JMP Group Reports Fourth Quarter and Fiscal Year 2012 Financial Results
JMP Group Reports Fourth Quarter and Fiscal Year 2012 Financial Results
Business Wire
SAN FRANCISCO -- February 13, 2013
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 Count Revenues Count Revenues Count Revenues Count Revenues Count Revenues
thousands)
Public 15 $3,905 28 $9,297 3 $862 82 $28,955 56 $26,546
equity
Debt and
convertible 5 718 3 293 - 19 18 3,111 7 6,285
securities
Private
capital 4 5,789 2 989 - - 11 10,025 5 3,729
markets and
other
Strategic 3 2,560 3 1,639 8 4,901 12 8,891 18 9,554
advisory
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, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2012 2012 2011 2012 2011
Hedge fund $821 $1,580 $1,244 $4,897 $1,765
investments
Principal
investments:
Investment in
New York - - 344 (209 ) 359
Mortgage Trust
Other principal 17 38 (39 ) 846 (389 )
investments
Total principal 17 38 305 637 (30 )
investments
Venture
investments:
Investment in
Harvest Growth (164 ) (131 ) (53 ) 230 (102 )
Capital funds
Other venture
investments and 1,140 (421 ) (89 ) 1,501 (113 )
warrants
Total venture 976 (552 ) (142 ) 1,731 (215 )
investments
Principal
transaction
revenues net of
non-controlling 1,814 1,066 1,407 7,265 1,520
interests in
Harvest Growth
Capital funds
Non-controlling
interests in (2,829 ) (3,021 ) 314 4,030 95
Harvest Growth
Capital funds
Total principal
transaction ($1,015 ) ($1,955 ) $1,721 $11,295 $1,615
revenues
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, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2012 2012 2011 2012 2011
Revenues:
Non-interest $27,328 $19,998 $22,820 $110,957 $115,696
revenues
Net interest (1,573 ) (1,754 ) (1,730 ) (7,095 ) (2,391 )
expense
Loan loss (1,071 ) 65 (1,467 ) (1,990 ) (1,944 )
provision
Total net 24,684 18,309 19,623 101,872 111,361
revenues
Asset management
fees earned on
Harvest Growth
Capital funds 1,060 597 150 2,342 759
and Harvest
Capital Credit ^
(1)
Dividend
distribution
from Harvest - 157 - 234 -
Capital Credit ^
(1)
Less: Net
interest income
and other (1,202 ) (772 ) - (2,789 ) -
revenues from
Harvest Capital
Credit ^ (1)
Total net
revenues
including fee 24,542 18,291 19,773 101,659 112,120
revenues from
consolidated
entities
Add
back/(subtract):
Net amortization
of liquidity
discounts on
loans and 7,577 7,456 6,619 29,208 23,522
asset-backed
securities
issued
Amortization of - - - - 200
intangible asset
Unrealized
mark-to-market
(gain)/loss – (1,770 ) (41 ) 184 (2,174 ) 216
Harvest Capital
Credit
Net unrealized
loss/(gain) on
strategic equity 294 107 (361 ) 527 (441 )
investments and
warrants
Non-controlling
interests in net
unrealized
losses/(gains) 2,830 3,021 (314 ) (4,029 ) (95 )
on Harvest
Growth Capital
funds
Adjusted net 33,473 28,834 25,901 125,191 135,522
revenues
Subtract:
Net gain on loan
portfolio 1,665 449 143 2,638 13,101
acquired
Adjusted net
revenues
excluding net $31,808 $28,385 $25,758 $122,553 $122,421
gain on loan
portfolio
acquired
Adjustments to reflect economic contributions from two Harvest Growth
Capital funds and Harvest Capital Credit as though deconsolidated for
^(1) 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, Sept. Dec. 31, Dec. 31, Dec. 31,
2012 30, 2012 2011 2012 2011
Base management fees:
Fees reported as asset $2,339 $2,195 $2,600 $9,433 $9,708
management fees
Fees reported as other 263 339 924 1,916 2,848
income
Fees earned at Harvest
Growth Capital funds 435 275 150 1,154 759
and Harvest Capital
Credit
Total base management 3,037 2,809 3,674 12,503 13,315
fees
Incentive fees:
Fees reported as asset 2,715 1,560 2,292 6,342 10,077
management fees
Fees reported as other - - - - 381
income
Fees earned at Harvest
Growth Capital funds 624 322 - 1,188 -
and Harvest Capital
Credit
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 - - - 1,735 -
termination fee
Total other fee income 30 26 876 1,844 1,107
Asset
management-related fee
revenues:
All fees reported as 5,054 3,755 4,892 15,775 19,785
asset management fees
All fees reported as 293 365 1,800 3,760 4,336
other income
All fees earned at
Harvest Growth Capital 1,059 597 150 2,342 759
funds and Harvest
Capital Credit
Total asset
management-related fee $6,406 $4,717 $6,842 $21,877 $24,880
revenues
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 Dec. 31, 2012 Sept. 30, 2012 Dec. 31, 2011
per share amounts)
Net income/(loss)
attributable to JMP $5,514 ($1,625 ) ($5,944 )
Group Inc.
Add back/(subtract):
Income tax 3,007 (884 ) (4,024 )
expense/(benefit)
Income/(loss) before 8,521 (2,509 ) (9,968 )
taxes
Add back/(subtract):
Compensation expense – 1,910 194 9,166
post-IPO RSUs
Accounting adjustment – (6,985 ) - -
deferred compensation
Net amortization of
liquidity discounts on 7,577 7,456 6,619
loans and asset-backed
securities issued
IPO-related expense – (450 ) - -
Harvest Capital Credit
Unrealized
mark-to-market (543 ) (14 ) 88
(gain)/loss – Harvest
Capital Credit
Unrealized loss/(gain)
on strategic equity 294 107 (361 )
investments and warrants
Operating income before 10,324 5,234 5,544
taxes
Income tax expense 4,336 2,198 2,328
(assumed rate of 42%)
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)
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
^(1) 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 $2,832 ($2,511 )
Group Inc.
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 (6,985 ) -
compensation
Net amortization of liquidity discounts
on loans and asset-backed securities 29,208 23,522
issued
Amortization of intangible asset - 200
IPO-related expense – Harvest Capital (450 ) -
Credit
Unrealized mark-to-market (gain)/loss – (709 ) 109
Harvest Capital Credit
Unrealized loss/(gain) on strategic 527 (441 )
equity investments and warrants
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)
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
^(1) 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 Dec. 31, 2012 Sept. 30, Dec. 31,
amounts) 2012 2011
Operating net income $5,988 $3,036 $3,216
Add back:
Income tax expense (assumed rate 4,336 2,198 2,328
of 42%)
Operating income before taxes 10,324 5,234 5,544
Subtract:
Earnings from gains on loan 998 269 86
portfolio acquired
Adjusted operating income before 9,326 4,965 5,458
taxes
Income tax expense (assumed rate 3,917 2,085 2,292
of 42%)
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)
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
^(1) 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 Dec. 31, 2012 Dec. 31, 2011
amounts)
Operating net income $16,548 $17,118
Add back:
Income tax expense (assumed rate of 11,984 12,395
42%)
Operating income before taxes 28,532 29,513
Subtract:
Earnings from gains on loan portfolio 1,581 7,861
acquired
Adjusted operating income before taxes 26,951 21,652
Income tax expense (assumed rate of 11,320 9,094
42%)
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)
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
^(1) 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 Securities Strategies Corp. Corporate ations Group dation dation Group
amounts)
Revenues:
Investment banking $13,023 - - - - $13,023 - ($51 ) $12,972
Brokerage 5,628 - - - - 5,628 - - 5,628
Asset
management-related - $6,412 $80 $36 ($122 ) 6,406 ($289 ) (769 ) 5,348
fees ^ (1)
Principal 40 (35 ) (62 ) 642 - 585 (2,829 ) (108 ) (2,352 )
transactions ^ (2)
Gain on sale and
payoff of loans ^ - - 3,935 - - 3,935 - 327 4,262
(3)
Net dividend (5 ) - - - - (5 ) - - (5 )
income
Net interest 12 1 4,741 215 - 4,969 - 1,034 6,003
income ^ (4)
Provision for loan - - (1,068 ) - - (1,068 ) - - (1,068 )
losses
Adjusted net 18,698 6,378 7,626 893 (122 ) 33,473 (3,118 ) 433 30,788
revenues
Expenses:
Non-interest 17,086 4,038 (1,036 ) 2,994 (122 ) 22,960 109 77 23,146
expenses ^ (5)
Less:
Non-controlling - 1 188 - - 189 (3,227 ) 356 (2,682 )
interest ^ (6)
Operating
income/(loss) 1,612 2,339 8,474 (2,101 ) - 10,324 - - 10,324
before taxes
Income tax
expense/(benefit) 677 983 3,558 (882 ) - 4,336 - - 4,336
(assumed rate of
42%)
Operating net $935 $1,356 $4,916 ($1,219 ) - $5,988 - - $5,988
income/(loss)
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 $8,474 $10,324 $10,324
before taxes
Less: Earnings
contribution from 998 998 998
gain on loan
portfolio acquired
Adjusted operating
income before 7,476 9,326 9,326
taxes
Income tax expense
(assumed rate of 3,140 3,917 3,917
42%)
Adjusted operating $4,336 $5,409 $5,409
net income
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
Reflects revenues detailed in section above titled “Asset
^(1) Management-Related Fee Revenues;” management fees totaling $1.1 million
are eliminated upon consolidation of two Harvest Growth Capital funds
and Harvest Capital Credit.
Reverses net unrealized gains and losses on strategic equity
investments and warrants and excludes non-controlling interests in net
^(2) 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.
Reverses stock-based compensation expense and excludes fund-related
^(5) expenses totaling $0.2 million that are recognized upon consolidation
of two Harvest Growth Capital funds and Harvest Capital Credit.
Excludes non-controlling interests totaling $2.9 million in the net
^(6) 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 Securities Strategies Corp. Corporate ations Group dation dation Group
amounts)
Revenues:
Investment banking $51,174 - - - - $51,174 - ($192 ) $50,982
Brokerage 21,903 - - - - 21,903 - - 21,903
Asset
management-related 27 $22,219 $173 $1 ($543 ) 21,877 ($1,048 ) (1,252 ) 19,577
fees ^ (1)
Principal 377 3,335 187 2,448 - 6,347 4,030 (185 ) 10,192
transactions ^ (2)
Gain on sale and
payoff of loans ^ - - 6,578 - - 6,578 - 327 6,905
(3)
Net dividend (30 ) 234 - - - 204 - (234 ) (30 )
income
Net interest 53 157 18,748 357 - 19,315 - 2,798 22,113
income ^ (4)
Provision for loan - - (2,207 ) - - (2,207 ) - - (2,207 )
losses ^ (5)
Adjusted net 73,504 25,945 23,479 2,806 (543 ) 125,191 2,982 1,262 129,435
revenues
Expenses:
Non-interest 66,716 19,453 (2,358 ) 12,719 (543 ) 95,987 175 169 96,331
expenses ^ (6)
Less:
Non-controlling - 1 671 - - 672 2,807 1,093 4,572
interest ^ (7)
Operating
income/(loss) 6,788 6,491 25,166 (9,913 ) - 28,532 - - 28,532
before taxes
Income tax
expense/(benefit) 2,851 2,726 10,570 (4,163 ) - 11,984 - - 11,984
(assumed rate of
42%)
Operating net $3,937 $3,765 $14,596 ($5,750 ) - $16,548 - - $16,548
income/(loss)
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 $25,166 $28,532 $28,532
before taxes
Less: Earnings
contribution from 1,581 1,581 1,581
gain on loan
portfolio acquired
Adjusted operating
income before 23,585 26,951 26,951
taxes
Income tax expense
(assumed rate of 9,905 11,320 11,320
42%)
Adjusted operating $13,680 $15,631 $15,631
net income
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
Reflects revenues detailed in section above titled “Asset
^(1) Management-Related Fee Revenues”; management fees totaling $2.3 million
are eliminated upon consolidation of two Harvest Growth Capital funds
and Harvest Capital Credit.
Reverses net unrealized gains and losses on strategic equity
investments and warrants and excludes non-controlling interests in net
^(2) 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.
Reverses stock-based compensation expense and excludes fund-related
^(6) expenses totaling $0.3 million that are recognized upon consolidation
of two Harvest Growth Capital funds and Harvest Capital Credit.
Excludes non-controlling interests totaling $3.9 million in the net
^(7) 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 Dec. 31, 2012 Sept. 30, 2012 Dec. 31, 2011
share amounts)
Total JMP Group stockholders' $126,890 $121,057 $129,706
equity
Less: Net benefit of vesting
of performance-related RSUs ^ - - (3,642 )
(1)
JMP Group stockholders' 126,890 121,057 126,064
equity, net of RSU benefit
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 (15,548 ) (24,543 ) (49,447 )
issued
Net liquidity discount (11,217 ) (18,059 ) (33,709 )
Accounting adjustment – (6,985 ) - -
deferred compensation
Pre-tax adjustments to equity (18,202 ) (18,059 ) (33,709 )
Income tax benefit (assumed 7,645 7,585 14,158
rate of 42%)
After-tax adjustments to (10,557 ) (10,474 ) (19,551 )
equity
Adjusted tangible $116,333 $110,583 $106,513
stockholders' equity
Adjusted tangible book value $5.15 $4.87 $4.85
per share
Basic shares outstanding 22,592 22,706 21,947
Quarterly operating ROATE ^ 21.1 % 11.1 % 12.1 %
(2)
LTM operating ROATE ^ (2) 15.0 % 12.7 % 16.1 %
Quarterly operating ROATE ^
(2) excluding the financial 19.1 % 10.5 % 11.9 %
impact of gains on acquired
loans
LTM operating ROATE ^ (2)
excluding the financial 14.2 % 12.4 % 11.8 %
impact of gains on acquired
loans
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
^(1) 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 401,003 410,770
issued, net of allowance for loan losses
Small business loans, net of allowance for 38,924 7,477
loan losses
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 $11,567 $10,921
purchased, at fair value
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 Dec. 31, Dec. 31, Dec. 31, Dec. 31,
per share amounts) 2012 2011 2012 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 4,400 2,039 7,232 17,020
loans
Net dividend (4 ) 495 (29 ) 1,365
(expense)/income
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 (1,071 ) (1,467 ) (1,990 ) (1,944 )
losses
Total net revenues 24,684 19,623 101,872 111,361
Non-interest expenses:
Compensation and 10,582 22,799 66,415 89,017
benefits
Administration 1,582 1,589 6,186 6,649
Brokerage, clearing 1,150 1,183 3,806 4,735
and exchange fees
Travel and business 952 1,113 3,387 3,681
development
Communications and 861 1,059 3,503 3,988
technology
Occupancy 805 711 3,157 2,927
Professional fees 1,306 644 3,630 2,955
Depreciation 242 192 884 721
Impairment loss on - - - 700
intangible asset
Other 138 83 420 426
Total non-interest 17,618 29,373 91,388 115,799
expense
Income/(loss) before 7,066 (9,750 ) 10,484 (4,438 )
income tax expense
Income tax 3,007 (4,024 ) 1,617 (1,670 )
expense/(benefit)
Net income/(loss) 4,059 (5,726 ) 8,867 (2,768 )
Less: Net
(loss)/income
attributable to (1,455 ) 218 6,035 (257 )
noncontrolling
interest
Net income/(loss)
attributable to JMP $5,514 ($5,944 ) $2,832 ($2,511 )
Group Inc.
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
Contact:
Investor Relations Contact:
JMP Group Inc.
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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