JMP Group LLC (NYSE:JMP), an investment banking and alternative
asset management firm, reported financial results today for the
quarter ended March 31, 2017.
- The net loss attributable to JMP Group
under generally accepted accounting principles, or GAAP, was $4.7
million, or $0.22 per diluted share, compared to net income of $1.8
million, or $0.08 per share, for the quarter ended March 31,
2016.
- Total net revenues on a GAAP basis were
$24.4 million, compared to $38.6 million for the quarter ended
March 31, 2016.
- The operating net loss was $2.1
million, or $0.09 per diluted share, compared to operating net
income of $2.2 million, or $0.10 per share, for the quarter
ended March 31, 2016. For more information about operating net
income, including a reconciliation to net income attributable to
JMP Group, see the section below titled “Non-GAAP Financial
Measures.”
- Adjusted net revenues, which exclude
certain non-cash items and non-controlling interests, were $25.3
million, compared to $36.6 million for the quarter ended March 31,
2016. For more information about adjusted net revenues, including a
reconciliation to net revenues, see the section below titled
“Non-GAAP Financial Measures.”
“Our first quarter operating net loss of $0.09 per share
included specific loan loss provisions for two corporate credits as
well as a large negative mark on our total return swap resulting
from a decline in prices of non-investment grade corporate loans,”
said Chairman and Chief Executive Officer Joe Jolson. “Excluding
these items, which reduced our net investment income by $0.13 per
share, our operating EPS would have been $0.04—which is still below
our normalized run rate, primarily due to our large cash balance of
$2.59 per share at March 31 that is funded with 8% long-term debt.
While we continue to look for opportunities to redeploy our cash
and generate attractive risk-adjusted returns, investors should
expect our net investment income to remain below historical
levels.
“Even so, we continue to be optimistic about the remainder of
this year. Based on an improving environment for equity issuance,
our first quarter capital markets revenues were up 28% and 16%
versus last year and the previous quarter, respectively. We also
continue to expect another good year of strategic advisory
revenues, despite a soft first quarter, given our transaction
pipeline. Additionally, we are hopeful that, barring any further
material loan losses and a successful execution of CLO IV in the
next three months, our net investment income will make a positive
contribution to operating EPS in the quarters to come.”
Segment Results of Operations
At JMP Securities, the broker-dealer segment, adjusted net
revenues were $18.9 million, a decrease of 22.6% from $24.4 million
for the first quarter of 2016. JMP Securities’ operating margin on
adjusted net revenues was 1.7%, compared to 9.8% for the first
quarter of 2016.
The asset management segment produced adjusted net revenues of
$5.3 million, a decrease of 47.8% from $10.2 million for the first
quarter of 2016. Excluding incentive fees that are no longer
recognized at the asset management segment, adjusted net revenues
would have been $5.5 million for the first quarter of 2016,
resulting instead in a year-over-year decrease of 3.8%.
JMP Group gained 0.4% for the quarter on the capital invested by
the company in hedge funds managed by Harvest Capital Strategies,
compared to gains of 3.6% and 2.5% by the HFRI Equity Hedge (Total)
Index and the Russell 2000 Index, respectively. JMP Group’s net
return on invested capital managed by JMP Credit Advisors was 0.1%,
compared to 4.7% for the first quarter of 2016.
A summary of JMP Group’s operating net income per share by
segment for the quarter ended March 31, 2017, and for comparable
prior periods is set forth below.
Quarter Ended ($ as shown) Mar. 31, 2017
Dec. 31, 2016 Mar. 31, 2016 Broker-dealer
$0.01 $0.02 $0.07 Asset management 0.01 0.04 $0.02 Operating
platform EPS 0.02 0.06 0.09 Net corporate income (0.11 ) 0.07 0.01
Operating EPS (diluted) ($0.09 ) $0.13 $0.10
Note: Due to rounding, numbers in
columns above may not sum to totals presented.
For more information about segment reporting; adjusted net
revenues, including a reconciliation to net revenues; and operating
net income, including a reconciliation to net income, see the
section below titled “Non-GAAP Financial Measures.”
Composition of Revenues
Investment Banking
Investment banking revenues were $13.6 million, a decrease of
25.7% from $18.3 million for the first quarter of 2016.
A summary of the company’s investment banking revenues and
transaction counts for the quarter ended March 31, 2017, and for
comparable prior periods is set forth below.
Quarter Ended Mar. 31, 2017 Dec. 31,
2016 Mar. 31, 2016 ($ in thousands) Count
Revenues Count Revenues Count
Revenues Equity and debt origination 23 $10,470 15
$6,704 10 $6,228
Strategic advisory and private
placements
3 3,130 6 6,930 4 12,068 Total 26 $13,600 21 $13,634 14 $18,296
Brokerage
Net brokerage revenues were $5.3 million, a decrease of 13.3%
from $6.1 million for the first quarter of 2016.
Total capital markets revenues, which consist of net brokerage
revenues produced by the institutional equities division in
addition to equity and debt origination revenues generated by the
investment banking division, were $15.8 million, compared to $12.3
million for the first quarter of 2016.
Asset Management
Asset management fees were $5.9 million, compared to $9.3
million for the first quarter of 2016, due to a decrease in
incentive fees to $1.9 million from $5.2 million for the first
quarter of 2016.
Asset management-related fee revenues reflect asset management
fees, net of non-controlling interests in HCAP Advisors, as well as
certain fee revenues reported in the company’s financial statements
as other income. Asset management-related fee revenues were $5.9
million, a decrease of 33.8% from $8.9 million for the first
quarter of 2016. For more information about asset
management-related fee revenues, see the section below titled
“Non-GAAP Financial Measures.”
Client assets under management at March 31, 2017, totaled $2.0
billion, including $1.2 billion of funds managed by Harvest Capital
Strategies, JMP Asset Management and HCAP Advisors and
$0.8 billion par value of loans and cash managed by JMP Credit
Advisors. Client assets under management were $2.2 billion at
December 31, 2016, and $2.3 billion at March 31, 2016.
Including sponsored funds in which JMP Group owns an economic
interest, client assets under management totaled $3.4 billion at
March 31, 2017.
At March 31, 2017, private capital, including corporate credit,
small business lending, venture capital and real estate-related
investments, represented 77.1% of client assets under management,
including sponsored funds.
Principal Transactions
Principal transactions generated a net realized and unrealized
loss of $1.9 million, compared to a net realized and unrealized
gain of $0.9 million for the first quarter of 2016.
Adjusted principal transaction revenues reverse certain
unrealized market-to-market gains or losses, including those on JMP
Group’s investment in Harvest Capital Credit Corporation, as well
as unrealized losses derived from depreciation and amortization of
real estate investment properties. Adjusted principal transaction
revenues were $0.6 million, a decrease of 28.8% from $0.9 million
for the first quarter of 2016. For more information about adjusted
principal transaction revenues, including a reconciliation to
principal transaction revenues, see the section below titled
“Non-GAAP Financial Measures.”
Net Interest Income
Net interest income was $1.0 million, compared to $4.4 million
for the quarter ended March 31, 2016. The year-over-year decline
was primarily due to a materially lower average loan balance
resulting from the ongoing deleveraging of JMP Credit Advisors CLO
I, which fully liquidated in February 2017.
Provision for Loan Losses
The net loan loss provision for the quarter was $1.3 million,
including a specific provision of $1.0 million in connection with
impaired loans underlying certain collateralized loan obligations
managed by JMP Credit Advisors. At March 31, 2017, general loan
loss reserves and deferred loan fees equaled $11.0 million, or
1.8% of gross performing loans outstanding. With regard to impaired
loans, specific loan loss reserves and deferred loan fees equaled
$2.2 million, or 43.1% of gross impaired loans outstanding at March
31, 2017.
Expenses
Compensation and Benefits
Compensation and benefits expense was $21.8 million, compared to
$27.4 million for the first quarter of 2016. With regard to
annually awarded compensation, a concept which adjusts compensation
expense related to share-based awards and deferred compensation,
compensation and benefits expense was 81.2% of adjusted net
revenues, compared to 74.1% for the first quarter of 2016. Further
excluding specific loan loss provisions and compensation expense
related to hedge fund incentive fees, the compensation ratio was
75.5%, compared to 70.7% for the first quarter of 2016. For more
information about compensation ratios, see the section below titled
“Non-GAAP Financial Measures.”
Non-Compensation Expense
Non-compensation expense was $7.8 million, in line with $7.8
million for the quarter ended March 31, 2016.
Share Repurchase Activity
JMP Group repurchased no shares of its common stock during the
quarter ended March 31, 2017. At quarter-end, one million shares
remained eligible for repurchase under the company’s existing
authorization. During the quarter, $0.2 million of the company’s
equity capital was returned to employees through the net settlement
of shares issued in RSU vesting events.
Personnel
At March 31, 2017, the company had 224 full-time employees,
compared to 228 at December 31, 2016, and 232 at March 31,
2016.
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 a more 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)
reverses the general loan loss provision taken with regard to
certain CLOs, (ii) reverses unrealized losses derived from
depreciation and amortization of real estate investment properties,
(iii) reverses net unrealized gains or losses on strategic equity
investments and warrants, (iv) reverses net unrealized
mark-to-market gains or losses on investments related to deferred
compensation, and (v) excludes non-controlling interests in various
sources of revenue that are consolidated according to GAAP. In
particular, adjusted net revenue adjusts for:
- the non-specific loss provision
recorded with regard to loans held by JMP Credit Advisors CLO II
and JMP Credit Advisors III, which is required by GAAP;
- depreciation and amortization expense
related to commercial real estate investments that is recognized by
JMP Group as a result of equity method accounting;
- unrealized mark-to-market gains or
losses on the company’s strategic equity investments as well as
certain warrant positions;
- 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; and
- non-controlling interests in revenues
generated by consolidated entities, including HCAP Advisors and
CLOs managed by JMP Credit Advisors.
A reconciliation of JMP Group’s net revenues to its adjusted net
revenues for the quarter ended March 31, 2017, and for comparable
prior periods is set forth below.
Quarter Ended (in thousands) Mar. 31, 2017
Dec. 31, 2016 Mar. 31, 2016 Revenues:
Non-interest revenues $24,672 $34,336 $34,760 Net interest income
972 2,294 4,426 Provision for loan losses (1,266 ) (606 ) (631 )
Total net revenues 24,378 36,024 38,555 Add back/(subtract):
General loan loss (reversal)/provision –
collateralized loan obligations
(418 ) 349 407
Unrealized loss – real estate-related
depreciation and amortization
2,156 1,718 330
Unrealized mark-to-market loss/(gain) –
strategic equity investments and warrants
419 (1,211 ) (329 )
Unrealized mark-to-market (gain) –
deferred compensation
(75 ) (276 ) (77 ) Non-controlling interests (1,199 ) (1,115 )
(2,270 ) Adjusted net revenues $25,261 $35,489
$36,616
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 (i) excludes the non-controlling interest in asset
management subsidiary HCAP Advisors and (ii) includes certain fee
revenues (in particular, asset management fundraising fees
generated by JMP Securities, loan fees, and revenues from
fee-sharing arrangements with other asset managers) that are
reported in JMP Group’s financial statements as other income.
A statement of JMP Group’s asset management-related fee revenues
for the quarter ended March 31, 2017, and for comparable prior
periods is set forth below.
Quarter Ended (in thousands) Mar. 31, 2017
Dec. 31, 2016 Mar. 31, 2016 Base
management fees: Fees reported as asset management fees $4,045
$3,851 $4,135 Less: Non-controlling interest in HCAP Advisors (335
) (337 ) (364 ) Total base management fees 3,710 3,514
3,771 Incentive fees: Fees reported as asset
management fees 1,866 3,983 5,191 Less: Non-controlling interest in
HCAP Advisors (113 ) 43 (263 ) Total incentive fees 1,753
4,026 4,928 Other fee income: Total
fundraising and other fees 446 872 227
Asset management-related fee revenues $5,909 $8,412
$8,926
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.
Adjusted Principal Transaction Revenues
Adjusted principal transaction revenue is a non-GAAP financial
measure that (i) reverses net unrealized gains and losses on
strategic equity investments and warrants and on investments
related to deferred compensation and (ii) reverses unrealized
losses derived from depreciation and amortization of real estate
investment properties, in keeping with the calculation of adjusted
net revenue, as detailed above.
A summary of the company’s principal transaction revenues for
the quarter ended March 31, 2017, and for comparable prior
periods is set forth below.
Quarter Ended (in thousands) Mar. 31, 2017
Dec. 31, 2016 Mar. 31, 2016 Hedge fund
investments $130 $200 ($600 ) Investment in Harvest Capital Credit
Corporation (419 ) 1,211 314 Other principal investments (1,603 )
4,446 1,216 Total principal transaction revenues
(1,892 ) 5,857 930 Add back/(subtract):
Unrealized mark-to-market loss/(gain) –
strategic equity investments and warrants
419 (1,211 ) (329 )
Unrealized mark-to-market (gain) –
deferred compensation
(75 ) (276 ) (77 )
Unrealized loss – real estate-related
depreciation and amortization
2,156 1,718 330 Total operating adjustments
2,500 231 (76 ) Total adjusted principal transaction
revenues $608 $6,088 $854
Company management utilizes adjusted principal transaction
revenue because it is a component of adjusted net revenue. The
exclusion of certain elements of principal transaction revenues, as
presented above, results in an adjusted measure that is included as
“Principal transactions” among JMP Group’s revenues in the non-GAAP
presentation of segment results of operations that appears below.
Management believes that adjusting principal transaction revenues
and total revenues in these ways is useful in that it allows for a
clearer understanding and comparison of JMP Group’s financial
results for the periods presented.
Compensation Ratio
A compensation ratio expresses compensation expense as a
percentage of net revenues in a given period. As utilized by JMP
Group, an adjusted compensation ratio is a non-GAAP financial
measure that employs adjusted net revenues as the denominator in
its calculation. Furthermore, this ratio adjusts the financial
impact of certain compensation-related and transaction-related
expenses that are or are not recognized under GAAP. In particular,
the adjusted compensation ratio reverses compensation expense and
unrealized mark-to-market gains or losses related to share-based
awards, deferred compensation and non-controlling interests (so
that the compensation expenses used in the numerator correspond to
the adjusted net revenues generated in the periods presented). In
addition, the company presents a further adjusted compensation
ratio that excludes any compensation related to incentive fees
generated by hedge funds, a majority of which is passed through to
the funds’ investment teams if earned, as well as any specific loan
loss provisions.
A statement of JMP Group’s compensation ratio for the quarter
ended March 31, 2017, and for comparable prior periods is set forth
below.
Quarter Ended ($ in thousands) Mar. 31, 2017
Dec. 31, 2016 Mar. 31, 2016
Compensation Ratio Adjusted net revenues $25,261 $35,489
$36,616 Compensation and benefits $21,798
$30,960 $27,425 Subtract/(add back): Compensation expense – stock
options and SARs 67 483 215 Compensation expense – RSUs 239 233 252
Compensation expense – deferred compensation 654 3,742 (515 )
Unrealized mark-to-market gain – deferred
compensation
75 276 77 Compensation expense – non-controlling interest 260
262 278 Adjusted compensation and benefits
$20,503 $25,964 $27,118 Adjusted ratio
of compensation expense to revenues 81.2 % 73.2 % 74.1 %
Compensation Ratio Excluding Incentive
Fees and Loss Provision
Adjusted net revenues $25,261 $35,489 $36,616 Subtract/(add
back): Compensation expense – hedge fund incentive fees 1,471 4,055
4,228
Specific loan loss
(provision)/reversal
(1,413 ) (81 ) 12
Adjusted net revenues, excluding hedge
fund incentive fees and specific loss provision
$25,203 $31,515 $32,376 Adjusted
compensation and benefits $20,503 $25,964 $27,118 Subtract:
Compensation expense – hedge fund incentive fees 1,471 4,055
4,228
Adjusted compensation and benefits,
excluding hedge fund incentive fees
$19,032 $21,909 $22,890
Adjusted ratio of compensation expense to
revenues, excluding hedge fund incentive fees and specific loss
provision
75.5 % 69.5 % 70.7 %
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 share-based awards and
deferred compensation, (ii) reverses the general loan loss
provision taken with regard to certain CLOs, (iii) excludes
amortization expense related to JMP Credit Advisors CLO III, (iv)
reverses unrealized losses derived from depreciation and
amortization of real estate investment properties, (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 options;
- net deferred compensation, which
consists of (a) deferred compensation awarded in a given period but
recognized as a GAAP expense over the subsequent three years, less
(b) GAAP expense recognized in a given period but already reflected
in the operating income of a prior period; the purpose of this
adjustment is to fully reflect compensation awarded in a given
year, notwithstanding the timing of GAAP expense;
- the non-specific loan loss provision
recorded with regard to loans held by JMP Credit Advisors CLO II
and JMP Credit Advisors III, which is required by GAAP;
- amortization expense related to an
intangible asset resulting from the repurchase of a portion of the
equity of JMP Credit Advisors CLO III;
- depreciation and amortization expense
related to commercial real estate investments that is recognized by
JMP Group as a result of equity method accounting;
- 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% at the taxable direct subsidiary of parent
company JMP Group, while applying a tax rate of 0% to the company’s
other direct subsidiary, which is a “pass-through entity” for tax
purposes.
A reconciliation of JMP Group’s net income to its operating net
income for the quarter ended March 31, 2017, and for comparable
prior periods is set forth below.
Quarter Ended Mar. 31, 2017 Dec. 31,
2016 Mar. 31, 2016 Net (loss)/income
attributable to JMP Group ($4,740 ) $789 $1,803 Add back:
Income tax (benefit)/expense (1,084 ) (3,855 ) 50
(Loss)/income before taxes (5,824 ) (3,066 ) 1,853 Add
back/(subtract): Compensation expense – stock options and SARs 67
483 215 Compensation expense – RSUs 239 233 252
Compensation expense – net deferred
compensation
654 3,742 (515 )
General loan loss (reversal)/provision –
collateralized loan obligations
(418 ) 349 407 Amortization of intangible asset – CLO III 69 138 -
Unrealized loss – real estate-related
depreciation and amortization
2,156 1,718 330
Unrealized mark-to-market loss/(gain) –
strategic equity investments and warrants
419 (1,211 ) (329 ) Operating (loss)/income before taxes
(2,638 ) 2,386 2,213 Income tax (benefit)/expense (555 )
(452 ) 55 Operating net (loss)/income ($2,083 ) $2,838
$2,158 Operating net (loss)/income per share:
Basic ($0.10 ) $0.13 $0.10 Diluted (1) ($0.09 ) $0.13 $0.10
Weighted average shares outstanding: Basic 21,573 21,071 21,349
Diluted (1) 21,988 22,018 21,707
(1)
In 2013 and the first quarter of 2014, JMP
Group issued restricted share units, or RSUs, bearing
non-forfeitable distribution equivalent rights. GAAP requires RSUs
with non-forfeitable distribution equivalent rights to be included
in the diluted share count (without applying the treasury method).
Management presents 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 was 22,024,335 for the quarter
ended December 31, 2016, and 21,865,254 for the quarter ended March
31, 2016. The weighted average number of diluted shares outstanding
for the quarter ended March 31, 2017, was 21,572,686, equivalent to
the weighted average number of basic shares outstanding, due to the
company's net loss for the period. Under GAAP, in a period of net
loss, dilutive securities are disregarded in the calculation of
earnings per share.
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 presentation of adjusted net revenues (i) reverses the
general loan loss provision taken with regard to certain CLOs, (ii)
reverses net unrealized gains and losses on strategic equity
investments and warrants, (iii) reverses unrealized losses derived
from depreciation and amortization of real estate investment
properties, (iv) excludes non-controlling interests in various
sources of revenue that are consolidated according to GAAP, and (v)
reverses unrealized mark-to-market gains or losses on investments
related to deferred compensation. 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 share-based awards
and deferred compensation. Expenses derived from non-controlling
interests in entities that are consolidated according to GAAP have
also been reversed. For the purposes of calculating operating net
income, an effective tax rate of 38% is assumed for JMP Group’s
taxable subsidiary, based on the company’s best estimation of the
subsidiary’s average rate of taxation over the long term.
A statement of JMP Group’s operating net income on a segment
basis for the quarter ended March 31, 2017, is set forth below.
Quarter Ended March 31, 2017
Net Broker- Asset
Operating Corporate Elimin- JMP (in thousands, except per share
amounts) Dealer Mgmt. Platforms Income ations Group
Revenues: Investment banking $13,600 - $13,600 - - $13,600
Brokerage 5,286 - 5,286 - - 5,286 Asset management-related fees 4
$5,311 5,315 $1,635 ($1,041 ) 5,909 Principal transactions - - -
608 - 608 Gain on sale and payoff of loans - - - 779 - 779
Gain on repurchase of asset-backed
securities issued
- - - 210 - 210 Net dividend income - - - 267 - 267 Net interest
income - - - 15 - 15 Provision for loan losses - - - (1,413 ) -
(1,413 ) Adjusted net revenues 18,890 5,311 24,201 2,101
(1,041 ) 25,261 Expenses: Non-interest expense/(income)
18,561 5,095 23,656 5,284 (1,041 ) 27,899 Operating
income/(loss) before taxes 329 216 545 (3,183 ) - (2,638 )
Income tax expense/(benefit) 125 81 206 (761 ) - (555 )
Operating net income/(loss) $204 $135 $339 ($2,422 ) -
($2,083 ) Operating net income/(loss) per share: Basic $0.01
$0.01 $0.02 ($0.11 ) - ($0.10 ) Diluted $0.01 $0.01 $0.02 ($0.11 )
- ($0.09 )
Book Value per Share
At March 31, 2017, JMP Group’s book value per share was $5.27.
Adding back accumulated depreciation and amortization expense
related to commercial real estate investments that is recognized by
JMP Group as a result of equity method accounting reflects the
reversal of that expense in the calculation of adjusted net
revenues, adjusted principal transaction revenues and operating net
income. Likewise, adding back the accumulated general loan loss
provision related to collateralized loan obligations reflects the
reversal of that provision in the calculation of adjusted net
revenues and operating net income. Such reversals result in an
adjusted book value per share of $5.74, as set forth below.
(in thousands, except per share amounts) Mar. 31,
2017 Dec. 31, 2016 Mar. 31, 2016
Shareholders' equity $114,174 $119,377 $122,736
Accumulated unrealized loss – real
estate-related depreciation and amortization
6,461 4,304 393
Accumulated general loan loss provision –
collateralized loan obligations
3,662 4,080 3,401 Adjusted shareholders' equity $124,297 $127,761
$126,530 Book value per share $5.27 $5.56 $5.79 Adjusted
book value per share $5.74 $5.95 $5.97 Basic shares
outstanding 21,659 21,457 21,201 Quarterly operating ROE (1)
(7.1%) 9.4% 7.0% LTM operating ROE (1) 5.2% 8.6% 7.2%
Quarterly adjusted operating ROE (1) (6.6%) 8.9% 6.8% LTM adjusted
operating ROE (1) 4.9% 8.2% 7.1%
(1)
Operating return on equity (ROE) equals
operating net income divided by average shareholders’ equity.
Adjusted operating ROE equals operating net income divided by
average adjusted shareholders’ equity. For more information about
operating net income, including a reconciliation to net income
attributable to JMP Group, see the section above titled “Operating
Net Income.”
Company management utilizes adjusted book value on a total and
per share basis, adjusted in the manner described above, as an
additional means of evaluating JMP Group’s efforts to retain
earnings and build shareholders’ equity. Management believes that
adjusted book value per share provides useful information by
excluding non-cash expenses related to real estate investments that
otherwise obscure the company’s increases and decreases in net
worth as a result of its core business activities. Management also
believes that adjusted book value allows for a better comparison of
shareholder’s equity and the return on that equity in a given
period to those in prior and future periods.
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 the company’s Form 10-K for the year ended December
31, 2016, as filed with the U.S. Securities and Exchange Commission
on March 14, 2017, 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, 2016, and all
other periodic reports are available on JMP Group’s website at
www.jmpg.com and on the SEC’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.
Disclosure Information
JMP Group uses the investor relations section of its website as
a means of complying with its disclosure obligations under
Regulation FD. Accordingly, investors should monitor the company’s
website in addition to its press releases, SEC filings, and
investor conference calls and webcasts.
Conference Call
JMP Group will hold a conference call to discuss the results
detailed herein at 10:00 a.m. EDT on Thursday, April 27, 2017. To
participate in the call, dial (888) 566-6060 (domestic) or (973)
200-3100 (international). The conference identification number is
11441033.
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 a diversified capital markets 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, venture and private capital, and credit
management activities though Harvest Capital Strategies, JMP Asset
Management and JMP Credit Advisors; and the management of Harvest
Capital Credit Corporation (NASDAQ: HCAP), a business development
company, through HCAP Advisors. For more information, visit
www.jmpg.com.
JMP GROUP LLC Consolidated Statements of Financial
Condition (Unaudited) (in thousands) Mar.
31, 2017 Dec. 31, 2016 Assets Cash and
cash equivalents $81,235 $85,492 Restricted cash and deposits
67,133 227,656 Marketable securities owned, at fair value 20,558
18,722 Other investments 30,279 32,869 Loans held for sale, at fair
value 1,437 32,488 Loans held for investment, net of allowance for
loan losses 1,157 1,930
Loans collateralizing asset-backed
securities issued, net of allowance for loan losses
610,955 654,127 Cash collateral posted for total return swap 25,940
25,000 Deferred tax assets 7,942 7,942 Other assets 34,552 39,604
Total assets $881,188 $1,125,830 Liabilities and
Shareholders' Equity Liabilities: Marketable securities
sold, but not yet purchased, at fair value $5,206 $4,747 Accrued
compensation 8,520 36,158 Asset-backed securities issued, net of
issuance costs 613,354 825,854 Bond payable, net of issuance costs
91,890 91,785 Deferred tax liability 2,653 3,872 Other liabilities
30,825 28,120 Total liabilities 752,448 990,536
Shareholders' Equity: Total JMP Group LLC shareholders' equity
114,174 119,377 Non-redeemable non-controlling interest 14,566
15,917 Total equity 128,740 135,294 Total liabilities and
shareholders' equity $881,188 $1,125,830
JMP GROUP LLC
Consolidated Statements of Operations (Unaudited)
Quarter Ended (in thousands, except per share
amounts) Mar. 31, 2017 Mar. 31, 2016 Revenues:
Investment banking $13,600 $18,296 Brokerage 5,286 6,095 Asset
management fees 5,911 9,326 Principal transactions (1,893 ) 930
Gain/(loss) on sale and payoff of loans 847 (376 ) Gain on
repurchase of debt 210 - Net dividend income 266 263 Other income
445 226 Non-interest revenues 24,672 34,760
Interest income 9,067 12,401 Interest expense (8,095
) (7,975 ) Net interest income 972 4,426
Provision for loan losses (1,266 ) (631 ) Total net revenues 24,378
38,555 Non-interest expenses: Compensation and
benefits 21,798 27,425 Administration 1,819 1,818 Brokerage,
clearing and exchange fees 759 761 Travel and business development
915 1,291 Communications and technology 1,053 1,016 Occupancy 1,111
936 Professional fees 1,162 1,073 Depreciation 311 332 Other 677
621 Total non-interest expense 29,605 35,273
Net (loss)/income before income tax expense (5,227 )
3,282 Income tax expense/(benefit) (1,084 ) 50 Net
(loss)/income (4,143 ) 3,232 Less: Net income attributable to
non-redeemable non-controlling interest 597 1,429 Net
(loss)/income attributable to JMP Group ($4,740 ) $1,803
Net (loss)/income attributable to JMP Group per share: Basic
($0.22 ) $0.08 Diluted ($0.22 ) $0.08 Weighted average
common shares outstanding: Basic 21,573 21,349 Diluted 21,573
21,865
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version on businesswire.com: http://www.businesswire.com/news/home/20170426005359/en/
Investor Relations ContactJMP Group LLCAndrew Palmer,
415-835-8978apalmer@jmpg.comorMedia Relations ContactsDukas
Linden Public Relations, Inc.Seth Linden,
212-704-7385seth@dlpr.comBen Jaffe, 212-704-7385ben@dlpr.com
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