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, 2012.
- Operating net income was $6.0 million,
or $0.26 per diluted share, for the quarter, compared to $3.2
million, or $0.15 per share, for the fourth quarter of 2011. For
the year, operating net income was $16.5 million, or $0.72 per
share, compared to $17.1 million, or $0.76 per share, for
2011.
- 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
$0.24 per share for the quarter, an increase of 71.4% from $0.14
per share for the fourth quarter of 2011. For the year, adjusted
operating net income was a record $0.68 per share, an increase of
21.4% from $0.56 per share for 2011. For more information on
operating net income and adjusted operating net income, including a
reconciliation to net income, please see the section below titled
“Non-GAAP Financial Measures.”
- Net income attributable to JMP Group
under generally accepted accounting principles, or GAAP, was $5.5
million, or $0.24 per share, for the quarter, compared to a net
loss of $5.9 million, or $0.26 per share, for the fourth quarter of
2011. For the year, net income was $2.8 million, or $0.12 per
share, compared to a net loss of $2.5 million, or $0.11 per share,
for 2011.
- Adjusted net revenues, which exclude
certain non-cash items and non-controlling interests, were $33.5
million for the quarter, compared to $25.9 million for the fourth
quarter of 2011. For the year, adjusted net revenues were $125.2
million, compared to $135.5 million for 2011. Further excluding net
gains on the sale or payoff of acquired loans, adjusted net
revenues would have been $31.8 million and $122.6 million for the
quarter and year ended December 31, 2012, respectively, and $25.8
million and $122.4 million for the quarter and year ended December
31, 2011, respectively. 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
$24.7 million and $101.9 million for the quarter and year ended
December 31, 2012, respectively, compared to $19.6 million and
$111.4 million for the quarter and year ended December 31, 2011,
respectively.
- In January 2013, the company completed
a $46.0 million offering of 8.00% senior notes due 2023,
successfully accessing the longer-term debt markets for the first
time. The proceeds are intended to be used for general corporate
purposes.
“JMP Group posted record adjusted operating EPS—which excludes
profits on the sale of acquired loans—of $0.24 for the quarter, up
more than 70% from the fourth quarter of 2011, thanks to increased
public equity underwriting and private placement fee revenues, good
overall performance in our hedge funds and credit strategies, and
an adjustment to the compensation ratio applied to net investment
income for the period,” said Chairman and Chief Executive Officer
Joe Jolson. “Despite depressed institutional equity underwriting
and trading volumes across Wall Street for much of 2012, JMP
delivered its second consecutive year of record earnings,
generating $0.68 of adjusted operating EPS, compared to $0.56 for
2011.”
Segment Results of Operations
At JMP Securities, adjusted net revenues excluding net
investment income grew 56.8% for the fourth quarter and 2.1% for
2012 on a year-over-year basis, driven by a growing share of U.S.
equity capital markets fee revenues and higher private placement
fee revenues, which were partially offset by a decline in net
brokerage commission revenues. JMP Securities’ operating margin on
adjusted net revenues improved to 9.2% for the year, compared to
4.1% for 2011, as a result of revenue growth combined with
continued strict control over operating expenses.
At Harvest Capital Strategies, adjusted net revenues excluding
net investment income grew 13.0% for the fourth quarter and fell
3.7% for 2012 on a year-over-year basis, despite a decline in
incentive fees generated by the Harvest Small Cap Partners strategy
as well as a reduction in other revenues due to the liquidation of
a sponsored hedge fund, Expo Health Sciences Master Fund, and the
termination of a consulting agreement with New York Mortgage Trust,
Inc. in June 2012. The decline in fee revenues was more than offset
by a material increase in net investment income driven primarily by
an improved return on the capital invested by JMP Group in its
hedge funds of 11.9% for 2012, compared to 4.8% for 2011, and a
reduced compensation accrual in connection with net investment
income.
At the JMP Credit segment, which includes Harvest Capital
Credit, adjusted net revenues excluding net gains on the sale or
payoff of acquired loans improved by 2.2% for the fourth quarter
but declined by 14.4% for 2012 on a year-over-year basis. A decline
in CLO management fee revenues resulting from the final liquidation
of Rosedale CLO II in July 2012 was partially offset by increasing
revenues from Harvest Capital Credit as it deployed its committed
capital throughout the year.
A statement of JMP Group’s operating net income and adjusted
operating net income by segment for the quarter and year ended
December 31, 2012 and for comparable prior periods is set forth
below.
Quarter Ended Dec. 31, Year Ended Dec. 31, ($
as shown) 2012 2011 2012 2011 JMP Securities
$0.04 ($0.05 ) $0.17 $0.08 Harvest Capital Strategies 0.06 0.04
0.16 0.11 JMP Credit 0.19 0.17 0.60 0.59 Corporate (0.05 ) (0.02 )
(0.25 ) (0.22 ) Adjusted operating EPS 0.24 0.14 0.68 0.56 Acquired
loan sale gains 0.02 - 0.04 0.20
Operating EPS $0.26 $0.14 $0.72 $0.76
For more information on segment reporting; adjusted net
revenues, including a reconciliation to net revenues; and operating
net income and adjusted operating net income, including a
reconciliation to net income, please see the section below titled
“Non-GAAP Financial Measures.”
Composition of Revenues
Investment Banking
Investment banking revenues were $13.0 million for the quarter,
an increase of 124.4% from $5.8 million for the fourth quarter of
2011. For the year, investment banking revenues were $51.0 million,
an increase of 10.6% from $46.1 million for 2011.
A statement of the company’s investment banking revenues and
transaction counts for the quarter and year ended December 31, 2012
and for comparable prior periods is set forth below.
Quarter Ended Year Ended Dec. 31, 2012
Sept. 30, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31,
2011 ($ in thousands) Count Revenues Count Revenues
Count Revenues Count Revenues Count Revenues
Public equity 15 $3,905 28 $9,297 3 $862 82 $28,955 56
$26,546
Debt and convertible securities
5 718 3 293 - 19 18 3,111 7 6,285
Private capital markets and other
4 5,789 2 989 - - 11 10,025 5 3,729 Strategic advisory 3 2,560 3
1,639 8 4,901 12 8,891 18 9,554 Total 27 $12,972 36 $12,218
11 $5,782 123 $50,982 86 $46,114
Brokerage
Net brokerage revenues were $5.6 million for the quarter, a
decrease of 7.6% from $6.1 million for the fourth quarter of 2011,
yet ranking as the strongest quarter of 2012. For the year, net
brokerage revenues totaled $21.9 million, a decrease of 14.0%
from $25.5 million for 2011.
Asset Management
Asset management fees and other related revenues were $6.4
million for the quarter, a decrease of 6.4% from $6.8 million
for the fourth quarter of 2011. For the year, asset management fees
and other related revenues were $21.9 million, a decrease of 12.1%
from $24.9 million for 2011. 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, 2012 totaled $1.2
billion, including $742.2 million of funds managed by Harvest
Capital Strategies and $471.9 million par value of loans and cash
underlying the collateralized loan obligation managed by JMP Credit
Advisors. Client assets under management were also $1.2 billion at
both September 30, 2012 and December 31, 2011. Including sponsored
funds, client assets under management totaled $1.9 billion at
December 31, 2012, compared to $1.7 billion at
September 30, 2012 and $2.2 billion at December 31, 2011.
At December 31, 2012, private capital, including corporate
credit, small business lending, REIT advisory services and venture
capital, represented 66.3% of client assets under management
including sponsored funds.
Principal Transactions
Principal transactions generated a net realized and unrealized
loss of $1.0 million for the quarter, compared to a net realized
and unrealized gain of $1.7 million for the fourth quarter of 2011.
For the year, principal transactions generated a net realized and
unrealized gain of $11.3 million, compared to $1.6 million for
2011.
A statement of the company’s principal transaction revenues for
the quarter and year ended December 31, 2012 and for
comparable prior periods is set forth below.
Quarter Ended Year Ended (in thousands) Dec.
31, 2012 Sept. 30, 2012
Dec. 31, 2011
Dec. 31, 2012 Dec. 31, 2011 Hedge fund investments
$821 $1,580 $1,244 $4,897 $1,765
Principal investments: Investment in New York Mortgage Trust
- - 344 (209 ) 359 Other principal investments 17 38
(39 ) 846 (389 ) Total principal investments 17 38
305 637 (30 ) Venture investments:
Investment in Harvest Growth Capital funds (164 ) (131 ) (53 ) 230
(102 ) Other venture investments and warrants 1,140 (421 )
(89 ) 1,501 (113 ) Total venture investments 976 (552
) (142 ) 1,731 (215 )
Principal transaction revenues net of
non-controlling interests in Harvest Growth Capital funds
1,814 1,066 1,407 7,265 1,520
Non-controlling interests in Harvest
Growth Capital funds
(2,829 ) (3,021 ) 314 4,030 95 Total
principal transaction revenues ($1,015 ) ($1,955 ) $1,721
$11,295 $1,615
Included in the net loss of $1.0 million for the quarter ended
December 31, 2012 was a loss of $2.8 million attributable to
non-controlling interests in net realized and unrealized losses at
Harvest Growth Capital and Harvest Growth Capital II, venture
capital funds managed by Harvest Capital Strategies that are
consolidated under GAAP. GAAP accounting requires that JMP Group
consolidate both funds due to Harvest Capital Strategies’ role as
the funds’ manager and managing member, despite the company’s
ownership of just 4.5% of Harvest Growth Capital and 3.3% of
Harvest Growth Capital II. The presentation of adjusted net
revenues elsewhere in this press release excludes JMP Group’s
non-controlling interests in these funds; and, accordingly, the
aforementioned loss of $2.8 million is not included in adjusted net
revenues. Net of its non-controlling interests, JMP Group had a net
realized and unrealized loss of $0.2 million on its investments in
Harvest Growth Capital and Harvest Growth Capital II 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 Sale, Payoff and Mark-to-Market of Loans and Loan Loss
Provision
Together, JMP Credit Corporation and Harvest Capital Credit
generated a net realized and unrealized gain of $4.4 million from
the sale, payoff or mark-to-market of loans for the quarter,
compared to $2.0 million for the fourth quarter of 2011. For
the year, the net realized and unrealized gain from the sale,
payoff or mark to market of loans was $7.2 million, compared to
$17.0 million for 2011.
JMP Credit Corporation realized a net gain of $3.9 million for
the quarter due to the sale or payoff of 60 of the loans in its
portfolio, compared to a net gain of $2.0 million in connection
with 21 loans for the fourth quarter of 2011. For the year, the net
realized gain was $6.6 million as a result of the sale or payoff of
127 loans, compared to a net gain of $17.0 million in connection
with 110 loans for 2011. For the quarter and year ended December
31, 2012, net realized gains of $2.7 million and $4.7 million,
respectively, were due to the sale or payoff of loans acquired with
JMP Credit in April 2009, compared to net realized gains of
$1.8 million and $14.8 million for the quarter and year ended
December 31, 2011, respectively. At December 31, 2012, seven
loans with an aggregate par value of $25.2 million and an
associated liquidity discount of $4.3 million remained from
the portfolio acquired in April 2009.
At December 31, 2012, discounts and reserves (including
liquidity discounts, allowances for loan losses and deferred loan
fees) equaled $12.7 million, or 3.1% of gross performing loans
outstanding at JMP Credit. With regard to impaired loans, discounts
and reserves (including credit discounts, liquidity discounts, and
allowances for loan losses) equaled $1.7 million—equivalent to
49.6% of gross impaired loans outstanding or 0.4% of gross loans
outstanding—compared to $9.5 million, or 2.2% of gross loans
outstanding, at December 31, 2011.
A net loan loss provision of $1.1 million for the quarter was
recorded at JMP Credit, which is currently consolidated under GAAP,
as a specific reserve in connection with an impaired loan. At
December 31, 2012, general loan loss reserves equaled 0.5% of
gross performing loans at JMP Credit, in line with 0.5% at December
31, 2011.
Harvest Capital Credit realized a net realized and unrealized
gain of $0.5 million for the fourth quarter of 2012 and $0.7
million for the full year. Of those amounts, $0.3 million resulted
from the payoff of two loans in its portfolio during the fourth
quarter. No loans were paid off in 2011. The remaining net
unrealized gains of $0.2 million and $0.4 million for the quarter
and year ended December 31, 2012, respectively, were due to
mark-to-market adjustments, as discussed below.
Due to its adoption of investment company accounting in
preparation for its pending initial public offering as a business
development company, Harvest Capital Credit, which is currently
consolidated under GAAP, was required to change certain accounting
principles which it had been permitted to employ historically. As
of September 30, 2012, Harvest Capital Credit reports all
investments, including debt investments, at market value or, in the
absence of a readily available market value, at fair value.
Consequently, its financial statements for the first three quarters
of 2012 have been recast to reflect a retrospective application of
investment company accounting, and all loan loss provisions taken
for those periods have been reversed. At December 31, 2012, Harvest
Capital Credit’s debt investments were marked to market, resulting
in net unrealized gains of $0.2 million and $0.4 million for the
fourth quarter and the full year, respectively.
JMP Group’s consolidated financial statements for the quarter
and year ended December 31, 2012 indicate loan loss provisions of
$1.1 million and $2.0 million, respectively. However, for the
year, there is a reversal of $0.2 million in connection with the
recasting of Harvest Capital Credit’s results described above. Net
of the reversal, the loan loss provision associated only with JMP
Credit would have been $2.2 million for the year.
Other Income
Other income was $0.3 million for the quarter, compared to $1.8
million for the fourth quarter of 2011. For the year, other income
was $3.8 million, compared to $4.3 million for 2011.
Net Interest Income
Interest income was $8.8 million for the quarter, and interest
expense was $10.4 million, resulting in net interest expense of
$1.6 million, compared to net interest expense of $1.7 million for
the fourth quarter of 2011. Excluding net amortization expense
related to liquidity discounts, net interest income was
$6.0 million, compared to $4.9 million for the fourth quarter
of 2011. The year-over-year increase was primarily due to the
launch of Harvest Capital Credit in September 2011 and the
subsequent deployment of a portion of its committed capital. For
the year, net interest expense was $7.1 million, compared to
net interest expense of $2.4 million for 2011; excluding net
interest expense due to net amortization of liquidity discounts,
net interest income was $22.1 million for 2012 and $21.1 million
for 2011.
Expenses
Compensation and Benefits
Compensation and benefits expense was $10.6 million for the
quarter, compared to $22.8 million for the fourth quarter of 2011.
For the fourth quarter of 2012, non-cash compensation expense
attributable to performance-related and other restricted stock
units, or RSUs, granted subsequent to JMP Group’s May 2007 initial
public offering was $1.9 million, compared to $9.2 million for
the fourth quarter of 2011. The aforementioned compensation and
benefits expense of $10.6 million for the quarter excludes 77%, or
$7.0 million, of the total cost of deferred compensation for
2012, which will be recognized for GAAP accounting purposes on a
quarterly basis though paid at year-end 2013 and 2014.
For the year, compensation and benefits expense was $66.4
million, compared to $89.0 million for 2011. For 2012, non-cash
compensation expense attributable to performance-related and other
RSUs granted subsequent to the company’s IPO was $2.5 million,
compared to $9.5 million for 2011. The aforementioned
compensation and benefits expense of $66.4 million for the year
excludes 77%, or $7.0 million, of the total cost of deferred
compensation for 2012, which will be recognized for GAAP accounting
purposes on a quarterly basis though paid at year-end 2013 and
2014.
Excluding the cost of RSU grants but accelerating and
recognizing all deferred compensation expense at December 31, 2012,
compensation and benefits expense was 46.8% of adjusted net
revenues for the quarter, compared to 52.6% for the fourth quarter
of 2011, and was 56.6% for the year, compared to 58.1% for 2011.
The declines in the compensation ratios for both the fourth quarter
of 2012 and the full year were related to better-than-expected net
investment income, which affected the company’s revenue mix and led
management to decide at year-end to adjust the compensation accrual
on net investment income for 2012. The decision reduced the
company’s ratio of compensation and benefits expense to adjusted
net revenues by 8.9 percentage points for the quarter and 2.4
percentage points for the year.
Non-Compensation Expense
Non-compensation expense was $7.0 million for the quarter,
compared to $6.6 million for the fourth quarter of 2011. For the
year, non-compensation expense was $25.0 million, compared to
$26.8 million for 2011. As a percentage of adjusted net revenues,
non-compensation expense was 21.0% for the quarter, compared to
25.4% for the fourth quarter of 2011, and was 19.9% for the year,
compared to 19.8% for 2011.
Personnel
At December 31, 2012, the company had 224 full-time employees,
compared to 217 at the end of the prior quarter and 217 at December
31, 2011.
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
generally 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 asset management fees, net interest income or expense, and
other revenues eliminated upon the consolidation of Harvest Growth
Capital, Harvest Growth Capital II and Harvest Capital Credit, (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 unrealized mark-to-market gains and losses recorded at
Harvest Capital Credit, (v) reverses net unrealized gains and
losses on strategic equity investments and warrants and (vi)
excludes the non-controlling interest in net unrealized gains and
losses on Harvest Growth Capital and Harvest Growth Capital II. In
particular, adjusted net revenue adjusts for:
- base management and incentive fees
earned by Harvest Capital Strategies as manager of Harvest Growth
Capital and Harvest Growth Capital II, both venture capital funds,
and Harvest Capital Credit, a small business lending strategy;
Harvest Capital Strategies is managing member of Harvest Growth
Capital and Harvest Growth Capital II and is the external manager
of Harvest Capital Credit, and, as a result of its ownership of
each, JMP Group consolidates the three entities in accordance with
GAAP accounting standards and eliminates the fees in consolidation;
presenting these fees as though Harvest Growth Capital, Harvest
Growth Capital II and Harvest Capital Credit were deconsolidated
presents the entities’ results in a manner similar to those of the
other investment funds managed by Harvest Capital Strategies;
- the non-cash net amortization of
liquidity discounts at JMP Credit, due to scheduled contractual
principal repayments, of $7.6 million and $29.2 million for the
quarter and year ended December 31, 2012, 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 investment portfolio at Harvest Capital Credit as
well as the reversal of previously recorded loan loss
provisions;
- unrealized mark-to-market gains or
losses on the company’s strategic equity investments as well as
certain warrant positions; and
- non-controlling interests in net
unrealized gains and losses generated by Harvest Growth Capital and
Harvest Growth Capital II, of which Harvest Capital Strategies is
manager and managing member; under GAAP, JMP Group consolidates the
two funds; 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
impact of gains or losses 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 reconciliation of JMP Group’s net revenues to its adjusted net
revenues for the quarter and year ended December 31, 2012 and for
comparable prior periods is set forth below.
Quarter Ended Year Ended (in thousands)
Dec. 31, 2012
Sept. 30, 2012 Dec. 31, 2011 Dec. 31, 2012
Dec. 31, 2011 Revenues: Non-interest revenues $27,328
$19,998 $22,820 $110,957 $115,696 Net interest expense (1,573 )
(1,754 ) (1,730 ) (7,095 ) (2,391 ) Loan loss provision (1,071 ) 65
(1,467 ) (1,990 ) (1,944 ) Total net revenues 24,684 18,309
19,623 101,872 111,361
Asset management fees earned on Harvest
Growth Capital funds and Harvest Capital Credit (1)
1,060 597 150 2,342 759
Dividend distribution from Harvest Capital
Credit (1)
- 157 - 234 -
Less: Net interest income and other
revenues from Harvest Capital Credit (1)
(1,202 ) (772 ) - (2,789 ) -
Total net revenues including fee revenues
from consolidated entities
24,542 18,291 19,773 101,659 112,120
Add back/(subtract):
Net amortization of liquidity discounts on
loans and asset-backed securities issued
7,577 7,456 6,619 29,208 23,522 Amortization of intangible asset -
- - - 200
Unrealized mark-to-market (gain)/loss –
Harvest Capital Credit
(1,770 ) (41 ) 184 (2,174 ) 216
Net unrealized loss/(gain) on strategic
equity investments and warrants
294
107 (361 ) 527 (441 )
Non-controlling interests in net
unrealized losses/(gains) on Harvest Growth Capital funds
2,830 3,021
(314
) (4,029 ) (95 ) Adjusted net revenues 33,473 28,834
25,901 125,191 135,522 Subtract: Net
gain on loan portfolio acquired 1,665 449 143
2,638 13,101
Adjusted net revenues excluding net gain
on loan portfolio acquired
$31,808 $28,385 $25,758 $122,553
$122,421 (1) Adjustments to reflect economic
contributions from two Harvest Growth Capital funds and Harvest
Capital Credit as though deconsolidated for purposes of financial
reporting; upon deconsolidation, fee revenues and dividend payments
would be recognized, while net interest income and other revenues
generated by these entities would not be recorded by JMP Group.
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 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 base management and
incentive fees earned by Harvest Capital Strategies as manager of
Harvest Growth Capital, Harvest Growth Capital II and Harvest
Capital Credit. JMP Group consolidates the two Harvest Growth
Capital funds and Harvest Capital Credit in accordance with GAAP
accounting standards; however, asset management fees generated by
these entities are included in asset management-related fee
revenues as though deconsolidated.
A statement of JMP Group’s asset management-related fee revenues
for the quarter and year ended December 31, 2012 and for comparable
prior periods is set forth below.
Quarter Ended Year Ended (in thousands) Dec.
31, 2012 Sept. 30, 2012 Dec. 31, 2011 Dec. 31, 2012
Dec. 31, 2011 Base management fees: Fees reported as
asset management fees $2,339 $2,195 $2,600 $9,433 $9,708 Fees
reported as other income 263 339 924 1,916 2,848
Fees earned at Harvest Growth Capital
funds and Harvest Capital Credit
435 275 150 1,154 759 Total base management fees 3,037 2,809 3,674
12,503 13,315 Incentive fees: Fees reported as asset
management fees 2,715 1,560 2,292 6,342 10,077 Fees reported as
other income - - - - 381
Fees earned at Harvest Growth Capital
funds and Harvest Capital Credit
624 322 - 1,188 - Total incentive fees 3,339 1,882 2,292 7,530
10,458 Other fee income: Fundraising fees 30 26 876 109
1,107 New York Mortgage Trust termination fee - - - 1,735 - Total
other fee income 30 26 876 1,844 1,107 Asset
management-related fee revenues: All fees reported as asset
management fees 5,054 3,755 4,892 15,775 19,785 All fees reported
as other income 293 365 1,800 3,760 4,336
All fees earned at Harvest Growth Capital
funds and Harvest Capital Credit
1,059 597 150 2,342 759
Total asset management-related fee
revenues
$6,406 $4,717 $6,842 $21,877 $24,880
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) excludes one-time
costs associated with Harvest Capital Credit’s pending initial
public offering, (v) reverses unrealized mark-to-market gains and
losses recorded at Harvest Capital Credit, (vi) reverses net
unrealized gains and losses on strategic equity investments and
warrants, and (vii) 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, resulting in
non-cash compensation expense in periods prior to the quarter ended
September 30, 2011;
- the grant of RSUs subsequent to the
company’s IPO, which resulted in non-cash compensation expense of
$1.9 million and $2.5 million for the quarter and year ended
December 31, 2012, respectively;
- deferred compensation that will be paid
at year-end 2013 and 2014 but which company management opts to
recognize in the period when such compensation is awarded, in order
to state non-GAAP earnings as conservatively as possible;
- the non-cash net amortization of
liquidity discounts at JMP Credit, due to scheduled contractual
principal repayments, of $7.6 million and $29.2 million for the
quarter and year ended December 31, 2012, 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;
- a non-recurring expense of $450,000 in
connection with the IPO of Harvest Capital Credit, which has filed
a registration statement on Form N-2 with the U.S. Securities and
Exchange Commission,
- unrealized mark-to-market gains or
losses on the investment portfolio at Harvest Capital Credit as
well as the reversal of previously recorded loan loss
provisions;
- unrealized mark-to-market gains or
losses on the company’s strategic equity investments 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 its operating net
income for the quarter and year ended December 31, 2012 and for
comparable prior periods are set forth below.
Quarter Ended (in thousands, except per share amounts) Dec.
31, 2012 Sept. 30, 2012 Dec. 31, 2011 Net
income/(loss) attributable to JMP Group Inc. $5,514 ($1,625 )
($5,944 )
Add back/(subtract):
Income tax expense/(benefit) 3,007 (884 ) (4,024 )
Income/(loss) before taxes 8,521 (2,509 ) (9,968 ) Add
back/(subtract): Compensation expense – post-IPO RSUs 1,910 194
9,166 Accounting adjustment – deferred compensation (6,985 ) - -
Net amortization of liquidity discounts on
loans and asset-backed securities issued
7,577 7,456 6,619 IPO-related expense – Harvest Capital Credit (450
) - -
Unrealized mark-to-market (gain)/loss –
Harvest Capital Credit
(543 ) (14 ) 88
Unrealized loss/(gain) on strategic equity
investments and warrants
294 107 (361 ) Operating income before taxes 10,324
5,234 5,544 Income tax expense (assumed rate of 42%) 4,336
2,198 2,328 Operating net income $5,988
$3,036 $3,216 Operating net income per share:
Basic $0.26 $0.13 $0.15 Diluted $0.26 $0.13 $0.15 Weighted
average shares outstanding: Basic 22,637 22,737 22,016 Diluted
22,722 22,830 22,174
(1)
(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 did not take place until
the first quarter of 2012, at which time it increased 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
have been $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, 2012 Dec. 31, 2011 Net income/(loss)
attributable to JMP Group Inc. $2,832 ($2,511 )
Add back/(subtract):
Income tax expense/(benefit) 1,617 (1,670 ) Income/(loss)
before taxes 4,449 (4,181 )
Add back/(subtract):
Compensation expense – IPO-related RSUs - 778 Compensation expense
– post-IPO RSUs 2,492 9,526 Accounting adjustment – deferred
compensation (6,985 ) -
Net amortization of liquidity discounts on
loans and asset-backed securities issued
29,208 23,522 Amortization of intangible asset - 200 IPO-related
expense – Harvest Capital Credit (450 ) -
Unrealized mark-to-market (gain)/loss –
Harvest Capital Credit
(709 ) 109
Unrealized loss/(gain) on strategic equity
investments and warrants
527 (441 ) Operating income before taxes 28,532 29,513
Income tax expense (assumed rate of 42%) 11,984
12,395 Operating net income $16,548 $17,118
Operating net income per share: Basic $0.73 $0.77 Diluted
$0.72 $0.76 Weighted average shares outstanding: Basic
22,582 22,118 Diluted 22,906 22,504
(1)
(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 did not take place until
the first quarter of 2012, at which time it increased 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 have been
$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.
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 or losses 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 present the earnings power of the company’s
core businesses and ongoing operations. Moreover, the company
utilized adjusted operating net income as a threshold for the
vesting of performance-related RSUs granted as a component of 2011
and 2012 employee bonus compensation.
Reconciliations of JMP Group’s operating net income to its
adjusted operating net income for the quarter and year ended
December 31, 2012 and for comparable prior periods are set forth
below.
Quarter Ended (in thousands, except per share
amounts) Dec. 31, 2012 Sept. 30, 2012 Dec. 31, 2011
Operating net income $5,988 $3,036 $3,216 Add back:
Income tax expense (assumed rate of 42%) 4,336 2,198 2,328
Operating income before taxes 10,324 5,234 5,544 Subtract:
Earnings from gains on loan portfolio acquired 998 269 86 Adjusted
operating income before taxes 9,326 4,965 5,458 Income tax
expense (assumed rate of 42%) 3,917 2,085 2,292 Adjusted operating
net income $5,409 $2,880 $3,166 Adjusted operating net
income per share: Basic $0.24 $0.13 $0.14 Diluted $0.24 $0.13 $0.14
Weighted average shares outstanding: Basic 22,637 22,737
22,016 Diluted 22,722 22,830 22,174
(1)
(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 did not take place until
the first quarter of 2012, at which time it increased 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
have been $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, 2012 Dec. 31, 2011 Operating net
income $16,548 $17,118 Add back: Income tax expense (assumed
rate of 42%) 11,984 12,395 Operating income before taxes 28,532
29,513 Subtract: Earnings from gains on loan portfolio
acquired 1,581 7,861 Adjusted operating income before taxes 26,951
21,652 Income tax expense (assumed rate of 42%) 11,320 9,094
Adjusted operating net income $15,631 $12,558 Adjusted
operating net income per share: Basic $0.69 $0.57 Diluted $0.68
$0.56 Weighted average shares outstanding: Basic 22,582
22,118 Diluted 22,906 22,504 (1) (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 did not take place until the first quarter of 2012, at
which time it increased 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 have been $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 tables that follow. Management believes that these
presentations enable 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 asset management fees,
net interest income or expense, and other revenues eliminated upon
the consolidation of Harvest Growth Capital, Harvest Growth Capital
II and Harvest Capital Credit, (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 unrealized
mark-to-market gains and losses recorded at Harvest Capital Credit;
(v) reverse net unrealized gains and losses on strategic equity
investments and warrants and (vi) exclude non-controlling interests
in net unrealized gains and losses on Harvest Growth Capital,
Harvest Growth Capital II and Harvest Capital Credit. 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.
Statements of JMP Group’s operating net income on a segment
basis for the quarter and year ended December 31, 2012 are set
forth below.
Quarter Ended December 31, 2012 Harvest
JMP Operating HGC HCC
Consoli- JMP Capital Credit Elimin- JMP Consoli- Consoli- dated JMP
(in thousands, except per share amounts) Securities Strategies
Corp. Corporate ations Group dation dation Group Revenues:
Investment banking $13,023 - - - - $13,023 - ($51 ) $12,972
Brokerage 5,628 - - - - 5,628 - - 5,628 Asset management-related
fees (1) - $6,412 $80 $36 ($122 ) 6,406 ($289 ) (769 ) 5,348
Principal transactions (2) 40 (35 ) (62 ) 642 - 585 (2,829 ) (108 )
(2,352 ) Gain on sale and payoff of loans (3) - - 3,935 - - 3,935 -
327 4,262 Net dividend income (5 ) - - - - (5 ) - - (5 ) Net
interest income (4) 12 1 4,741 215 - 4,969 - 1,034 6,003 Provision
for loan losses - - (1,068 ) - - (1,068
) - - (1,068 ) Adjusted net revenues 18,698 6,378
7,626 893 (122 ) 33,473 (3,118 ) 433 30,788 Expenses:
Non-interest expenses (5) 17,086 4,038 (1,036 ) 2,994 (122 ) 22,960
109 77 23,146 Less: Non-controlling interest (6) - 1
188 - - 189 (3,227 ) 356
(2,682 ) Operating income/(loss) before taxes 1,612 2,339 8,474
(2,101 ) - 10,324 - - 10,324
Income tax expense/(benefit) (assumed rate
of 42%)
677 983 3,558 (882 ) - 4,336 -
- 4,336 Operating net income/(loss) $935
$1,356 $4,916 ($1,219 ) - $5,988
- - $5,988 Operating net income/(loss)
per share: Basic $0.04 $0.06 $0.21 ($0.05 ) - $0.26 - - $0.26
Diluted $0.04 $0.06 $0.21 ($0.05 ) - $0.26 - - $0.26
Reconciliation to Adjusted Operating Net Income Operating
income before taxes $8,474 $10,324 $10,324
Less: Earnings contribution from gain on
loan portfolio acquired
998 998 998
Adjusted operating income before taxes
7,476 9,326 9,326
Income tax expense (assumed rate of
42%)
3,140 3,917 3,917 Adjusted operating net
income $4,336 $5,409 $5,409
Adjusted operating net income/(loss) per
share:
Basic $0.04 $0.06 $0.19 ($0.05 ) - $0.24 - - $0.24 Diluted $0.04
$0.06 $0.19 ($0.05 ) - $0.24 - - $0.24 (1) Reflects revenues
detailed in section above titled “Asset Management-Related Fee
Revenues;” management fees totaling $1.1 million are eliminated
upon consolidation of two Harvest Growth Capital funds and Harvest
Capital Credit. (2) Reverses net unrealized gains and losses
on strategic equity investments and warrants and excludes
non-controlling interests in net realized and unrealized gains and
losses related to two Harvest Growth Capital funds as well as other
principal transaction revenues related to Harvest Capital Credit;
net realized and unrealized losses totaling $2.9 million are
recognized upon consolidation of the entities. (3) Excludes
unrealized mark-to-market gains of $0.2 million on the loan
portfolio at Harvest Capital Credit. (4) Excludes expense
related to the non-cash net amortization of liquidity discounts at
JMP Credit Corporation. (5) Reverses stock-based
compensation expense and excludes fund-related expenses totaling
$0.2 million that are recognized upon consolidation of two Harvest
Growth Capital funds and Harvest Capital Credit. (6)
Excludes non-controlling interests totaling $2.9 million in the net
realized and unrealized losses of two Harvest Growth Capital funds
and Harvest Capital Credit that are recognized upon consolidation
of the entities. Year Ended December 31, 2012
Harvest JMP Operating HGC
HCC Consoli- JMP Capital Credit Elimin- JMP Consoli-
Consoli- dated JMP (in thousands, except per share amounts)
Securities Strategies Corp. Corporate ations Group dation dation
Group Revenues: Investment banking $51,174 - - - - $51,174 -
($192 ) $50,982 Brokerage 21,903 - - - - 21,903 - - 21,903
Asset management-related fees (1)
27 $22,219 $173 $1 ($543 ) 21,877 ($1,048 ) (1,252 ) 19,577
Principal transactions (2) 377 3,335 187 2,448 - 6,347 4,030 (185 )
10,192 Gain on sale and payoff of loans (3) - - 6,578 - - 6,578 -
327 6,905 Net dividend income (30 ) 234 - - - 204 - (234 ) (30 )
Net interest income (4) 53 157 18,748 357 - 19,315 - 2,798 22,113
Provision for loan losses (5) - - (2,207 ) - -
(2,207 ) - - (2,207 ) Adjusted net revenues 73,504
25,945 23,479 2,806 (543 ) 125,191 2,982 1,262 129,435
Expenses: Non-interest expenses (6) 66,716 19,453 (2,358 ) 12,719
(543 ) 95,987 175 169 96,331 Less: Non-controlling interest
(7) - 1 671 - - 672 2,807
1,093 4,572 Operating income/(loss) before taxes
6,788 6,491 25,166 (9,913 ) - 28,532 - - 28,532
Income tax expense/(benefit) (assumed rate
of 42%)
2,851 2,726 10,570 (4,163 ) - 11,984 -
- 11,984 Operating net income/(loss) $3,937
$3,765 $14,596 ($5,750 ) - $16,548 -
- $16,548 Operating net income/(loss)
per share: Basic $0.17 $0.17 $0.64 ($0.25 ) - $0.73 - - $0.73
Diluted $0.17 $0.16 $0.64 ($0.25 ) - $0.72 - - $0.72
Reconciliation to Adjusted Operating Net Income Operating
income before taxes $25,166 $28,532 $28,532
Less: Earnings contribution from gain on
loan portfolio acquired
1,581 1,581 1,581
Adjusted operating income before taxes
23,585 26,951 26,951
Income tax expense (assumed rate of
42%)
9,905 11,320 11,320 Adjusted operating net
income $13,680 $15,631 $15,631
Adjusted operating net income/(loss) per
share:
Basic $0.17 $0.17 $0.60 ($0.25 ) - $0.69 - - $0.69 Diluted $0.17
$0.16 $0.60 ($0.25 ) - $0.68 - - $0.68 (1) Reflects revenues
detailed in section above titled “Asset Management-Related Fee
Revenues”; management fees totaling $2.3 million are eliminated
upon consolidation of two Harvest Growth Capital funds and Harvest
Capital Credit. (2) Reverses net unrealized gains and losses
on strategic equity investments and warrants and excludes
non-controlling interests in net realized and unrealized gains and
losses related to two Harvest Growth Capital funds as well as other
principal transaction revenues related to Harvest Capital Credit;
net realized and unrealized gains totaling $3.8 million are
recognized upon consolidation of the entities. (3) Excludes
unrealized mark-to-market gains of $0.3 million on the loan
portfolio at Harvest Capital Credit. (4) Excludes expense
related to the non-cash net amortization of liquidity discounts at
JMP Credit Corporation. (5) Excludes reversal of previously
recorded loan loss provisions at Harvest Capital Credit in the
amount of $0.2 million. (6) Reverses stock-based
compensation expense and excludes fund-related expenses totaling
$0.3 million that are recognized upon consolidation of two Harvest
Growth Capital funds and Harvest Capital Credit. (7)
Excludes non-controlling interests totaling $3.9 million in the net
realized and unrealized gains of two Harvest Growth Capital funds
and Harvest Capital Credit that are recognized upon consolidation
of the entities.
Adjusted Tangible Book Value per Share
At December 31, 2012, JMP Group’s tangible book value per share
was $5.62, compared to $5.33 at September 30, 2012 and $5.74 at
December 31, 2011. Adjusting book value to reflect the net
liquidity discount on JMP Credit Corporation’s loan portfolio and
asset-backed securities issued and to accelerate the recognition of
deferred compensation expense, JMP Group’s adjusted tangible book
value per share at December 31, 2012 would have been $5.15, as
indicated by the table below.
(in thousands, except per share amounts) Dec.
31, 2012 Sept. 30, 2012 Dec. 31, 2011 Total JMP Group
stockholders' equity $126,890 $121,057 $129,706 Less: Net benefit
of vesting of performance-related RSUs (1) - - (3,642
) JMP Group stockholders' equity, net of RSU benefit 126,890
121,057 126,064 Less: Goodwill and intangible assets - -
- Tangible stockholders' equity 126,890 121,057
126,064 Liquidity discount on loans 4,331 6,484 15,738
Liquidity discount on asset-backed securities issued (15,548 )
(24,543 ) (49,447 ) Net liquidity discount (11,217 ) (18,059 )
(33,709 ) Accounting adjustment – deferred compensation (6,985 ) -
- Pre-tax adjustments to equity (18,202 ) (18,059 )
(33,709 ) Income tax benefit (assumed rate of 42%) 7,645
7,585 14,158 After-tax adjustments to equity (10,557
) (10,474 ) (19,551 ) Adjusted tangible stockholders' equity
$116,333 $110,583 $106,513 Adjusted
tangible book value per share $5.15 $4.87 $4.85
Basic shares outstanding 22,592 22,706 21,947
Quarterly operating ROATE (2) 21.1 % 11.1 % 12.1 % LTM operating
ROATE (2) 15.0 % 12.7 % 16.1 %
Quarterly operating ROATE (2) excluding
the financial impact of gains on acquired loans
19.1 % 10.5 % 11.9 %
LTM operating ROATE (2) excluding the
financial impact of gains on acquired loans
14.2 % 12.4 % 11.8 % (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
required 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 lowered
pre-tax earnings and created a tax benefit, which added to net
income and, consequently, to stockholders’ equity. JMP Group opted
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 was 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 ended December 31, 2012, JMP Group
repurchased 155,558 shares of its common stock at an average price
of $5.21 per share, or $0.8 million in total. At year-end,
approximately 750,000 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 or
losses 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 quarter,
depending upon the amount and sorts of revenue recognized as well
as other factors. The amount of compensation and benefits expense
recognized in a particular quarter may not be indicative of such
expense in any future period. As a result, the company suggests
that its 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, such as the use of proceeds from a
January 2013 bond offering. 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, 2011 as filed
with the Securities and Exchange Commission on March 12, 2012 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, 2011 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 13, 2013.
To participate in the call, dial (888) 566-6060. The conference
identification number is 98680768.
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, 2012 Dec. 31, 2011 Assets Cash
and cash equivalents $67,075 $70,363 Restricted cash and deposits
69,813 48,440 Marketable securities owned, at fair value 14,347
24,309 Other investments 81,918 51,706 Loans held for sale 3,134
2,957
Loans collateralizing asset-backed
securities issued, net of allowance for loan losses
401,003 410,770 Small business loans, net of allowance for loan
losses 38,924 7,477 Deferred tax assets 13,089 26,221 Other assets
21,319 18,378
Total assets
$710,622 $660,621 Liabilities and Stockholders' Equity
Liabilities: Marketable securities sold, but not yet
purchased, at fair value $11,567 $10,921 Accrued compensation
20,256 38,143 Asset-backed securities issued 415,456 381,556 Note
payable 38,713 19,222 Deferred tax liability 9,743 23,214 Other
liabilities 26,824 31,081 Total liabilities 522,559 504,137
Redeemable non-controlling interest 161 50 Stockholders'
Equity: Total JMP Group Inc. stockholders' equity 126,890 129,705
Non-redeemable non-controlling interest 61,012 26,729 Total equity
187,902 156,434 Total liabilities and stockholders' equity $710,622
$660,621
JMP GROUP INC. Consolidated Statements of
Operations
(Unaudited)
Quarter Ended Year Ended (in thousands, except
per share amounts) Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012
Dec. 31, 2011 Revenues: Investment banking $12,972
$5,782 $50,982 $46,114 Brokerage 5,628 6,091 21,903 25,461 Asset
management fees 5,054 4,892 15,775 19,785 Principal transactions
(1,015 ) 1,721 11,294 1,615 Gain on sale, payoff and mark-to-market
of loans 4,400 2,039 7,232 17,020 Net dividend (expense)/income (4
) 495 (29 ) 1,365 Other income 293 1,800 3,800
4,336 Non-interest revenues 27,328 22,820
110,957 115,696 Interest income 8,847 7,557
32,898 33,356 Interest expense (10,420 ) (9,287 ) (39,993 ) (35,747
)
Net interest (expense)
(1,573 ) (1,730 ) (7,095 ) (2,391 ) Provision for loan
losses (1,071 ) (1,467 ) (1,990 ) (1,944 ) Total net revenues
24,684 19,623 101,872 111,361
Non-interest expenses: Compensation and benefits 10,582 22,799
66,415 89,017 Administration 1,582 1,589 6,186 6,649 Brokerage,
clearing and exchange fees 1,150 1,183 3,806 4,735 Travel and
business development 952 1,113 3,387 3,681 Communications and
technology 861 1,059 3,503 3,988 Occupancy 805 711 3,157 2,927
Professional fees 1,306 644 3,630 2,955 Depreciation 242 192 884
721 Impairment loss on intangible asset - - - 700 Other 138
83 420 426 Total non-interest expense 17,618
29,373 91,388 115,799
Income/(loss) before income tax expense 7,066 (9,750 ) 10,484
(4,438 )
Income tax expense/(benefit)
3,007 (4,024 ) 1,617 (1,670 ) Net income/(loss) 4,059
(5,726 ) 8,867 (2,768 )
Less: Net (loss)/income attributable to
noncontrolling interest
(1,455 ) 218 6,035 (257 ) Net income/(loss)
attributable to JMP Group Inc. $5,514 ($5,944 ) $2,832
($2,511 )
Net income/(loss) attributable to JMP
Group Inc. per share:
Basic $0.24 ($0.27 ) $0.13 ($0.11 ) Diluted $0.24 ($0.26 ) $0.12
($0.11 ) Weighted average common shares outstanding: Basic
22,637 22,016 22,582 22,118 Diluted 22,722 22,797 22,906 23,069
JMP (NYSE:JMP)
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JMP (NYSE:JMP)
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