completed the sale of its interests in the Star Asia Group, including the Star Asia Special Situations Fund.

4. SAA Manager serves as the external manager of the Star Asia Special Situations Fund. SAA Manager had been identified as a related party because it was an equity method investee of the Company. The Company did not elect the fair value option for its investment in SAA Manager. Income or loss recognized under the equity method is disclosed in the tables at the end of this section. On February 20, 2014, the Company completed the sale of its interest in the Star Asia Group, including SAA Manager.

5. SAP GP serves as the general partner for the Star Asia Special Situations Fund. SAP GP had been identified as a related party because it was an equity method investee of the Company. The Company did not elect the fair value option for its investment in SAP GP. Income or loss recognized under the equity method is disclosed in the table at the end of this section. Since its inception during the fourth quarter of 2012 and through its sale on February 20, 2014, the Company had not made an investment or recognized any income or loss under the equity method from SAP GP.

F. Investment Vehicles and Other

The entities below are identified as related parties. Amounts with respect to the transactions identified below are summarized in the tables at the end of this section.

1. Star Asia SPV is a Delaware limited liability company formed in 2010. It was formed to create a pool of assets that would provide collateral to investors who participated in Star Asia’s 2010 rights offering. The investors in Star Asia’s rights offering also received equity interests in Star Asia SPV. Star Asia SPV purchased certain assets from Star Asia and the equity interest holders of Star Asia SPV received investment returns on the assets held in the Star Asia SPV up to an agreed upon maximum. Returns above that agreed upon maximum were remitted back to Star Asia. During the second quarter of 2013, the Company received its maximum investment return from Star Asia SPV and the Company no longer has an ownership interest in the entity. Star Asia SPV has been identified as a related party because it was an equity method investee of the Company. Income or loss recognized under the equity method is disclosed in the table at the end of this section.

2. Star Asia Opportunity is a Delaware limited liability company formed in July 2011 to partially finance the acquisition of seven real estate properties in Japan. During the second quarter of 2014, the Company received its final liquidating distribution from Star Asia Opportunity. Star Asia Opportunity had been identified as a related party because it was an equity method investee of the Company. The Company recognized its share of the income or loss of Star Asia Opportunity as income or loss from equity method affiliates in the consolidated statements of operations. Income or loss recognized under the equity method is disclosed in the tables at the end of this section.

The following tables display the routine intercompany transactions recognized in the statements of operations from the identified related parties that are described above.

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RELATED PARTY TRANSACTIONS
Three Months Ended March 31, 2015
(Dollars in Thousands)

		Management fee revenue		Net trading		Principal transactions		Income / (loss) from equity method affiliates	Professional fee and other operating		Interest expense incurred
EBC	$	-	$	-	$	-	$	-	$	-	$	56
Mead Park Capital		-		-		-		-		-		136
Mead Park		-		-		-		-		50		-
Woodlea		-		-		-		-		8		-
	$	-	$	-	$	-	$	-	$	58	$	192



RELATED PARTY TRANSACTIONS
Three Months Ended March 31, 2014
(Dollars in Thousands)

		Management fee revenue		Net trading		Principal transactions		Income / (loss) from equity method affiliates	Professional fee and other operating		Interest expense incurred
TBBK	$	-	$	22	$	-	$	-	$	-	$	-
Star Asia (1)		125		-		-		-		-		-
Star Asia Opportunity		-		-		-		(1)		-		-
Star Asia Capital Management (1)		-		-		-		13		-		-
SAA Manager (1)		-		-		-		14		-		-
EBC		-		-		-		-		-		55
Mead Park Capital		-		-		-		-		-		134
	$	125	$	22	$	-	$	26	$	-	$	189

(1)

Effective February 20, 2014, the Company sold its interest in these entities. See paragraph E from above.

The following related party transactions are non-routine and are not included in the tables above.

G. Directors and Employees

In addition to the employment agreements the Company has entered into with Daniel G. Cohen, its Vice Chairman; Lester R. Brafman, its Chief Executive Officer; and Joseph W. Pooler, Jr., its Chief Financial Officer, the Company has entered into its standard indemnification agreement with each of its directors and executive officers.

The Company has a sublease agreement for certain office space with the Company’s Chairman of the Board. The Company receives payments under this agreement. The payments are recorded as a reduction in the related rent expense. The Company recorded an immaterial amount of sublease income for the three months ended March 31, 2015.

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20. DUE FROM / DUE TO RELATED PARTIES

The following table summarizes the outstanding due from / to related parties. These amounts may result from normal operating advances or from timing differences between the transactions disclosed in note 19 and final settlement of those transactions in cash. All amounts are primarily non-interest bearing.



DUE FROM/DUE TO RELATED PARTIES
(Dollars in Thousands)

	March 31, 2015		December 31, 2014
Employees & other	$	353	$	552
Due from Related Parties	$	353	$	552


Mead Park	$	50	$	-
Woodlea		8		-
Total Due to Related Parties	$	58	$	-

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of the consolidated financial condition and results of operations of Institutional Financial Markets, Inc. and its majority owned subsidiaries (collectively, “we,” “us,” “our,” or the “Company”) should be read in conjunction with the unaudited consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On a regular basis, we evaluate these estimates, including fair value of financial instruments. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

All amounts in this disclosure are in thousands (except share and per share data) unless otherwise noted.

Overview

We are a financial services company specializing in credit-related fixed income investments. We were founded in 1999 as an investment firm focused on small-cap banking institutions, but have grown to provide an expanding range of capital markets, investment banking, and asset management solutions to institutional investors, corporations, and other small broker-dealers. We are organized into three business segments: Capital Markets, Asset Management, and Principal Investing.

•Capital Markets: Our Capital Markets business segment consists primarily of credit-related fixed income sales, trading, and financing, as well as new issue placements in corporate and securitized products, and advisory services. Our fixed income sales and trading group provides trade execution to corporate investors, institutional investors, and other smaller broker-dealers. We specialize in a variety of products, including but not limited to: corporate bonds, ABS, MBS, CMBS, RMBS, CDOs, CLOs, CBOs, CMOs, municipal securities, TBAs and other forward agency MBS contracts, SBA loans, U.S. government bonds, U.S. government agency securities, brokered deposits and CDs for small banks, and hybrid capital of financial institutions including TruPS, whole loans, and other structured financial instruments. We also offer execution and brokerage services for equity products. We carry out our capital market activities primarily through our subsidiaries: JVB in the United States and CCFL in Europe.

• Principal Investing: Our Principal Investing business segment is comprised of investments that we have made using our own capital excluding investments we make to support our Capital Markets business segment. Historically, we generally made principal investments in the entities we managed. Beginning in the first quarter of 2014, we began investing our capital in investments (primarily equity tranches of CLOs) that we do not manage. Our focus on CLO equity capitalizes on our strengths in structured credit and leveraged finance. These investments are a component of our other investments, at fair value in our consolidated balance sheet.

•Asset Management: Our Asset Management business segment manages assets within CDOs, permanent capital vehicles, managed accounts, and investment funds (collectively, “Investment Vehicles”). A CDO is a form of secured borrowing. The borrowing is secured by different types of fixed income assets such as corporate or mortgage loans or bonds. The borrowing is in the form of a securitization, which means that the lenders are actually investing in notes backed by the assets. In the event of default, the lenders will have recourse only to the assets securing the loan. Our Asset Management business segment includes our fee-based asset management operations, which include ongoing base and incentive management fees. As of March 31, 2015, we had approximately $4.10 billion in AUM of which 99.0% was in CDOs.

We generate our revenue by business segment primarily through:

Capital Markets

•our trading activities, which include execution and brokerage services, securities lending activities, riskless trading activities, as well as gains and losses (unrealized and realized) and income and expense earned on securities classified as trading;

•new issue and advisory revenue comprised of (a) origination fees for corporate debt issues originated by us; (b) revenue from advisory services; and (c) new issue revenue associated with arranging and placing the issuance of newly created debt, equity, and hybrid financial instruments;

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Principal Investing

•gains and losses (unrealized and realized) and income and expense earned on investments classified as other investments, at fair value; and

•income or loss from equity method affiliates.

Asset Management

• asset management fees for our ongoing asset manager services provided to various Investment Vehicles, which may include fees both senior and subordinate to the securities issued by the Investment Vehicles;

•incentive management fees earned based on the performance of the various Investment Vehicles;

•income or loss from equity method affiliates;

Business Environment

Our business is materially affected by economic conditions in the financial markets, political conditions, broad trends in business and finance, changes in volume and price levels of securities transactions, and changes in interest 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 continue to reduce our trading volume and revenues, could negatively affect our ability to generate new issue and advisory revenue, and could adversely affect our profitability.

As a general rule, our trading business benefits from increased market volatility. Increased volatility usually results in increased activity from our clients and counterparties. However, periods of extreme volatility may result in client’s reducing their trading volumes which will negatively impact our results. Also, periods of extreme volatility may result in large fluctuations in securities valuations and we may incur losses on our holdings.

In addition, as a smaller firm, we are exposed to intense competition. Although we provide financing to our customers, larger firms have a much greater capability to provide their clients with financing which provides them with a competitive advantage. We are much more reliant upon our employee’s relationships, networks, and abilities to exploit market opportunities. Therefore, our business may significantly be impacted by the addition or loss of key personnel.

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 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.

A portion of our revenues is generated from net trading activity. We engage in proprietary trading for our own account, provide securities financing for our customers, as well as execute “riskless” trades with a customer order in hand resulting in limited market risk to us. The inventory of securities held for our own account, as well as held to facilitate customer trades, and our market making activities are sensitive to market movements.

A portion of our revenues is generated from new issue and advisory engagements. The fees charged and volume of these engagements are sensitive to the overall business environment. During the first quarter of 2014, we stopped providing investment banking and advisory services to special purpose acquisition companies (“SPACs”) in our U.S. broker-dealer, JVB. We will continue to earn new issue and advisory revenue in JVB primarily related to new issues of structured products and as part of our European operations conducted by CCFL.

A portion of our revenues 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 March 31, 2015, 99.0% of our existing AUM are CDOs. The creation of CDOs and permanent capital vehicles has depended upon a vibrant securitization market. Since 2008, volumes within the securitization market have dropped significantly and have not recovered since that time. Consequently, we have been unable to complete a new securitization since 2008.

A portion of our revenues is generated from our principal investing activities. Therefore, our revenues are impacted by the underlying performance of these investments. As of March 31, 2015, we had $25,823 of other investments, at fair value representing our principal investment portfolio. Our results of operations and financial condition will be significantly impacted by the financial results of these investments.

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Legislation Affecting the Financial Services Industry

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law. The Dodd-Frank Act contains a variety of provisions designed to regulate financial markets, including credit and derivative transactions. While many provisions of the Dodd-Frank Act have been implemented, other aspects of the Dodd-Frank Act are subject to rulemaking that will take effect over the next several years, thus making it difficult to assess Dodd-Frank’s aggregated impact on the financial industry, including us, at this time. The Dodd-Frank Act establishes enhanced compensation and corporate governance oversight for the financial services industry, provided a specific framework for payment, clearing and settlement regulation, and empowered the SEC to adopt regulations requiring new fiduciary duties and other more stringent regulation of broker-dealers, investment companies, and investment advisers. We will continue to monitor all applicable developments in the implementation of the Dodd-Frank Act and expect to adapt successfully to any new applicable legislative and regulatory requirements.

Recent Events

Sale of European Operations

On August 19, 2014, we announced that we had entered into a definitive agreement to sell our European operations (the “Europe Sale Agreement”) to an entity controlled by Daniel G. Cohen, the Vice Chairman of the Company’s Board of Directors and of the board of managers of the Operating LLC, President and Chief Executive of our European Business and President of CCFL. The purchase price of $8,700 consists of an upfront payment of $4,750 (subject to adjustment) and $3,950 to be paid over four years. Upon closing, we will enter into a non-cancellable trust deed with one of the entities included in the sale that will entitle us to substantially all of the revenues earned from the management of the Munda CLO. This sale will include all activities carried out in our London, Paris, and Madrid offices and involves approximately 30 employees. As part of the transaction, Mr. Cohen will resign as President and Chief Executive of our European Business and will receive no severance or other termination benefits. The transaction is subject to regulatory approval of the United Kingdom Financial Conduct Authority (“FCA”).

Under the terms of the Europe Sale Agreement, we had the right to initiate, solicit, facilitate, and encourage alternative acquisition proposals from third parties for a “go shop” period of up to 90 days from the signing of the purchase agreement. On October 29, 2014, the special committee of the board of directors elected to end the “go shop” period. The “go shop” period did not result in us receiving a superior proposal from a third party, and we intend to pursue the transaction with the entity controlled by Daniel G. Cohen, which is expected to close in the first half of 2015.

The Europe Sale Agreement is subject to customary closing conditions and regulatory approval from the FCA.

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Consolidated Results of Operations

This section provides a comparative discussion of our consolidated results of operations for the specified periods. The period-to-period comparisons of financial results are not necessarily indicative of future results.

Three Months Ended March 31, 2015 Compared to the Three Months Ended March 31, 2014

The following table sets forth information regarding our consolidated results of operations for the three months ended March 31, 2015 and 2014.


INSTITUTIONAL FINANCIAL MARKETS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands)
(Unaudited)

	Three Months Ended March 31,				Favorable / (Unfavorable)
	2015		2014		$ Change		% Change
Revenues
Net trading	$	7,271	$	6,929	$	342		5%
Asset management		2,298		4,069		(1,771)		(44)%
New issue and advisory		1,498		330		1,168		354%
Principal transactions and other income		1,727		1,859		(132)		(7)%
Total revenues		12,794		13,187		(393)		(3)%

Operating expenses
Compensation and benefits		7,588		7,970		382		5%
Business development, occupancy, equipment		818		1,058		240		23%
Subscriptions, clearing, and execution		1,848		2,199		351		16%
Professional fee and other operating		2,025		3,321		1,296		39%
Depreciation and amortization		234		331		97		29%
Total operating expenses		12,513		14,879		2,366		16%

Operating income / (loss)		281		(1,692)		1,973		117%

Non-operating income / (expense)

Interest expense, net		(976)		(1,129)		153		14%
Income / (loss) from equity method affiliates		-		26		(26)		(100)%
Income / (loss) before income taxes		(695)		(2,795)		2,100		75%
Income taxes		61		10		(51)		(510)%
Net income / (loss)		(756)		(2,805)		2,049		73%
Less: Net income (loss) attributable to the non-controlling interest		(198)		(707)		(509)		(72)%
Net income / (loss) attributable to IFMI	$	(558)	$	(2,098)	$	1,540		73%

Revenues

Revenues decreased by $393, or 3%, to $12,794 for the three months ended March 31, 2015 from $13,187 for the three months ended March 31, 2014. As discussed in more detail below, the change was comprised of (i) an increase of $342 in net trading revenue; (ii) a decrease of $1,771 in asset management revenue; (iii) an increase of $1,168 in new issue and advisory revenue; and (iv) a decrease of $132 in principal transactions and other income.

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Net Trading

Net trading revenue increased by $342, or 5%, to $7,271 for the three months ended March 31, 2015 from $6,929 for the three months ended March 31, 2014. The following table provides detail on net trading revenue by operation.

Our TBA and other forward agency MBS and mortgage trading business has increased from prior year as we have expanded capital dedicated to this business which has allowed us to increase the number of clients served. This increase was partially offset because we stopped our CLO trading activity subsequent to March 31, 2014.

Our net trading revenue includes unrealized gains on our trading investments, as of the applicable measurement date, that 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 volatility and uncertainty in the capital markets, the net trading revenue recognized during the three months ended March 31, 2015 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 fair value hierarchy. Level 3 assets are carried at fair value based on estimates derived using internal valuation models and other estimates. See notes 6 and 7 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q. The fair value estimates made by the Company may not be indicative of the final sale price at which these assets may be sold.

Asset Management

Assets Under Management

Our assets under management (“AUM”) equals the sum of: (1) the gross assets included in CDOs that we have sponsored and manage; plus (2) the NAV of the permanent capital vehicles and investment funds we manage; plus (3) the NAV of other accounts we manage.

Our calculation of AUM may differ from the calculations used by other asset managers and, as a result, this measure may not be comparable to similar measures presented by other asset managers. This definition of AUM is not necessarily identical to a definition of AUM that may be used in our management agreements.



ASSETS UNDER MANAGEMENT
(Dollars in Thousands)

	March 31,					December 31,
	2015		2014		2014		2013
Company sponsored CDOs (1)	$	4,013,635	$	5,295,645	$	4,283,333	$	5,377,187
Permanent capital vehicles (2)		-		-		-		109,977
Investment funds (3)		-		-		-		172,052
Managed accounts (4)		40,542		32,733		13,689		35,752
Assets under management (5)	$	4,054,177	$	5,328,378	$	4,297,022	$	5,694,968

(1)

Management fee income earned from Company sponsored CDOs is recorded as a component of asset management revenue.

(2)

Management fee income earned from funds managed in permanent capital vehicles is recorded as a component of asset management revenue.

(3)

Management fee income earned from investment funds is primarily comprised of fees earned by entities in which the Company has an equity method investment. Accordingly, the resulting revenue is accounted for within income from equity method affiliates.

(4)

Management fee income earned on managed accounts is recorded as a component of asset management revenue.

(5)

AUM for company sponsored CDOs, permanent capital vehicles, investment funds, and other managed accounts represents total AUM at the end of the period indicated.

(6)

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Asset management fees decreased by $1,771, or 44%, to $2,298 for the three months ended March 31, 2015 from $4,069 for the three months ended March 31, 2014, as discussed in more detail below. The following table provides a more detailed comparison of the two periods.



ASSET MANAGEMENT
(Dollars in Thousands)

	March 31, 2015		March 31, 2014		Change
CDO and related service agreements	$	2,210	$	3,254	$	(1,044)
Other		88		815		(727)
Total	$	2,298	$	4,069	$	(1,771)

CDOs

Asset management revenue from company sponsored CDOs decreased by $1,044 to $2,210 for the three months ended March 31, 2015 from $3,254 for the three months ended March 31, 2014. The following table summarizes the periods presented by asset class.



FEES EARNED BY ASSET CLASS
(Dollars in Thousands)

	March 31, 2015		March 31, 2014		Change
TruPS and insurance company debt - U.S.	$	1,014	$	1,610	$	(596)
High grade and mezzanine ABS		9		148		(139)
TruPS and insurance company debt - Europe		513		649		(136)
Broadly syndicated loans - Europe		674		847		(173)
Total	$	2,210	$	3,254	$	(1,044)

Asset management fees for TruPS and insurance company debt – U.S. declined primarily because in May 2014 and October 2014, two securitizations that we managed had successful auctions and terminated. We will no longer earn fees related to these securitizations going forward. We earned a total of $589 in revenue from these two securitizations for the three months ended March 31, 2014.

Asset management fees for high grade and mezzanine ABS declined primarily because the average AUM in the remaining deals in this asset class declined due to defaults of the underlying assets, repayments of the underlying assets, and the transfer of certain management contracts to a third party. As of March 31, 2015, we only manage one remaining contract. We do not expect to earn material management fees in the future from this asset class.

Asset management fees for TruPS and insurance company debt – Europe declined because of both (i) the decline of collateral balances due to principal payments and defaults and (ii) the impact of foreign exchange rates as these contracts make payments in Euros.

Asset management fees for broadly syndicated loans – Europe consist of a single CLO. Fees declined because the reinvestment period has ended for this CLO. Following the end of such reinvestment period, principal payments received will be paid out to investors in the CLO. The fees we earn should decline as the collateral balances decline. Additionally, this contract also makes payments in Euros, which negatively impacted the revenue earned.

Other

Other asset management revenue decreased by $727 to $88 for the three months ended March 31, 2015 from $815 for the three months ended March 31, 2014. The decrease was comprised of (i) a decrease of $125 resulting from the sale of Star Asia Manager (see note 4 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q) and (ii) a decrease of $602 in asset management revenue earned from separate accounts.

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New Issue and Advisory Revenue

New issue and advisory revenue increased by $1,168, or 354%, to $1,498 for the three months ended March 31, 2015 from $330 for the three months ended March 31, 2014.

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 stays 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.

Principal Transactions and Other Income

Principal transactions and other income decreased by $132 to $1,727 for the three months ended March 31, 2015, as compared to $1,859 for the three months ended March 31, 2014. The following table summarizes principal transactions and other income by category.



PRINCIPAL TRANSACTIONS & OTHER INCOME
(Dollars in Thousands)

	March 31, 2015		March 31, 2014		Change
EuroDekania	$	(228)	$	1,131	$	(1,359)
Tiptree		(449)		50		(499)
Currency hedges		409		(347)		756
CLO investments		649		44		605
Other principal investments		18		(4)		22
Gain on sale of Star Asia Group		-		78		(78)
Total principal transactions		399		952		(553)

Alesco X-XVII revenue share		187		188		(1)
Star Asia revenue share		1,102		79		1,023
Strategos revenue share		20		123		(103)
All other income / (loss)		19		517		(498)
Other income		1,328		907		421

Total principal transactions and other income	$	1,727	$	1,859	$	(132)

Principal Transactions

EuroDekania is an investment company and we carry our investment at the NAV of the fund. Income recognized in each period is a result of changes in the underlying NAV of the fund as well as distributions received. Our investment in EuroDekania is denominated in Euros. We sometimes hedge this exposure (as described in greater detail below). Currently, EuroDekania is not making new investments, and has no plans to make new investments. As cash is received from its current investments, it has been returned to EuroDekania’s shareholders.

Tiptree is publicly traded and we carry our investment at Tiptree’s closing share price. Changes in the fair value of our investment in Tiptree represent changes in its share price.

Beginning in the first quarter of 2014, we began investing our capital in investments (primarily in CLOs) that we do not manage. Our focus on CLO investments capitalizes on our strengths in structured credit and leveraged finance. The income of $649 recognized during the three months ended March 31, 2015 is comprised of $715 of investment income, $227 of net unrealized gain; partially offset by $293 of impairment charges.

In 2015, our currency hedge consists of a Euro forward agreement designed to hedge the currency risk associated with our investment in EuroDekania. In 2014, the currency hedge consists of a Yen hedge designed to hedge the currency risk associated with our investment in Star Asia. The Yen hedge was extinguished in connection with the sale of the Star Asia Group.

On February 20, 2014, we completed the sale of all of our ownership interests in the Star Asia Group. In consideration for the sale of the Star Asia Group, we received an initial upfront payment of $20,043 and will receive contingent payments equal to 15% of

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certain revenues generated by Star Asia Manager, SAA Manager, SAP GP, Star Asia Capital Management, and certain affiliated entities for a period of at least four years. As a result of the sale of the Star Asia Group, we recorded a gain of $78 in the first quarter of 2014, which is included in the table above. The gain is attributable to the Star Asia Group as a whole. It is calculated as the cash received of $20,043 less the combined carrying value of all the entities in the Star Asia Group of $19,965 at the time of the sale. The Company’s accounting policy is to record contingent payments receivable as income as they are earned. In the future, the Company will record any contingent income as a component of principal transactions and other income. These contingent payments are shown in the table above as Star Asia revenue share.

Other Income / (Loss)

Other income increased by $421 to $1,328 for the three months ended March 31, 2015, as compared to $907 for the three months ended March 31, 2014. Other income / (loss) is comprised of certain ongoing revenue share arrangements as well as other miscellaneous operating income items. The Star Asia entity revenue share represents contingent payments that are owed to us from the buyer of our interests in the entities in the Star Asia Group. The Star Asia revenue share arrangement expires effective January of 2018. The Alesco X-XVII revenue shares represent contingent payments that are owed to us from the buyer of the Alesco X-XVII management agreements. This arrangement expires February of 2017. The Strategos revenue share expired in December 2014 but had a final adjustment which was recorded in the three months ended March 31, 2015.

Operating Expenses

Operating expenses decreased by $2,366, or 16%, to $12,513 for the three months ended March 31, 2015 from $14,879 for the three months ended March 31, 2014. As discussed in more detail below, the change was comprised of (i) a decrease of $382 in compensation and benefits; (ii) a decrease of $240 in business development, occupancy, and equipment; (iii) a decrease of $351 in subscriptions, clearing, and execution; (iv) a decrease of $1,296 of professional fee and other operating; and (v) a decrease of $97 of depreciation and amortization.

Compensation and Benefits

Compensation and benefits decreased by $382, or 5%, to $7,588 for the three months ended March 31, 2015 from $7,970 for the three months ended March 31, 2014.



COMPENSATION AND BENEFITS
(Dollars in Thousands)

	March 31, 2015		March 31, 2014		Change
Cash compensation and benefits	$	7,025	$	7,297	$	(272)
Equity-based compensation		563		673		(110)
Total	$	7,588	$	7,970	$	(382)

Cash compensation and benefits in the table above is primarily comprised of salary, incentive compensation, and benefits. Cash compensation and benefits decreased by $272 to $7,025 for the three months ended March 31, 2015 from $7,297 for the three months ended March 31, 2014. This decrease was a result of a decrease in incentive compensation that is tied to revenue and operating profitability as well as the reduction in our headcount. Our total headcount decreased from 111 at March 31, 2014 to 104 at March 31, 2015. From time to time, the Company pays employees severance when they are terminated without cause. These severance payments are included within cash compensation in the table above.

Equity-based compensation decreased by $110 to $563 for the three months ended March 31, 2015 from $673 for the three months ended March 31, 2014. This was primarily as a result of certain share grants becoming fully vested on or about December 31, 2014 partially offset by the issuance of new grants during 2015.

Business Development, Occupancy, and Equipment

Business development, occupancy, and equipment decreased by $240, or 23%, to $818 for the three months ended March 31, 2015 from $1,058 for the three months ended March 31, 2014. The decrease was comprised of a decrease of $140 in business development and a decrease in occupancy and equipment expenses of $100, primarily as a result of the reduction in headcount and office space in connection with the merger of CCPR and JVB.

Subscriptions, Clearing, and Execution

Subscriptions, clearing, and execution decreased by $351, or 16%, to $1,848 for the three months ended March 31, 2015 from $2,199 for the three months ended March 31, 2014. The decrease was due to a reduction in subscriptions of $573, primarily the result

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of cancellation of subscriptions in connection with the merger of CCPR and JVB, partially offset by an increase in clearing and solicitation costs of $222 primarily as the result of solicitation costs paid related to new issue revenue earned by CCFL.

Professional Fees and Other Operating Expenses

Professional fees and other operating expenses decreased by $1,296, or 39%, to $2,025 for the three months ended March 31, 2015 from $3,321 for the three months ended March 31, 2014. This was comprised of a decrease of $967 in professional fees and a decrease of $329 in other operating expenses. The decrease in professional fees was primarily due to a decrease in consulting expense. The decrease in other operating expense was primarily due to reduction in expenses as a result of the reduction in headcount related to the merger of CCPR and JVB.

Depreciation and Amortization

Depreciation and amortization decreased by $97, or 29%, to $234 for the three months ended March 31, 2015 from $331 for the three months ended March 31, 2014.

Non-Operating Income and Expense

Interest Expense

Interest expense decreased by $153, or 14%, to $976 for the three months ended March 31, 2015 from $1,129 for the three months ended March 31, 2014. The decrease was comprised of a decrease of $86 related to our 10.50% Contingent Convertible Senior Notes due 2027 that were repurchased in May 2014 and a decrease of $67 related to reduced interest expense incurred on our junior subordinated notes due to changes in the effective rate used to determine discount amortization. These notes have a variable rate and we adjust our amortization schedule annually, at the beginning of each year, based on the expected future LIBOR curve. See note 12 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

Income / (Loss) from Equity Method Affiliates

Income from equity method affiliates decreased by $26, or 100% to $0 for the three months ended March 31, 2015 from $26 for the three months ended March 31, 2014. Income or loss from equity method affiliates represents our share of the related entities’ earnings.



INCOME / (LOSS) FROM EQUITY METHOD AFFILIATES
(Dollars in Thousands)

	March 31, 2015		March 31, 2014		Change
SAA Manager	$	-	$	14	$	(14)
Star Asia Capital Management		-		13		(13)
Star Asia Opportunity		-		(1)		1
Total	$	-	$	26	$	(26)

As of March 31, 2015, we had no investments accounted for under the equity method. See notes 10 and 19 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

Income Tax Expense / (Benefit)

The income tax expense / (benefit) increased by $51 to income tax expense / (benefit) of $61 for the three months ended March 31, 2015 from $10 for the three months ended March 31, 2014. The increase was primarily due to increase in foreign taxes incurred in Spain and France. Also, see note 16 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q regarding an income tax assessment received by the Company from the Commonwealth of Pennsylvania.

Net Income / (Loss) Attributable to the Non-controlling Interest

Net income / (loss) attributable to the non-controlling interest for the three months ended March 31, 2015 and 2014 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. In addition, net income / (loss) attributable to the non-controlling interest also included non-controlling interest related to entities that were consolidated by the Operating LLC but not wholly owned.

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SUMMARY CALCULATION OF NON-CONTROLLING INTEREST
For the Three Months Ended March 31, 2015

	Total
	Operating LLC				Consolidated
	Consolidated		IFMI		IFMI
Net income / (loss) before tax	$	(695)	$	-	$	(695)
Income tax expense / (benefit)		61		-		61
Net income / (loss) after tax		(756)		-		(756)
Average effective Operating LLC non-controlling interest (1)%		26.19%
Operating LLC non-controlling interest		(198)



SUMMARY CALCULATION OF NON-CONTROLLING INTEREST
For the Three Months Ended March 31, 2014

	Total
	Operating LLC				Consolidated
	Consolidated		IFMI		IFMI
Net income / (loss) before tax	$	(2,795)	$	-	$	(2,795)
Income tax expense / (benefit)		10		-		10
Net income / (loss) after tax		(2,805)		-		(2,805)
Average effective Operating LLC non-controlling interest (1)%		25.20%
Operating LLC non-controlling interest		(707)

(1)Non-controlling interest is recorded on a monthly basis. 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.

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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. In addition, our United States and United Kingdom broker-dealer subsidiaries are subject to certain regulatory requirements to maintain minimum levels of net capital. Historically, our primary sources of funds have been our operating activities and general corporate borrowings. In addition, our trading operations have generally been financed by use of collateralized securities financing arrangements as well as margin loans.

Certain subsidiaries of the Operating LLC have restrictions on the withdrawal of capital and otherwise in making distributions and loans. JVB is subject to net capital restrictions imposed by the SEC and FINRA that require certain minimum levels of net capital to remain in this subsidiary. In addition, these restrictions could potentially impose notice requirements or limit our ability to withdraw capital above the required minimum amounts (excess capital) whether through a distribution or a loan. CCFL is regulated by the FCA and must maintain certain minimum levels of capital. See note 14 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

See Liquidity and Capital Resources – Debt Financing and Liquidity and Capital Resources – Contractual Obligations below.

During the third quarter of 2010, our Board of Directors initiated a dividend of $0.05 per quarter, which was paid regularly through December 31, 2011. Beginning in 2012, the Company declared a dividend of $0.02 per quarter, which was paid regularly through the first quarter of 2015. The Company’s Board of Directors has the power to decide to increase, reduce, or eliminate dividends in the future. The Company’s Board of Director’s decision will depend on a variety of factors, including business, financial, and regulatory considerations as well as any limitations under Maryland law or imposed by any agreements governing indebtedness of the Company. There can be no assurances that such dividends will be maintained or increased and, if maintained or increased, will not subsequently be discontinued.

Each time a cash dividend was declared by our Board of Directors, a pro rata distribution was made to the other members of the Operating LLC upon the payment of dividends to stockholders of the Company.

On May 4, 2015, our Board of Directors declared a cash dividend of $0.02 per share, which will be paid on our common stock on June 2, 2015 to stockholders of record on May 19, 2015. A pro rata distribution will be made to the other members of the Operating LLC upon the payment of the dividends to stockholders of the Company.

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Cash Flows

We have four primary uses for capital:

(1) To fund the operations of our Capital Markets business segment: Our Capital Markets business segment utilizes capital (i) to fund securities inventory to facilitate client trading activities; (ii) for risk trading on our own account; (iii) to fund our collateralized securities lending activities; (iv) for temporary capital needs associated with underwriting activities; (v) to fund business expansion into existing or new product lines including additional capital dedicated to our TBA and other forward agency MBS and mortgage trading business line; and (vi) to fund any operating losses incurred.

(2) To fund principal investments for our principal investing segment: We make principal investments to generate attractive returns. We may need to raise additional debt or equity financing in order to ensure we have the capital necessary to take advantage of attractive investment opportunities.

(3) To fund mergers or acquisitions: We may opportunistically use capital to acquire other asset managers, individual asset management contracts, or financial services firms. To the extent our liquidity sources are insufficient to fund our future activities, we may need to raise additional funding through an equity or debt offering. No assurances can be given that additional financing will be available in the future, or that if available, such financing will be on favorable terms.

(4) To fund potential dividends and distributions: During the third quarter of 2010 and for each subsequent quarter through March 31, 2015, we have declared a dividend. A pro rata distribution has been paid to the other members of the Operating LLC upon the payment of any dividends to stockholders of IFMI.

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.

As of March 31, 2015 and December 31, 2014, we maintained cash and cash equivalents of $5,082 and $12,253, respectively. We generated cash from or used cash for the following activities.



SUMMARY CASH FLOW INFORMATION
(Dollars in Thousands)

	Three Months Ended March 31,
	2015		2014
Cash flow from operating activities	$	(9,392)	$	1,444
Cash flow from investing activities		2,890		14,088
Cash flow from financing activities		(411)		(410)
Effect of exchange rate on cash		(258)		3
Net cash flow		(7,171)		15,125
Cash and cash equivalents, beginning		12,253		13,161
Cash and cash equivalents, ending	$	5,082	$	28,286

See the statement of cash flows in our consolidated financial statements. We believe our available cash and cash equivalents, as well as our investment in our trading portfolio and related borrowing capacity, will provide sufficient liquidity to meet the cash needs of our ongoing operations in the near term.

Three Months Ended March 31, 2015

As of March 31, 2015, our cash and cash equivalents were $5,082, representing a decrease of $7,171 from December 31, 2014. The decrease was attributable to the cash used by operating activities of $9,392, the cash provided by investing activities of $2,890, the cash used by financing activities of $411, and the decrease in cash caused by the change in exchange rates of $258.

The cash used by operating activities of $9,392 was comprised of (a) net cash inflows of $179 related to working capital fluctuations; (b) net cash outflows of $9,472 from trading activities comprised of our investments-trading, trading securities sold, not yet purchased, securities sold under agreement to repurchase, and receivables and payables from brokers, dealers, and clearing agencies, as well as the changes in unrealized gains and losses on the investments-trading and trading securities sold, but not yet purchased; and (c) net cash outflows from other earnings items of $99 (which represents net income or loss adjusted for the following non-cash operating items: other income / (expense), realized and unrealized gains and losses and accretion of income on other investments, income or loss from equity method affiliates, equity based compensation, depreciation and amortization, amortization of discount on debt, and impairment of goodwill).

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The cash provided by investing activities of $2,890 was comprised of (a) $2,976 of sales and returns of capital of other investments, at fair value cash used to purchase other investments, at fair value partially offset by (b) $1 of purchases of other investments, at fair value and (c) $85 of purchases of furniture, equipment, and leasehold improvements.

The cash used in financing activities of $411 was comprised of (a) $106 of distributions to non-controlling interests related to the Operating LLC and (b) $305 in dividends to shareholders of IFMI.

Three Months Ended March 31, 2014

As of March 31, 2014, our cash and cash equivalents were $28,286, representing a net increase of $15,125 from December 31, 2013. The increase was attributable to the cash provided by operating activities of $1,444, the cash provided by investing activities of $14,088, the cash used by financing activities of $410, and the increase in cash caused by the change in exchange rates of $3.

The cash provided by operating activities of $1,444 was comprised of (a) net cash outflows of $3,548 related to working capital fluctuations; (b) net cash inflows of $7,435 from trading activities comprised of our investments-trading, trading securities sold, not yet purchased, securities sold under agreement to repurchase, and receivables and payables from brokers, dealers, and clearing agencies, as well as the changes in unrealized gains and losses on the investments-trading and trading securities sold, but not yet purchased; and (c) a net cash outflows from other earnings items of $2,443 (which represents net income or loss adjusted for the following non-cash operating items: other income / (expense), realized and unrealized gains and losses and accretion of income on other investments, income or loss from equity method affiliates, equity based compensation, depreciation and amortization, amortization of discount on debt, and impairment of goodwill).

The cash provided by investing activities of $14,088 was comprised of (a) $19,924 of net proceeds from the sale of the Star Asia Group; (b) $1,336 of proceeds from sales and returns of principal from other investments, at fair value; (c) $50 in distributions received from equity method affiliates; net of (d) $7,222 of cash used to acquire other investments, at fair value.

The cash used in financing activities of $410 was comprised of (a) $79 used for the payment of employee tax obligations related to restricted stock vesting and (b) $331 in dividends to shareholders of IFMI.

Regulatory Capital Requirements

We have two subsidiaries that are licensed securities dealers: JVB in the United States and CCFL in the United Kingdom. As a U.S. broker-dealer, JVB is subject to the Uniform Net Capital Rule in Rule 15c3-1 under the Exchange Act, and our London-based subsidiary, CCFL, is subject to the regulatory supervision and requirements of the FCA. The amount of net assets that these subsidiaries may distribute is subject to restrictions under these applicable net capital rules. These subsidiaries have historically operated in excess of minimum net capital requirements. Our minimum capital requirements at March 31, 2015 were as follows.


MINIMUM NET CAPITAL REQUIREMENTS
(Dollars in Thousands)
United States	$	267
United Kingdom		1,747
Total	$	2,014

We operate with more than the minimum regulatory capital requirement in our licensed broker-dealers and at March 31, 2015, total net capital, or the equivalent as defined by the relevant statutory regulations, in our licensed broker-dealers totaled $12,907. See note 14 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

In addition, our licensed broker-dealers are generally subject to capital withdrawal notification and restrictions.

Securities Financing

We maintain repurchase agreements with various third party financial institutions. There is no maximum limit as to the amount of securities that may be transferred pursuant to these agreements, and transactions are approved on a case-by-case basis. The repurchase agreements do not include substantive provisions other than those covenants and other customary provisions contained in standard master repurchase agreements. The repurchase agreements generally require us to transfer additional securities to the counterparty in the event the value of the securities then held by the counterparty in the margin account falls below specified levels and contains events of default in cases where we breach our obligations under the agreement. We receive margin calls from our repurchase agreement counterparties from time to time in the ordinary course of business. To date, we have maintained sufficient liquidity to meet margin calls, and we have never been unable to satisfy a margin call, however, no assurance can be given that we

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will be able to satisfy requests from our counterparties to post additional collateral in the future. See note 9 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

If there were an event of default under the repurchase agreements, we would give our counterparty the option to terminate all repurchase transactions existing with us and make any amount due from us to the counterparty payable immediately. Repurchase obligations are full recourse obligations to us. If we were to default under a repurchase obligation, the counterparty would have recourse to our other assets if the collateral was not sufficient to satisfy the obligation in full.

The Company’s clearing brokers provide securities financing arrangements including margin arrangements and securities borrowing and lending arrangements. These arrangements generally require us to transfer additional securities or cash to the clearing broker in the event the value of the securities then held by the clearing broker in the margin account falls below specified levels and contain events of default in cases where we breach our obligations under such agreements.

An event of default under the clearing agreement would give our counterparty the option to terminate our clearing arrangement. Any amounts owed to the clearing broker would be immediately due and payable. These obligations are recourse to us. Furthermore, a termination 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.

The following table presents our period end balance, average monthly balance, and maximum balance at any month end during the three months ended March 31, 2015 and the twelve months ended December 31, 2014 for receivables under resale agreements and securities sold under agreements to repurchase.



		For the Three Months Ended March 31, 2015		Twelve Months Ended December 31, 2014
Receivables under resale agreements
Period end	$	110,913	$	101,675
Monthly average		104,370		64,409
Maximum month end		110,913		101,675
Securities sold under agreements to repurchase
Period end	$	111,118	$	101,856
Monthly average		104,569		64,740
Maximum month end		111,118		101,856

Fluctuations in the balance of our repurchase agreements from period to period and intraperiod are dependent on business activity in those periods. 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. Month-end balances may be higher or lower than average period balances.

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Debt Financing

As of March 31, 2015, we had the following sources of debt financing other than securities financing arrangements: (1) convertible senior notes, comprised of 8.0% Convertible Notes; and (2) junior subordinated notes payable to the following two special purpose trusts: (a) Alesco Capital Trust I and (b) Sunset Financial Statutory Trust I.

See note 12 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q for a discussion of the Company’s outstanding debt.

The following table summarizes the Company’s long-term indebtedness and other financing outstanding.



DETAIL OF DEBT
(Dollars in Thousands)

Description	Current Outstanding Par			March 31, 2015		December 31, 2014		Interest Rate Terms	Interest (3)		Maturity
Convertible senior notes:
8.00% convertible senior notes (the "8.0% Convertible Notes")	$	8,248		$	8,248	$	8,248	8.00%	8.00	%	September 2018 (1)

Junior subordinated notes:
Alesco Capital Trust I		28,125	(2)		11,650		11,499	4.25%	4.25	%	July 2037
Sunset Financial Statutory Trust I		20,000	(2)		8,300		8,192	4.42%	4.42	%	March 2035
	$	48,125			19,950		19,691
Total				$	28,198	$	27,939

(1)

The holders of the 8.0% Convertible Notes may convert all or any part of the outstanding principal amount of the 8.0% Convertible Notes at any time prior to maturity into shares of the Company's company stock at a conversion price of $3.00 per share, subject to customary anti-dilution adjustments.

(2)The outstanding par represents the total par amount of the junior subordinated notes held by two separate VIE trusts. We do not consolidate these trusts. We hold $1,489 par value of these junior subordinated notes, comprised of $870 par value of junior subordinated notes related to Alesco Capital Trust I and $619 par value of junior subordinated notes related to Sunset Financial Statutory Trust I. These notes have a carrying value of $0. Therefore, the net par value held by third parties is $48,125.

(3)Represents the interest rate in effect as of the last day of the reporting period.

Off-Balance Sheet Arrangements

There were no material off balance sheet arrangements as of March 31, 2015.

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Contractual Obligations

The table below summarizes our significant contractual obligations as of March 31, 2015 and the future periods in which such obligations are expected to be settled in cash. We assumed that the 8.0% Convertible Notes are not converted prior to maturity. Our junior subordinated notes are assumed to be repaid on their respective maturity dates. Excluded from the table below are obligations that are short-term in nature, including trading liabilities and repurchase agreements.



CONTRACTUAL OBLIGATIONS
March 31, 2015
(Dollars in Thousands)

		Payment Due by Period
		Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 Years
Operating lease arrangements	$	4,686	$	1,752	$	1,918	$	710	$	306
Maturity of 8.0% Convertible Notes (1)		8,248		-		-		8,248		-
Interest on 8.0% Convertible Notes (1)		2,330		669		1,338		323		-
Maturities on junior subordinated notes		48,125		-		-		-		48,125
Interest on junior subordinated notes (2)		44,616		2,082		4,162		4,162		34,210
	$	108,005	$	4,503	$	7,418	$	13,443	$	82,641

(1)Assumes the 8.0% Convertible Notes are not converted prior to maturity.

(2)The interest on the junior subordinated notes related to Alesco Capital Trust I is variable. The interest rate of 4.2546% (based on a 90-day LIBOR rate in effect as of March 31, 2015 plus 4.00%) was used to compute the contractual interest payment in each period noted. The interest on the junior subordinated notes related to Sunset Financial Statutory Trust I is variable. The interest rate of 4.4231% (based on a 90-day LIBOR rate in effect as of March 31, 2015 plus 4.15%) was used to compute the contractual interest payment in each period noted.

We believe that we will be able to continue to fund our current operations and meet our contractual obligations through a combination of existing cash resources and other sources of credit. Due to the uncertainties that exist in the economy, we cannot be certain that we will be able to replace existing financing or find sources of additional financing in the future.

Recent Accounting Pronouncements

The following is a list of recent accounting pronouncements that we believe will have a continuing impact on our financial statements going forward.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which replaces existing revenue recognition guidance in Topic 605, Revenue Recognition, replaces certain other industry-specific revenue recognition guidance, specifies the accounting for certain costs to obtain or fulfill a contract with a customer and provides recognition and measurement guidance in relation to sales of non-financial assets. The core principle of this ASU is to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU provides guidance on how to achieve this core principle, including how to identify contracts with customers and separate performance obligations in the contract, how to determine and allocate the transaction price to such performance obligations and how to recognize revenue when a performance obligation has been satisfied. The ASU is effective for annual reporting periods, and interim periods within those reporting periods, beginning after December 15, 2016 with early adoption prohibited. We will be required to apply the amendments in this ASU using one of the following two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within the ASU; or (ii) retrospective with the cumulative effect of initially applying the ASU recognized at the date of the initial application and providing certain additional disclosures as defined in the ASU. We will adopt the provisions of this ASU effective January 1, 2017 and are currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.

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15, 2015 with early adoption permitted using either of two methods: (i) prospective to all awards granted or modified after the effective date; or (ii) retrospective to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter, with the cumulative effect applying this ASU as an adjustment to the opening retained earnings balance as of the beginning of the earliest annual period presented in the financial statements. We will adopt the provisions of this ASU effective January 1, 2016 and are currently evaluating the new guidance to determine the impact, if any, that it will have on our consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-13, Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity, which provides a measurement alternative for an entity that consolidates collateralized financing entities. A collateralized financing entity is a variable interest entity with nominal or no equity that holds financial assets and issues beneficial interests in those financial assets. The beneficial interests, which are financial liabilities of the collateralized financing entity, have contractual recourse only to the related assets of the collateralized financing entity. If elected, the alternative method results in the reporting entity measuring both the financial assets and financial liabilities of the collateralized financing entity using the more observable of the two fair value measurements, which effectively removes measurement differences between the financial assets and financial liabilities of the collateralized financing entity previously recorded as net income (loss) attributable to non-controlling and other beneficial interests and as an adjustment to appropriated retained earnings. The reporting entity continues to measure its own beneficial interests in the collateralized financing entity (other than those that represent compensation for services) at fair value. The ASU is effective for annual periods and interim periods with those annual periods beginning after December 15, 2015. A reporting entity may apply the ASU using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the annual period of adoption. A reporting entity may also apply the ASU retrospectively to all relevant prior periods beginning with the annual period in which ASU No. 2009-17, Consolidation (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, was adopted. Early adoption is permitted. We are currently evaluating the potential impact of the provisions of this ASU on our consolidated financial statements and related disclosures.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20), Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items, which eliminates from U.S. GAAP the requirement of extraordinary items to be separately classified on the income statement. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We will adopt the provisions of this ASU effective January 1, 2016 and are currently evaluating the new guidance to determine the impact it may have on our consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis, which makes targeted amendments to the current consolidation guidance and ends the deferral granted to investment companies from applying the Variable Interest Entity (“VIE”) guidance. The revised consolidation guidance, among other things, (i) modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, (ii) eliminates the presumption that a general partner should consolidate a limited partnership, and (iii) modifies the consolidation analysis of reporting entities that are involved with VIEs through fee arrangements and related party relationships. The standard is effective for us beginning on January 1, 2016, however, early adoption is allowed, including in any interim period. We are currently evaluating the impact of this ASU on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement for debt issuance costs are not affected by the amendments in this Update. The amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of these amendments is permitted for financial statements that have not been previously issued. An entity should apply the new guidance on a retrospective basis, and the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. We are currently evaluating the impact of these amendments on the presentation in our consolidated financial statements.

Critical Accounting Policies and Estimates

Our accounting policies are essential to understanding and interpreting the financial results reported in our condensed consolidated financial statements. The significant accounting policies used in the preparation of our condensed consolidated financial statements are summarized in note 3 to the Company’s consolidated financial statements and notes thereto found in our Annual Report on Form 10-K for the year ended December 31, 2014. Certain of those policies are considered to be particularly important to the presentation of our financial results because they require us to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures. We base our

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assumptions, estimates, and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates, and judgments to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. 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. During the three months ended March 31, 2015, there were no material changes to matters discussed under the heading “Critical Accounting Policies and Estimates” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

All amounts in this section are in thousands unless otherwise noted.

Market Risk

Market risk is the risk of economic loss arising from the adverse impact of market changes to the market value of our trading and investment positions. Market risk is inherent to both derivative and non-derivative financial instruments, and accordingly, the scope of our market risk management procedures extends beyond derivatives to include all market risk sensitive financial instruments. For purposes of analyzing the components of market risk, we have broken out our investment portfolio into three broad categories, plus debt:

Fixed Income Securities: We hold, from time to time, interests in the following financial instruments which can be in the form of securities, loans, or derivatives: U.S. Treasury securities, U.S. government agency MBS, U.S. government agency debt securities, CMOs, non-government MBS, corporate bonds, non-redeemable and redeemable preferred stock, municipal bonds, certificates of deposits, SBA loans, residential loans, whole loans, and unconsolidated investments in the middle and senior tiers of securitization entities and TruPS. We attempt to mitigate our exposure to market risk by entering into economic hedging transactions, which may include TBA and other forward agency MBS transactions. The fixed income category can be broadly broken down into two subcategories: fixed rate and floating rate.

Floating rate instruments and derivatives whose underlying are floating rate instruments are not in themselves particularly sensitive to interest rate risk. Because they generally accrue 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. Floating rate fixed income securities are subject to other market risks such as: default risk of the underlying issuer, changes in issuer’s credit spreads, prepayment rates, investor demand and supply of securities within a particular asset class or industry class of the ultimate obligor. The sensitivity to any individual market risk can be difficult to quantify.

The fair value of fixed rate instruments and derivatives whose underlying are fixed rate instruments is sensitive to changes in interest rates. However, fixed rate securities that have low credit ratings or represent junior interests in securitizations are not particularly interest rate sensitive. In general, when we acquire interest rate sensitive securities, we enter into an offsetting short position for a similar fixed rate security. Alternatively, we may enter into other interest rate hedging arrangements such as interest rate swaps or Eurodollar futures. We measure our net interest rate sensitivity by determining how the fair value of our net interest rate sensitive assets would change as a result of a 100 basis points (“bps”) adverse shift across the entire yield curve. Based on this analysis, as of March 31, 2015, we would incur a loss of $7,202 if the yield curve rises 100 bps across all maturities and a gain of $7,179 if the yield curve falls 100 bps across all maturities.

Equity Securities: We hold equity interests in the form of investments in investment funds, permanent capital vehicles, and equity instruments of publicly traded companies. These investments are subject to equity price risk. Equity price risk results from changes in the level or volatility of underlying equity prices, which affect the value of equity securities or instruments that in turn derive their value from a particular stock. We attempt to reduce the risk of loss inherent in our inventory of equity securities by closely monitoring those security positions. However, since we generally make investments in our investment funds and permanent capital vehicles in order to facilitate third party capital raising (and hence increase our AUM and asset management fees), we may be unwilling to sell these positions as compared to investments in unaffiliated third parties. We have one permanent capital vehicle investment that is denominated in Euros. The fair value of this investment is subject to change as the spot foreign exchange rate between these currencies and the U.S. Dollar (our functional currency) fluctuates. We may, from time to time, enter into foreign exchange rate derivatives to hedge all or a portion of this risk. We measure our net equity price sensitivity and foreign currency sensitivity by determining how the net fair value of our equity price sensitive and foreign exchange sensitive assets would change as a result of a 10% adverse change in equity prices or foreign exchange rates. Based on this analysis, as of March 31, 2015, our equity price sensitivity was $485 and our foreign exchange currency sensitivity was $40.

Other Securities: These investments are primarily made up of residual interests in securitization entities. The fair value of these investments will fluctuate over time based on a number of factors including, but not limited to: liquidity of the investment type, the credit performance of the individual assets and issuers within the securitization entity, the asset class of the securitization entity and the relative supply of and demand for investments within that asset class, credit spreads in general, the transparency of valuation of the assets and liabilities of the securitization entity, and investors’ view of the accuracy of ratings prepared by the independent rating agencies. The sensitivity to any individual market risk cannot be quantified.

Debt: In addition to the risks noted above, we incur interest rate risk related to our debt obligations. We have debt that accrues interest at either variable rates or fixed rates. As of March 31, 2015, a 100 bps change in the three month LIBOR would result in a change in our annual cash paid for interest in the amount of $481. A 100 bps adverse change in the market yield to maturity would result in an increase in the fair value of the debt in the amount of $3,043 as of March 31, 2015.

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Counterparty Risk and Settlement Risk

We are subject to counterparty risk primarily in two areas: our collateralized securities transactions described in note 9 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q, and our forward agency MBS activities described in note 8 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q. With respect to the matched book repo financing activities, our risk is that the counterparty does not fulfill its obligation to repurchase the underlying security when it is due. In this case, we would typically liquidate the underlying security, which may result in a loss if the security has declined in value in relation to the balance due from the counterparty under the reverse repurchase agreement.

With respect to our forward agency MBS trading activities, our risk is that the counterparty does not settle the forward contract trade on the scheduled settlement date. In this case, we would have to execute the trade, which may result in a loss based on market movement in the value of the underlying trade between its initial trade date and its settlement date (which can be as long as 120 days). If we were to incur a loss under either of these activities, we have recourse to the counterparty pursuant to the underlying agreements.

Finally, we have general settlement risk in all of our regular way fixed income and equity trading activities. If a counterparty fails to settle a trade, we may incur a loss in closing out the position and would be forced to try to recover this loss from the counterparty. If the counterparty has become insolvent or does not have sufficient liquid assets to reimburse us for the loss, we may not get reimbursed.

How we manage these risks

Market Risk

We seek to manage our market risk by utilizing our underwriting and credit analysis processes that are performed in advance of acquiring any investment. In addition, we continually monitor our investments—trading and our trading securities sold, not yet purchased on a daily basis and our other investments on a monthly basis. We perform an in-depth monthly analysis on all our investments and our risk committee meets on a monthly basis to review specific issues within our portfolio and to make recommendations for dealing with these issues. In addition, each of our broker-dealers has an assigned chief risk officer that reviews the firm’s positions and trading activities on a daily basis.

Counterparty Risk

We seek to manage our counterparty risk through two major tools. First, we perform a credit assessment of each counterparty to ensure the counterparty has sufficient equity, liquidity, and profitability to support the level of trading or lending we plan to do with them. Second, we require counterparties to post cash or other liquid collateral (“margin”) in the case of changes in the market value of the underlying securities or trades on an ongoing basis.

In the case of collateralized securities financing transactions, we will generally lend less than the market value of the underlying security initially. The difference between the amount lent and the value of the security is referred to as the haircut. We will seek to maintain this haircut while the loan is outstanding. If the value of the security declines, we will require the counterparty to post margin to offset this decline. 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.

When we enter into forward agency MBS trades with counterparties, we also require counterparties to post margin with us in the case of the market value of the underlying trade declining. If the counterparty fails to post margin, we will close out the underlying trade. 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. However, some of our forward agency MBS trading activities are done without initial margin or cash deposits.

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ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have established and maintain disclosure controls and procedures that are designed to ensure that material information relating to the Company (and its consolidated subsidiaries) required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, who certify our financial reports and to other members of senior management and the Company’s Board of Directors.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of March 31, 2015. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective at March 31, 2015.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

Incorporated by reference to the headings titled “Legal and Regulatory Proceedings” in note 16 to the consolidated financial statements include in Item 1 in this Quarterly Report on Form 10-Q.

Item 1A.Risk Factors

In addition to the information set forth in this Quarterly Report on Form 10-Q, you should also carefully review and consider the risk factors contained in our other reports and periodic filings with the SEC, including without limitation the risk factors contained under the caption “Item 1A—Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014 that could materially and adversely affect our business, financial condition, and results of operations. The risk factors discussed in that Form 10-K do not identify all risks that we face because our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations. There have been no material changes in the significant factors that may affect our business and operations as described in “Item 1A—Risk Factors” of the Annual Report on 10-K for the year ended December 31, 2014.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Effective January 1, 2010, the Company ceased to qualify as a REIT and, therefore, is not required to make any dividends or other distributions to its stockholders. However, the Company’s Board of Directors has the power to decide to increase, reduce, or eliminate dividends in the future. The Company’s Board of Director’s decision will depend on a variety of factors, including business, financial and regulatory considerations as well as any limitations under Maryland law or imposed by any agreements governing indebtedness of the Company. There can be no assurances that such dividends will be maintained or increased and, if maintained or increased, will not subsequently be discontinued.

Certain subsidiaries of the Operating LLC have restrictions on the withdrawal of capital and otherwise in making distributions and loans. JVB is subject to net capital restrictions imposed by the SEC and FINRA that require certain minimum levels of net capital to remain in this subsidiary. In addition, these restrictions could potentially impose notice requirements or limit our ability to withdraw capital above the required minimum amounts (excess capital) whether through distribution or loan. CCFL is regulated by the FCA in the United Kingdom and must maintain certain minimum levels of capital. See note 14 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q.

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Item 6.Exhibits



Exhibit No.	Description



10.1	Letter Agreement, dated March 26, 2015 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities Exchange Commission on March 30, 2015).

11.1	Statement Regarding Computation of Per Share Earnings.*

31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.**

31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.**

32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.***

32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.***

101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at March 31, 2015 and December 31, 2014, (ii) the Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months Ended March 31, 2015 and 2014, (iii) the Consolidated Statement of Changes in Equity for the Three Months Ended March 31, 2015, (iv) the Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015, and 2014, and (v) Notes to Consolidated Financial Statements.**

Data required by FASB Accounting Standards Codification 260, “Earnings per Share,” is provided in note 15 to our consolidated financial statements included in Item 1 in this Quarterly Report on Form 10-Q. Filed herewith. **Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	Institutional Financial Markets, Inc.

	By:	/s/ LESTER R. BRAFMAN

		Lester R. Brafman
Date: May 5, 2015		Chief Executive Officer

	Institutional Financial Markets, Inc.

	By:	/s/ JOSEPH W. POOLER, JR.

		Joseph W. Pooler, Jr.
Date: May 5, 2015		Executive Vice President, Chief Financial Officer and Treasurer


Maryland	16-1685692
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Cira Centre 2929 Arch Street, 17th Floor Philadelphia, Pennsylvania	19104
(Address of principal executive offices)	(Zip Code)


Large accelerated filer	◻	Accelerated filer	◻

Non-accelerated filer	◻ (Do not check if a smaller reporting company)	Smaller reporting company	☒



	Institutional Financial Markets, Inc.
			Preferred Stock $ Amount		Common Stock $ Amount	Additional Paid-In Capital			Retained Earnings / (Accumulated Deficit)		Accumulated Other Comprehensive Income / (Loss)		Total Stockholders' Equity		Non-controlling Interest		Total Equity
December 31, 2014		$	5	$	15	$	74,604	$	(25,617)	$	(772)	$	48,235	$	8,259	$	56,494
Net loss			-		-		-		(558)		-		(558)		(198)		(756)
Other comprehensive income/ (loss) (1)			-		-		-		-		(176)		(176)		(62)		(238)
Acquisition / (surrender) of additional units of consolidated subsidiary, net			-		-		90		-		(6)		84		(84)		-
Equity-based compensation and vesting of shares			-		-		416		-		-		416		147		563
Dividends/Distributions			-		-		-		(305)		-		(305)		(106)		(411)
March 31, 2015		$	5	$	15	$	75,110	$	(26,480)	$	(954)		47,696	$	7,956	$	55,652


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	5

	Consolidated Balance Sheets—March 31, 2015 and December 31, 2014	5

	Consolidated Statements of Operations and Comprehensive Income (Loss)—Three Months Ended March 31, 2015 and 2014	6

	Consolidated Statements of Changes in Equity—Three Months Ended March 31, 2015	7

	Consolidated Statements of Cash Flows—Three Months Ended March 31, 2015 and 2014	8

	Notes to Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	62

Item 4.	Controls and Procedures	64

Part II. OTHER INFORMATION

Item 1.	Legal Proceedings	65

Item 1A.	Risk Factors	65

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66

Item 6.	Exhibits	67

Signatures		68