JMP Group Inc. (NYSE:JMP), an investment banking and alternative
asset management firm, reported financial results today for the
quarter and six months ended June 30, 2011.
- Total net revenues were $31.5 million
for the quarter, compared to $42.8 million for the second quarter
of 2010. For the six months ended June 30, 2011, total net revenues
were a record $74.4 million, an increase of 9.3% from
$68.1 million for the six months ended June 30, 2010.
- Adjusting for the impact of non-cash
items, adjusted net revenues were $36.5 million for the quarter,
compared to $45.3 million for the second quarter of 2010. For the
six months ended June 30, 2011, adjusted net revenues were a
record $83.9 million, an increase of 16.8% from $71.8 million
for the six months ended June 30, 2010. For more information on
adjusted net revenues, including a reconciliation to net revenues,
please see the section below titled “Non-GAAP Financial
Measures.”
- Net income attributable to JMP Group
was $1.5 million, or $0.07 per diluted share, for the quarter,
compared to $2.2 million, or $0.10 per diluted share, for the
second quarter of 2010. For the six months ended June 30, 2011, net
income attributable to JMP Group was a record $5.1 million, or
$0.22 per diluted share, an increase of 28.5% from $3.9 million, or
$0.18 per diluted share, for the six months ended June 30,
2010.
- Operating net income was $4.9 million,
or $0.22 per diluted share, for the quarter, compared to
$4.8 million, or $0.21 per diluted share, for the second
quarter of 2010. For the six months ended June 30, 2011, operating
net income was a record $11.2 million, or $0.49 per diluted share,
an increase of 43.5% from $7.8 million, or $0.35 per diluted share,
for the six months ended June 30, 2010.
- Excluding the financial impact of gains
recognized by JMP Credit Corporation on the sale or payoff of loans
initially acquired in April 2009, adjusted operating net income was
$0.12 per share and $0.31 per share for the quarter and six months
ended June 30, 2011, respectively, compared to $0.05 per share and
$0.14 per share for the quarter and six months ended June 30, 2010,
respectively. For more information on operating net income and
adjusted operating net income, on a consolidated and a segment
basis, including a reconciliation to net income, please see the
section below titled “Non-GAAP Financial Measures.”
“JMP posted a solid second quarter, producing operating EPS of
$0.22 per share,” said Chairman and Chief Executive Officer Joe
Jolson. “Adjusted operating EPS, which excludes acquired loan sale
profits, more than doubled year over year to $0.12 per share,
despite a weaker-than-expected capital markets environment. On an
adjusted basis, JMP earned a record $0.56 per share over the latest
four quarters, an increase of 87% from the $0.30 per share earned
during the previous four quarters. We are beginning to enjoy a
positive contribution from our two-year initiative of reinvesting
some of our excess investment income back into growth strategies in
our operating businesses. The growth spend is partially reflected
in elevated corporate expenses, as detailed in our segment
reporting tables. Our stated goal has been to double our market
share organically from 2010 through 2015. As in the first quarter
of 2011, the benefits of our diversified business model were
evidenced again in the second quarter of this year. With our
momentum building and our investment banking market share
continuing to increase, we remain confident of achieving our goal
of generating at least a 10% return on adjusted tangible equity for
the year, excluding any acquired loan sale profits.”
Revenues
Investment Banking
Investment banking revenues were $10.1 million for the quarter,
a decrease of 5.4% from $10.6 million for the second quarter of
2010. For the six months ended June 30, 2011, investment banking
revenues were $30.3 million, an increase of 88.1% from $16.1
million for the six months ended June 30, 2010.
The company executed 28 investment banking transactions during
the quarter, compared to 22 during the second quarter of 2010.
Public equity underwriting revenues amounted to $6.5 million,
up from $6.1 million, as the company executed 18 public equity
offerings, versus 15 in the second quarter of 2010. Private capital
markets revenues were $2.2 million, down from
$2.6 million, with the company executing five private capital
markets transactions, versus four in the second quarter of 2010.
Strategic advisory revenues totaled $1.4 million, down from
$2.0 million, with the company acting as a strategic advisor
on five completed transactions, compared to three during the second
quarter of 2010.
Brokerage
Net brokerage revenues were $6.2 million, a decrease of 19.5%
from $7.7 million for the second quarter of 2010. For the six
months ended June 30, 2011, net brokerage revenues were $12.5
million, a decrease of 18.8% from $15.4 million for the six months
ended June 30, 2010.
Asset Management
Asset management fees and other related revenues totaled $6.7
million, an increase of 95.2% from $3.4 million for the second
quarter of 2010. For the six months ended June 30, 2011, asset
management fees and other related revenues were $10.7 million, an
increase of 56.7% from $6.8 million for the six months ended June
30, 2010. For more information on asset management-related fee
revenues, please see the section below titled “Non-GAAP Financial
Measures.”
Client assets under management at June 30, 2011 totaled $1.3
billion, including $548.6 million of funds managed by Harvest
Capital Strategies and $761.7 million par value of loans and cash
underlying the two collateralized loan obligations managed by JMP
Credit Advisors, the internal manager of JMP Credit Corporation.
Client assets under management were $1.3 billion at March 31, 2011
and $1.1 billion at June 30, 2010. Including sponsored
funds, client assets under management totaled $2.4 billion at
June 30, 2011, compared to $2.0 billion at March 31, 2011 and
$1.4 billion at June 30, 2010. Private capital, including corporate
credit, REIT advisory services, venture capital and distressed
mortgage investments, represented 47.7% of total sponsored assets
under management at June 30, 2011, compared to 41.3% at June 30,
2010.
Principal Transactions
Principal transactions generated net revenues of $2.6 million
for the quarter, compared to $0.4 million for the second quarter of
2010. For the six months ended June 30, 2011, principal
transactions generated net revenues of $6.2 million, compared to
$1.8 million for the six months ended June 30, 2010. For the
quarter, direct investments and investments by JMP Group in hedge
funds managed by Harvest Capital Strategies produced net realized
and unrealized gains of $2.1 million, compared to net realized and
unrealized gains of $1.0 million for the second quarter of 2010. In
addition, the company’s strategic equity investment in publicly
traded New York Mortgage Trust, Inc. produced an unrealized gain of
$0.5 million, compared to an unrealized loss of $0.5 million
for the second quarter of 2010.
Gain on Sales and Payoffs of Loans and Loan Loss Provision
JMP Credit Corporation realized gains of $6.8 million due to the
sale or payoff of 31 of the loans in its portfolio during the
quarter, compared to $15.8 million on 21 loans during the second
quarter of 2010. For the six months ended June 30, 2011, realized
gains amounted to $13.6 million as a result of the sale or payoff
of 70 loans, compared to $19.2 million on 32 loans for the six
months ended June 30, 2010. For the quarter and six months ended
June 30, 2011, $0.7 million and $1.6 million, respectively, were
due to the sale or payoff of loans that had been purchased
subsequent to the acquisition of JMP Credit Corporation in April
2009. At June 30, 2011, 18 loans with an aggregate par value of
$70.7 million and an associated liquidity discount of $20.9 million
remained from the portfolio acquired in April 2009.
A loan loss provision of $0.1 million was recorded for the
quarter as a general reserve with regard to performing loans at JMP
Credit. At June 30, 2011, general loan loss reserves equaled 0.4%
of gross performing loans, compared to 0.2% at June 30, 2010.
At June 30, 2011, gross impaired loans totaled $14.1 million, or
3.1% of gross loans outstanding, compared to $13.9 million, or 3.1%
of gross loans outstanding, at December 31, 2010 and $24.4 million,
or 5.5% of gross loans outstanding, at June 30, 2010. With regard
to impaired loans at June 30, 2011, discounts and reserves
(including credit discounts, liquidity discounts, allowances for
loan losses and deferred loan fees) equaled $11.4 million, or
80.7% of gross impaired loans outstanding. With regard to
performing loans at June 30, 2011, discounts and reserves
(including liquidity discounts, allowances for loan losses and
deferred loan fees) equaled $22.2 million, or 5.1% of gross
performing loans outstanding.
Net Interest and Net Dividend Income
Interest income was $7.7 million for the quarter, and interest
expense was $8.8 million, resulting in a net interest deficit of
$1.1 million, compared to net interest income of $4.7 million for
the second quarter of 2010. Excluding interest expense due to net
amortization of liquidity discounts, net interest income was $4.5
million for the quarter, compared to $4.1 million for the quarter
ended June 30, 2010. For the six months ended June 30, 2011, net
interest income was $0.9 million, compared to $8.0 million for
the six months ended June 30, 2010; excluding interest expense due
to net amortization of liquidity discounts, net interest income was
$9.4 million and $8.7 million, respectively, for the same periods.
Net dividend income equaled $0.3 million for the quarter,
compared to $0.5 million for the first quarter of 2010, and totaled
$0.5 million for the six months ended June 30, 2011, compared to
$1.1 million for the six months ended June 30, 2010.
Expenses
Compensation and Benefits
Compensation and benefits expense was $22.0 million for the
quarter, compared to $30.6 million for the second quarter of 2010.
For the six months ended June 30, 2011, compensation and benefits
expense was $50.2 million, compared to $46.1 million for the six
months ended June 30, 2010. Of the amounts recorded for the quarter
and six months ended June 30, 2011, non-cash compensation expense
attributable to restricted stock units, or RSUs, granted in
connection with JMP Group’s May 2007 initial public offering was
$0.4 million and $0.8 million, respectively, while such
expense attributable to RSUs granted thereafter was
$0.1 million and $0.2 million, respectively.
As a percentage of adjusted net revenues, compensation and
benefits expense was 60.3% for the quarter, compared to 67.5% for
the second quarter of 2010, and was 59.9% for the six months ended
June 30, 2011, compared to 64.2% for the six months ended June 30,
2010. Excluding the cost of RSU grants, compensation and benefits
expense was 58.8% of adjusted net revenues for the quarter,
compared to 64.4% for the second quarter of 2010, and was 58.7% for
the six months ended June 30, 2011, compared to 61.0% for the six
months ended June 30, 2010.
Non-Compensation Expense
Non-compensation expense was $6.6 million for the quarter,
compared to $7.1 million for the second quarter of 2010. For the
six months ended June 30, 2011, non-compensation expense was $12.7
million, compared to $13.4 million for the six months ended June
30, 2010. As a percentage of adjusted net revenues,
non-compensation expense was 18.1% for the quarter, compared to
15.7% for the second quarter of 2010, and was 15.1% for the six
months ended June 30, 2011, compared to 18.7% for the six months
ended June 30, 2010.
Non-GAAP Financial Measures
In addition to the GAAP financial results presented in this
press release, JMP Group presents the non-GAAP financial measures
discussed below. These non-GAAP measures are provided to enhance
investors’ overall understanding of the company’s current financial
performance. Additionally, company management believes that this
presentation enables meaningful comparison of JMP Group’s financial
performance in various periods. However, the non-GAAP financial
results presented should not be considered a substitute for results
that are presented in a manner consistent with GAAP. A limitation
of the non-GAAP financial measures presented is that the
adjustments concern gains or expenses that JMP Group expects to
continue to recognize; the adjustment of these items should not be
construed as an inference that these gains or expenses are unusual,
infrequent or non-recurring. Therefore, company management believes
that both JMP Group’s GAAP measures of its financial performance
and the respective non-GAAP measures should be considered together.
The non-GAAP measures presented herein may not be comparable to
similarly titled measures presented by other companies.
Adjusted Net Revenue
Adjusted net revenue is a non-GAAP financial measure that (i)
excludes the net amortization of discounts on loans held and
asset-backed securities issued by JMP Credit Corporation, (ii)
excludes amortization expense related to an intangible asset, and
(iii) reverses net unrealized gains and losses on strategic equity
investments and warrants. In particular, adjusted net revenue
adjusts for:
- the non-cash net amortization of
liquidity discounts at JMP Credit, due to scheduled contractual
principal repayments, of $5.7 million and $10.5 million for the
quarter and six months ended June 30, 2011, respectively;
- non-cash amortization of $0.1 million
in connection with an intangible asset; and
- unrealized mark-to-market gains or
losses on the company’s strategic equity investments in publicly
traded New York Mortgage Trust, Inc. as well as certain warrant
positions.
A reconciliation of JMP Group’s net revenues to the company’s
adjusted net revenues for the quarter and six months ended June 30,
2011 and for comparable prior periods is set forth below.
Quarter Ended Six Months Ended (in
thousands) June 30, 2011 Mar. 31, 2011
June 30, 2010 June 30, 2011 June 30, 2010
Revenues: Non-interest revenues $ 32,529 $ 40,922 $
38,153 $ 73,451 $ 60,033 Net interest income (1,068 )
1,980 4,693 912 8,031
Total net revenues
31,461 42,902 42,846 74,363 68,064 Add back/(subtract):
Net amortization of liquidity discounts on
loans and asset-backed securities issued
5,746 4,794 1,696 10,540 3,192 Amortization of intangible asset 100
100 - 200 -
Unrealized (gain)/loss on strategic equity
investments and warrants
(824 ) (397 ) 781 (1,221 ) 569
Adjusted net revenues $ 36,483 $ 47,399 $ 45,323 $
83,882 $ 71,825
Company management has utilized adjusted net revenue, adjusted
in the manner described above, as an additional device to aid in
understanding and analyzing JMP Group’s financial results for the
periods presented. Management believes that adjusted net revenues
provide useful information by excluding non-cash additions to and
deductions from total net revenues that may otherwise obscure the
company’s cash operating revenues and complicate an assessment of
the company’s core business outlook. Management also believes that
adjusted net revenue is a useful measure because it allows for a
better evaluation of the performance of JMP Group’s ongoing
business and facilitates a meaningful comparison of the company’s
results in a given period to those in prior and future periods.
Asset Management-Related Fee Revenues
Asset management-related revenue is a non-GAAP financial measure
that sums asset management fees with certain fee revenues (in
particular, asset management fundraising fees generated by JMP
Securities, loan fees, and revenues from fee-sharing arrangements
with other asset managers) that are reported in JMP Group’s
financial statements as other income.
A statement of the company's asset management-related revenues
for the quarter and six months ended June 30, 2011 and for
comparable prior periods is set forth below.
Quarter Ended Six Months Ended (in
thousands) June 30, 2011 Mar. 31, 2011
June 30, 2010 June 30, 2011 June 30, 2010
Base management fees: Fees reported as asset
management fees $ 2,316 $ 2,274 $ 2,269 $ 4,590 $ 4,562 Fees
reported as other income 569 418 141
987 230 Total base management fees 2,885 2,692
2,410 5,577 4,792 Incentive fees: Fees
reported as asset management fees 3,730 879 873 4,609 1,471 Fees
reported as other income 2 350 - 352
263 Total incentive fees 3,732 1,229
873 4,961 1,734 Fundraising fees reported as
other income 111 60 164 171 308
Asset management-related fee revenues: All fees reported as
asset management fees 6,046 3,153 3,142 9,199 6,033 All fees
reported as other income 682 828 305
1,510 801 Total asset management-related fee revenues $
6,728 $ 3,981 $ 3,447 $ 10,709 $ 6,834
Company management has utilized asset management-related revenue
as a means of assessing the aggregate production of JMP Group’s
combined asset management activities, including its fundraising and
other services for third parties. Management believes that asset
management-related revenues, as presented above, provide useful
information by indicating the relative contributions of base
management fees and performance-related incentive fees, thus
facilitating a comparison of those fees in a given period to those
in prior and future periods. Management also believes that asset
management-related revenue is a more meaningful measure than
standalone asset management fees as reported, because asset
management-related revenues represent the combined impact of JMP
Group’s various asset management activities on the company’s total
net revenues.
Operating Net Income
Operating net income is a non-GAAP financial measure that (i)
reverses stock-based compensation expense related to equity awards
granted both at the time of JMP Group’s May 2007 initial public
offering and thereafter, (ii) excludes the net amortization of
discounts on loans held and asset-backed securities issued by JMP
Credit Corporation, (iii) excludes amortization expense related to
an intangible asset, (iv) reverses net unrealized gains and losses
on strategic equity investments and warrants, and (v) assumes an
effective tax rate of 42%. In particular, operating net income
adjusts for:
- the grant of 1,931,060 restricted stock
units, or RSUs, at the time of the company’s IPO, which resulted in
non-cash compensation expense of $0.4 million and $0.8 million for
the quarter and six months ended June 30, 2011,
respectively;
- the grant of RSUs subsequent to the
company’s IPO, which resulted in non-cash compensation expense of
$0.1 million and $0.2 million for the quarter and six months ended
June 30, 2011, respectively;
- the non-cash net amortization of
liquidity discounts at JMP Credit, due to scheduled contractual
principal repayments, of $5.7 million and $10.5 million for the
quarter and six months ended June 30, 2011, respectively;
- non-cash amortization of $0.1 million
in connection with an intangible asset;
- unrealized mark-to-market gains or
losses on the company’s strategic equity investments in publicly
traded New York Mortgage Trust, Inc. as well as certain warrant
positions; and
- a combined federal, state and local
income tax rate of 42%.
Reconciliations of JMP Group’s net income to the company’s
operating net income for the quarter and six months ended June 30,
2011 and for comparable prior periods are set forth below.
Quarter Ended (in thousands, except per share
amounts) June 30, 2011 Mar. 31, 2011
June 30, 2010 Net income attributable to JMP Group Inc. $
1,518 $ 3,538 $ 2,216 Add back: Income tax expense
1,281 2,484 2,102 Income before taxes
2,799 6,022 4,318 Add back/(subtract): Compensation expense
– IPO-related RSUs 447 331 1,221 Compensation expense – post-IPO
RSUs 122 126 191
Net amortization of liquidity discounts on
loans and asset-backed securities issued
5,746 4,794 1,696 Amortization of intangible asset 100 100 -
Unrealized (gain)/loss on strategic equity
investments and warrants
(824 ) (397 ) 781 Operating income before
taxes 8,390 10,976 8,207 Income tax expense (assumed rate of
42%) 3,524 4,610 3,447 Operating
net income $ 4,866 $ 6,366 $ 4,760 Operating
net income per share: Basic $ 0.22 $ 0.29 $ 0.22 Diluted $ 0.22 $
0.28 $ 0.21 Weighted average shares outstanding: Basic
22,254 21,843 21,654 Diluted 22,613 22,836 22,295 Six
Months Ended (in thousands, except per share amounts) June 30, 2011
June 30, 2010 Net income attributable to JMP
Group Inc. $ 5,056 $ 3,934 Add back: Income tax expense
3,764 3,491 Income before taxes 8,820 7,425
Add back/(subtract): Compensation expense – IPO-related RSUs
778 1,897 Compensation expense – post-IPO RSUs 248 417
Net amortization of liquidity discounts on
loans and asset-backed securities issued
10,540 3,192 Amortization of intangible asset 200 -
Unrealized (gain)/loss on strategic equity
investments and warrants
(1,221 ) 569 Operating income before taxes 19,365
13,500 Income tax expense (assumed rate of 42%) 8,133
5,670 Operating net income $ 11,232 $ 7,830
Operating net income per share: Basic $ 0.51 $ 0.36 Diluted
$ 0.49 $ 0.35 Weighted average shares outstanding: Basic
22,050 21,633 Diluted 22,720 22,378
Company management has utilized operating net income on a total
and per share basis, adjusted in the manner described above, as an
additional device to aid in understanding and analyzing JMP Group’s
financial results for the periods presented. Management believes
that operating net income provides useful information by excluding
certain items that may not be representative of the company’s core
operating results or business outlook. Management also believes
that operating net income is a useful measure because it allows for
a better evaluation of the performance of JMP Group’s ongoing
business and facilitates a meaningful comparison of the company’s
results in a given period to those in prior and future periods.
Adjusted Operating Net Income
Adjusted operating net income excludes from operating net income
the financial contribution of gains recognized by JMP Credit
Corporation due to the sale or payoff of loans originally included
in the portfolio acquired by JMP Group in April 2009. Management
believes that this metric can be instructive to investors who wish
to assess the company’s core earnings over time without regard to a
relatively volatile revenue stream that may not recur. By excluding
profits from sales and payoffs of acquired loans, management
intends to represent the earnings power of the company’s core
business strategy and ongoing operations.
Reconciliations of the company’s operating net income to its
adjusted operating net income for the quarter and six months ended
June 30, 2011 and for comparable prior periods are set forth
below.
Quarter Ended (in thousands, except per share
amounts) June 30, 2011 Mar. 31, 2011
June 30, 2010 Operating net income $ 4,866 $ 6,366 $ 4,760
Add back: Income tax expense (assumed rate of 42%)
3,524 4,610 3,447 Operating income before taxes 8,390
10,976 8,207 Subtract: Earnings contribution from gains on
loan portfolio acquired 3,699 3,479 6,342
Adjusted operating income before taxes 4,691 7,497 1,865
Income tax expense (assumed rate of 42%) 1,970 3,149
783 Adjusted operating net income 2,721 4,348
1,082 Adjusted operating net income per share: Basic
$ 0.12 $ 0.20 $ 0.05 Diluted $ 0.12 $ 0.19 $ 0.05 Weighted
average shares outstanding: Basic 22,254 21,843 21,654 Diluted
22,613 22,836 22,295 Six Months Ended (in thousands,
except per share amounts) June 30, 2011 June 30, 2010
Operating net income $ 11,232 $ 7,830 Add back:
Income tax expense (assumed rate of 42%) 8,133 5,670
Operating income before taxes 19,365 13,500 Subtract:
Earnings contribution from gains on loan portfolio acquired
7,178 8,203 Adjusted operating income before taxes 12,187
5,297 Income tax expense (assumed rate of 42%) 5,119
2,225 Adjusted operating net income 7,068
3,072 Adjusted operating net income per share: Basic $ 0.32
$ 0.14 Diluted $ 0.31 $ 0.14 Weighted average shares
outstanding: Basic 22,050 21,633 Diluted 22,720 22,378
Segment Reporting
In order to demonstrate the earnings power of each of its
primary businesses on a standalone basis, JMP Group presents the
operating net income generated by each segment in the table that
follows. Management believes that this presentation enables
investors to better understand the separate but interrelated
financial operations of the company’s various business lines and
more accurately assess the contribution of each to JMP Group’s
aggregate results.
Total revenues have been adjusted as detailed above in the
section titled “Adjusted Net Revenue,” and the resulting adjusted
net revenues exclude (i) the net amortization of discounts on loans
held and asset-backed securities issued by JMP Credit Corporation,
(ii) amortization expense related to an intangible asset and (iii)
net unrealized gains and losses on strategic equity investments and
warrants. Total non-interest expenses have been adjusted, in part,
as detailed above in the section titled “Operating Net Income,” and
the resulting pro forma non-interest expense reverses stock-based
compensation expense related to equity awards granted both at the
time of JMP Group’s May 2007 initial public offering and
thereafter. For the purposes of calculating operating net income,
an effective tax rate of 42% is assumed.
Statements of JMP Group’s operating net income on a segment
basis for the quarter and six months ended June 30, 2011 are set
forth below.
Quarter Ended June 30, 2011 Harvest
JMP JMP
Capital Credit Elimin- JMP (in thousands, except per share amounts)
Securities Strategies Corp. Corporate ations Group Revenues:
Investment banking $ 10,059 - - - - $ 10,059 Brokerage 6,187 - - -
- 6,187 Asset management-related fees 52 6,647 254 - (225 ) 6,728
Principal transactions 773 969 24 (36 ) - 1,730 Gain on sale and
payoff of loans - - 6,837 - - 6,837 Net dividend income 168 - - 130
- 298 Net interest income 24 9 4,879 (135 ) - 4,777 Provision for
loan losses - - (134 ) - -
(134 ) Adjusted net revenues 17,263 7,625 11,860 (41
) (225 ) 36,482 Expenses: Pro forma non-interest expenses
16,069 6,197 2,946 3,056 (225 ) 28,043 Less: Noncontrolling
interest - (102 ) 151 - -
49 Operating income before taxes 1,194 1,530 8,763
(3,097 ) - 8,390 Income tax expense (assumed rate of 42%)
502 642 3,681 (1,301 ) -
3,524 Operating net income $ 692 $ 888 $ 5,082
($1,796 ) - $ 4,866 Operating net
income per share: Basic $ 0.03 $ 0.04 $ 0.23 ($0.08 ) - $ 0.22
Diluted $ 0.03 $ 0.04 $ 0.23 ($0.08 ) - $ 0.22
Reconciliation to Adjusted Operating Net Income Operating
income before taxes $ 8,763 $ 8,390
Less: Earnings contribution from gain on
loan portfolio acquired
3,699 3,699 Adjusted operating income
before taxes 5,064 4,691 Income tax expense (assumed rate of
42%) 2,127 1,970 Adjusted operating net
income $ 2,937 $ 2,721 Adjusted operating net
income per share: Basic $ 0.03 $ 0.04 $ 0.13 ($0.08 ) - $ 0.12
Diluted $ 0.03 $ 0.04 $ 0.13 ($0.08 ) - $ 0.12 Six
Months Ended June 30, 2011 Harvest JMP
JMP Capital Credit
Elimin- JMP (in thousands, except per share amounts) Securities
Strategies Corp. Corporate ations Group Revenues: Investment
banking $ 30,284 - - - - $ 30,284 Brokerage 12,472 - - - - 12,472
Asset management-related fees 104 10,499 456 - (351 ) 10,708
Principal transactions 1,113 4,039 (309 ) 121 - 4,964 Gain on sale
and payoff of loans - - 13,608 - - 13,608 Net dividend income 312 -
- 236 - 548 Net interest income 138 19 11,772 (277 ) - 11,652
Provision for loan losses - - (354 ) -
- (354 ) Adjusted net revenues 44,423 14,557 25,173
80 (351 ) 83,882 Expenses: Pro forma non-interest expenses
37,967 9,986 7,433 6,878 (351 ) 61,913 Less: Noncontrolling
interest - 2,324 280 - -
2,604 Operating income before taxes 6,456 2,247
17,460 (6,798 ) - 19,365 Income tax expense (assumed rate of
42%) 2,712 943 7,334 (2,856 ) -
8,133 Operating net income $ 3,744 $ 1,304 $ 10,126
($3,942 ) - $ 11,232 Operating net
income per share: Basic $ 0.17 $ 0.06 $ 0.46 ($0.18 ) - $ 0.51
Diluted $ 0.16 $ 0.06 $ 0.44 ($0.17 ) - $ 0.49
Reconciliation to Adjusted Operating Net Income Operating
income before taxes $ 17,460 $ 19,365
Less: Earnings contribution from gain on
loan portfolio acquired
7,178 7,178 Adjusted operating income
before taxes 10,282 12,187 Income tax expense (assumed rate
of 42%) 4,319 5,119 Adjusted operating
net income $ 5,964 $ 7,068 Adjusted operating
net income per share: Basic $ 0.17 $ 0.06 $ 0.27 ($0.18 ) - $ 0.32
Diluted $ 0.16 $ 0.06 $ 0.26 ($0.17 ) - $ 0.31
Adjusted Tangible Book Value per Share
At June 30, 2011, JMP Group’s tangible book value per share was
$5.91, compared to $6.01 at March 31, 2011 and $5.65 at June
30, 2010. During the quarter ended June 30, 2011, 303,660 net
shares were issued in connection with the vesting of the final
tranche of the company’s IPO-related restricted stock units,
reducing book value on a per share basis. Adjusting book value to
reflect the net liquidity discount on JMP Credit Corporation’s loan
portfolio and asset-backed securities issued, JMP Group’s adjusted
tangible book value per share at June 30, 2011 would have been
$4.77, as indicated by the table below.
(in thousands, except per share amounts) June 30,
2011 Mar. 31, 2011 June 30, 2010
Total JMP Group stockholders' equity $ 132,360 $ 132,766 $ 121,276
Goodwill and intangible assets - (100 )
- Tangible stockholders' equity 132,360 132,666 121,276
Liquidity discount on loans 20,880 28,949 64,410 Liquidity
discount on asset-backed securities issued (64,923 )
(72,383 ) (93,866 ) Net liquidity discount (44,043 ) (43,434
) (29,456 ) Income tax benefit (assumed rate of 42%) 18,498
18,242 12,372 Net after-tax
liquidity discount (25,545 ) (25,192 ) (17,084
) Adjusted tangible stockholders' equity $ 106,815 $
107,474 $ 104,192 Adjusted tangible book value
per share $ 4.77 $ 4.87 $ 4.85 Basic
shares outstanding 22,388 22,084 21,482 Quarterly operating
ROATE* 18.3 % 23.2 % 16.6 % LTM operating ROATE* 22.0 % 21.3 % 15.0
%
Quarterly operating ROATE* excluding the
financial impact of gains on acquired loans
10.0 % 15.7 % 4.0 % * Return on adjusted tangible equity =
annualized operating net income / average adjusted tangible
stockholders' equity.
Share Repurchase Activity
During the quarter, JMP Group repurchased 187,364 shares of its
common stock at an average price of $8.00 per share, or $1.5
million in total. All such shares were repurchased in connection
with the vesting of restricted stock units, whereby employees
tendered shares for the payment of applicable withholding taxes. At
quarter-end, approximately 575,000 shares remained eligible for
repurchase under the company’s existing repurchase
authorization.
Cautionary Note Regarding Quarterly Financial Results
Due to the nature of its business, JMP Group’s quarterly
revenues and net income may fluctuate materially depending on: the
size and number of investment banking transactions on which it
advises; the timing of the completion of those transactions; the
size and number of securities trades which it executes for
brokerage customers; the performance of its asset management funds
and inflows and outflows of assets under management; gains stemming
from sales of or prepayments on, or losses stemming from defaults
on, loans underlying the company’s collateralized loan obligation;
and the effect of the overall condition of the securities markets
and economy as a whole. Accordingly, revenues and net income in any
particular quarter may not be indicative of future results.
Furthermore, JMP Group’s compensation expense is generally based
upon revenues and can fluctuate materially in any particular
quarter depending upon the amount and sorts of revenue recognized
as well as other factors. The amount of compensation and benefits
expense recognized in any particular quarter may not be indicative
of such expense in a future period. As a result, the company
suggests that annual results may be the most meaningful gauge for
investors in evaluating the performance of its business.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements provide JMP Group’s current
expectations or forecasts about future events, including beliefs,
plans, objectives, intentions, assumptions and other statements
that are not historical facts, such as the potential for market
share gains, the presumed benefits of a diversified business model
and the company’s ability to generate future returns on adjusted
tangible book value. Forward-looking statements are subject to
known and unknown risks and uncertainties that could cause actual
results to differ materially from those expected or implied by the
forward-looking statements. The company’s actual results could
differ materially from those anticipated in forward-looking
statements for many reasons, including the factors described in the
sections entitled “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in the
company’s Form 10-K for the year ended December 31, 2010 as filed
with the Securities and Exchange Commission on March 8, 2011 as
well as in the similarly captioned sections of other periodic
reports filed by the company under the Exchange Act. The Form 10-K
for the year ended December 31, 2010 and all other periodic reports
are available on JMP Group’s website at www.jmpg.com and on the
Securities and Exchange Commission’s website at www.sec.gov. Unless
required by law, JMP Group undertakes no obligation to publicly
update or revise any forward-looking statement to reflect
circumstances or events after the date of this press release.
Conference Call
JMP Group will hold a conference call to discuss the results
detailed herein at 10:00 a.m. EDT on Wednesday, July 27, 2011. To
participate in the call, dial (888) 566-6060 (domestic) or (706)
634-1012 (international). The conference identification number is
“84900269.”
The conference call will also be broadcast live over the
Internet and will be accessible via a link in the investor
relations section of the company’s website, at
investor.jmpg.com/events.cfm. The Internet broadcast will be
archived and will remain available on the website for future
replay.
About JMP Group
JMP Group Inc. is a full-service investment banking and asset
management firm that provides investment banking, sales and
trading, and equity research services to corporate and
institutional clients and alternative asset management products to
institutional and high-net-worth investors. JMP Group operates
through three subsidiaries: JMP Securities, Harvest Capital
Strategies and JMP Credit Advisors. For more information, visit
www.jmpg.com.
JMP GROUP INC.
Consolidated Statements of Financial Condition
(Unaudited)
(in thousands) June 30, 2011 Dec. 31,
2010 Assets Cash and cash equivalents $ 61,445 $ 71,114
Restricted cash and deposits 44,129 47,718 Receivable from clearing
broker 1,550 1,331 Marketable securities owned, at fair value
25,560 23,748 Other investments 52,894 38,702 Loans held for
investment, net of allowance for loan losses - 813
Loans collateralizing asset-backed
securities issued, net of purchase discounts and allowance for loan
losses
415,618 400,763 Deferred tax assets 24,278 32,507 Other assets
22,244 21,169 Total assets $ 647,718 $ 637,865
Liabilities and Stockholders' Equity Liabilities: Marketable
securities sold, but not yet purchased, at fair value $ 12,619 $
10,669 Accrued compensation 27,520 37,424 Asset-backed securities
issued, net of purchase discounts 366,080 351,322 Note payable
23,590 26,209 Deferred tax liability 30,249 36,176 Other
liabilities 33,385 34,013 Total liabilities
493,443 495,813 Stockholders' Equity: Total JMP Group
Inc. stockholders' equity 132,360 130,596 Noncontrolling interest
21,915 11,456 Total equity 154,275
142,052 Total liabilities and equity $ 647,718 $ 637,865
JMP GROUP INC. Consolidated Statements of Operations
(Unaudited)
Quarter Ended Six Months
Ended (in thousands, except per share amounts) June 30, 2011
June 30, 2010 June 30, 2011 June 30, 2010 Revenues:
Investment banking $ 10,059 $ 10,635 $ 30,284 $ 16,104 Brokerage
6,187 7,690 12,472 15,360 Asset management fees 6,046 3,142 9,199
6,033 Principal transactions 2,554 411 6,184 1,833 Gain on sale and
payoff of loans 6,837 15,762 13,608 19,242 Net dividend income 298
499 548 1,115 Other income 682 305
1,510 801 Non-interest revenues
32,663 38,444 73,805
60,488 Interest income 7,728 13,003 18,348 24,581
Interest expense (8,796 ) (8,310 ) (17,436 )
(16,550 ) Net interest income (1,068 ) 4,693
912 8,031 Provision for
loan losses (134 ) (291 ) (354 ) (455 )
Total net revenues 31,461 42,846
74,363 68,064 Non-interest expenses:
Compensation and benefits 22,017 30,592 50,248 46,112
Administration 1,744 1,974 2,814 2,995 Brokerage, clearing and
exchange fees 1,179 1,223 2,277 2,574 Travel and business
development 791 1,001 1,461 1,921 Communications and technology 995
1,073 1,916 2,146 Occupancy 777 671 1,442 1,322 Professional fees
797 813 1,505 1,788 Depreciation 179 169 337 337 Impairment loss on
intangible asset - - 700 - Other 134 214
238 344 Total non-interest
expenses 28,613 37,730 62,938
59,539 Income before income tax expense
2,848 5,116 11,425 8,525 Income tax expense 1,281
2,102 3,764 3,491 Net
income 1,567 3,014 7,661 5,034 Less: Net income attributable to
noncontrolling interest 49 798
2,605 1,100 Net income attributable to JMP
Group Inc. $ 1,518 $ 2,216 $ 5,056 $ 3,934
Net income attributable to JMP Group Inc. per share:
Basic $ 0.07 $ 0.10 $ 0.23 $ 0.18 Diluted $ 0.07 $ 0.10 $ 0.22 $
0.18 Weighted average common shares outstanding: Basic
22,254 21,654 22,050 21,633 Diluted 22,613 22,295 22,720 22,378
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