JMP Group Inc. (NYSE: JMP), an investment banking and
alternative asset management firm, reported financial results today
for the quarter and full fiscal year ended December 31, 2011.
- Operating net income was $3.2 million,
or $0.14 per diluted share, for the quarter, compared to
$8.7 million, or $0.38 per diluted share, for the fourth
quarter of 2010. For the year, operating net income was $17.1
million, or $0.76 per diluted share, versus $20.2 million, or $0.90
per diluted share, for 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
$0.14 per share and $0.56 per share for the quarter and year ended
December 31, 2011, respectively, compared to $0.19 per share and
$0.39 per share for the quarter and year ended December 31, 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.”
- The net loss attributable to JMP Group
under generally accepted accounting principles, or GAAP, was $5.9
million, or $0.26 per share, for the quarter, compared to net
income of $3.9 million, or $0.17 per share, for the fourth
quarter of 2010. For the year, the net loss was $2.5 million,
or $0.11 per share, versus net income of $9.6 million, or
$0.43 per share, for 2010.
- Adjusted net revenues, which exclude
certain non-cash items and noncontrolling interests, were $25.7
million for the quarter, compared to $46.6 million for the fourth
quarter of 2010. For the year, adjusted net revenues were
$135.3 million, versus $152.5 million for 2010. Further
excluding net gains on the sale or payoff of acquired loans,
adjusted net revenues would have been $122.2 million for 2011, up
6.9% from $114.3 million for 2010. For more information on adjusted
net revenues, including a reconciliation to net revenues, please
see the section below titled “Non-GAAP Financial Measures.”
- Total net revenues on a GAAP basis were
$19.6 million for the quarter, compared to $44.0 million for the
fourth quarter of 2010. For the year, total net revenues were
$111.4 million, versus $144.7 million for 2010.
“2011 turned out to be a much more difficult year for U.S.
financial markets than originally expected,” said Chairman and
Chief Executive Officer Joe Jolson. “Nevertheless, JMP produced
record adjusted operating EPS, a metric which excludes acquired
loan sale profits, of $0.56 for the full year—up over 40% from the
$0.39 earned for 2010 and representing a return on adjusted
tangible book value of 11.8%, well above our stated goal of 10%.
JMP Credit enjoyed another record year, generating earnings of
$0.59 per share excluding acquired loan sale profits. Harvest
Capital Strategies earned $0.11 per share, an increase of 57% from
$0.07 for 2010, thanks to growth of almost 21% in hedge fund assets
under management and good performance from our largest fund,
Harvest Small Cap Partners. JMP Securities had a challenging year
due to severe industry-wide headwinds, contributing $0.08 of
operating EPS, versus $0.13 last year. However, underlying this
result was a substantial increase in equity underwriting market
share as well as the stabilization of commission revenues in the
second half of 2011.”
Revenues
Investment Banking
Investment banking revenues were $5.8 million for the quarter, a
decrease of 66.3% from $17.1 million for the fourth quarter of
2010. For the year, investment banking revenues were $46.1 million,
an increase of 1.2% from $45.6 million for 2010.
The company executed 11 investment banking transactions during
the quarter, compared to 26 during the fourth quarter of 2010.
Public equity underwriting revenues amounted to $0.9 million,
down from $9.5 million, as the company executed three public
equity offerings, versus 16 in the fourth quarter of 2010. Private
capital markets and other revenues were less than
$0.1 million, down from $2.9 million, with the company
executing no transactions, versus four in the fourth quarter of
2010. Strategic advisory revenues totaled $4.9 million, up
from $4.7 million, with the company acting as a strategic
advisor on eight completed transactions, compared to six during the
fourth quarter of 2010.
Over the course of the full year, the company executed 86
investment banking transactions, compared to 74 during 2010. Public
equity underwriting revenues totaled $26.5 million, up from
$22.3 million, as the company executed 56 public equity
offerings, versus 44 the year before. Private capital markets and
other revenues came to $9.5 million, down from $11.0 million,
with the company executing 11 transactions, compared to 14 in 2010.
Strategic advisory revenues were $10.1 million, down from
$12.2 million, with the company acting as a strategic advisor
on 19 completed transactions, versus 16 in 2010.
Brokerage
Net brokerage revenues were $6.1 million, a decrease of 13.0%
from $7.0 million for the fourth quarter of 2010. For the year, net
brokerage revenues were $25.5 million, a decrease of 9.9% from
$28.3 million for 2010. However, during the second half of 2011,
net brokerage revenues rose 4.1% from the first half of 2011,
suggesting market share gains, given the decrease in overall U.S.
equity trading volumes over the course of the year.
Asset Management
Asset management fees and other related revenues totaled $6.8
million, an increase of 27.1% from $5.4 million for the fourth
quarter of 2010. For the year, asset management fees and other
related revenues were $24.9 million, an increase of 56.0% from
$16.0 million for 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 December 31, 2011 totaled $1.2
billion, including $584.7 million of funds managed by Harvest
Capital Strategies and $575.4 million par value of loans and cash
underlying two collateralized loan obligations managed by JMP
Credit Advisors. Client assets under management were $1.3 billion
at both September 30, 2011 and December 31, 2010. Including
sponsored funds, client assets under management totaled
$2.1 billion at December 31, 2011, compared to $2.4 billion at
September 30, 2011 and $1.9 billion at December 31, 2010.
Private capital, including corporate credit, small business
lending, REIT advisory services, venture capital and distressed
mortgage investments, represented 46.0% of total sponsored assets
under management at December 31, 2011, compared to 46.5% at
December 31, 2010.
Principal Transactions
Principal transactions generated net revenues of $1.7 million
for the quarter, compared to $0.5 million for the fourth
quarter of 2010. For the year, principal transactions generated net
revenues of $1.6 million, compared to $3.4 million for
2010.
A statement of the company’s principal transaction revenues for
the quarter and year ended December 30, 2011 and for
comparable prior periods is set forth below.
Quarter Ended Year Ended (in thousands) Dec. 31, 2011
Sept. 30, 2011 Dec. 31, 2010 Dec. 31, 2011
Dec. 31, 2010 Hedge fund investments $1,244 ($1,758 )
$831 $1,765 $2,459 Principal
investments: Investment in New York Mortgage Trust 344 (689 ) 779
359 226 Other principal investments (39 ) (68 ) (2,271 ) (389 )
(2,282 ) Total principal investments 305 (757 ) (1,492 ) (30
) (2,056 ) Venture investments: Investment in Harvest Growth
Capital (53 ) (149 ) (10 ) (102 ) 150 Other venture investments and
warrants (89 ) (642 ) 752 (113 ) 1,316 Total venture
investments (142 ) (791 ) 742 (215 ) 1,466
Principal transaction revenues net of
noncontrolling interest in Harvest Growth Capital
1,407 (3,306 ) 81 1,520 1,869
Noncontrolling interest in Harvest Growth
Capital
314 (2,984 ) 453 95 1,552 Total
principal transaction revenues $1,721 ($6,290 ) $534
$1,615 $3,421
Of the $1.7 million of principal transaction revenues for the
fourth quarter of 2011, $0.3 million was attributable to
noncontrolling interests in net realized and unrealized gains at
Harvest Growth Capital, a venture capital fund managed by Harvest
Capital Strategies that is consolidated under GAAP. GAAP accounting
requires that JMP Group consolidate Harvest Growth Capital due to
Harvest Capital Strategies’ role as the fund’s manager and managing
member, despite the company’s ownership of just 5.0% of the fund.
The presentation of adjusted net revenues elsewhere in this press
release excludes noncontrolling interests in Harvest Growth
Capital; and, accordingly, the aforementioned $0.3 million of
net realized and unrealized gains for the fourth quarter of 2011 is
not included in adjusted net revenues. Net of noncontrolling
interests, JMP Group had net realized and unrealized losses of
$0.1 million on its investment in Harvest Growth Capital for
the quarter. For more information on adjusted net revenues,
including a reconciliation to net revenues, please see the section
below titled “Non-GAAP Financial Measures.”
Gain on Sales and Payoffs of Loans and Loan Loss Provision
JMP Credit Corporation realized gains of $2.0 million due to the
sale or payoff of 21 of the loans in its portfolio during the
quarter, compared to $13.1 million on 32 loans during the fourth
quarter of 2010. For the year, realized gains amounted to $17.0
million as a result of the sale or payoff of 110 loans, compared to
$39.4 million on 81 loans for 2010. For the quarter and year
ended December 31, 2011, realized gains of $0.2 million and
$2.2 million, respectively, were due to the sale or payoff of
loans that had been purchased subsequent to the acquisition of JMP
Credit in April 2009. At December 31, 2011, 10 loans with an
aggregate par value of $47.3 million and an associated liquidity
discount of $15.7 million remained from the portfolio acquired in
April 2009.
A loan loss provision of $1.5 million was recorded for the
quarter, of which $1.7 million was with regard to a legacy impaired
loan at JMP Credit and $0.3 million was as a general reserve in
connection with performing loans at JMP Credit and Harvest Capital
Credit, the company’s small business lending strategy, both of
which are currently consolidated under GAAP. Partially offsetting
those amounts was a recovery of $0.5 million on a loan charged off
in the third quarter of 2010. At December 31, 2011, general
loan loss reserves equaled 0.5% of gross performing loans, compared
to 0.3% at December 31, 2010.
At December 31, 2011, gross impaired loans totaled $10.5
million, or 2.4% of gross loans outstanding, compared to $13.9
million, or 3.1% of gross loans outstanding, at December 31,
2010. With regard to impaired loans at December 31, 2011,
discounts and reserves (including credit discounts, liquidity
discounts, allowances for loan losses and deferred loan fees)
equaled $9.6 million, or 91.0% of gross impaired loans
outstanding. With regard to performing loans at December 31,
2011, discounts and reserves (including liquidity discounts,
allowances for loan losses and deferred loan fees) equaled
$16.6 million, or 3.9% of gross performing loans
outstanding.
Net Interest and Net Dividend Income
Interest income was $7.6 million for the quarter, and interest
expense was $9.3 million, resulting in net interest expense of $1.7
million, compared to net interest income of $0.5 million for the
fourth quarter of 2010. Excluding net interest expense due to net
amortization of liquidity discounts, net interest income was $4.9
million for the quarter, in line with $4.9 million for the quarter
ended December 31, 2010. For the year, net interest expense
was $2.4 million, compared to net interest income of
$11.5 million for 2010; excluding net interest expense due to
net amortization of liquidity discounts, net interest income was
$21.1 million and $21.3 million, respectively, for the same
periods.
Net dividend income equaled $0.5 million for the quarter,
compared to $0.8 million for the fourth quarter of 2010, and
totaled $1.4 million for the year, compared to $2.2 million for
2010.
Expenses
Compensation and Benefits
Compensation and benefits expense was $22.8 million for the
quarter, compared to $30.2 million for the fourth quarter of 2010.
For the year, compensation and benefits expense was $89.0 million,
compared to $95.7 million for 2010. Of the amount recorded for
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 $0.8 million, none of which was
incurred in the fourth quarter, as the remaining expense completely
amortized in the first half of the year with the vesting of the
final tranche of IPO-related RSUs. Non-cash compensation expense
attributable to performance-related and other RSUs granted
subsequent to the company’s IPO was $9.2 million for the
quarter, versus $4.2 million for the fourth quarter of 2010, and
$9.5 million for the year, versus $5.0 million for 2010.
To ensure that vesting of performance-related RSUs is reflective
of the company’s core operating results, performance targets
exclude the GAAP accounting impact of the vesting. Thus, vesting of
performance-related RSUs is triggered by the achievement of
adjusted operating EPS objectives. As discussed in the company’s
2011 proxy statement, there were two vintages of
performance-related RSUs that were eligible to vest during the
year, with each vintage vesting upon the attainment of a separate
goal. In 2011, JMP Group exceeded both annual goals: (i) a
return of more than 10% on adjusted tangible book value per share
and (ii) adjusted operating EPS of $0.55. Vesting of
performance-related RSUs granted in 2012 could be triggered by the
achievement of a new adjusted operating EPS objective during the
year, a target which will be disclosed in the company’s 2012 proxy
statement.
As a percentage of adjusted net revenues, compensation and
benefits expense was 88.7% for the quarter, compared to 64.8% for
the fourth quarter of 2010, and was 65.8% for the year, compared to
62.7% for 2010. Excluding the cost of RSU grants, compensation and
benefits expense was 53.0% of adjusted net revenues for the
quarter, compared to 55.1% for the fourth quarter of 2010, and was
58.2% for the year, compared to 57.8% for 2010.
Non-Compensation Expense
Non-compensation expense was $6.6 million for the quarter,
compared to $5.9 million for the fourth quarter of 2010. For the
year, non-compensation expense was $26.8 million, compared to
$28.0 million for 2010. As a percentage of adjusted net revenues,
non-compensation expense was 25.6% for the quarter, compared to
12.5% for the fourth quarter of 2010, and was 19.8% for the year,
compared to 18.4% for 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, losses 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)
includes management fees eliminated upon the consolidation of
Harvest Growth Capital, (ii) excludes the net amortization of
liquidity 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) excludes noncontrolling interests in net
unrealized gains and losses on Harvest Growth Capital. In
particular, adjusted net revenue adjusts for:
- management fees earned by Harvest
Capital Strategies as manager of Harvest Growth Capital, a venture
capital fund; Harvest Capital Strategies is managing member of
Harvest Growth Capital; and, despite its minority ownership, JMP
Group consolidates the fund in accordance with GAAP accounting
standards and eliminates the management fees in consolidation;
presenting these management fees as though Harvest Growth Capital
were deconsolidated presents the fund’s results in a manner similar
to those of the other funds managed by Harvest Capital
Strategies;
- the non-cash net amortization of
liquidity discounts at JMP Credit, due to scheduled contractual
principal repayments, of $6.6 million and $23.5 million for the
quarter and year ended December 31, 2011, respectively;
- non-cash amortization, in connection
with an intangible asset, of $0.1 million per quarter in certain
periods prior to the quarter ended September 30, 2011;
- 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
- noncontrolling interests in net
unrealized gains and losses generated by Harvest Growth Capital, of
which Harvest Capital Strategies is manager and managing member;
under GAAP, JMP Group consolidates the fund; however, as presented,
unrealized gains and losses that do not accrue to the company are
reversed.
Additionally, management considers it instructive to further
adjust the company’s adjusted net revenues to exclude 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, a volatile source of revenue
that cannot be expected to recur indefinitely.
A reconciliation of JMP Group’s net revenues to the company’s
adjusted net revenues for the quarter and year ended December 31,
2011 and for comparable prior periods is set forth below.
Quarter Ended Year Ended (in thousands)
Dec. 31, 2011
Sept. 30, 2011 Dec. 31, 2010 Dec. 31, 2011
Dec. 31, 2010 Revenues: Non-interest revenues $21,353
$18,948 $43,510 $113,752 $133,238 Net interest income (1,730 )
(1,573 ) 481 (2,391 ) 11,475 Total net revenues
19,623 17,375 43,991 111,361 144,713
Management fees earned on Harvest Growth
Capital
150 203 97 759 254
Total net revenues including fees on
Harvest Growth Capital
19,773 17,578 44,088 112,120 144,967
Add back/(subtract):
Net amortization of liquidity discounts on
loans and asset-backed securities issued
6,619 6,363 4,452 23,522 9,783 Amortization of intangible asset - -
100 200 100
Net unrealized (gain)/loss on strategic
equity investments and warrants
(361 ) 1,141 (1,544 ) (441 ) (757 )
Noncontrolling interest in net unrealized
(gain)/loss on Harvest Growth Capital
(314 ) 2,984 (453 ) (95 ) (1,552 ) Adjusted net revenues
25,717 28,066 46,643 135,306 152,541
Subtract: Net gain on loan portfolio acquired 143
995 12,736 13,101 38,203
Adjusted net revenues excluding net gain
on loan portfolio acquired
$25,574 $27,071 $33,907 $122,205
$114,338
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 as well as noncontrolling
interests and loan sale gains that may otherwise obscure the
company’s operating revenues and complicate an assessment of the
company’s core business activities. Management believes that
adjusting net revenue in these ways is useful in that 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 fee 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. In addition, asset
management-related fee revenues incorporate management fees earned
by Harvest Capital Strategies as manager of Harvest Growth Capital.
JMP Group consolidates Harvest Growth Capital in accordance with
GAAP accounting standards; however, management fees generated by
the fund are included in asset management-related fee revenues as
though deconsolidated.
A statement of the company’s asset management-related fee
revenues for the quarter and year ended December 31, 2011 and
for comparable prior periods is set forth below.
Quarter Ended Year Ended (in thousands)
Dec. 31, 2011 Sept. 30 2011 Dec. 31, 2010 Dec. 31,
2011 Dec. 31, 2010 Base management fees: Fees
reported as asset management fees $2,600 $2,519 $2,171 $9,708
$9,278 Fees reported as other income 924 937 318 2,848 772 Fees
earned at Harvest Growth Capital 150 203 97 759 254 Total base
management fees 3,674 3,659 2,586 13,315 10,304 Incentive
fees: Fees reported as asset management fees 2,292 3,175 744 10,077
2,952 Fees reported as other income - 29 1,907 381 2,170 Total
incentive fees 2,292 3,204 2,651 10,458 5,122 Fundraising
fees reported as other income 876 60 146 1,107 524 Asset
management-related fee revenues: All fees reported as asset
management fees 4,892 5,694 2,915 19,785 12,231 All fees reported
as other income 1,800 1,026 2,371 4,336 3,466 All fees earned at
Harvest Growth Capital 150 203 97 759 254 Total asset
management-related fee revenues $6,842 $6,923 $5,383 $24,880
$15,951
Company management has utilized asset management-related fee
revenue as a means of assessing the performance of JMP Group’s
combined asset management activities, including its fundraising and
other services for third parties. Management believes that asset
management-related fee 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 fee revenue is a more meaningful measure than
standalone asset management fees as reported, because asset
management-related fee 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
liquidity 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
no non-cash compensation expense for the quarter ended December 31,
2011 and $0.8 million of non-cash compensation expense for the
year ended December 31, 2011;
- the grant of RSUs subsequent to the
company’s IPO, which resulted in non-cash compensation expense of
$9.2 million and $9.5 million for the quarter and year ended
December 31, 2011, respectively;
- the non-cash net amortization of
liquidity discounts at JMP Credit, due to scheduled contractual
principal repayments, of $6.6 million and $23.5 million for the
quarter and year ended December 31, 2011, respectively;
- non-cash amortization, in connection
with an intangible asset, of $0.1 million per quarter in certain
periods prior to the quarter ended September 30, 2011;
- 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 year ended December 31,
2011 and for comparable prior periods are set forth below.
Quarter Ended (in thousands, except per
share amounts) Dec. 31, 2011 Sept. 30, 2011 Dec. 31, 2010
Net (loss)/income attributable to JMP Group Inc. ($5,944 )
($1,623 ) $3,854 Add back: Income tax (benefit)/expense
(4,024 ) (1,410 ) 3,551 Income before taxes (9,968 ) (3,033
) 7,405 Add back/(subtract): Compensation expense –
IPO-related RSUs - - 339 Compensation expense – post-IPO RSUs 9,166
112 4,189
Net amortization of liquidity discounts on
loans and asset-backed securities issued
6,619 6,363 4,452 Amortization of intangible asset - - 100
Unrealized (gain)/loss on strategic equity
investments and warrants
(361 ) 1,141 (1,544 ) Operating income before taxes 5,456
4,583 14,941 Income tax expense (assumed rate of 42%) 2,292
1,925 6,275 Operating net income $3,164
$2,658 $8,666 Operating net income per share:
Basic $0.14 $0.12 $0.40 Diluted $0.14
(1)
$0.12 $0.38 Weighted average shares outstanding: Basic
22,016 22,354 21,734 Diluted 22,174
(1)
22,493 22,537
(1) Weighted average diluted share count indicated is a non-GAAP
measure. Due to the vesting in the first quarter of 2012 of
performance-related RSUs resulting from the achievement of adjusted
operating EPS objectives for 2011, GAAP requires that not only the
related compensation expense but also the increase in diluted
shares be reflected as fourth quarter 2011 events, irrespective of
the fact that the vesting does not take place until the first
quarter of 2012, at which time it increases the weighted average
number of basic shares outstanding. On a GAAP basis, the weighted
average number of diluted shares outstanding for the quarter ended
December 31, 2011 was 22,796,939, and operating net income per
diluted share using this denominator would be $0.14. Alternately,
management prefers to present a non-GAAP share count for the
period, which is in keeping with the calculation of the weighted
average number of diluted shares in quarters not impacted by the
vesting of performance-related RSUs.
Year Ended (in thousands, except per share amounts)
Dec. 31, 2011 Dec. 31, 2010 Net income attributable to JMP
Group Inc. ($2,511 ) $9,603 Add back: Income tax expense
(1,670 ) 8,577 Income before taxes (4,181 ) 18,180
Add back/(subtract): Compensation expense – IPO-related RSUs 778
2,576 Compensation expense – post-IPO RSUs 9,526 4,998
Net amortization of liquidity discounts on
loans and asset-backed securities issued
23,522 9,783 Amortization of intangible asset 200 100
Unrealized (gain) on strategic equity
investments and warrants
(441 ) (757 ) Operating income before taxes 29,404 34,880
Income tax expense (assumed rate of 42%) 12,350 14,650
Operating net income $17,054 $20,230
Operating net income per share: Basic $0.77 $0.93 Diluted $0.76
(1)
$0.90 Weighted average shares outstanding: Basic 22,118
21,646 Diluted 22,504
(1)
22,396
(1) Weighted average diluted share count indicated is a non-GAAP
measure. Due to the vesting in the first quarter of 2012 of
performance-related RSUs resulting from the achievement of adjusted
operating EPS objectives for 2011, GAAP requires that not only the
related compensation expense but also the increase in diluted
shares be reflected as fourth quarter 2011 events, irrespective of
the fact that the vesting does not take place until the first
quarter of 2012, at which time it increases the weighted average
number of basic shares outstanding. On a GAAP basis, the weighted
average number of diluted shares outstanding for the year ended
December 31, 2011 was 23,069,186, and operating net income per
diluted share using this denominator would be $0.74. Alternately,
management prefers to present a non-GAAP share count for the
period, which is in keeping with the calculation of the weighted
average number of diluted shares in quarters not impacted by the
vesting of performance-related RSUs.
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 core business activities. 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. 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. Moreover, the company utilizes adjusted operating net
income as a threshold for the vesting of its performance-related
RSUs.
Reconciliations of the company’s operating net income to its
adjusted operating net income for the quarter and year ended
December 31, 2011 and for comparable prior periods are set forth
below.
Quarter Ended (in thousands, except per share
amounts) Dec. 31, 2011 Sept. 30, 2011 Dec. 31, 2010
Operating net income $3,164 $2,658 $8,666 Add back: Income
tax expense (assumed rate of 42%) 2,292 1,925 6,275 Operating
income before taxes 5,456 4,583 14,941 Subtract: Earnings
contribution from gains on loan portfolio acquired 87 597 7,642
Adjusted operating income before taxes 5,369 3,986 7,299
Income tax expense (assumed rate of 42%) 2,255 1,674 3,066 Adjusted
operating net income $3,114 $2,312 $4,233 Adjusted operating
net income per share: Basic $0.14 $0.10 $0.19 Diluted $0.14
(1)
$0.10 $0.19 Weighted average shares outstanding: Basic
22,016 22,354 21,734 Diluted 22,174
(1)
22,493 22,537
(1) Weighted average diluted share count indicated is a non-GAAP
measure. Due to the vesting in the first quarter of 2012 of
performance-related RSUs resulting from the achievement of adjusted
operating EPS objectives for 2011, GAAP requires that not only the
related compensation expense but also the increase in diluted
shares be reflected as fourth quarter 2011 events, irrespective of
the fact that the vesting does not take place until the first
quarter of 2012, at which time it increases the weighted average
number of basic shares outstanding. On a GAAP basis, the weighted
average number of diluted shares outstanding for the quarter ended
December 31, 2011 was 22,796,939, and adjusted operating net income
per diluted share using this denominator would be $0.14.
Alternately, management prefers to present a non-GAAP share count
for the period, which is in keeping with the calculation of the
weighted average number of diluted shares in quarters not impacted
by the vesting of performance-related RSUs.
Year Ended (in thousands, except per share
amounts) Dec. 31, 2011 Dec. 31, 2010 Operating net income
$17,054 $20,230 Add back: Income tax expense (assumed rate
of 42%) 12,350 14,650 Operating income before taxes 29,404 34,880
Subtract: Earnings contribution from gains on loan portfolio
acquired 7,859 19,977 Adjusted operating income before taxes 21,545
14,903 Income tax expense (assumed rate of 42%) 9,049 6,259
Adjusted operating net income $12,496 $8,644 Adjusted
operating net income per share: Basic $0.56 $0.40 Diluted $0.56
(1)
$0.39 Weighted average shares outstanding: Basic 22,118
21,646 Diluted 22,504
(1)
22,396
(1) Weighted average diluted share count indicated is a non-GAAP
measure. Due to the vesting in the first quarter of 2012 of
performance-related RSUs resulting from the achievement of adjusted
operating EPS objectives for 2011, GAAP requires that not only the
related compensation expense but also the increase in diluted
shares be reflected as fourth quarter 2011 events, irrespective of
the fact that the vesting does not take place until the first
quarter of 2012, at which time it increases the weighted average
number of basic shares outstanding. On a GAAP basis, the weighted
average number of diluted shares outstanding for the year ended
December 31, 2011 was 23,069,186, and adjusted operating net income
per diluted share using this denominator would be $0.54.
Alternately, management prefers to present a non-GAAP share count
for the period, which is in keeping with the calculation of the
weighted average number of diluted shares in quarters not impacted
by the vesting of performance-related RSUs.
Segment Reporting
In order to demonstrate the contribution to the company’s
results 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 to more accurately assess the contribution of
each to JMP Group’s aggregate results.
Total net revenues have been adjusted, in part, as detailed
above in the section titled “Adjusted Net Revenue,” and the
resulting adjusted net revenues (i) include management fees
eliminated upon consolidation of Harvest Growth Capital, (ii)
exclude the net amortization of liquidity discounts on loans held
and asset-backed securities issued by JMP Credit Corporation, (iii)
exclude amortization expense related to an intangible asset, (iv)
reverse net unrealized gains and losses on strategic equity
investments and warrants and (v) exclude noncontrolling interests
in net unrealized gains and losses on Harvest Growth Capital. Total
non-interest expenses have been adjusted, in part, as detailed
above in the section titled “Operating Net Income,” and the
resulting adjusted 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.
Basic per share amounts are based on GAAP measures of weighted
average basic shares outstanding. Diluted per share amounts are
based on non-GAAP measures of weighted average diluted shares
outstanding. Due to the vesting in the first quarter of 2012 of
performance-related RSUs resulting from the achievement of adjusted
operating EPS objectives for 2011, GAAP requires that not only the
related compensation expense but also the increase in diluted
shares be reflected as fourth quarter 2011 events, irrespective of
the fact that the vesting does not take place until the first
quarter of 2012, at which time it increases the weighted average
number of basic shares outstanding. On a GAAP basis, the weighted
average number of diluted shares outstanding was 22,796,939 and
23,069,186 for the quarter and year ended December 31, 2011,
respectively. Management prefers to utilize a non-GAAP share count
for these periods, which is in keeping with the calculation of the
weighted average number of diluted shares in quarters not impacted
by the vesting of performance-related RSUs.
Statements of JMP Group’s operating net income on a segment
basis for the quarter and year ended December 31, 2011 are set
forth below.
Quarter Ended December 31, 2011
(in thousands, except per share
amounts)
JMPSecurities
HarvestCapitalStrategies
JMPCreditCorp.
Corporate
Elimin-ations
OperatingJMPGroup
HGCConsolid-ation
Consolid-ated JMPGroup
Revenues: Investment banking $5,803 - - - ($21 ) $5,782 -
$5,782 Brokerage 6,091 - - - - 6,091 - 6,091
Asset management-related fees (1)
181 $5,676 $1,145 - (160 ) 6,842 ($150 ) 6,692
Principal transactions (2)
777 541 (89 ) ($182 ) - 1,047 313 1,360 Gain on sale and payoff of
loans - - 2,039 - - 2,039 - 2,039 Net dividend income 289 - - 206 -
495 - 495
Net interest income (3)
45 65 4,824 (45 ) - 4,889 - 4,889 Provision for loan losses -
- (1,945 ) 478 - (1,467 ) - (1,467 )
Adjusted net revenues 13,186 6,282 5,974 457 (181 ) 25,718 163
25,881 Expenses:
Non-interest expenses (4)
15,273 4,829 (1,147 ) 1,387 (160 ) 20,182 26 20,208
Less: Noncontrolling interest (5)
- - 80 - - 80 137 217
Operating income before taxes (2,087 ) 1,453 7,041 (930 )
(21 ) 5,456 - 5,456
Income tax expense (assumed rate of
42%)
(876 ) 610 2,958 (391 ) (9 ) 2,292 - 2,292
Operating net income ($1,211 ) $843 $4,083 ($539 )
($12 ) $3,164 - $3,164 Operating net
income per share: Basic ($0.06 ) $0.04 $0.18 ($0.02 ) ($0.00 )
$0.14 - $0.14 Diluted ($0.05 ) $0.04 $0.17 ($0.02 ) ($0.00 ) $0.14
- $0.14 Reconciliation to Adjusted Operating Net Income
Operating income before taxes $7,041 $5,456 $5,456
Less: Earnings contribution from gain on
loan portfolio acquired
87 87 87
Adjusted operating income before taxes
6,954 5,369 5,369
Income tax expense (assumed rate of
42%)
2,921 2,255 2,255 Adjusted operating net
income $4,033 $3,114 $3,114
Adjusted operating net income per
share:
Basic ($0.06 ) $0.04 $0.18 ($0.02 ) ($0.00 ) $0.14 - $0.14 Diluted
($0.05 ) $0.04 $0.17 ($0.02 ) ($0.00 ) $0.14 - $0.14
(1) Reflects revenues detailed in section above titled “Asset
Management-Related Fee Revenues;” management fees of $0.2 million
are eliminated upon consolidation of Harvest Growth Capital.
(2) Reverses net unrealized gains and losses on strategic equity
investments and warrants and excludes noncontrolling interests in
net realized and unrealized gains and losses related to Harvest
Growth Capital; net realized and unrealized gains of $0.3 million
are recognized upon consolidation of the fund.
(3) Excludes expense related to the non-cash net amortization of
liquidity discounts at JMP Credit Corporation and amortization
expense related to an intangible asset.
(4) Reverses stock-based compensation expense and excludes
fund-related expenses of $26,000 that are recognized upon
consolidation of Harvest Growth Capital.
(5) Excludes noncontrolling interests of $0.1 million in the net
realized and unrealized gains of Harvest Growth Capital that are
recognized upon consolidation of the fund.
Year Ended December 31, 2011
(in thousands, except per share
amounts)
JMPSecurities
HarvestCapitalStrategies
JMPCreditCorp.
Corporate
Elimin-ations
OperatingJMPGroup
HGCConsolid-ation
Consolid-ated JMPGroup
Revenues: Investment banking $46,135 - - - ($21 ) $46,114 -
$46,114 Brokerage 25,461 - - - - 25,461 - 25,461
Asset management-related fees (1)
337 $23,068 $1,908 $130 (563 ) 24,880 ($759 ) 24,121
Principal transactions (2)
1,101 741 (409 ) (353 ) - 1,080 95 1,175 Gain on sale and payoff of
loans - - 17,021 - - 17,021 - 17,021 Net dividend income 776 - -
590 - 1,366 - 1,366
Net interest income (3)
174 254 21,347 (446 ) - 21,329 - 21,329 Provision for loan losses -
- (2,423 ) 478 - (1,945 ) - (1,945 ) Adjusted
net revenues 73,984 24,063 37,444 399 (584 ) 135,306 (664 ) 134,642
Expenses:
Non-interest expenses (4)
70,953 19,634 6,608 8,787 (563 ) 105,419 78 105,497
Less: Noncontrolling interest (5)
- - 483 - - 483 (742 ) (259 ) Operating
income before taxes 3,031 4,429 30,353 (8,388 ) (21 ) 29,404 -
29,404
Income tax expense (assumed rate of
42%)
1,273 1,860 12,749 (3,523 ) (9 ) 12,350 -
12,350 Operating net income $1,758 $2,569 $17,604
($4,865 ) ($12 ) $17,054 - $17,054
Operating net income per share: Basic $0.08 $0.11 $0.80 ($0.22 )
($0.00 ) $0.77 - $0.77 Diluted $0.08 $0.11 $0.79 ($0.22 ) ($0.00 )
$0.76 - $0.76 Reconciliation to Adjusted Operating Net
Income Operating income before taxes $30,353 $29,404 $29,404
Less: Earnings contribution from gain on
loan portfolio acquired
7,859 7,859 7,859
Adjusted operating income before taxes
22,494 21,545 21,545
Income tax expense (assumed rate of
42%)
9,447 9,049 9,049 Adjusted operating net
income $13,047 $12,496 $12,496
Adjusted operating net income per
share:
Basic $0.08 $0.11 $0.59 ($0.22 ) ($0.00 ) $0.56 - $0.56 Diluted
$0.08 $0.11 $0.59 ($0.22 ) ($0.00 ) $0.56 - $0.56
(1) Reflects revenues detailed in section above titled “Asset
Management-Related Fee Revenues;” management fees of $0.8 million
are eliminated upon consolidation of Harvest Growth Capital.
(2) Reverses net unrealized gains and losses on strategic equity
investments and warrants and excludes noncontrolling interests in
net realized and unrealized gains and losses related to Harvest
Growth Capital; net realized and unrealized gains of $0.1 million
are recognized upon consolidation of the fund.
(3) Excludes expense related to the non-cash net amortization of
liquidity discounts at JMP Credit Corporation and amortization
expense related to an intangible asset.
(4) Reverses stock-based compensation expense and excludes
fund-related expenses of $78,000 that are recognized upon
consolidation of Harvest Growth Capital.
(5) Excludes noncontrolling interests of $0.7 million in the net
realized and unrealized losses of Harvest Growth Capital that are
recognized upon consolidation of the fund.
Adjusted Tangible Book Value per Share
At December 31, 2011, JMP Group’s tangible book value per share
was $5.74, compared to $5.80 at September 30, 2011 and $5.97 at
December 31, 2010. Adjusting book value to reflect the net benefit
of vesting of performance-related RSUs as well as 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 December 31, 2011 would have been $4.85, as
indicated by the table below.
(in thousands, except per share amounts) Dec. 31, 2011
Sept. 30, 2011 Dec. 31, 2010 Total JMP Group
stockholders' equity $129,706 $128,448 $130,596
Less: Net benefit of vesting of
performance-related RSUs (1)
(3,642 ) - - JMP Group stockholders' equity, net of
RSU benefit 126,064 128,448 130,596
Less: Goodwill and intangible assets
- - (900 ) Tangible stockholders' equity 126,064
128,448 129,696 Liquidity discount on loans 15,738 18,392
35,594 Liquidity discount on asset-backed securities issued (49,447
) (57,284 ) (79,681 ) Net liquidity discount (33,709 ) (38,892 )
(44,087 ) Income tax benefit (assumed rate of 42%) 14,158
16,335 18,517 Net after-tax liquidity discount
(19,551 ) (22,557 ) (25,570 ) Adjusted tangible
stockholders' equity $106,513 $105,891 $104,126
Adjusted tangible book value per share $4.85
$4.78 $4.79 Basic shares outstanding 21,947
22,147 21,737
Quarterly operating ROATE (2)
11.9%
10.0%
33.8%
LTM operating ROATE (2)
16.1%
21.5%
18.9%
Quarterly operating ROATE (2) excluding
the financial impact of gains on acquired loans
11.7%
8.7%
16.5%
LTM operating ROATE (2) excluding the
financial impact of gains on acquired loans
11.8%
13.0%
8.1%
(1) Due to the vesting in the first quarter of 2012 of
performance-related RSUs resulting from the achievement of adjusted
operating EPS objectives for 2011, GAAP requires that the related
compensation expense be reflected in the fourth quarter of 2011,
the period in which the objectives were met and the vesting was
triggered. The increased expense lowers pre-tax earnings and
creates a tax benefit, which adds to net income and, consequently,
to stockholders’ equity. JMP Group opts to reverse the net benefit
of the vesting for the purposes of calculating tangible
stockholders’ equity in order to exclude the financial impact of an
event that is not core to the company’s operating activities.
(2) Return on adjusted tangible equity equals annualized
operating net income divided by average adjusted tangible
stockholders’ equity.
Share Repurchase Activity
During the quarter, JMP Group repurchased 202,871 shares of its
common stock on the open market at an average price of $6.49 per
share, or $1.3 million in total. At year-end, approximately
1.1 million 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
or in its small business lending portfolio; 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 may contain 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. 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. EST on Wednesday, February 15, 2012.
To participate in the call, dial (888) 566-6060 (domestic) or (973)
200-3100 (international). The conference identification number is
50735220.
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) Dec. 31, 2011 Dec. 31, 2010
Assets Cash and cash equivalents $69,613 $71,114
Restricted cash and deposits 48,440 47,718 Receivable from clearing
broker 1,138 1,331 Marketable securities owned, at fair value
24,309 23,748 Other investments 51,706 38,702 Loans held for sale
2,957 - 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
410,770 400,763 Small business loans, net of allowance for loan
losses 7,477 - Deferred tax assets 26,221 33,430 Other assets
17,616 21,169 Total assets $660,247 $638,788 Liabilities and
Stockholders' Equity Liabilities: Marketable securities
sold, but not yet purchased, at fair value $10,921 $10,669 Accrued
compensation 38,143 37,424 Asset-backed securities issued, net of
purchase discounts 381,556 351,322 Note payable 19,222 26,209
Deferred tax liability 23,214 37,099 Other liabilities 30,707
34,013 Total liabilities 503,763 496,736 Redeemable
noncontrolling interest 50 - Stockholders' Equity: Total JMP
Group Inc. stockholders' equity 129,705 130,596 Noncontrolling
interest 26,729 11,456 Total equity 156,434 142,052 Total
liabilities and stockholders' equity $660,247 $638,788
JMP GROUP INC.
Consolidated Statements of
Operations
(Unaudited)
Quarter Ended Year Ended (in thousands, except
per share amounts) Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2011
Dec. 31, 2010 Revenues: Investment banking $5,782
$17,141 $46,114 $45,577 Brokerage 6,091 7,004 25,461 28,259 Asset
management fees 4,892 2,915 19,785 12,231 Principal transactions
1,721 534 1,615 3,421 Gain on sale and payoff of loans 2,039 13,132
17,020 39,363 Net dividend income 495 776 1,365 2,248 Other income
1,800 2,371 4,336 3,466 Non-interest
revenues 22,820 43,873 115,696 134,565
Interest income 7,557 9,079 33,356 45,162 Interest expense
(9,287 ) (8,598 ) (35,747 ) (33,687 ) Net interest (expense)/income
(1,730 ) 481 (2,391 ) 11,475 Provision for
loan losses (1,467 ) (363 ) (1,944 ) (1,327 ) Total net revenues
19,623 43,991 111,361 144,713
Non-interest expenses: Compensation and benefits 22,799 30,234
89,017 95,708 Administration 1,589 1,428 6,649 5,752 Brokerage,
clearing and exchange fees 1,183 1,358 4,735 5,110 Travel and
business development 1,113 815 3,681 3,447 Communications and
technology 1,059 833 3,988 3,969 Occupancy 711 672 2,927 2,666
Professional fees 644 474 2,955 3,080 Depreciation 192 140 721 635
Impairment loss on intangible asset - - 700 2,750 Other 83
132 426 611 Total non-interest expenses 29,373
36,086 115,799 123,728
(Loss)/income before income tax expense (9,750 ) 7,905 (4,438 )
20,985 Income tax (benefit)/expense (4,024 ) 3,551 (1,670 )
8,577 Net (loss)/income (5,726 ) 4,354 (2,768 ) 12,408 Less:
Net income/(loss) attributable to noncontrolling interest 218
500 (257 ) 2,805 Net (loss)/income
attributable to JMP Group Inc. ($5,944 ) $3,854 ($2,511 )
$9,603 Net (loss)/income attributable to JMP Group
Inc. per share: Basic ($0.27 ) $0.18 ($0.11 ) $0.44 Diluted ($0.26
) $0.17 ($0.11 ) $0.43 Weighted average common shares
outstanding: Basic 22,016 21,734 22,118 21,646 Diluted 22,797
22,537 23,069 22,396
JMP (NYSE:JMP)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
JMP (NYSE:JMP)
Historical Stock Chart
Von Jul 2023 bis Jul 2024