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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the Fiscal Year Ended December 31, 2012

or

For the transition period from              to             

Commission File Number 001-08007

SIGNATURE GROUP HOLDINGS, INC.

(Exact Name of Registrant as Specified in its Charter)

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933.    ¨  Yes    þ  No

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    ¨  Yes    þ  No

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    þ  Yes    ¨  No

Indicate by checkmark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    þ  Yes    ¨  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

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Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    ¨  Yes     þ  No

The aggregate market value of the Registrant’s common stock held by non-affiliates of the Registrant was $38,451,819 on June 29, 2012, the last business day of the Registrant’s most recently completed second fiscal quarter, based on the closing sales price of the Registrant’s common stock on the OTCQX, on that date. Shares of the Registrant’s common stock held by each officer, director and each person known to the Registrant to own 10% or more of the outstanding voting power of the Registrant have been excluded since such persons may be deemed to be affiliates. This determination of affiliate status is not a determination for any other purpose.

Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    þ  Yes    ¨  No

On March 1, 2013, 121,360,173 shares of the Registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates by reference certain information from the Registrant’s definitive proxy statement for the 2013 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission on or before April 30, 2013.

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ANNUAL REPORT ON FORM 10-K

For the Year Ended December 31, 2012

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SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

All references to “we,” “us,” “our,” “Signature,” or the “Company” refer to Signature Group Holdings, Inc. and its subsidiaries on a consolidated basis, unless the context otherwise states.

Certain statements in this Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (the “Annual Report”), including, without limitation, matters discussed under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” should be read in conjunction with the consolidated financial statements, related notes, and other detailed information included elsewhere in this Annual Report. We are including this cautionary statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Certain statements that are not historical fact are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “estimates,” “assumes,” “may,” “should,” “will,” “likely,” “could,” or other similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results, performance or achievements to differ materially from the forward-looking statements. These forward-looking statements are based on our current beliefs, intentions and expectations. These statements are neither guarantees nor indicative of future performance. Important assumptions and other important factors that could cause changes in our financial condition or results of operations or could cause actual results to differ materially from those forward-looking statements include, but are not limited to:

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All forward-looking statements set forth herein are qualified by these cautionary statements and are made only as of the date hereof. We undertake no obligation to update or revise the information contained herein including, without limitation, any forward-looking statements whether as a result of new information, subsequent events or circumstances, or otherwise, unless otherwise required by law.

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PART I

Overview

Signature Group Holdings, Inc. is a diversified enterprise incorporated as Fremont General Corporation (“Fremont”) in 1972. On June 11, 2010 (the “Effective Date”), Fremont completed a plan of reorganization (the “Plan of Reorganization”) and emerged from Chapter 11 bankruptcy proceedings (the “Bankruptcy Proceedings”) with (i) the present name, (ii) a new board of directors (the “Board”) and management team, (iii) a substantial amount of NOLs, which, as of December 31, 2012, included federal and California NOLs of $886.9 million and $980.0 million, respectively, and (iv) publicly traded common stock. See “Bankruptcy Proceedings” in Part I, Item 3 of this Annual Report for more information about the Bankruptcy Proceedings.

Since the Effective Date, management and the Board have worked to reposition the Company, divesting non-core legacy assets, undertaking and successfully completing a major project to get the Company’s financial statements audited for the years subsequent to 2006, remediating delinquent SEC filings, settling or resolving a substantial number of legacy legal actions, making select investments through Signature Special Situations and acquiring North American Breaker Co., LLC (“NABCO”) on July 29, 2011 (the “NABCO Acquisition Date”), our wholly owned specialty industrial supply company. We expect to continue to reposition the Company through additional acquisitions, as well as through organic growth of our existing operations. The Company operates through two principal operating segments: Industrial Supply and Signature Special Situations.

Industrial Supply. Industrial Supply is based in Burbank, California and is one of the largest independent suppliers of circuit breakers in the country. We focus exclusively on the replacement circuit breakers market, particularly for commercial and industrial circuit breakers, where replacement time is extremely important, but we also supply residential circuit breakers. We operate from five warehouse locations across the United States, which enables us to improve customer delivery times, a key attribute of our service-oriented model.

Signature Special Situations. Signature Special Situations selectively acquires sub-performing and nonperforming commercial and industrial loans, leases and mortgages, typically at a discount to unpaid principal balance (“UPB”). We may also originate secured debt financings to middle market companies for a variety of situations, including supporting another transaction such as an acquisition, recapitalization or restructuring. The Company may take positions in corporate bonds and other structured debt instruments, which may be performing, sub-performing or nonperforming, as well as other specialized financial assets.

Our operations also include a discontinued operations segment, where we hold and manage certain assets and liabilities related to the former businesses of Fremont and Cosmed, Inc. (“Cosmed”), a small cosmetics company, for which management and the Board have formally adopted plans of disposal. These assets and liabilities are being managed to maximize cash recoveries and limit costs and exposures to the Company.

Our corporate headquarters are located at 15303 Ventura Boulevard, Suite 1600, Sherman Oaks, California 91403, and our telephone number is (805) 435-1255. Signature’s common stock is quoted on the OTC Market (“OTCQX”) under the trading symbol “SGGH.”

Business Strategy

Our business strategy is to acquire controlling interests in operating companies that leverage the unique strengths of our platform, including our status as a public company, our unique tax assets, and the experience of our management and Board. We plan to focus on companies that are highly profitable and will be accretive to earnings immediately, and where we hope to increase annual cash flows relative to what might be generated by private equity firms and other buyers without the unique tax assets we possess. We generally pursue businesses with talented and experienced management teams, strong margins, and defensible market positions. We regularly

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consider acquisitions of businesses that operate in unique industries, as well as businesses that we believe are in transition or are otherwise misunderstood by the marketplace. Post-acquisition, we generally expect to retain existing management of the acquired company and expect to accord them significant autonomy in their daily operations. Our strategy tends to emphasize non-auction or “proprietary” deal flow sourced directly through our management team’s established referral networks.

Our management team has relationships with significant numbers of deal referral sources, including accountants, attorneys, business brokers, commercial and investment bankers, and other professionals, which should generate substantial opportunities to assess middle market businesses available for acquisition or financing. In addition, the flexibility, creativity, experience and expertise of our management team in structuring transactions allows us to consider non-traditional and complex transactions.

We are opportunistic and approach each potential prospect or transaction without preconceptions about a target company’s size, historical operating performance, industry segment, geographic location or any other particular limiting characteristic. In evaluating opportunities, we plan to focus on designing a structure to produce high returns on capital, relative to the underlying risks. We believe our strategy provides us with competitive advantages over other financial service companies, financial institutions, lenders and equity investors who tend to employ a more formulaic approach.

We believe the current financing environment is conducive to our ability to consummate transactions in our target market. Owners and management teams hoping to sell or finance their businesses should consider us an attractive business partner because of our ability to:

A key element to our business strategy is utilizing our federal and state NOLs, primarily generated by Fremont’s legacy businesses, by becoming a profitable enterprise through the implementation of our business plan. As of December 31, 2012, our federal and California NOLs were $886.9 million and $980.0 million, respectively, representing a substantial portion of our deferred tax assets. The ultimate realization of deferred tax assets depends on the ability to generate future taxable income during the periods in which temporary differences become deductible. As a result of generating losses since 2006, among other factors, we determined that sufficient uncertainty exists as to the realizability of our net deferred tax asset and have placed a valuation allowance of $373.7 million and $409.0 million on our net deferred tax asset at December 31, 2012 and 2011, respectively.

In order to preserve certain of our tax benefits, we amended and restated our bylaws (the “Amended and Restated Bylaws”) in 2010 to impose certain restrictions on the transfer of our common stock and other equity securities (the “Tax Benefit Preservation Provision”). The Tax Benefit Preservation Provision established a trading restriction on any holders of five-percent or more of our common stock in order to reduce the risk that any change in ownership might limit our ability to utilize the NOLs under Section 382 of the Internal Revenue Code of 1986, as amended (the “Tax Code”). The transfer restrictions apply until the earlier of (i) the repeal of Section 382 of the Tax Code, or any successor statute if the Board determines that the Tax Benefit Preservation Provision is no longer necessary to preserve the tax benefits for Signature; (ii) the beginning of any of our tax years in which the Board determines that no tax benefits may be carried forward; or (iii) such other date as the Board may fix in accordance with the Amended and Restated Bylaws.

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Management Strategy

Our management strategy involves proactive strategic, financial and operational support for the management and operations of our business units. Particular areas in which we may provide assistance to our business units include:

As part of our business and operating strategy, we may dispose of businesses or assets we own from time to time via sale, liquidation or other means when attractive opportunities arise that outweigh the potential future value we believe such businesses or assets can bring to us. As such, our decision to dispose of businesses or assets is based on our belief that doing so will increase shareholder value to a greater extent than through our continued ownership of such businesses or assets.

Operating Segments

We report our results of operations under both continuing and discontinued operations. All of the activities related to our operating segments and our growth strategies, as well as ongoing general corporate functions are included in continuing operations. Discontinued operations presents the financial condition and results of operations of the businesses and operations that have been sold or discontinued by the Company.

Continuing Operations

At December 31, 2012, Signature’s continuing operations had $121.4 million in assets, or 96.6% of our total assets, and $57.7 million of liabilities, or 85.5% of our total liabilities.

Industrial Supply

Signature has consolidated the results of operations of Industrial Supply since the NABCO Acquisition Date. We are one of the largest independent suppliers of circuit breakers for the replacement market in the United States. Circuit breakers are critical safety devices used in virtually all residential, commercial and industrial structures and many large electrical power systems. Circuit breakers automatically shut off an electrical circuit when the flow of electricity increases above a safe level so that potentially serious damage, such as that caused by fire, can be averted.

The electrical power system in the United States is characterized by an aging infrastructure and largely reflects technology developed in the 1950s or earlier. According to a Georgia Institute of Technology study published in May 2009, the majority of equipment in the United States electrical grid is forty or more years old, and circuit breakers are a primary component of that equipment.

Because circuit breakers are critical components of most electrical systems, they must be replaced immediately when damaged. Our primary focus is on the replacement market, particularly for commercial and industrial

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circuit breakers where replacement time is extremely important. We believe the replacement market niche has fewer large competitors and is less dependent on macroeconomic trends than serving the new construction market. Circuit breakers are manufacturer specific and generally not interchangeable, so product availability and knowledge in the replacement niche is very important. Accordingly, we maintain a significant depth of certified, new product inventory from all the major manufacturers, as well as a considerable investment in discontinued, end of life inventory that is no longer widely available. We do not manage our operations in terms of inventory turns or other traditional operating inventory metrics; rather, our inventory levels may increase in a declining sales environment if valuable purchase opportunities present themselves as there is minimal risk of obsolescence for these products.

We are a national supplier selling exclusively to wholesale electrical distributors and operate from five warehouse locations across the country. This national presence allows us to service a broad section of our customer base with next day ground shipping, providing a competitive advantage for the mission critical components we supply. In 2012, we served approximately 600 customers, shipped approximately 5,500 SKUs to over 3,000 customer locations nationwide. Our customer base includes many of the largest wholesale electrical distribution companies in the nation, who find it impracticable to stock more than a limited amount of circuit breaker inventory, given the broad number of SKUs and infrequent demand, and prefer the convenience we offer as a just-in-time supplier. By providing industry-leading customer service, maintaining an extensive inventory, and offering same day shipping, we have become a preferred supplier for many of our large wholesale electrical distributor customers. Customers for whom we are a preferred supplier represented 51.1% of Industrial Supply net sales in 2012.

Other pertinent business factors include:

Signature Special Situations

Signature Special Situations opportunistically acquires sub-performing and nonperforming commercial and industrial loans, leases and mortgages, typically at a discount to UPB. We may also originate secured debt financings to middle market companies for a variety of situations including supporting another transaction such as an acquisition, recapitalization or restructuring and take positions in corporate bonds and other structured debt instruments, which may be performing, sub-performing or nonperforming, as well as other specialized financial assets.

The objective of this operation is to generate high risk-adjusted returns in the form of interest income, fees, recovery of discounted principal balances, contingent consideration, or market value appreciation, while maintaining an intense focus on managing downside risks and exposure. In some instances, we may also receive equity securities in the form of convertible debt, preferred and convertible preferred stock, options or warrants, where our returns would come in the form of gains associated with such equity securities.

The largest asset in Signature Special Situations is a portfolio of residential real estate loans, originated by Fremont Investment Loan (“FIL”). See Note 7 — Loans in the Notes to Consolidated Financial Statements in Part IV, Item 15 of this Annual Report for additional information about our residential real estate loans. In 2011, Signature Special Situations acquired certain corporate bonds, as well as the secured debt of a specialty manufacturing company. In 2012, Signature Special Situations acquired additional corporate bonds, exited certain bond positions and restructured the previously acquired secured debt following a friendly foreclosure. We

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issued new senior secured debt and received 4.00% cumulative preferred stock, convertible to 45.0% of the common equity of the new borrower following bankruptcy, and contingent consideration should certain earnings thresholds be achieved.

Discontinued Operations

At December 31, 2012, our discontinued operations had $4.3 million in assets, or 3.4% of our total assets, and $9.8 million in liabilities, or 14.5% of our total liabilities.

Under our business strategy, we seek to maximize the value of the assets of our discontinued operations and expect to redeploy the proceeds in our continuing operations. Assets of discontinued operations decreased $18.3 million in 2012, primarily from sales of our nonperforming subprime residential real estate loan portfolio, real estate owned (“REO”), and commercial real estate investments.

Discontinued operations also include expenses and liabilities associated with various litigation matters that pertain to Fremont’s prior business activities. As of December 31, 2012, the Company was a party to forty-three defensive cases involving individual home borrowers, the majority of whom are fighting to hold off foreclosure against the loan servicer and current mortgage owner, and where Fremont has been named in the matter because it was the originator of the mortgage. We are also involved in three defensive cases involving former Fremont executives seeking severance claims. See “Legal Proceedings” included in Note 19 — Commitments and Contingencies in the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report for more information about the material legal proceedings in which we are involved.

The largest liability in our discontinued operations is our residential loan repurchase reserve. At December 31, 2012, the repurchase reserve liability was $7.5 million. This liability represents estimated losses we may experience from repurchase claims, both known and unknown, based on breaches of certain representations and warranties provided by FIL, Fremont’s California industrial bank subsidiary, to counterparties that purchased the residential real estate loans FIL originated, predominantly from 2002 through March of 2007. See Note — 17 Discontinued Operations in the Notes to Consolidated Financial Statements in Part IV, Item 15 of this Annual Report for additional information about the repurchase reserve.

In the fourth quarter of 2012, the Company received an unsolicited offer to purchase the intellectual property and other assets of Cosmed. Management is currently engaged in negotiations to sell substantially all of the assets of Cosmed, however, no assurances can be made regarding the terms of such transaction or that such a transaction will close. Accordingly, Cosmed’s assets, liabilities and results of operations have been reclassified to discontinued operations for all periods presented. See Note 17 — Discontinued Operations in the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report for additional information regarding our discontinued operations.

Competition

As an acquirer of and financing source for middle market companies, we compete in a diverse market with a wide spectrum of capital providers, including commercial and investment banks, public and private funds, hedge funds, commercial finance companies, private equity funds, and high net worth individuals. Many of Signature’s existing and potential competitors are substantially larger and have considerably greater financial, technical, and marketing resources than we do.

Our Industrial Supply operation serves the replacement market for circuit breakers, which is highly competitive and fragmented, with several hundred electrical component and circuit breaker competitors serving this market, ranging from local hardware stores to mass merchant retailers and large wholesale electrical distribution companies. The product offerings and levels of service from the other circuit breaker providers with whom we compete vary widely. We compete with many circuit breaker providers on a regional and local basis. Most of our

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direct competitors are smaller single location companies that focus on a specific geographic area or feature a select product offering, such as a particular line of circuit breakers. In addition to the direct competition with other circuit breaker providers, we also face, on a much more limited basis, competition with distributors and manufacturers that sell products directly or through multiple distribution channels to end users or other resellers. In the markets we serve, competition is primarily based on product line breadth, quality, product availability, service capabilities and price.

Employees

As of December 31, 2012, our consolidated operations included 56 full-time employees. Industrial Supply represented 62.5% of our total full-time employees as of December 31, 2012. None of our employees are covered by a collective bargaining agreement. Management believes that its relationship with its employees is good.

Available Information: Website Access to Periodic Reports

The following information can be found on Signature’s website at www.signaturegroupholdings.com:

Additionally, we will provide copies of any of this information free of charge upon written request to, Signature Group Holdings, Inc., Investor Relations, 15303 Ventura Boulevard, Suite 1600, Sherman Oaks, California 91403, or by email request to invrel@signaturegroupholdings.com.

Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described below in addition to the other information contained in this Annual Report and in our other filings with the SEC, including our subsequent reports on Forms 10-Q and 8-K. The risks and uncertainties described below are not the only ones we face and the order in which the risks appear is not intended as an indication of their relative weight or importance. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs, our business, financial condition, results of operations and/or liquidity could be materially and adversely affected. In that event, the market price for our common stock will likely decline and you may lose all or part of your investment.

A. Business Risks

Signature’s financial condition and results of operations will depend on its ability to acquire and integrate businesses that perform and meet expectations after closing. A key element of our business strategy involves the acquisition and integration of profitable operating businesses. We may experience challenges identifying,

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financing, consummating and integrating such acquisitions. While we have reviewed various acquisition opportunities, competition exists in the market for profitable operating companies, and we were not able to complete any acquisitions during the last fiscal year. We may not be able to find other suitable acquisition opportunities that are available at attractive valuations, if at all. Even if we do find suitable acquisition opportunities, we may not be able to consummate the acquisitions on commercially acceptable terms, as the current price of our common stock may make it more difficult and expensive to initiate or consummate additional acquisitions, and suitable financing arrangements may not be available on acceptable terms, on a timely basis, or at all.

Even if we are successful in completing additional acquisitions, acquisitions often require significant capital infusions, could result in unanticipated costs and expenses, and may divert management’s attention from other aspects of our business. We may also encounter difficulties in assimilating and integrating the operations, personnel, technologies, products and information systems of acquired companies and retaining key personnel. Acquisitions could disrupt our relationships with our existing customers, suppliers and strategic partners and may create other contractual, intellectual property or employment issues. The acquisition of another company or business may also require us to enter into a business or geographic market in which we have little or no prior experience. These challenges could disrupt our ongoing business, distract our management and employees, harm our reputation and increase our operating costs. These challenges are magnified as the size of the acquisition increases.

Furthermore, acquisitions can result in increased debt or contingent liabilities, adverse tax consequences, substantial depreciation or deferred compensation charges. We may also incur significant goodwill impairment charges in the future. Any of these events could negatively impact our financial condition and results of operations and could cause the price of our common stock to decline.

We cannot assure you that we will be able to consummate any future acquisitions or that we will realize the benefits anticipated from these acquisitions. Even if we are able to grow and build our operations, any failure to manage our growth effectively could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our operations may not perform as expected. Based on any number of factors, we may from time to time decide to sell companies or assets. There can be no assurance that we will be successful in completing these transactions. If these transactions are completed, they may reduce the size of our business. There is also no assurance that we will receive adequate consideration for any company or asset dispositions. As a result, our future disposition of businesses or assets could have a material adverse effect on our business, financial condition, and result of operations.

We may need to raise additional capital to fund future opportunities or repay our indebtedness, which funding may not be available on terms acceptable to us, or at all. We currently have a limited capital base and have generated net losses of $7.5 million and $12.8 million in the years ended December 31, 2012 and 2011, respectively. We have experienced volatility in our cash flows from operations ranging from positive cash flows from operations of $2.3 million in the year ended December 31, 2012, to negative cash flows from operations of $15.6 million in the year ended December 31, 2011. In order to make future acquisitions of businesses or assets, acquire debt instruments, or fund new loans, we may need to raise capital through debt or equity financing at the Company level, sell the stock or assets of our subsidiary businesses, offer debt or equity to the sellers of target businesses, or by undertaking a combination of any of the above. To avoid limiting the use of our NOLs, we may choose to fund some or all of those acquisitions with new debt or existing cash. In addition, acquisitions may also require us to make significant capital infusions into the acquired companies. Since the timing and size of prospective transactions cannot be readily predicted, we may need to be able to obtain funding on short notice to fully benefit from attractive opportunities. Such funding may not be available on acceptable terms, on a timely basis, or at all. In addition, the level of our indebtedness may impact our ability to borrow further at the Company level. Another source of capital for us may be the sale of equity securities or convertible debt securities, which securities could have rights, preferences and privileges senior to our existing shareholders and could result in

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further dilution to our shareholders. Our ability to raise equity capital in this manner is also subject to market conditions and investor demand for the shares at prices that we consider to be in the interests of our shareholders. These challenges may materially adversely affect our ability to pursue our business strategy successfully and may materially adversely affect our business, financial condition and results of operations. Additional financing may not be available on favorable terms, on a timely basis, or at all. If adequate funds are not available or are not available on acceptable terms, we may be unable to continue our operations as planned, pursue acquisitions, expand our sales and marketing programs, take advantage of future opportunities or respond to competitive pressures, any of which could have a material adverse effect on the Company’s business, financial condition and results of operations.

Signature’s ability to utilize its NOLs or recognize tax benefits on future domestic taxable income may be limited. Signature’s ability to fully utilize its existing federal and state NOLs could be limited or eliminated should Signature (i) undergo an “ownership change” as described under Section 382 of the Tax Code; (ii) be found by the Internal Revenue Service (“IRS”) not to be able to avail itself of Section 382(l)(5) of the Tax Code; (iii) not return to profitability or be only marginally profitable; or (iv) due to changes in federal or state tax laws and regulations. Although we cannot assure you that the IRS will agree with our position, we believe the Company met the criteria under Section 382(l)(5) of the Tax Code, as of the Effective Date, to be able to utilize the NOLs to offset future income generated by the Company, if any. Such usage, however, is predicated upon the Company not experiencing a future “ownership change.” An ownership change is generally defined as greater than a 50% change in equity ownership by value over a three-year period. We may experience an “ownership change” in the future as a result of changes in our common stock ownership, which would result in a limitation on our ability to utilize our NOLs. In addition, any changes to tax rules or the interpretation of tax rules could negatively impact our ability to recognize benefits from our NOLs.

Our NOLs only have value to the extent we generate taxable income. If we are unable to generate taxable income prior to the expiration of the NOLs, or if we are only marginally profitable during such period, we will be limited in our ability to utilize the tax benefits related to our NOLs.

Finally, the use of federal and state NOLs is subject to various tax laws and regulations and the changes in such or the interpretations thereof. In California, for example, during 2011, we were unable to utilize any of our state NOLs due to a state moratorium on the usage of NOLs. While the moratorium expired on December 31, 2011, and has not yet been extended, no assurance can be made that we will be able to use our California state NOL in the future.

Signature’s use of its NOLs in the future may be challenged by the IRS under anti-abuse rules associated with tax avoidance. While Signature believes it is eligible to utilize the full amount of the NOLs under Section 382(l)(5), the IRS can, at any time, challenge the use of NOLs in the future under an argument that a transaction or transactions were consummated with the substantial intent of sheltering future tax liabilities. In any situation where the IRS is successful in such a challenge, Signature’s ability to utilize its NOLs may be limited, which may have a material adverse impact on Signature’s acquisition strategy, financial condition and results of operations.

Signature is subject to a considerable number of pending legal proceedings that virtually all relate to the discontinued operations of the Company. We are subject to a number of lawsuits seeking monetary damages and injunctive relief that relate to discontinued operations. For a summary of our material legal proceedings, see “Legal Proceedings” in Note 19 — Commitments and Contingencies in the Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this Annual Report. Additional litigation may be filed against us or disputes may arise in the future concerning matters involving the discontinued operations. We have been and intend to continue to vigorously defend ourselves in all legal proceedings in which we are involved, however, the outcome of litigation and other legal matters is always uncertain and could materially adversely affect our liquidity, financial condition and results of operations. Furthermore, the costs to defend the Company in these matters may be significant.

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Signature has received repurchase claims relating to certain residential mortgage loans originated prior to March 31, 2007 and sold by the discontinued operations of the Company. We may receive additional claims in the future that, unless withdrawn or settled within the limits of a repurchase reserve we have established, could adversely affect our financial condition and results of operations. As of December 31, 2012, Signature had $101.7 million of outstanding repurchase claims associated with breaches of certain representations and warranties related to the residential real estate mortgages sold by FIL. Signature maintains a loan repurchase reserve for the estimated losses we may experience from repurchase claims, both known and unknown, based on the representations and warranties FIL provided to counterparties that purchased the residential real estate loans, largely from 2002 through 2007. While management believes that Signature’s $7.5 million loan repurchase reserve liability was sufficient as of December 31, 2012, such reserve is subjective and is based on management’s current expectations based on facts currently known to management. Changing or new facts and circumstances could cause us to increase such repurchase reserve in future periods or may cause the Company to experience losses in excess of its repurchase reserve liability. Any material increase in, or change in the nature of, our repurchase claim activity and payout amounts, our repurchase reserve, or changes in our ability to object to, defend or settle such claims, could have a material adverse effect on our financial condition and results of operations. See “Critical Accounting Policies” in Part II, Item 7 of this Annual Report for additional information related to our repurchase reserve.

Signature depends on key personnel to achieve its business and strategic objectives. We depend on the members of our senior management team, particularly Craig Noell and Kyle Ross, to execute our business plan and strategy and to manage our business and day-to-day operations, including identifying, structuring, closing and monitoring the deployment of our capital. These members of our senior management team have critical industry experience and relationships that we rely upon to implement our business plan. If we lose the services of one or more of these individuals we may not be able to operate our business or identify and manage our business as we planned, and our ability to compete could be harmed, both of which could have a material adverse effect on our business, financial condition and results of operations.

Signature has a new management team, Board and business strategy with limited operating history. Signature emerged from Bankruptcy Proceedings in June 2010 with a new management team and Board, as well as a new business plan and strategy. Since then, we have experienced changes in our Board. Signature is subject to all of the business risks and uncertainties associated with any new business, including the risk that we will not achieve our business objectives. The members of the Board have not worked together in the past, which we believe to be valuable on one hand, as it provides a broader perspective for the business strategy and initiatives we may be required to evaluate, but this limited history also represents a potential risk in that the Board may not come to a consensus on every business decision or may require additional time to deliberate among potential options for any particular matter, which could result in possible lost business opportunities. Additionally, in the future, we may have turnover in the members of the Board, as we experienced in 2011 and 2012.

Impairment of our intangible assets could result in significant charges that could adversely impact our future operating results. We have significant intangible assets, including goodwill, which are susceptible to impairment charges as a result of changes in various factors or conditions. The most significant intangible assets on our balance sheet are goodwill, customer relationships and trade names, all of which are related to business combinations. We assess the potential impairment of goodwill and indefinite-lived intangible assets on an annual basis, as well as whenever events or changes in circumstances indicate that the carrying value may exceed fair value. We assess finite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value may exceed fair value.

As of December 31, 2012, we had identifiable intangible assets with a carrying value of $4.3 million, and goodwill of $17.8 million in our consolidated balance sheets. Adverse changes in the operations of our businesses or other unforeseeable factors could result in an impairment charge in future periods that could adversely impact our results of operations and financial position in that period.

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We do not have long-term contracts with our customers and the loss of a significant number of our key customers could materially adversely affect our business, financial condition and results of operations. Industrial Supply operates primarily based on individual orders and sales with customers and did not have any backlog as of December 31, 2012. Historically, we have not entered into long-term supply contracts with our customers. As such, our customers could cease buying circuit breakers and related products from us at any time and for any reason, without any penalty. During the years ended December 31, 2012 and 2011, each of three of our customers represented more than 10% of consolidated operating revenues. In 2012 and 2011, these customers accounted for 40.3% and 35.1% of the our consolidated operating revenues, respectively, and represented 55.3% and 56.7% of trade accounts receivable at December 31, 2012 and 2011, respectively. Because we do not have long-term contracts with our customers, we have no recourse in the event a customer no longer wants to purchase products from us. If a significant number of our customers elected not to purchase our products, it could materially adversely affect our business, financial condition and results of operations.

Signature has $5.1 million in remaining unpaid claims filed with the California Federal Bankruptcy Court that could have a material adverse effect on our capital resources and detract our management team if we are unsuccessful in objecting to, litigating or settling these matters in the near future. As of December 31, 2012, there remained two open unpaid claims filed with the United States Bankruptcy Court for the Central District of California, Santa Ana Division (the “California Federal Bankruptcy Court”) totaling $5.1 million. We plan to continue to litigate those claims, which litigation has been costly both in terms of legal fees, as well as management’s time in addressing these matters. If Signature is unsuccessful in resolving such litigation in the near future, or is unable to negotiate substantially reduced settlements for the remaining claims, and Signature is obligated to pay these amounts, it could have a material adverse effect on our financial condition and results of operations. See Note 19 — Commitments and Contingencies in the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report for additional information about the Colburn and Walker matters.

Signature’s $24.8 million tax refund request related to its 2008 NOL carryback is subject to review by the Congressional Joint Committee on Taxation, and we may be required to pay additional amounts to the IRS related to pending examinations of our tax returns. Following completion of the IRS examination of Fremont’s consolidated tax returns for the 2006 and 2007 tax years, the Company received a tax refund in the amount of $24.4 million, net of other potential tax liabilities of $0.4 million, related to its 2008 NOL carryback to the 2003, 2004 and 2005 tax years. In February 2011, the IRS notified the Company that the tax refund was subject to review by the Congressional Joint Committee on Taxation (the “Joint Committee”), which reviews all refund requests in excess of $2.0 million.

The Company’s tax returns for the 2003, 2004, 2005 and 2008 tax years are currently under examination by the IRS. In connection with such examination, in December 2012, the IRS notified the Company of a $2.6 million alternative minimum tax liability related to the 2005 tax year. The Company has provided the IRS with certain information related to the proposed 2005 alternative minimum tax liability. Such information provides the basis for reducing the alternative minimum tax liability to $0.4 million, which liability was accrued at December 31, 2012, and in January 2013. While we are still in negotiations with the IRS regarding this examination, we cannot assure you that we will not be required to pay additional amounts related to the liability alleged by the IRS or that other amounts may become due related to the examination.

Although the Company does not have any reason to believe that the Joint Committee will not approve the remaining portion of the tax refund, there is no assurance that such approval will be given by the Joint Committee and an adverse finding could have a material adverse effect on our financial condition and results of operations.

We have experienced substantial losses and may continue to experience losses for the foreseeable future. For the years ended December 31, 2012 and 2011, the Company reported net losses of $7.5 million and $12.8 million, respectively. While the net loss declined in 2012, we cannot assure you that our efforts to increase

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operating revenues and reduce our operating costs will improve our financial performance or that we will be able to achieve profitability on a quarterly or annual basis in the foreseeable future. Since emerging from Bankruptcy Proceedings, we continue to have significant operating costs, including compensation, legal, professional and other outside services expenses, occupancy, interest expense, and other general and administrative expenses. As a result of the fixed nature of many of our operating costs, we generally are unable to reduce our expenses significantly in the short-term to compensate for any unexpected delay or decrease in anticipated revenues. As a result, we may continue to experience operating losses and net losses for the foreseeable future, which could make it difficult to fund our operations, finance any acquisitions and achieve our business plan, any of which could cause the market price of our common stock to decline.

If we fail to maintain an effective system of internal control over financial reporting or experience material weaknesses in our system of internal control, we may not be able to report our financial results accurately or on a timely basis and may not be able to detect fraud, any of which could materially and adversely affect our business and our stock price. Our management concluded that as of December 31, 2011, we operated with a weakness in our internal control over financial reporting related to our inability to maintain a sufficient number of financial and accounting personnel with the appropriate level of accounting knowledge and experience in order to provide timely, accurate and reliable financial statements in accordance with general accepted accounting principles (“GAAP”). Under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), our management (a) acquired accounting and financial reporting resources with the appropriate accounting knowledge and experience, and (b) implemented new disclosure controls and procedures, which, we believe, remediated the material weakness as of September 30, 2012, and we continue to believe that our disclosure controls and procedures are operating effectively at December 31, 2012.

Although we believe we have addressed the material weakness, if we fail to maintain or enhance these accounting functions or if we experience any further deficiencies or weaknesses in our internal control over financial reporting or fail to properly maintain an effective system of internal control over financial reporting, we may be unable to detect fraud or to report our financial results accurately and on a timely basis. The existence of any such deficiencies and/or weaknesses, even if cured, could also lead to the loss of investor confidence in the reliability of our financial statements, which could negatively impact the price of our common stock. Such deficiencies or material weaknesses may also subject us to lawsuits, investigations and other penalties.

In addition, our business strategy contemplates the acquisitions of businesses and the operation of subsidiaries whose financial results will be consolidated into our financial statements and reporting. As a result of these business activities and our future growth, the scope of our internal control over financial reporting will have to expand, which may subject us to increased internal control risks. Effective internal control over financial reporting must be established and maintained at these subsidiaries in order for us to produce accurate and timely financial reports. Failure to do so would result in our inability to report our financial results accurately and on a timely basis, and possibly lead to other deficiencies, which would likely have a negative effect on the market value of our equity securities.

Furthermore, Section 404 of the Sarbanes-Oxley Act currently requires us to evaluate the effectiveness of our internal control over financial reporting at the end of each fiscal year and to include a management report assessing the effectiveness of our internal control over financial reporting in our Annual Report. As a smaller reporting company, we were exempt from the auditor attestation requirement regarding our internal control over financial reporting for our fiscal year ended December 31, 2012; however, to the extent we do not qualify as a non-accelerated filer or smaller reporting company in subsequent fiscal years, we will be subject to the auditor attestation requirement under Section 404(b) of the Sarbanes-Oxley Act. In such an event, we may not be able to complete the work required for such attestation on a timely basis and, even if we timely complete such requirements, we cannot assure you that our independent registered public accounting firm will conclude that our internal control over financial reporting is effective.

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The value of the collateral securing our loans receivable depends on market and economic conditions, the availability of buyers and other factors. In the event of a default, there can be no assurance that the proceeds, if any, from the sale or sales of the collateral securing our loans will be sufficient to satisfy the obligations of our borrowers. There is also a risk that the collateral securing our loans may decrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise, or may fluctuate in value based upon the success of the borrower and market conditions. If such proceeds are not sufficient to repay amounts outstanding under the loan, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the borrower’s remaining assets, if any, which may result in the incurrence of losses that could have a material adverse effect on our financial condition and results of operations.

Changes in, and compliance with, laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy. We are subject to regulation at the federal, state and local level. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, any of which could harm us and our shareholders, potentially with retroactive effect. In particular, any changes in government regulations that affect our ability to collect amounts due on our residential real estate loans or increased costs to service and monitor such loans, or changes in bankruptcy or collection laws could negatively impact our operating results.

Additionally, changes to laws and regulations may cause us to alter our business strategy in order to avail ourselves of new or different opportunities. Such changes could result in material differences in the strategies and plans set forth in this Annual Report. Thus, any such changes, if they occur, could have a material adverse effect on our financial condition and results of operations. In addition, our inability to comply with the federal, state and local statutes and regulations in the business segments, geographic regions and jurisdictions in which we operate could have a material adverse impact on our financial condition, results of operations and our stock price.

B. Risks Related to an Investment in Our Common Stock

Our common stock is quoted on the OTCQX market, which may not provide investors with a meaningful degree of liquidity. Bid quotations for our common stock are available on the OTCQX, an electronic quotation service for securities traded over-the-counter. Bid quotations can be sporadic and do not provide any meaningful liquidity to investors. In 2012, the Company’s common stock also experienced low average trading volumes, which likely will impact an investor’s sale of a large number of shares at any given time for a desired sales price, if at all.

The market price of our common stock may fluctuate significantly. Since the Effective Date, the market price and liquidity of the market for shares of our common stock has varied significantly, from a low closing sales price per share of $0.23 per share in 2012, to a high closing price per share $0.86 per share in 2010. The market price of our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include, but are not limited to:

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Certain provisions of our Amended and Restated Bylaws could deter takeover attempts and have an adverse impact on the price of our common stock. Our Amended and Restated Bylaws contain provisions to protect the value of our NOLs. Such provisions may have the effect of discouraging a third party from making an acquisition proposal for us, which may inhibit a change in control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the market price for our common stock. See “Tax Benefit Preservation Provision” in Part II, Item 5 of this Annual Report for additional information about these provisions.

Our Rights Agreement could discourage, delay or prevent takeover attempts. Attempts to acquire control of the Company may be discouraged, delayed or prevented by a rights agreement, between Fremont and Mellon Investor Service, LLC dated October 23, 2007 (the “Rights Agreement”), which was adopted to protect the value of our NOLs and continues to remain in effect. The Rights Agreement provides for a dividend distribution of a right for each outstanding share of Company common stock (a “Right”). The Rights Agreement also provides that, in the event that (i) the Company engages in a merger or other business combination transaction in which the Company is not the surviving corporation; (ii) the Company engages in a merger or other business combination transaction in which the Company is the surviving corporation and the Company’s common stock is changed or exchanged; or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold or transferred, each holder of a Right (except Rights that have previously been voided because they were held by the acquiring person or entity) shall thereafter have the right to receive, upon exercise, common stock of the acquiring company as set forth in the Rights Agreement. The existence of the Rights Agreement may discourage, delay or prevent a third party from effecting a change of control or takeover of the Company in circumstances that could give the holders of our common stock the opportunity to realize a premium over the market price of our common stock.

Our pending legal proceedings and other contingent liabilities may limit our ability to use our common stock as currency in potential future transactions. We are subject to a number of lawsuits seeking monetary damages or injunctive relief and have potential other contingent liabilities, including repurchase claims, which relate to our discontinued operations. See Part I, Item 3 of this Annual Report for more information about our legal proceedings. The outcome of such litigation and other legal matters is always uncertain and could materially adversely affect our financial condition and results of operations, which may limit our ability to utilize our common stock as consideration for potential future acquisitions and other transactions in which we may engage.

None.

We currently lease 6,329 square feet in Sherman Oaks, California for our primary executive and administrative offices, as well as 19,916 square feet in Burbank, California for the corporate and administrative offices and primary warehouse facility of our Industrial Supply operations. The leases for each of these facilities expire in 2014, however we have three five-year options available for the Industrial Supply facility. We also lease

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warehouse space at four regional distribution centers in Dallas, Texas; Orlando, Florida; Chicago, Illinois; and Cranbury, New Jersey, each of which holds inventory to facilitate next day shipping to our customers. We believe our existing properties are adequate for our operations for at least the next twelve months. We expect to open two additional distribution centers in 2013, to obtain broader geographic coverage and to improve shipping times to our customers in those regions.

Bankruptcy Proceedings

The Company has been and is continuing to reposition its business after a bankruptcy reorganization process, from which the Company emerged in June 2010. Prior to June 2008, the Company operated as a financial services holding company, with most operations conducted through FIL, which offered certificates of deposit, savings and money market deposit accounts through retail banking branches in California and was a significant participant in the residential and commercial mortgage lending industry.

In June 2008, the Company filed a voluntary petition for relief under Chapter 11 of Title 11 of the U.S. Code in the California Federal Bankruptcy Court. In May 2010, the California Federal Bankruptcy Court entered an order, as amended (the “Confirmation Order”), confirming the Plan of Reorganization. On the Effective Date, the Company emerged from Bankruptcy Proceedings and filed Amended and Restated Articles of Incorporation with the Office of the Secretary of the State for the State of Nevada, which, among other things, changed the Company’s name to Signature Group Holdings, Inc.

The Confirmation Order and the Plan of Reorganization provided for a number of material transactions and events as of or following the Effective Date, certain of which are summarized below.

Consolidation of Fremont Subsidiaries. On the Effective Date, Fremont completed a two-step merger transaction in which Fremont General Credit Corporation (“FGCC”), a wholly owned subsidiary of Fremont, merged with and into Fremont (the “FGCC Merger”) and then Fremont Reorganizing Corporation (“FRC”), formerly known as FIL, merged with and into Fremont (the “FRC Merger”), with Fremont as the surviving corporation in both mergers. Following the consummation of the FGCC Merger and the FRC Merger, the assets of FGCC and FRC became the assets of Signature and any existing liabilities of FGCC and FRC, any guarantees by FGCC or FRC of any obligation of Fremont and any joint and several liabilities of FGCC and FRC became obligations of Signature. All of the stock of FGCC and FRC was canceled and all intercompany claims and obligations of Fremont, FGCC and FRC were eliminated.

Signature Common Stock Investment, Warrants Issuance and Registration Rights. Pursuant to the Plan of Reorganization, a series of accredited investors including Signature’s CEO, Craig Noell, and one of our current Board members (collectively, the “Signature Investors”) purchased an aggregate of 12.5 million shares of Signature’s common stock for an aggregate purchase price of $10.0 million in cash pursuant to the terms of subscription agreements between the Company and each of the Signature Investors.

Additionally, pursuant to the Plan of Reorganization, in June 2010, Signature issued warrants to purchase an aggregate of 15.0 million shares of Signature’s common stock (the “Warrants”) to three investors, including Signature Group Holdings, LLC, an investment management company owned by the Company’s CEO and CFO, Craig Noell and Kyle Ross, respectively, which owns the Warrants on behalf of itself and certain other nominees, and two other investors (collectively, the “Warrant Investors”). The Warrants vested 20% on the issuance date, and vest 20% each year thereafter on the anniversary of the issuance date. The Warrant Investors are required to pay cash in the amount of $0.02 per vested share for the Warrants, which is payable upon vesting, for an aggregate purchase price of $0.3 million.

The exercise price for the Warrants was originally $1.03, but as a result of anti-dilution and pricing protection provisions in the Warrants, the exercise price of Warrants to purchase 3,100,000 shares of the Company’s

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common stock has been reduced to $0.664 per share and the exercise price of the balance of the Warrants has been reduced to $0.69 per share, upon dilutive issuances of securities.

The Company has entered into a registration rights agreement with the Signature Investors and Warrant Investors, pursuant to which the Company as agreed to use commercially reasonable efforts to register the shares of common stock issued to the Signature Investors and issuable to the Warrant Investors upon the exercise of Warrants in accordance with the requirements of the Securities Act of 1933, as amended, pursuant to a resale shelf registration statement on Form S-3 or if the Company is not eligible to use Form S-3, on a registration statement on Form S-1.

Distributions. Pursuant to the Plan of Reorganization, on the Effective Date, the Company paid claims aggregating $280.8 million to satisfy Allowed Claims, as defined in the Plan of Reorganization. In addition to the Allowed Claims, on the Effective Date, the Company paid an additional $2.7 million in professional fees to five firms with aggregate claims of $4.9 million. Between the Effective Date and December 31, 2012, the Company paid an additional $1.3 million in professional fees to these firms, as well as $4.2 million in substantial contribution claims, which included expense reimbursements to plan proponent and other interested parties the California Federal Bankruptcy Court determined had made substantial contributions in Signature’s progress toward reorganization.

Litigation and Loan Repurchase Settlements. During the Bankruptcy Proceedings, the Company executed a number of settlement agreements related to litigation matters and loan repurchase claims, pursuant to which the Company paid a total of $118.6 million in settlements, including $36.5 million included in Allowed Claims above. In the year ended December 31, 2012, no additional settlements were executed or paid, leaving $5.1 million in claims that have not yet been paid (the “Unpaid Claims”). The Unpaid Claims consist of the Colburn and Walker matters set forth in “Legal Proceedings” in Note 19 — Commitments and Contingencies in the Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this Annual Report.

Status of Bankruptcy Proceedings. On February 15, 2013, the Company filed a Motion for Final Decree and Order Closing Chapter 11 Case (the “Final Decree”) with the California Federal Bankruptcy Court. On February 28, 2013, claimants Gwyneth Colburn and Kyle Walker filed an Opposition to Reorganized Debtor’s Motion for Entry of Final Decree and Order Closing Case. At a hearing on March 28, 2013, the Final Decree was approved and a written order will be submitted to the California Federal Bankruptcy Court for the judge’s signature. The Final Decree closing the case does not affect the open claims filed by Colburn and Walker.

Legal Proceedings

The information set forth under “Legal Proceedings” in Note 19 — Commitments and Contingencies of the Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this Annual Report, is incorporated herein by reference.

Not Applicable.

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PART II

Market Information

The Company’s common stock is quoted on the OTCQX under the trading symbol “SGGH.” The following table sets forth prices of the high and low completed trades of the Company’s common stock as reported as composite transactions on the OTCQX.

On March 1, 2013, there were 1,410 registered shareholders and the last reported trade of our common stock on the OTCQX was $0.48 per share.

Dividends

There were no cash dividends declared on Signature’s common stock during the years ended December 31, 2012 and 2011.

The decision to pay dividends is made by the Board and is dependent on the earnings of Signature, management’s assessment of future capital needs, and other factors. The Company has not paid a dividend since the fourth quarter of 2006. Signature does not expect to pay any cash dividends on its common stock in the foreseeable future. Signature anticipates that any earnings generated from future operations will be used to finance its operations and growth.

Equity Compensation Plan Information

The following table sets forth the number of shares of our common stock subject to outstanding common stock options, warrants and stock rights, the weighted average exercise price of outstanding common stock options, warrants and stock rights, and the number of shares remaining available for future award grants under our equity compensation plans (“Equity Plans”) as of December 31, 2012:

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Issuer Purchases of Equity Securities

There were no issuer purchases of equity securities during the year ended December 31, 2012.

Tax Benefit Preservation Provision

In order to preserve valuable tax attributes following emergence from Bankruptcy Proceedings, restrictions were included in our Amended and Restated Bylaws on transfers of Signature common stock. Unless approved by the Board, any attempted transfer of Signature common stock is prohibited and void to the extent that, as a result of such transfer (or any series of transfers) (i) any person or group of persons shall become a “five-percent holder” of Signature (as defined in Section 1.382-2T(g) of the Tax Code) or (ii) the ownership interests of any five-percent holder shall be increased or decreased. Persons wishing to become a five-percent holder (or existing five-percent holders wishing to increase or decrease their percentage share ownership) must request a waiver of the restriction from Signature, and the Board may grant a waiver in its sole discretion.

The Tax Benefit Preservation Provision is meant to reduce the potential for a “change of control” event, which, if it were to occur, would have the effect of limiting the amount of the NOLs available in a particular year, or eliminate the NOLs altogether if such a “change of control” were to occur during the two-year period after emerging from Bankruptcy Proceedings on the Effective Date. This two-year period “change of control” test has expired and the Company no longer believes there is a risk of full elimination of the NOLs.

Not applicable to smaller reporting companies.

This Item 7 contains certain non-GAAP financial information. See “Reconciliation of Non-GAAP Financial Measures” below for important information regarding the non-GAAP financial information included in this Item 7, together with a reconciliation of such non-GAAP financial information presented to the most comparable GAAP information.

OVERVIEW

Signature is a diversified enterprise with current principal holdings in cash, financial assets, and principal activities in industrial supply and special situations finance. We anticipate that we will continue to use our cash and other financial assets to pursue value-enhancing acquisitions and leverage our unique tax assets, as well as support the growth needs of our existing operating segments, as necessary.

We plan to acquire controlling interests in businesses with talented and experienced management teams, strong margins, and defensible market positions. We regularly consider acquisitions of businesses that operate in unique industries, as well as businesses that we believe are in transition or are otherwise misunderstood by the marketplace. Post-acquisition, we plan to operate our businesses as autonomous subsidiaries.

A key element to our business strategy is utilizing our federal and state NOLs, primarily generated by Fremont’s legacy businesses. As of December 31, 2012, our federal and California NOLs are $886.9 million and $980.0 million, respectively. The NOLs are further discussed in Note 12 — Income Taxes in the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report.

Operating Segments

The Company’s consolidated financial statements included in this Annual Report and this Management’s Discussion and Analysis of Financial Condition and Results of Operations present the Company’s financial

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condition and results of operations by operating segment. We report our results of operations under both continuing and discontinued operations. All of the activities related to our operating subsidiaries and our growth strategies, as well as ongoing general corporate functions are included in continuing operations.

Continuing Operations: At December 31, 2012, Signature’s continuing operations had $121.4 million in assets, or 96.6% of our total assets, and $57.7 million of liabilities, or 85.5% of our total liabilities. Continuing operations includes two operating segments, Industrial Supply and Signature Special Situations. Industrial Supply is comprised of our wholly owned subsidiary, NABCO, whose results of operations have been consolidated into Signature’s operations since the NABCO Acquisition Date. NABCO is one of the largest independent suppliers of circuit breakers in the United States and is focused on the replacement circuit breaker market, particularly for commercial and industrial applications where replacement time is extremely important.

Our other continuing operations segment is Signature Special Situations, which may opportunistically acquire sub-performing and nonperforming commercial and industrial loans, leases and mortgages typically at a discount to UPB. We may also originate secured debt financings to middle market companies for a variety of situations including supporting another transaction such as an acquisition, recapitalization or restructuring. In addition, we may take positions in corporate bonds and other structured debt instruments, which may be performing, sub-performing or nonperforming, as well as other specialized financial assets. The largest asset in this segment is a portfolio of subprime residential real estate loans. In the first quarter of 2012, we determined that the economics of a “hold and retain” strategy were advantageous, as compared to the secondary market bids received for our performing (less than sixty days past due) residential real estate loan portfolio. As a result of management’s analysis and our current liquidity position, we intend to hold these loans for investment for the foreseeable future. With the change of intention, we reclassified $23.0 million of loans, with an aggregate UPB of $46.9 million, from discontinued operations to Signature Special Situations on April 1, 2012.

Discontinued Operations: At December 31, 2012, Signature’s discontinued operations had $4.3 million in assets, or 3.4% of our total assets, and $9.8 million of liabilities, or 14.5% of our total liabilities. Discontinued operations presents the financial condition and results of operations of the businesses and operations that have been sold or discontinued by the Company, including certain of Fremont’s former operations, or where the Company is actively engaged in sale discussions. In the fourth quarter of 2012, the Company received an unsolicited offer from a third party to purchase the intellectual property and other assets of Cosmed, the Company’s majority owned subsidiary that owns the product formulations of an anti-aging line of skin care products. Management is currently engaged in negotiations to sell substantially all of the assets of Cosmed. As a result, Cosmed’s assets, liabilities and results of operations have been reclassified in discontinued operations for all periods presented. No assurances can be made that the Cosmed transaction will close in a timely manner, or at all.

In addition to Cosmed, the Company’s discontinued operations include (i) loans held for sale, net, which was comprised of sub-performing and nonperforming (sixty or more days past due) residential real estate loans, which were entirely liquidated in the year ended December 31, 2012; (ii) REO, which is comprised of property acquired through foreclosure, or deed in lieu of foreclosure, on loans secured by real estate, and (iii) commercial real estate investments, held for sale, which are participations in community development projects and other similar types of loans and investments in partnerships. Under our business strategy, we seek to maximize the value of the discontinued operations assets and expect to redeploy the proceeds in our continuing operations.

The largest liability within discontinued operations is our residential loan repurchase reserve, which, as a result of receiving no new claims in more than eighteen months, has been reduced to $7.5 million at December 31, 2012. See “Critical Accounting Policies” below for additional information about the repurchase reserve.

Discontinued operations also includes operating costs and liabilities associated with various litigation matters pertaining to Fremont’s prior business activities. As of December 31, 2012, the Company was a party to forty-three defensive cases involving individual home borrowers, the majority of whom are fighting to hold off

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foreclosure against the loan servicer and current mortgage owner, and where Fremont has been named in the matter because it was the originator of the mortgage. We are also involved in three defensive cases involving former Fremont executives seeking severance claims. See “Legal Proceedings” in Note 19 — Commitments and Contingencies in the Notes to Consolidated Financial Statements in Part IV, Item 15 of this Annual Report for more information about the material legal proceedings in which we are involved.

Corporate and Other

Corporate and other operating costs relate to administrative, financial and human resource activities that are not allocated to specific operations and are excluded from segment results of operations. These operating costs are not allocated to any segments, as management excludes such costs when assessing segment performance.

Critical Accounting Policies

The accounting and reporting policies of the Company conform to GAAP. The Company’s accounting policies are fundamental to understanding our consolidated financial statements and this Management’s Discussion and Analysis of Results of Operations and Financial Condition. Several of our policies are critical as they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and affect the reported amount of assets and liabilities and operating revenues and costs included in the consolidated financial statements. Circumstances and events that differ significantly from those underlying the Company’s estimates, assumptions and judgments could cause the actual amounts reported to differ significantly from these estimates. These policies govern (i) the repurchase reserve, (ii) deferred tax asset valuation, and (iii) goodwill and intangible assets, each of which is described below. On an ongoing basis, we evaluate our estimates and assumptions based on historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable under the circumstances; however, actual results may differ significantly from these estimates and assumptions, which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the reporting periods.

Repurchase reserve

Fremont’s subprime residential mortgage business originated residential real estate loans, and made customary standard industry representations and warranties in sales of those residential real estate loans. As a result of breaches of certain of these representations and warranties, the Company may be required to repurchase certain loans due to material defects that occurred in the origination of the loans. The Company maintains a repurchase reserve pursuant to FASB Accounting Standards Codification (“ASC”) 460-10, Guarantees, and FASB ASC 450-10, Contingencies, for the estimated losses expected to be incurred due to outstanding loan repurchase claims, as well as potential future loan repurchase claims. The reserve is based on historical repurchase settlements, expected future repurchase trends for loans already sold in whole loan sale transactions and the expected valuation of such loans when repurchased. Because the estimated reserve is based upon currently available information, is subject to known and unknown uncertainties using multiple assumptions requiring significant judgment, we have identified the estimate of the repurchase reserve as a critical accounting estimate, and actual results may vary significantly from the current estimate. When loans are repurchased or a claim is settled, charge-offs are made to the repurchase reserve.

The repurchase reserve may vary significantly each period as the methodology used to estimate the expense continues to be refined based on the level and type of repurchase requests presented, defects identified, and other relevant factor. The estimated range of possible losses related to repurchase claims at December 31, 2012, both known and unknown, was $4.0 million to $8.1 million, for which the Company maintained a repurchase reserve of $7.5 million. The estimated range of possible losses related to repurchase claims at December 31, 2011, both known and unknown, was $4.6 million to $9.3 million, for which the Company maintained a repurchase reserve of $8.5 million. The repurchase reserve is included in noncurrent liabilities of discontinued operations in the consolidated balance sheets, and the provision for loss or the relief of the repurchase reserve is included in other income (expense) in the statements of operations of discontinued operations.

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The repurchase reserve represents our best estimate of the probable loss that the Company may incur for material breaches of certain representations and warranties in the contractual provisions of its sales of residential real estate loans. Because the level of repurchase losses is dependent on economic factors, investor demand strategies and other external conditions that may change over the life of the underlying loans, the liability for loan repurchase losses is difficult to estimate and requires considerable management judgment.

Deferred tax asset valuation

We recognize deferred tax assets and liabilities for the future tax consequences related to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax credits and NOLs. At December 31, 2012 and 2011, we had deferred tax assets of $373.7 million and $409.0 million, respectively, each with full valuation allowances. We evaluate our deferred tax assets for recoverability considering negative and positive evidence, including our historical financial performance, projections of future taxable income, and future reversals of existing taxable temporary differences. We are required to establish a valuation allowance for deferred tax assets if we determine, based on available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets will not be realized. In evaluating the need for a valuation allowance, we estimate future taxable income based on management approved business plans, future capital requirements and ongoing tax planning strategies. This process involves significant management judgment about assumptions that are subject to change from period to period. Because the recognition of deferred tax assets requires management to make significant judgments about future earnings, the periods in which items will impact taxable income and the application of inherently complex tax laws, we have identified the assessment of deferred tax assets and the need for any related valuation allowance as a critical accounting estimate.

Our analysis of the realizability of deferred tax assets considers any future taxable income expected from continuing operations. The use of different assumptions of future earnings, the periods in which items will affect taxable income and the application of inherently complex tax laws can result in changes in the amounts of deferred tax items recognized, which can result in equity and earnings volatility because such changes are reported in current period earnings. Furthermore, if future events differ from our current forecasts, valuation allowances may need to be adjusted, which could have a material effect on our results of operations and financial condition. We will continue to update our assumptions and forecasts of future taxable income and assess the need for a full valuation allowance.

Our interpretations of tax laws are subject to examination by the IRS and state taxing authorities. Resolution of disputes over interpretations of tax laws may result in us being assessed additional income taxes. We regularly review whether we may be assessed such additional income taxes and recognize liabilities for such potential future tax obligations as appropriate.

Goodwill and intangible assets

As a result of our acquisitions, we have goodwill and other intangible assets. Goodwill resulting from business combinations is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill was $17.8 million as of December 31, 2012 and 2011. Intangible assets consist primarily of customer relationships and trade names and totaled $4.3 million and $6.7 million as of December 31, 2012 and 2011, respectively, net of accumulated amortization. Goodwill and intangible assets together represented 17.6% and 17.1% of our total assets as of December 31, 2012 and 2011, respectively.

Goodwill is not amortized but must be allocated to reporting units and tested for impairment on an annual basis or in interim periods if events or circumstances indicate potential impairment. Our reporting unit for purposes of goodwill impairment testing is Industrial Supply. We perform our annual goodwill impairment test for all reporting units in the fourth quarter each year using a two-step process. First, we compare the fair value of each

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reporting unit to its current carrying amount, including goodwill. If the fair value of the reporting unit is in excess of the carrying value, the related goodwill is considered not to be impaired and no further analysis is necessary. If, however, the carrying value of the reporting unit exceeds the fair value, there is an indication of potential impairment and a second step of testing is performed to measure the amount of impairment, if any, for that reporting unit.

Estimating the fair value of reporting units and the assets, liabilities and intangible assets of a reporting unit is a subjective process that involves the use of estimates and judgments, particularly related to cash flows, discount rates and an applicable control premium. Management judgment is required to assess whether the carrying value of the reporting unit can be supported by the fair value of the individual reporting unit. There are widely accepted valuation methodologies, such as the market approach (earnings multiples and/or transaction multiples) and/or income approach (discounted cash flow methods), that are used to estimate the fair value of reporting units. In applying these methodologies, we utilize a number of factors, including actual operating results, future business plans, economic projections and market data. Because of the significant judgment used in determining the estimated fair value of out reporting units and the material balances of our goodwill and intangible assets compared to our total assets, we have identified estimating the fair value of our reporting units as a critical accounting estimate.

In estimating the fair value of the reporting units in step one of the goodwill impairment analyses, fair values can be sensitive to changes in the projected cash flows and assumptions. In some instances, minor changes in the assumptions could impact whether the fair value of a reporting unit is greater than its carrying amount. Furthermore, a prolonged decrease or increase in a particular assumption could eventually lead to the fair value of a reporting unit being less than its carrying amount. Also, to the extent step two of the goodwill analyses is required, changes in the estimated fair values of individual assets and liabilities may impact other estimates of fair value for assets or liabilities and result in a different amount of implied goodwill, and ultimately the amount of goodwill impairment, if any. In conducting our goodwill impairment test for 2012, we determined the fair value of our reporting units using a discounted cash flow analysis, a form of the income approach. Our discounted cash flow analysis required management to make judgments about future revenue growth and operating costs. We relied on each reporting unit’s internal cash flow forecast and calculated a terminal value using a growth rate that reflected the nominal growth rate of the economy, as a whole, and discount rates for the respective reporting units.

Based on the results of step one of our 2012 goodwill impairment test, we determined that the fair value of Industrial Supply, including goodwill, significantly exceeded its carrying value. Actual operating revenues and earnings before interest, taxes, depreciation and amortization (“EBITDA”) are tracking 11.8% and 45.4% higher than our original estimates made at the acquisition date, implying that Industrial Supply was not at risk of failing step one of the impairment test. Accordingly, goodwill was not considered impaired and the second step of impairment testing was not required.

Intangible assets with definitive useful lives are amortized over their estimated lives and evaluated for potential impairment whenever events or changes in circumstances suggest that the carrying value of an intangible asset may not be fully recoverable. An impairment loss, generally calculated as the difference between the estimated fair value and the carrying value of the intangible asset, is recognized if the sum of the estimated undiscounted cash flows relating to the intangible asset is less than the corresponding carrying value. We did not recognize impairment on intangible assets in the years ended December 31, 2012 or 2011.

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CONSOLIDATED RESULTS OF OPERATIONS AND FINANCIAL CONDITION

2012 Highlights

The following table presents selected components of the Company’s consolidated statements of operations for the years ended December 31, 2012 and 2011:

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

General

Net loss attributable to Signature Group Holdings, Inc. decreased $5.3 million to $7.5 million for the year ended December 31, 2012, as compared to $12.8 million for the year ended December 31, 2011. The decrease in our net loss in 2012 is primarily related to reductions in loss from discontinued operations, net of income taxes offset by a small increase in loss from continuing operations. See “Review of Operating Segments Results of Operations” below for additional detail regarding our operating segments.

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Loss from continuing operations

Loss from continuing operations increased $0.5 million to $4.0 million for the year ended December 31, 2012, as compared to $3.5 million for the year ended December 31, 2011. The increase in loss from continuing operations is primarily related to a $16.7 million increase in operating costs, a $6.5 million decrease in other income and a $3.2 million increase in income tax expense, partially offset by a $24.4 million increase in operating revenues and a $1.5 million decrease in reorganization items, net.

Operating revenues

Total operating revenues for the year ended December 31, 2012 increased 125.2%, or $24.4 million, to $43.9 million, as compared to $19.5 million for the year ended December 21, 2011. The increase is primarily due to a $22.1 million increase, or 156.0%, in net sales of Industrial Supply, which was included for the full year in 2012 compared to only five months in 2011. This increase also reflects an increase in operating revenues provided by Signature Special Situations of $2.4 million, or 42.0%, for the year ended December 31, 2012, which is primarily related to a $1.6 million increase in change in market valuation allowance on loans receivable, net and $0.5 million of contingent consideration received.

Operating costs

Total operating costs increased $16.7 million to $46.4 million for the year ended December 31, 2012, as compared to $29.7 million for the year ended December 31, 2011. The increase in operating costs is primarily due to a $17.7 million increase in operating costs of Industrial Supply, which was included for the full year 2012 compared to only five months in 2011, partially offset by a $1.2 million decrease in selling, general and administrative expenses in corporate and other for the year ended December 31, 2012.

Loss from discontinued operations, net of income taxes

Loss from discontinued operations, net of income taxes decreased $5.9 million to a loss of $3.5 million for the year ended December 31, 2012, as compared to $9.4 million for the year ended December 31, 2011, due primarily to a reduction in activities in our discontinued operations segment, particularly related to ongoing legal matters.

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Consolidated Financial Condition

The following table presents selected components of the Company’s consolidated balance sheets as of December 31, 2012 and 2011:

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December 31, 2012 Compared to December 31, 2011

General

As discussed further below, total assets decreased by $17.3 million, or 12.1%, to $125.7 million at December 31, 2012, from $143.0 million at December 31, 2011. The decrease in total assets is primarily the result of an $18.3 million decrease in assets of discontinued operations, which is largely due to the sale of our residential real estate loans held for sale and more than twenty of our REO properties. The decrease also reflects a $2.4 million decrease in intangible assets and a $1.9 million decrease in investment securities, available for sale, partially offset by a $1.3 million increase in cash and cash equivalents, a $2.5 million increase in inventory and a $1.6 million increase in other assets. Total liabilities decreased by $11.7 million, or 14.8%, to $67.5 million at December 31, 2012, from $79.2 million at December 31, 2011. The decrease in total liabilities is primarily the result of a $8.7 million decrease in debt, a $2.5 million decrease in trade payables and a $1.9 million decrease in liabilities of discontinued operations, partially offset by a $0.4 million increase in contingent consideration and a $0.9 million increase in the common stock warrant liability.

Cash and cash equivalents

Cash and cash equivalents increased $1.3 million to $53.7 million at December 31, 2012, from $52.4 million at December 31, 2011. The $1.3 million increase in cash was primarily due to $12.8 million provided by operating and investing activities of discontinued operations, as more fully described in “Review of Operating Segments Financial Condition — Discontinued Operations” below, and $2.8 million in collections on loans receivable, net, including net repayments from borrowers under lines of credit facilities, partially offset by $8.3 million of repayments and retirement of debt, a $2.5 million increase in inventory and a $2.5 million decrease in trade payables, along with expenses associated with the $7.5 million net loss.

Investment securities, available for sale

Investment securities, available for sale decreased $1.9 million to $3.1 million at December 31, 2012, from $5.0 million at December 31, 2011. The decrease was primarily due to the sale of corporate bonds by Signature Special Situations, which resulted in a gain of $0.3 million.

Trade accounts receivable, net

Trade accounts receivable, net decreased $0.5 million to $3.6 million at December 31, 2012, from $4.1 million at December 31, 2011. The decrease was primarily due to the timing of payments received from customers.

Inventory

Inventory increased $2.5 million to $10.2 million at December 31, 2012, from $7.7 million at December 31, 2011. The increase in inventory was related to growth in the Industrial Supply segment during the year and opportunistic inventory purchases that reflect management’s desire to maintain strong inventory levels to support ongoing growth initiatives.

Loans receivable, net and loans held for sale, net

Together, loans receivable, net and loans held for sale, net increased $0.3 million to $24.4 million at December 31, 2012, from $24.1 million at December 31, 2011. The increase was primarily due to a $2.8 million change in market valuation allowance, increasing the carrying value of loans held for sale, net prior to their reclassification to loans receivable, net, offset by principal collections on loans receivable and repayments under commercial lines of credit.

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Intangible assets, net

Intangible assets, net, comprised of customer relationships and trade names, decreased $2.4 million to $4.3 million at December 31, 2012, from $6.7 million at December 31, 2011, as a result of scheduled amortization.

Trade payables

Trade payables decreased $2.5 million to $2.2 million at December 31, 2012, from $4.7 million at December 31, 2011. The decrease is primarily attributable to a $2.2 million reduction in trade payables within corporate and other, as professional fee expenses were $3.0 million lower in the fourth quarter of 2012, compared to the fourth quarter of 2011.

Lines of credit

Lines of credit decreased $4.1 million to $1.0 million at December 31, 2012, from $5.1 million at December 31, 2011. The decrease reflects our repayment of a portion of our line of credit as a result of strong operating results and liquidity in the Industrial Supply segment.

Contingent consideration

Contingent consideration increased $0.4 million to $4.0 million at December 31, 2012, from $3.6 million at December 31, 2011. In accordance with the NABCO purchase agreement, NABCO’s former shareholders earned contingent consideration of $4.0 million, based on the achievement of certain EBITDA milestones for the fiscal year ended December 31, 2012.

Long-term debt

Long-term debt decreased $4.5 million to $47.1 million at December 31, 2012, from $51.6 million at December 31, 2011. The decrease was attributable to scheduled amortization on the term loan, scheduled and accelerated principal amortization payments on the seller notes, and the repurchase of $1.8 million of our 9.00% notes payable due in December 2016 (the “Notes Payable”) in May 2012.

Common stock warrant liability

Common stock warrant liability increased $0.9 million to $2.3 million at December 31, 2012, from $1.4 million at December 31, 2011. Pursuant to our Plan of Reorganization, Signature issued Warrants to purchase 15.0 million shares of the Company’s common stock at a price of $1.03 per share. The Warrants include anti-dilution and pricing protection provisions, which provide for a reduction in the strike price of the Warrants if any common stock (or equivalents) of the Company, other than common stock (or equivalents) issued under the Signature Group Holdings, Inc. 2006 Performance Incentive Plan (the “Incentive Plan”), is issued at a price per share less than the exercise price during the term of the Warrants. The Warrants can also be adjusted due to future equity offerings undertaken by the Company with exercise pricing set at the then-current market price of the related shares or the contractual terms of other equity-linked financial instruments issued in a subsequent period. Accordingly, equity treatment is not allowed and the Warrants are classified as a derivative liability and re-measured at fair value at each reporting period. We value the Warrants using a trinomial lattice option pricing model that utilizes various assumptions.

The $0.9 million change in fair value of the common stock warrant liability during the year ended December 31, 2012 is primarily attributable to an increase in the underlying market price of the our common stock and a reduction in the remaining contractual term of the Warrants. The weighted average exercise price of the Warrants is $0.68 per share at December 31, 2012, which reflects a reduction to the original exercise price as a result of dilutive issuances of our common stock subsequent to the issuance of the Warrants. See Note 11 — Common Stock Warrant Liability in the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report for more information about the Warrants.

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Assets and liabilities of discontinued operations

Assets of discontinued operations decreased to $4.3 million at December 31, 2012, from $22.6 million at December 31, 2011. Liabilities of discontinued operations decreased to $9.8 million at December 31, 2012, from $11.7 million at December 31, 2011. See “Review of Operating Segments Financial Condition — Discontinued Operations” below.

REVIEW OF OPERATING SEGMENTS RESULTS OF OPERATIONS

The following tables present revenues, expenses, net earnings (loss) and other key financial measures from our operating segments for the years ended December 31, 2012 and 2011. We have three primary operating segments: Industrial Supply, Signature Special Situations and discontinued operations. Results of operations and other financial measures that are not included in our primary operating segments are included in corporate and other in the tables below.

Year Ended December 31, 2012, as Compared to the Year Ended December 31, 2011

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