UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
8-K
Current
Report
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported):
February
13, 2015
JMP Group
Inc.
(Exact
name of registrant as specified in its charter)
Commission
File Number: 001-33448
Delaware
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20-1450327
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(State or other jurisdiction of incorporation)
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(IRS Employer
Identification No.)
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600 Montgomery Street, Suite 1100
San Francisco, CA 94111
(Address
of principal executive offices, including zip code)
415-835-8900
(Registrant’s
telephone number, including area code)
(Former name or
former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
⃞
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
⃞
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
⃞
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
⃞
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
On February 13, 2015, JMP Group LLC (the “Company”) issued a press
release announcing financial results for its fiscal year ended December
31, 2014 and fourth quarter ended December 31, 2014. A copy of the
Company's press release containing this information is being furnished
as Exhibit 99.1 to this Current Report on Form 8-K.
The information furnished pursuant to Item 2.02, including Exhibit 99.1,
shall not be deemed "filed" for the purposes of Section 18 of the
Securities Exchange Act of 1934 (the “Exchange Act”) and will not be
deemed to be incorporated by reference into any filing under the
Securities Act of 1933, or the Exchange Act, except to the extent that
the Company specifically incorporates it by reference.
The information furnished in this report, including Exhibit 99.1, shall
not be deemed to constitute an admission that such information or
exhibit is required to be furnished pursuant to Regulation FD or that
such information or exhibit contains material information that is not
otherwise publicly available. In addition, the Company does not assume
any obligation to update such information or exhibit in the future.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
The following exhibits are furnished as part of this Current Report on
Form 8-K:
99.1 Press release of the Company dated
February 13, 2015.
Signature(s)
Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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JMP GROUP INC.
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Date:
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February 13, 2015
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By:
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/s/ Raymond Jackson
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Raymond Jackson
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Chief Financial Officer
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Exhibit 99.1
JMP Group
Reports Fourth Quarter and Fiscal Year 2014 Financial Results
SAN FRANCISCO--(BUSINESS WIRE)--February 13, 2015--JMP Group LLC (NYSE:
JMP), an investment banking and alternative asset management firm,
reported financial results today for its predecessor, JMP Group Inc.,
for the quarter and full fiscal year ended December 31, 2014. As of
January 1, 2015, JMP Group operates as a limited liability company that
is taxed as a partnership, and no longer as a corporation, for U.S.
federal income tax purposes. The first earnings release regarding the
financial results of JMP Group LLC will be for the first quarter of 2015.
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Adjusted net revenues, which exclude certain non-cash items and
non-controlling interests, were $44.0 million, a decrease of 8.1% from
$47.9 million for the fourth quarter of 2013. For the year ended
December 31, 2014, adjusted net revenues were a record $178.9 million,
an increase of 16.1% from $154.0 million for the year ended December
31, 2013. For more information on adjusted net revenues, including a
reconciliation to net revenues, please see the section below titled
“Non-GAAP Financial Measures.”
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Operating net income was $4.7 million, or $0.21 per diluted share, an
increase of 20.8% from $3.9 million, or $0.17 per share, for the
fourth quarter of 2013. For the year ended December 31, 2014,
operating net income was $16.6 million, or $0.73 per share, an
increase of 22.6% from $13.5 million, or $0.60 per share, for the year
ended December 31, 2013. For more information on operating net income,
including a reconciliation to net income attributable to JMP Group,
please see the section below titled “Non-GAAP Financial Measures.”
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Total net revenues under generally accepted accounting principles, or
GAAP, were $54.1 million and $182.9 million for the quarter and year
ended December 31, 2014, respectively, compared to $59.7 million and
$149.2 million for the quarter and year ended December 31, 2013,
respectively.
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Net income attributable to JMP Group on a GAAP basis was $4.9 million,
or $0.21 per diluted share, compared to $3.5 million, or $0.16 per
share, for the fourth quarter of 2013. For the year ended December 31,
2014, GAAP net income was $13.6 million, or $0.58 per share, compared
to $3.6 million, or $0.16 per share, for the year ended December 31,
2013.
“JMP Group produced another good year in 2014, with operating earnings
increasing 23% to $0.73 per share,” said Chairman and Chief Executive
Officer Joe Jolson. “Excluding net investment income and corporate
costs, our three operating platforms earned a record $0.60 per share, an
increase of 25% from $0.48 per share for 2013. The strong results drove
an 8% increase in our tangible book value per share to $6.26, despite
the repurchase of 1.8 million shares of our common stock at an average
price per share of $6.58 during the year. In January, we converted to a
publicly traded partnership and declared three monthly cash
distributions of $0.035 per share for the first quarter of 2015,
representing a 50% increase over our most recent quarterly dividend,
which was paid in November 2014. We anticipate that our payout ratio may
be between 50% and 70% of operating earnings this year, compared to
approximately 30% last year.”
Segment Results of Operations
At JMP Securities, the broker-dealer segment, adjusted net revenues were
$23.2 million, a decrease of 18.9% from $28.6 million for the fourth
quarter of 2013. The broker-dealer segment’s operating margin on
adjusted net revenues was 10.8%, compared to 14.5% for the prior quarter
and 15.7% for the fourth quarter of 2013.
At Harvest Capital Strategies, the asset management segment, adjusted
net revenues of $13.2 million increased 19.0% from $11.1 million for the
fourth quarter of 2013. JMP Group’s return on its capital invested in
hedge funds managed by Harvest Capital Strategies was 1.2% for the
quarter and 7.4% for the year ended December 31, 2014.
At JMP Credit Advisors, the corporate credit management segment,
adjusted net revenues totaled $1.4 million, an increase of 16.3% from
$1.2 million for the fourth quarter of 2013.
A summary of JMP Group’s operating net income per share by segment for
the quarter and year ended December 31, 2014, and for comparable prior
periods is set forth below.
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Quarter Ended
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Year Ended
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($ as shown)
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Dec. 31, 2014
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Sept. 30, 2014
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Dec. 31, 2013
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Dec. 31, 2014
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Dec. 31, 2013
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Broker-dealer
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$0.07
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$0.09
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$0.12
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$0.48
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$0.39
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Asset management
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0.05
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0.04
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0.05
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0.11
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0.06
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Corporate credit management
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0.00
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0.00
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0.01
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0.01
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0.03
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Operating platform EPS
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0.12
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0.13
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0.18
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0.60
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0.48
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Investment income
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0.18
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0.11
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0.14
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0.53
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0.56
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Corporate costs
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(0.09
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(0.09
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(0.15
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(0.40
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(0.44
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Operating EPS (diluted)
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$0.21
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$0.15
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$0.17
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$0.73
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$0.60
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For more information on segment reporting; adjusted net revenues,
including a reconciliation to net revenues; and 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 $15.9 million, a decrease of 27.3% from
$21.9 million for the fourth quarter of 2013. For the year ended
December 31, 2014, investment banking revenues were $81.1 million, an
increase of 9.3% from $74.2 million for the year ended December 31, 2013.
A summary of the company’s investment banking revenues and transaction
counts for the quarter and year ended December 31, 2014, and for
comparable prior periods is set forth below.
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Quarter Ended
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Year Ended
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Dec. 31, 2014
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Sept. 30, 2014
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Dec. 31, 2013
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Dec. 31, 2014
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Dec. 31, 2013
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($ in thousands)
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Count
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Revenues
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Count
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Revenues
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Count
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Revenues
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Count
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Revenues
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Count
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Revenues
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Public equity
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27
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$10,714
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26
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$9,834
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26
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$10,503
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120
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$54,786
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123
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$39,756
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Debt and convertible securities
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5
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1,670
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4
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470
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9
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8,730
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20
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4,801
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32
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18,762
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Private capital markets and other
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2
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1,685
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1
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125
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-
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4
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2,834
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4
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4,509
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Strategic advisory
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2
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1,824
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4
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6,634
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3
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2,639
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17
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18,650
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12
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11,146
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Total
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36
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$15,893
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35
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$17,063
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38
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$21,872
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161
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$81,071
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171
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$74,173
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Brokerage
Net brokerage revenues were $7.3 million, an increase of 9.4% from $6.7
million for the fourth quarter of 2013. For the year ended December 31,
2014, net brokerage revenues were $26.9 million, an increase of 9.3%
from $24.6 million for the year ended December 31, 2013.
Asset Management
Asset management-related fee revenues were $13.1 million, an increase of
19.4% from $10.9 million for the fourth quarter of 2013, largely due to
strong results from equity interests in RiverBanc and Accord Group
Holdings. For the year ended December 31, 2014, asset management-related
fee revenues were $45.7 million, an increase of 58.1% from $28.9 million
for the year ended December 31, 2013, primarily due to an increase of
$11.9 million in incentive fees, to $27.4 million. 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, 2014, totaled $2.1
billion, including $1.0 billion of funds managed by Harvest Capital
Strategies and HCAP Advisors and $1.1 billion par value of loans and
cash managed by JMP Credit Advisors. Client assets under management were
$2.2 billion at September 30, 2014, and $1.7 billion at December 31,
2013. Including sponsored funds in which Harvest Capital Strategies owns
an economic interest, client assets under management totaled $2.5
billion at December 31, 2014.
At December 31, 2014, private capital, including corporate credit, small
business lending, venture capital and real estate-related advisory
services, represented 63.3% of client assets under management, including
sponsored funds.
Principal Transactions
Principal transactions generated net realized and unrealized gains of
$12.1 million and $13.8 million for the quarter and year ended December
31, 2014, respectively, compared to net realized and unrealized gains of
$15.9 million and $20.7 million for the quarter and year ended December
31, 2013, respectively.
A summary of the company’s principal transaction revenues for the
quarter and year ended December 31, 2014, and for comparable prior
periods is set forth below.
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Quarter Ended
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Year Ended
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(in thousands)
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Dec. 31, 2014
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Sept. 30, 2014
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Dec. 31, 2013
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Dec. 31, 2014
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Dec. 31, 2013
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Hedge fund investments
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$1,366
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$1,784
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$2,317
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$7,112
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$5,555
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Principal investments:
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Investment in Harvest Capital Credit Corporation
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(1,129
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(1,273
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-
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(2,546
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69
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Other principal investments
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254
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26
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140
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227
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140
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Total principal investments
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(875
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(1,247
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140
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(2,319
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209
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Venture investments:
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Investment in Harvest Growth Capital funds
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438
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(164
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500
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255
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534
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Other venture investments and warrants
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237
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(298
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657
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483
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2,488
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Total venture investments
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675
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(462
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1,157
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738
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3,022
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Principal transaction revenues net of non-controlling interests in
Harvest Growth Capital funds
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1,166
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75
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3,614
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5,531
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8,786
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Non-controlling interests in Harvest Growth Capital funds
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10,963
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(4,351
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12,264
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8,317
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11,941
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Total principal transaction revenues
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$12,129
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($4,276
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$15,878
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$13,848
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$20,727
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Included in the net gain of $12.1 million for the quarter ended December
31, 2014, was a gain of $11.0 million attributable to non-controlling
interests in net realized and unrealized gains 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 4.8% of Harvest Growth Capital and 2.5% 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 gain of
$11.0 million is not included in adjusted net revenues. Net of its
non-controlling interests, JMP Group had a net realized and unrealized
gain of $0.4 million on its investments in Harvest Growth Capital and
Harvest Growth Capital II for the quarter. For more information on
adjusted net revenues, including reconciliation to net revenues, please
see the section below titled “Non-GAAP Financial Measures.”
Collateralized Loan Obligations
The net returns on invested capital managed by JMP Credit Advisors were
3.2% and 16.0% for the quarter and year ended December 31, 2014,
respectively, compared to 7.2% and 35.5% for the quarter and year ended
December 31, 2013, respectively.
At December 31, 2014, discounts and reserves (including liquidity
discounts, allowances for loan losses and deferred loan fees) equaled
$10.5 million, or 1.0% of gross performing loans outstanding at JMP
Credit. At December 31, 2013, such discounts and reserves equaled $8.6
million, or 1.2% of gross performing loans outstanding. There were no
impaired loans at either December 31, 2014, or December 31, 2013.
For the quarter ended December 31, 2014, JMP Credit was required under
GAAP to release a net $1.2 million of general loan loss reserves, due to
the better-than-expected credit loss experience of its portfolio over
the past five years. For the year ended December 31, 2014, the net loan
loss provision totaled $0.4 million. At December, 2014, general loan
loss reserves equaled 0.4% of gross performing loans at JMP Credit.
Net Interest Income
Net interest income was $4.7 million, compared to net interest income of
$4.5 million for the fourth quarter of 2013.
For the year ended December 31, 2014, net interest income was $16.6
million, compared $3.2 million for the year ended December 31, 2013,
when interest expense due to net amortization of liquidity discounts at
JMP Credit equaled $15.0 million. Excluding the amortization-related
expense, net interest income would have been $18.2 million for the year
ended December 31, 2013. Further excluding net interest income of $1.8
million attributable to Harvest Capital Credit, which, due to its May
2013 initial public offering, is no longer consolidated by JMP Group,
net interest income would have been $16.4 million for the year ended
December 31, 2013.
Expenses
Compensation and Benefits
Compensation and benefits expense was $26.0 million, compared to $33.4
million for the fourth quarter of 2013. With regard to annually awarded
compensation, a concept which excludes amortization expense from
stock-based awards but accelerates and recognizes the cost of net
deferred compensation related to the period, compensation and benefits
expense was 59.2% of adjusted net revenues, compared to 71.7% for the
fourth quarter of 2013. Further excluding compensation expense related
to strategic initiatives and hedge fund incentive fees, the compensation
ratio was 55.6%, compared to 65.5% for the fourth quarter of 2013.
For the year ended December 31, 2014, compensation and benefits expense
was $123.7 million, compared to $102.4 million for the year ended
December 31, 2013. With regard to annually awarded compensation,
compensation and benefits expense was 67.7% of adjusted net revenues,
compared to 67.6% for the year ended December 31, 2013. Further
excluding compensation expense related to strategic initiatives and
hedge fund incentive fees, the compensation ratio was 62.4%, compared to
61.7% for the year ended December 31, 2013.
For more information on compensation ratios, please see the section
below titled “Non-GAAP Financial Measures.”
Non-Compensation Expense
Non-compensation expense was $8.2 million, compared to $7.3 million for
the fourth quarter of 2013. For the year ended December 31, 2014,
non-compensation expense was $28.9 million, compared to $29.2 million
for the year ended December 31, 2013. Excluding costs related to JMP
Group’s conversion to a publicly traded limited liability company,
non-compensation expense would have been $7.8 million for the quarter
and $28.0 million for the year ended December 31, 2014.
Personnel
At December 31, 2014, the company had 235 full-time employees, compared
to 233 at September 30, 2014, and 235 at December 31, 2013.
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.
Furthermore, company management believes that this presentation enables
more a 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 non-GAAP items should not be construed as an
inference that these gains or expenses are unusual, infrequent or
non-recurring. Therefore, both GAAP measures of JMP Group’s 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 (until its IPO on
May 2, 2013), (ii) excludes the net amortization of liquidity discounts
on loans held and asset-backed securities issued by JMP Credit Advisors
CLO I, (iii) reverses the general loan loss provision taken with regard
to other CLOs, (iv) adjusts for unrealized mark-to-market gains and
losses recorded at Harvest Capital Credit (prior to its IPO on May 2,
2013), (v) reverses net unrealized gains and losses on strategic equity
investments and warrants, (vi) excludes the non-controlling interest in
net unrealized gains and losses on Harvest Growth Capital and Harvest
Growth Capital II, and (vii) reverses unrealized mark-to-market gains or
losses on investments related to deferred compensation. In particular,
adjusted net revenue adjusts for:
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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 was the external manager of Harvest Capital Credit, and, as a
result of its ownership of each (until the IPO of Harvest Capital
Credit on May 2, 2013), JMP Group has consolidated the three entities
(for the appropriate periods) in accordance with GAAP accounting
standards and has eliminated 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;
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the non-cash net amortization of liquidity discounts associated with
JMP Credit Advisors CLO I, due to scheduled contractual principal
repayments, for periods ending on or before June 30, 2013;
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the non-specific, non-cash loan loss provision recorded with regard to
loans acquired during the period by JMP Credit Advisors CLO II and JMP
Credit Advisors III, which is required by GAAP;
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unrealized mark-to-market gains or losses on the investment portfolio
at Harvest Capital Credit by reversing them; then, reflecting the
company’s IPO, recognizing those previously reversed gains or losses
as of May 2, 2013;
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unrealized mark-to-market gains or losses on the company’s strategic
equity investments as well as certain warrant positions;
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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; and
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unrealized mark-to-market gains or losses on investments in the
company’s hedge funds that are made on behalf of employees who opt for
such investments under the terms of their deferred compensation
agreements; any gains or losses will accrue to the individual employee
once the deferred compensation is released to that individual.
A reconciliation of JMP Group’s net revenues to its adjusted net
revenues for the quarter and year ended December 31, 2014, and for
comparable prior periods is set forth below.
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Quarter Ended
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Year Ended
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(in thousands)
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Dec. 31, 2014
|
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Sept. 30, 2014
|
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Dec. 31, 2013
|
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Dec. 31, 2014
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Dec. 31, 2013
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|
|
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Revenues:
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|
|
|
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Non-interest revenues
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$48,099
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$30,294
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|
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55,474
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|
$166,732
|
|
|
$148,616
|
|
Net interest income
|
|
4,737
|
|
|
4,359
|
|
|
4,458
|
|
|
16,644
|
|
|
3,236
|
|
Loan loss credit/(provision)
|
|
1,229
|
|
|
(956
|
)
|
|
(246
|
)
|
|
(436
|
)
|
|
(2,637
|
)
|
Total net revenues
|
|
54,065
|
|
|
33,697
|
|
|
59,686
|
|
|
182,940
|
|
|
149,215
|
|
Asset management fees earned on Harvest Growth Capital funds and
Harvest Capital Credit (1) (2)
|
|
281
|
|
|
281
|
|
|
386
|
|
|
1,306
|
|
|
2,152
|
|
Dividend distribution from Harvest Capital Credit (2)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
678
|
|
Less: Net interest income and other
|
|
|
|
|
|
|
|
|
|
|
revenues from Harvest Capital Credit (2)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,116
|
)
|
Total net revenues including fee revenues from consolidated
entities
|
|
54,346
|
|
|
33,978
|
|
|
60,072
|
|
|
184,246
|
|
|
149,929
|
|
|
|
|
|
|
|
|
|
|
|
|
Add back/(subtract):
|
|
|
|
|
|
|
|
|
|
|
Net amortization of liquidity discounts on loans and asset-backed
securities issued
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
14,979
|
|
General loan loss (credit)/provision – collateralized loan
obligations
|
|
(151
|
)
|
|
919
|
|
|
200
|
|
|
1,700
|
|
|
1,705
|
|
Unrealized mark-to-market (gain) – Harvest Capital Credit
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(515
|
)
|
Realization of mark-to-market gain – Harvest Capital Credit
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
772
|
|
Net unrealized loss/(gain) on strategic equity investments and
warrants
|
|
1,073
|
|
|
1,392
|
|
|
21
|
|
|
2,567
|
|
|
(596
|
)
|
Non-controlling interests in net unrealized (gains)/losses on
Harvest Growth Capital funds
|
|
(10,956
|
)
|
|
4,361
|
|
|
(12,248
|
)
|
|
(8,278
|
)
|
|
(11,925
|
)
|
Unrealized mark-to-market (gain)/loss – deferred compensation
|
|
(321
|
)
|
|
(332
|
)
|
|
(168
|
)
|
|
(1,379
|
)
|
|
(320
|
)
|
Adjusted net revenues
|
|
$43,991
|
|
|
$40,318
|
|
|
$47,877
|
|
|
$178,856
|
|
|
$154,029
|
|
(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.
|
(2)
|
|
Subsequent to its IPO on May 2, 2013, Harvest Capital Credit is no
longer consolidated; therefore, fees and dividends related to
Harvest Capital Credit are included in non-interest revenues
following that date.
|
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 (until its
IPO on May 2, 2013) 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, 2014, and for comparable prior
periods is set forth below.
|
|
Quarter Ended
|
|
Year Ended
|
(in thousands)
|
|
Dec. 31, 2014
|
|
Sept. 30, 2014
|
|
Dec. 31, 2013
|
|
Dec. 31, 2014
|
|
Dec. 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
Base management fees:
|
|
|
|
|
|
|
|
|
|
|
Fees reported as asset management fees
|
|
$3,030
|
|
$2,983
|
|
$2,612
|
|
$11,332
|
|
$10,114
|
Fees earned at Harvest Growth Capital, Harvest Growth Capital II
and Harvest Capital Credit/HCAP Advisors
|
|
827
|
|
769
|
|
697
|
|
3,169
|
|
2,437
|
Total base management fees
|
|
3,857
|
|
3,752
|
|
3,309
|
|
14,501
|
|
12,551
|
|
|
|
|
|
|
|
|
|
|
|
Incentive fees:
|
|
|
|
|
|
|
|
|
|
|
Fees reported as asset management fees
|
|
5,873
|
|
5,622
|
|
7,423
|
|
25,623
|
|
15,139
|
Fees earned at Harvest Growth Capital, Harvest Growth Capital II
and Harvest Capital Credit/HCAP Advisors
|
|
1,141
|
|
538
|
|
-
|
|
1,806
|
|
417
|
Total incentive fees
|
|
7,014
|
|
6,160
|
|
7,423
|
|
27,429
|
|
15,556
|
|
|
|
|
|
|
|
|
|
|
|
Other fee income:
|
|
|
|
|
|
|
|
|
|
|
Total fundraising and other fees
|
|
2,203
|
|
1,191
|
|
217
|
|
3,767
|
|
798
|
|
|
|
|
|
|
|
|
|
|
|
Asset management-related fee revenues
|
|
$13,074
|
|
$11,103
|
|
$10,949
|
|
$45,697
|
|
$28,905
|
|
|
|
|
|
|
|
|
|
|
|
Summations:
|
|
|
|
|
|
|
|
|
|
|
Fees reported as asset management fees
|
|
$8,903
|
|
$8,605
|
|
$10,035
|
|
$36,955
|
|
$25,253
|
Fees earned at Harvest Growth Capital, Harvest Growth Capital II
and Harvest Capital Credit/HCAP Advisors
|
|
1,968
|
|
1,307
|
|
697
|
|
4,975
|
|
2,854
|
Fees reported as other fee income
|
|
2,203
|
|
1,191
|
|
217
|
|
3,767
|
|
798
|
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.
Compensation Ratio
A compensation ratio expresses compensation expense as a percentage of
net revenues in a given period. As utilized by JMP Group, an adjusted
compensation ratio is a non-GAAP financial measure that employs adjusted
net revenues as the denominator in its calculation. Furthermore, this
ratio adjusts the financial impact of certain compensation-related and
transaction-related expenses that are or are not recognized under GAAP.
In particular, the adjusted compensation ratio reverses compensation
expense and unrealized mark-to-market gains or losses related to
stock-based awards and deferred compensation (so that the compensation
expenses used in the numerator correspond to the adjusted net revenues
generated in the periods presented). The adjusted compensation ratio is
further adjusted by excluding compensation paid to employees hired in
connection with JMP Group’s strategic investments in new business
initiatives. In addition, the company presents an adjusted compensation
ratio that excludes any compensation related to incentive fees generated
by hedge funds, a majority of which is passed through to the funds’
investment teams if earned.
A statement of JMP Group’s compensation ratio for the quarter and year
ended December 31, 2014, and for comparable prior periods is set forth
below.
|
|
Quarter Ended
|
|
Year Ended
|
($ in thousands)
|
|
Dec. 31, 2014
|
|
Sept. 30, 2014
|
|
Dec. 31, 2013
|
|
Dec. 31, 2014
|
|
Dec. 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
Compensation Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net revenues
|
|
$43,991
|
|
|
$40,318
|
|
|
$47,877
|
|
|
$178,856
|
|
|
$154,029
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
$26,013
|
|
|
$28,315
|
|
|
$33,366
|
|
|
$123,683
|
|
|
$102,432
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtract/(add back):
|
|
|
|
|
|
|
|
|
|
|
Compensation expense – stock options
|
|
509
|
|
|
509
|
|
|
262
|
|
|
1,917
|
|
|
920
|
|
Compensation expense – RSUs
|
|
1,181
|
|
|
776
|
|
|
804
|
|
|
3,744
|
|
|
2,823
|
|
Compensation expense – net deferred compensation
|
|
(2,035
|
)
|
|
(991
|
)
|
|
(2,623
|
)
|
|
(4,514
|
)
|
|
(6,170
|
)
|
Unrealized mark-to-market gain – deferred compensation
|
|
321
|
|
|
332
|
|
|
168
|
|
|
1,379
|
|
|
320
|
|
IPO-related administrative expense – Harvest Capital Credit
Corporation
|
|
-
|
|
|
-
|
|
|
450
|
|
|
-
|
|
|
450
|
|
Adjusted compensation and benefits
|
|
26,037
|
|
|
27,689
|
|
|
34,305
|
|
|
121,157
|
|
|
104,089
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
Compensation expense – strategic initiatives
|
|
(850
|
)
|
|
500
|
|
|
895
|
|
|
760
|
|
|
4,313
|
|
Adjusted compensation and benefits, excluding strategic initiatives
|
|
$26,887
|
|
|
$27,189
|
|
|
$33,410
|
|
|
$120,397
|
|
|
$99,776
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted ratio of compensation expense to revenues
|
|
59.2
|
%
|
|
68.7
|
%
|
|
71.7
|
%
|
|
67.7
|
%
|
|
67.6
|
%
|
Adjusted ratio of compensation expense to revenues, excluding
strategic initiatives
|
|
61.1
|
%
|
|
67.4
|
%
|
|
69.8
|
%
|
|
67.3
|
%
|
|
64.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Compensation Ratios Excluding Hedge Fund Incentive Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net revenues
|
|
$43,991
|
|
|
$40,318
|
|
|
$47,877
|
|
|
$178,856
|
|
|
$154,029
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
Compensation expense – hedge fund incentive fees
|
|
5,477
|
|
|
4,982
|
|
|
5,982
|
|
|
23,296
|
|
|
12,305
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net revenues, excluding hedge fund incentive fees
|
|
$38,514
|
|
|
$35,336
|
|
|
$41,895
|
|
|
$155,560
|
|
|
$141,724
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted compensation and benefits, excluding strategic initiatives
|
|
$26,887
|
|
|
$27,189
|
|
|
$33,410
|
|
|
$120,397
|
|
|
$99,776
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
Compensation expense – hedge fund incentive fees
|
|
5,477
|
|
|
4,982
|
|
|
5,982
|
|
|
23,296
|
|
|
12,305
|
|
Adjusted compensation and benefits, excluding strategic
initiatives and hedge fund incentive fees
|
|
$21,410
|
|
|
$22,207
|
|
|
$27,428
|
|
|
$97,101
|
|
|
$87,471
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted ratio of compensation expense to revenues, excluding
strategic initiatives and hedge fund incentive fees
|
|
55.6
|
%
|
|
62.8
|
%
|
|
65.5
|
%
|
|
62.4
|
%
|
|
61.7
|
%
|
Company management has utilized compensation ratios, adjusted in the
manners described above, to assess JMP Group’s personnel expenses as
they relate to its revenues for the periods presented. Management
believes that adjusted compensation ratios provide useful information by
including or excluding certain expenses as a means of representing the
company’s ongoing personnel costs resulting from its core business
activities. Management also believes that compensation ratios are useful
measures because they allow and facilitate meaningful comparisons of the
company’s personnel expenses in a given period to those in prior and
future periods.
Operating Net Income
Operating net income is a non-GAAP financial measure that (i) reverses
compensation expense related to stock-based awards and deferred
compensation, (ii) excludes the net amortization of liquidity discounts
on loans held and asset-backed securities issued by JMP Credit Advisors
CLO I, (iii) reverses the general loan loss provision taken with regard
to other CLOs, (iv) adjusts for 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)
assumes an effective tax rate. In particular, operating net income
adjusts for:
-
the grant of RSUs and stock options;
-
net deferred compensation, which consists of (a) deferred compensation
awarded at year-end 2012 and 2013 and reflected in operating net
income for 2012 and 2013, though recognized as a GAAP expense in 2013,
2014 and 2015, less (b) compensation awarded at year-end 2013 and
year-end 2014 and deferred into 2014, 2015 and 2016;
-
the non-cash net amortization of liquidity discounts associated with
JMP Credit Advisors CLO I, due to scheduled contractual principal
repayments, for periods ending on or before June 30, 2013;
-
the non-specific, non-cash loan loss provision recorded with regard to
loans acquired during the period by JMP Credit Advisors CLO II and JMP
Credit Advisors III, which is required by GAAP;
-
unrealized mark-to-market gains or losses on the investment portfolio
at Harvest Capital Credit;
-
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 38%.
A reconciliation of JMP Group’s net income to its operating net income
for the quarter and year ended December 31, 2014, and for comparable
prior periods is set forth below.
|
|
Quarter Ended
|
|
Year Ended
|
(in thousands, except per share amounts)
|
|
Dec. 31, 2014
|
|
Sept. 30, 2014
|
|
Dec. 31, 2013
|
|
Dec. 31, 2014
|
|
Dec. 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to JMP Group Inc.
|
|
$4,869
|
|
|
$1,495
|
|
|
$3,493
|
|
|
$13,557
|
|
|
$3,629
|
|
|
|
|
|
|
|
|
|
|
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
2,535
|
|
|
1,460
|
|
|
3,772
|
|
|
8,141
|
|
|
3,950
|
|
Income before taxes
|
|
7,404
|
|
|
2,955
|
|
|
7,265
|
|
|
21,698
|
|
|
7,579
|
|
|
|
|
|
|
|
|
|
|
|
|
Add back/(subtract):
|
|
|
|
|
|
|
|
|
|
|
Compensation expense – stock options
|
|
509
|
|
|
509
|
|
|
262
|
|
|
1,917
|
|
|
920
|
|
Compensation expense – RSUs
|
|
1,181
|
|
|
776
|
|
|
804
|
|
|
3,744
|
|
|
2,823
|
|
Compensation expense – net deferred compensation
|
|
(2,035
|
)
|
|
(991
|
)
|
|
(2,623
|
)
|
|
(4,514
|
)
|
|
(6,170
|
)
|
Net amortization of liquidity discounts – JMP Credit Advisors CLO I
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
14,979
|
|
General loan loss provision – collateralized loan obligations
|
|
(487
|
)
|
|
913
|
|
|
146
|
|
|
1,351
|
|
|
1,241
|
|
IPO-related expense – Harvest Capital Credit
|
|
-
|
|
|
-
|
|
|
450
|
|
|
-
|
|
|
450
|
|
Unrealized mark-to-market (gain)/loss – Harvest Capital Credit
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(162
|
)
|
Realization of mark-to-market gain – Harvest Capital Credit
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
772
|
|
Unrealized mark-to-market loss/(gain) – strategic equity
investments and warrants
|
|
1,073
|
|
|
1,392
|
|
|
21
|
|
|
2,567
|
|
|
(596
|
)
|
Operating income before taxes
|
|
7,645
|
|
|
5,554
|
|
|
6,325
|
|
|
26,763
|
|
|
21,836
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (assumed rate of 38%)
|
|
2,906
|
|
|
2,111
|
|
|
2,403
|
|
|
10,170
|
|
|
8,297
|
|
Operating net income
|
|
$4,739
|
|
|
$3,443
|
|
|
$3,922
|
|
|
$16,593
|
|
|
$13,539
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating net income per share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$0.23
|
|
|
$0.16
|
|
|
$0.18
|
|
|
$0.77
|
|
|
$0.61
|
|
Diluted (1)
|
|
$0.21
|
|
|
$0.15
|
|
|
$0.17
|
|
|
$0.73
|
|
|
$0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
20,716
|
|
|
21,686
|
|
|
21,825
|
|
|
21,481
|
|
|
22,158
|
|
Diluted (1)
|
|
22,502
|
|
|
23,093
|
|
|
22,701
|
|
|
22,749
|
|
|
22,650
|
|
(1)
|
|
In 2013 and the first quarter of 2014, JMP Group issued restricted
stock units, or RSUs, bearing non-forfeitable dividend equivalent
rights. GAAP requires RSUs with non-forfeitable dividend equivalent
rights to be included in the diluted share count (without applying
the treasury method). Management prefers to present a non-GAAP
diluted share count for the period, in keeping with the presentation
for quarters not impacted by this GAAP requirement for such RSUs.
The non-GAAP diluted share count reflects the impact of such RSUs
under the treasury method, which is consistent with the calculation
of the dilutive impact of all other RSUs outstanding. On a GAAP
basis, the weighted average number of diluted shares outstanding for
the quarter and year ended December 31, 2014, was 23,119,908 and
23,541,594, respectively. Given those denominators, operating net
income per diluted share would have instead been $0.20 for the
quarter and $0.70 for the year ended December 31, 2014, respectively.
|
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.
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 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 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
(until its IPO on May 2, 2013), (ii) exclude the net amortization of
liquidity discounts on loans held and asset-backed securities issued by
JMP Credit Advisors CLO I, (iii) reverse the general loan loss provision
taken with regard to other CLOs, (iv) adjust for 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 and Harvest Growth
Capital II. 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 compensation expense
related to stock-based awards granted subsequent to JMP Group’s initial
public offering. For the purposes of calculating operating net income,
an effective tax rate of 38% is assumed.
A statement of JMP Group’s operating net income on a segment basis for
the quarter ended December 31, 2014, is set forth below.
|
|
Quarter Ended December 31, 2014
|
(in thousands, except per share amounts)
|
|
Broker- Dealer
|
|
Asset Mgmt.
|
|
Corp. Credit Mgmt.
|
|
|
Operating Platforms
|
|
|
Invest- ment Income
|
|
Corp. Costs
|
|
Elimin- ations
|
|
|
JMP Group
|
|
|
HGC Consoli- dation
|
|
|
Consoli- dated JMP Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking
|
|
$15,893
|
|
|
-
|
|
-
|
|
|
|
$15,893
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
$15,893
|
|
|
|
-
|
|
|
|
$15,893
|
|
Brokerage
|
|
7,331
|
|
|
-
|
|
-
|
|
|
|
7,331
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
7,331
|
|
|
|
-
|
|
|
|
7,331
|
|
Asset management-related fees (1)
|
|
(50
|
)
|
|
$13,176
|
|
$1,424
|
|
|
|
14,550
|
|
|
$50
|
|
|
-
|
|
|
($1,526
|
)
|
|
|
13,074
|
|
|
|
($281
|
)
|
|
|
12,793
|
|
Principal transactions (2)
|
|
-
|
|
|
-
|
|
-
|
|
|
|
-
|
|
|
1,919
|
|
|
-
|
|
|
-
|
|
|
|
1,919
|
|
|
|
10,963
|
|
|
|
12,882
|
|
Gain on sale and payoff of loans
|
|
-
|
|
|
-
|
|
-
|
|
|
|
-
|
|
|
(309
|
)
|
|
-
|
|
|
-
|
|
|
|
(309
|
)
|
|
|
-
|
|
|
|
(309
|
)
|
Net dividend income
|
|
-
|
|
|
-
|
|
-
|
|
|
|
-
|
|
|
260
|
|
|
-
|
|
|
-
|
|
|
|
260
|
|
|
|
-
|
|
|
|
260
|
|
Net interest income
|
|
-
|
|
|
-
|
|
-
|
|
|
|
-
|
|
|
4,744
|
|
|
-
|
|
|
-
|
|
|
|
4,744
|
|
|
|
(7
|
)
|
|
|
4,737
|
|
Provision for loan losses
|
|
-
|
|
|
-
|
|
-
|
|
|
|
-
|
|
|
1,079
|
|
|
-
|
|
|
-
|
|
|
|
1,079
|
|
|
|
-
|
|
|
|
1,079
|
|
Adjusted net revenues
|
|
23,174
|
|
|
13,176
|
|
1,424
|
|
|
|
37,774
|
|
|
7,743
|
|
|
-
|
|
|
(1,526
|
)
|
|
|
43,991
|
|
|
|
10,675
|
|
|
|
54,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense/(income) (3)
|
|
20,660
|
|
|
10,332
|
|
1,488
|
|
|
|
32,480
|
|
|
313
|
|
|
3,022
|
|
|
(1,526
|
)
|
|
|
34,289
|
|
|
|
(22
|
)
|
|
|
34,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Non-controlling interest (4)
|
|
-
|
|
|
1,061
|
|
-
|
|
|
|
1,061
|
|
|
999
|
|
|
-
|
|
|
-
|
|
|
|
2,060
|
|
|
|
10,697
|
|
|
|
12,757
|
|
Operating income/(loss) before taxes
|
|
2,514
|
|
|
1,783
|
|
(64
|
)
|
|
|
4,233
|
|
|
6,431
|
|
|
(3,022
|
)
|
|
-
|
|
|
|
7,642
|
|
|
|
-
|
|
|
|
7,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense/(benefit)
|
|
955
|
|
|
678
|
|
(24
|
)
|
|
|
1,609
|
|
|
2,442
|
|
|
(1,148
|
)
|
|
-
|
|
|
|
2,903
|
|
|
|
-
|
|
|
|
2,903
|
|
Operating net income/(loss)
|
|
$1,559
|
|
|
$1,105
|
|
($40
|
)
|
|
|
$2,624
|
|
|
$3,989
|
|
|
($1,874
|
)
|
|
-
|
|
|
|
$4,739
|
|
|
|
-
|
|
|
|
$4,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating net income/(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$0.08
|
|
|
$0.05
|
|
($0.00
|
)
|
|
|
$0.13
|
|
|
$0.19
|
|
|
($0.09
|
)
|
|
-
|
|
|
|
$0.23
|
|
|
|
-
|
|
|
|
$0.23
|
|
Diluted (5)
|
|
$0.07
|
|
|
$0.05
|
|
($0.00
|
)
|
|
|
$0.12
|
|
|
$0.18
|
|
|
($0.09
|
)
|
|
-
|
|
|
|
$0.21
|
|
|
|
-
|
|
|
|
$0.21
|
|
(1)
|
|
Reflects revenues detailed in section above titled “Asset
Management-Related Fee Revenues;” management fees of $0.3 million
are eliminated upon consolidation of two Harvest Growth Capital
funds.
|
(2)
|
|
Reverses net unrealized gains and losses on strategic equity
investments and warrants. Excludes non-controlling interests in net
realized and unrealized gains totaling $11.0 million that are
recognized upon consolidation of two Harvest Growth Capital funds.
|
(3)
|
|
Reverses stock-based compensation expense as well as accounting
adjustments related to deferred compensation expense and excludes
fund-related expenses totaling $22,000 that are recognized upon
consolidation of two Harvest Growth Capital funds.
|
(4)
|
|
Excludes non-controlling interests totaling $10.7 million in the net
realized and unrealized gains of two Harvest Growth Capital funds
that are recognized upon consolidation of the entities.
|
(5)
|
|
In 2013 and the first quarter of 2014, JMP Group issued restricted
stock units, or RSUs, bearing non-forfeitable dividend equivalent
rights. GAAP requires RSUs with non-forfeitable dividend equivalent
rights to be included in the diluted share count (without applying
the treasury method). Management prefers to present a non-GAAP
diluted share count for the period, in keeping with the presentation
for quarters not impacted by this GAAP requirement for such RSUs.
The non-GAAP diluted share count reflects the impact of such RSUs
under the treasury method, which is consistent with the calculation
of the dilutive impact of all other RSUs outstanding. On a GAAP
basis, the weighted average number of diluted shares outstanding for
the quarter ended December 31, 2014, was 23,119,908; given that
denominator, operating net income per diluted share would have been
$0.20.
|
A statement of JMP Group’s operating net income on a segment basis for
the year ended December 31, 2014, is set forth below.
|
|
Year Ended December 31, 2014
|
(in thousands, except per share amounts)
|
|
Broker- Dealer
|
|
Asset Mgmt.
|
|
Corp. Credit Mgmt.
|
|
|
Operating Platforms
|
|
|
Invest- ment Income
|
|
Corp. Costs
|
|
Elimin- ations
|
|
|
JMP Group
|
|
|
HGC Consoli- dation
|
|
|
Consoli- dated JMP Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment banking
|
|
$81,158
|
|
-
|
|
-
|
|
|
$81,158
|
|
|
-
|
|
|
-
|
|
|
($88
|
)
|
|
|
$81,070
|
|
|
|
-
|
|
|
|
$81,070
|
|
Brokerage
|
|
26,916
|
|
-
|
|
-
|
|
|
26,916
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
26,916
|
|
|
|
-
|
|
|
|
26,916
|
|
Asset management-related fees (1)
|
|
-
|
|
$46,073
|
|
$5,266
|
|
|
51,339
|
|
|
$50
|
|
|
-
|
|
|
(5,692
|
)
|
|
|
45,697
|
|
|
|
($1,308
|
)
|
|
|
44,389
|
|
Principal transactions (2)
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
6,720
|
|
|
-
|
|
|
-
|
|
|
|
6,720
|
|
|
|
8,316
|
|
|
|
15,036
|
|
Gain on sale and payoff of loans
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
(492
|
)
|
|
-
|
|
|
-
|
|
|
|
(492
|
)
|
|
|
-
|
|
|
|
(492
|
)
|
Net dividend income
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
998
|
|
|
-
|
|
|
-
|
|
|
|
998
|
|
|
|
-
|
|
|
|
998
|
|
Net interest income
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
16,682
|
|
|
-
|
|
|
-
|
|
|
|
16,682
|
|
|
|
(38
|
)
|
|
|
16,644
|
|
Provision for loan losses
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
1,265
|
|
|
-
|
|
|
-
|
|
|
|
1,265
|
|
|
|
-
|
|
|
|
1,265
|
|
Adjusted net revenues
|
|
108,074
|
|
46,073
|
|
5,266
|
|
|
159,413
|
|
|
25,223
|
|
|
-
|
|
|
(5,780
|
)
|
|
|
178,856
|
|
|
|
6,970
|
|
|
|
185,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense/(income) (3)
|
|
90,643
|
|
41,145
|
|
4,672
|
|
|
136,460
|
|
|
4,683
|
|
|
$14,512
|
|
|
(5,692
|
)
|
|
|
149,963
|
|
|
|
121
|
|
|
|
150,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Non-controlling interest (4)
|
|
-
|
|
786
|
|
-
|
|
|
786
|
|
|
1,342
|
|
|
-
|
|
|
-
|
|
|
|
2,128
|
|
|
|
6,849
|
|
|
|
8,977
|
|
Operating income/(loss) before taxes
|
|
17,431
|
|
4,142
|
|
594
|
|
|
22,167
|
|
|
19,198
|
|
|
(14,512
|
)
|
|
(88
|
)
|
|
|
26,765
|
|
|
|
-
|
|
|
|
26,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense/(benefit)
|
|
6,624
|
|
1,576
|
|
226
|
|
|
8,426
|
|
|
7,293
|
|
|
(5,513
|
)
|
|
(33
|
)
|
|
|
10,173
|
|
|
|
-
|
|
|
|
10,173
|
|
Operating net income/(loss)
|
|
$10,807
|
|
$2,566
|
|
$368
|
|
|
$13,741
|
|
|
$11,905
|
|
|
($8,999
|
)
|
|
($55
|
)
|
|
|
$16,592
|
|
|
|
-
|
|
|
|
$16,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating net income/(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$0.50
|
|
$0.12
|
|
$0.02
|
|
|
$0.64
|
|
|
$0.55
|
|
|
($0.42
|
)
|
|
($0.00
|
)
|
|
|
$0.77
|
|
|
|
-
|
|
|
|
$0.77
|
|
Diluted (5)
|
|
$0.48
|
|
$0.11
|
|
$0.01
|
|
|
$0.60
|
|
|
$0.53
|
|
|
($0.40
|
)
|
|
($0.00
|
)
|
|
|
$0.73
|
|
|
|
-
|
|
|
|
$0.73
|
|
(1)
|
|
Reflects revenues detailed in section above titled “Asset
Management-Related Fee Revenues;” management fees of $1.3 million
are eliminated upon consolidation of two Harvest Growth Capital
funds.
|
(2)
|
|
Reverses net unrealized gains and losses on strategic equity
investments and warrants. Excludes non-controlling interests in net
realized and unrealized gains totaling $8.3 million that are
recognized upon consolidation of two Harvest Growth Capital funds.
|
(3)
|
|
Reverses stock-based compensation expense as well as accounting
adjustments related to deferred compensation expense and excludes
fund-related expenses totaling $121,000 that are recognized upon
consolidation of two Harvest Growth Capital funds.
|
(4)
|
|
Excludes non-controlling interests totaling $6.8 million in the net
realized and unrealized gains of two Harvest Growth Capital funds
that are recognized upon consolidation of the entities.
|
(5)
|
|
In 2013 and the first quarter of 2014, JMP Group issued restricted
stock units, or RSUs, bearing non-forfeitable dividend equivalent
rights. GAAP requires RSUs with non-forfeitable dividend equivalent
rights to be included in the diluted share count (without applying
the treasury method). Management prefers to present a non-GAAP
diluted share count for the period, in keeping with the presentation
for quarters not impacted by this GAAP requirement for such RSUs.
The non-GAAP diluted share count reflects the impact of such RSUs
under the treasury method, which is consistent with the calculation
of the dilutive impact of all other RSUs outstanding. On a GAAP
basis, the weighted average number of diluted shares outstanding for
the year ended December 31, 2014, was 23,541,594; given that
denominator, operating net income per diluted share would have been
$0.70.
|
Book Value per Share
At December 31, 2014, JMP Group’s tangible book value per share was
$6.26, as set forth below.
(in thousands, except per share amounts)
|
|
Dec. 31, 2014
|
|
Sept. 30, 2014
|
|
Dec. 31, 2013
|
|
|
|
|
|
|
|
Total JMP Group stockholders' equity
|
|
$132,804
|
|
$136,687
|
|
$126,385
|
Less: Goodwill and intangible assets
|
|
-
|
|
-
|
|
-
|
Tangible stockholders' equity
|
|
$132,804
|
|
$136,687
|
|
$126,385
|
|
|
|
|
|
|
Tangible book value per share
|
|
$6.26
|
|
$6.32
|
|
$5.79
|
|
|
|
|
|
|
Basic shares outstanding
|
|
21,216
|
|
21,619
|
|
21,819
|
|
|
|
|
|
|
|
Quarterly operating ROTE (1)
|
|
14.1%
|
|
10.2%
|
|
12.5%
|
LTM operating ROTE (1)
|
|
12.6%
|
|
12.1%
|
|
10.9%
|
(1)
|
|
Return on tangible equity (ROTE) equals annualized operating net
income divided by average tangible stockholders’ equity.
|
Share Repurchase Activity
During the quarter ended December 31, 2014, JMP Group repurchased nearly
1.5 million shares of its common stock at an aggregate price of
approximately $9.8 million, or $6.61 per share. At year-end,
approximately 0.6 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 or losses stemming from sales of or prepayments on, or
losses stemming from defaults on, loans underlying the company’s
collateralized loan obligations; 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. 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 Form 10-K for the year ended December 31, 2013, as filed
with the Securities and Exchange Commission by JMP Group Inc. on March
13, 2014, as well as in the similarly captioned sections of other
periodic reports filed by JMP Group Inc. or JMP Group LLC under the
Exchange Act. The Form 10-K for the year ended December 31, 2013 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 Friday, February 13, 2015. To participate in
the call, dial (888) 566-6060 (domestic) or (973) 200-3100
(international). The conference identification number is 82853542.
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 LLC is an investment banking and asset management firm that
provides investment banking, equity research, and sales and trading
services to corporate and institutional clients as well as alternative
asset management products and services to institutional and
high-net-worth investors. JMP Group conducts its investment banking and
research, sales and trading activities through JMP Securities; its hedge
fund and other investment activities though Harvest Capital Strategies;
the underwriting and management of investments in senior secured debt
through JMP Credit Advisors; and the management of Harvest Capital
Credit Corporation (NASDAQ: HCAP), a business development company that
finances small and midsized businesses, through HCAP Advisors. For more
information, visit www.jmpg.com.
|
JMP GROUP LLC
|
Consolidated Statements of Financial Condition
|
(Unaudited)
|
|
(in thousands)
|
|
Dec. 31, 2014
|
|
Dec. 31, 2013
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$101,362
|
|
$65,906
|
Restricted cash and deposits
|
|
67,102
|
|
68,029
|
Marketable securities owned, at fair value
|
|
29,466
|
|
29,295
|
Other investments
|
|
209,381
|
|
161,773
|
Loans held for investment, net of allowance for loan losses
|
|
1,997
|
|
825
|
Loans collateralizing asset-backed securities issued, net of
allowance for loan losses
|
|
1,038,848
|
|
727,270
|
Deferred tax assets
|
|
10,585
|
|
12,492
|
Other assets
|
|
57,929
|
|
56,341
|
Total assets
|
|
$1,516,670
|
|
$1,121,931
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Marketable securities sold, but not yet purchased, at fair value
|
|
$15,048
|
|
$13,749
|
Accrued compensation
|
|
54,820
|
|
51,347
|
Asset-backed securities issued
|
|
1,001,137
|
|
716,423
|
Note payable
|
|
-
|
|
15,000
|
Line of credit
|
|
-
|
|
2,895
|
Bond payable
|
|
94,300
|
|
46,000
|
Deferred tax liability
|
|
19,330
|
|
3,625
|
Other liabilities
|
|
42,899
|
|
35,652
|
Total liabilities
|
|
1,227,534
|
|
884,691
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
Total JMP Group Inc. stockholders' equity
|
|
132,804
|
|
126,385
|
Non-redeemable non-controlling interest
|
|
156,332
|
|
110,855
|
Total equity
|
|
289,136
|
|
237,240
|
Total liabilities and stockholders' equity
|
|
$1,516,670
|
|
$1,121,931
|
|
|
|
|
|
JMP GROUP LLC
|
Consolidated Statements of Operations
|
(Unaudited)
|
|
|
|
Quarter Ended
|
|
Year Ended
|
(in thousands, except per share amounts)
|
|
Dec. 31, 2014
|
|
Dec. 31, 2013
|
|
Dec. 31, 2014
|
|
Dec. 31, 2013
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Investment banking
|
|
$15,893
|
|
|
$21,872
|
|
|
$81,070
|
|
|
$74,173
|
|
Brokerage
|
|
7,331
|
|
|
6,701
|
|
|
26,916
|
|
|
24,625
|
|
Asset management fees
|
|
10,588
|
|
|
10,346
|
|
|
40,620
|
|
|
25,952
|
|
Principal transactions
|
|
12,129
|
|
|
15,878
|
|
|
13,848
|
|
|
20,727
|
|
(Loss)/gain on sale, payoff and mark-to-market of loans
|
|
(309
|
)
|
|
215
|
|
|
(492
|
)
|
|
1,806
|
|
Net dividend income
|
|
262
|
|
|
245
|
|
|
1,001
|
|
|
535
|
|
Other income
|
|
2,205
|
|
|
217
|
|
|
3,769
|
|
|
798
|
|
Non-interest revenues
|
|
48,099
|
|
|
55,474
|
|
|
166,732
|
|
|
148,616
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
12,269
|
|
|
8,743
|
|
|
40,042
|
|
|
33,346
|
|
Interest expense
|
|
(7,532
|
)
|
|
(4,285
|
)
|
|
(23,398
|
)
|
|
(30,110
|
)
|
Net interest income/(expense)
|
|
4,737
|
|
|
4,458
|
|
|
16,644
|
|
|
3,236
|
|
|
|
|
|
|
|
|
|
|
Release of loan loss reserve/(provision for loan losses)
|
|
1,229
|
|
|
(246
|
)
|
|
(436
|
)
|
|
(2,637
|
)
|
Total net revenues
|
|
54,065
|
|
|
59,686
|
|
|
182,940
|
|
|
149,215
|
|
|
|
|
|
|
|
|
|
|
Non-interest expenses:
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
26,013
|
|
|
33,366
|
|
|
123,683
|
|
|
102,432
|
|
Administration
|
|
1,927
|
|
|
1,405
|
|
|
7,310
|
|
|
8,660
|
|
Brokerage, clearing and exchange fees
|
|
789
|
|
|
692
|
|
|
3,304
|
|
|
3,543
|
|
Travel and business development
|
|
1,402
|
|
|
1,425
|
|
|
4,123
|
|
|
4,416
|
|
Communications and technology
|
|
983
|
|
|
942
|
|
|
3,843
|
|
|
3,534
|
|
Occupancy
|
|
815
|
|
|
811
|
|
|
3,337
|
|
|
3,245
|
|
Professional fees
|
|
1,505
|
|
|
1,485
|
|
|
4,738
|
|
|
3,953
|
|
Depreciation
|
|
242
|
|
|
226
|
|
|
931
|
|
|
921
|
|
Other
|
|
564
|
|
|
311
|
|
|
1,342
|
|
|
960
|
|
Total non-interest expense
|
|
34,240
|
|
|
40,663
|
|
|
152,611
|
|
|
131,664
|
|
|
|
|
|
|
|
|
|
|
Net income before income tax expense
|
|
19,825
|
|
|
19,023
|
|
|
30,329
|
|
|
17,551
|
|
Income tax expense
|
|
2,535
|
|
|
3,772
|
|
|
8,141
|
|
|
3,950
|
|
Net income
|
|
17,290
|
|
|
15,251
|
|
|
22,188
|
|
|
13,601
|
|
Less: Net income attributable to non-controlling interests
|
|
12,421
|
|
|
11,758
|
|
|
8,631
|
|
|
9,973
|
|
Net income attributable to JMP Group Inc.
|
|
$4,869
|
|
|
$3,493
|
|
|
$13,557
|
|
|
$3,628
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to JMP Group Inc. per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$0.22
|
|
|
$0.16
|
|
|
$0.60
|
|
|
$0.16
|
|
Diluted
|
|
$0.21
|
|
|
$0.16
|
|
|
$0.58
|
|
|
$0.16
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
20,716
|
|
|
21,825
|
|
|
21,481
|
|
|
22,158
|
|
Diluted
|
|
23,120
|
|
|
22,701
|
|
|
23,542
|
|
|
23,317
|
|
|
|
|
|
|
|
|
|
|
CONTACT:
Investor Relations Contact
JMP Group LLC
Andrew
Palmer, 415-835-8978
apalmer@jmpg.com
or
Media
Relations Contact
Dukas Public Relations
Seth Linden,
212-704-7385
seth@dukaspr.com
Zach Leibowitz, 212-704-7385
zach@dukaspr.com
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