jmpllc20170930_10q.htm
 

 



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q
 


 

(Mark One)

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   
  For the quarterly period ended March 31, 2018 OR

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   
  For the transition period from       to   

 

Commission File Number: 001-36802

JMP Group LLC

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

47-1632931

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

     

 

600 Montgomery Street, Suite 1100, San Francisco, California 94111

(Address of principal executive offices)

 

Registrant’s telephone number: (415) 835-8900

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

       

Non-accelerated filer

 

  (Do not check if a smaller reporting company)

 

Smaller reporting company

 

             

Emerging growth company

 

       

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

 

JMP Group LLC shares representing limited liability company interests outstanding as of May 7, 2018: 21,560,756.

 



 

 

 
 

 

Table of Contents

 

 

TABLE OF CONTENTS

 

     

 

 

Page

PART I.

FINANCIAL INFORMATION

4

     

Item 1.

Financial Statements - JMP Group LLC

4

 

Condensed Consolidated Statements of Financial Condition – March 31, 2018 (Unaudited) and December 31, 2017

4

 

Condensed Consolidated Statements of Operations - For the Three Months Ended March 31, 2018 and 2017 (Unaudited)

6

 

Condensed Consolidated Statements of Changes in Equity - For the Three Months Ended March 31, 2018 and 2017 (Unaudited)

7

 

Condensed Consolidated Statements of Cash Flows - For the Three Months Ended March 31, 2018 and 2017 (Unaudited)

8

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

36

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

56

Item 4.

Controls and Procedures

56

     

PART II.

OTHER INFORMATION

56

     

Item 1.

Legal Proceedings

56

Item 1A.

Risk Factors

56

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

57

Item 3.

Defaults Upon Senior Securities

57

Item 4.

Mine Safety Disclosures

57

Item 5.

Other Information

57

Item 6.

Exhibits

57

   

SIGNATURES

58

   

EXHIBIT INDEX

59

 

2

 
 

 

 AVAILABLE INFORMATION

 

JMP Group LLC is required to file current, annual and quarterly reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the Securities and Exchange Commission (the "SEC"). You may read and copy any document JMP Group LLC files with the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet website at http://www.sec.gov, from which interested persons can electronically access JMP Group LLC’s SEC filings.

 

JMP Group LLC provides its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, Forms 3, 4 and 5 filed by or on behalf of directors, executive officers and certain large shareholders, and any amendments to those documents filed or furnished pursuant to the Exchange Act free of charge on the Investor Relations section of its website located at http://www.jmpg.com. These filings will become available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. From time to time JMP Group LLC may use its website as a channel of distribution of material company information.

 

JMP Group LLC also makes available, in the Investor Relations section of its website and will provide print copies to shareholders upon request, (i) its corporate governance guidelines, (ii) its code of business conduct and ethics, and (iii) the charters of the audit, compensation, and corporate governance and nominating committees of its board of directors. These documents, as well as the information on the website, are not intended to be part of this quarterly report on Form 10-Q (the “Quarterly Report”) and inclusions of the internet address in this Quarterly Report. JMP Group LLC also uses the Investor Relations section of its website as a means of complying with its disclosure obligations under Regulation FD. Accordingly, you should monitor JMP Group LLC’s Investor Relations section of its website in addition to following JMP Group LLC’s press releases, SEC filings, and public conference calls and webcasts.

 

3

 

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1.

Financial Statements

 

JMP Group LLC

Condensed Consolidated Statements of Financial Condition

(Unaudited)

(Dollars in thousands, except per share data)

   

March 31, 2018

   

December 31, 2017

 

Assets

               

Cash and cash equivalents

  $ 47,858     $ 85,594  

Restricted cash

    70,419       51,727  

Investment banking fees receivable

    8,233       9,567  

Marketable securities owned, at fair value

    19,640       20,825  

Other investments (includes $10,044 and $18,450 measured at fair value at March 31, 2018 and December 31, 2017, respectively)

    17,033       27,984  

Loans held for investment, net of allowance for loan losses

    145,253       83,948  

Loans collateralizing asset-backed securities issued, net of allowance for loan losses

    754,632       765,583  

Interest receivable

    2,439       2,259  

Fixed assets, net

    2,169       2,322  

Other assets

    34,142       26,817  

Total assets

  $ 1,101,818     $ 1,076,626  
                 

Liabilities and Equity

               

Liabilities:

               

Marketable securities sold, but not yet purchased, at fair value

  $ 6,280     $ 7,919  

Accrued compensation

    10,064       43,131  

Asset-backed securities issued (net of debt issuance costs of $6,589 and $7,852 at March 31, 2018 and December 31, 2017, respectively)

    735,058       738,248  

Interest payable

    6,043       6,512  
       Repurchase agreement     3,878       -  
       Notes payable     8,829       -  

CLO V warehouse credit facility

    112,800       61,250  

Bond payable (net of debt issuance costs of $2,836 and $2,810 at March 31, 2018 and December 31, 2017, respectively)

    93,069       93,103  

Other liabilities

    19,661       16,284  

Total liabilities

    995,682       966,447  
                 

Commitments and Contingencies (Footnote 13)

               

JMP Group LLC Shareholders' Equity

               

Common shares, $0.001 par value, 100,000,000 shares authorized; 22,780,052 shares issued at both March 31, 2018 and December 31, 2017; 21,547,792 and 21,729,079 shares outstanding at March 31, 2018 and December 31, 2017, respectively

    23       23  

Additional paid-in capital

    135,084       134,719  

Treasury shares at cost, 1,232,260 and 1,050,973 shares at March 31, 2018 and December 31, 2017, respectively

    (6,916 )     (5,955 )

Accumulated deficit

    (34,773 )     (32,452 )

Total JMP Group LLC shareholders' equity

    93,418       96,335  

Nonredeemable Non-controlling Interest

    12,718       13,844  

Total equity

    106,136       110,179  

Total liabilities and equity

  $ 1,101,818     $ 1,076,626  

 

See accompanying notes to condensed consolidated financial statements.

 

4

 

 

JMP Group LLC

Condensed Consolidated Statements of Financial Condition - (Continued)

(Unaudited)

(Dollars in thousands, except per share data)

 

Assets and liabilities of consolidated variable interest entities (“VIEs”) included in total assets and total liabilities above:

 

   

March 31, 2018

   

December 31, 2017

 
                 

Restricted cash

  $ 53,535     $ 43,050  

Loans collateralizing asset-backed securities issued, net of allowance for loan losses

    754,693       765,583  

Interest receivable

    1,934       1,918  

Other assets

    316       568  

Total assets of consolidated VIEs

  $ 810,478     $ 811,119  
                 

Asset-backed securities issued

    739,511       738,248  

Interest payable

    4,439       5,346  

Other liabilities

    2,701       1,221  

Total liabilities of consolidated VIEs

  $ 746,651     $ 744,815  

 

The asset-backed securities issued (“ABS”) by the VIE are limited recourse obligations payable solely from cash flows of the loans collateralizing them and related collection and payment accounts pledged as security. Accordingly, only the assets of the VIE can be used to settle the obligations of the VIE.

 

See accompanying notes to condensed consolidated financial statements.

 

5

 
 

 

JMP Group LLC

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

 

   

Three Months Ended March 31,

   

2018

   

2017

 
                 

Revenues

               

Investment banking

  $ 20,662     $ 13,600  

Brokerage

    4,664       5,286  

Asset management fees

    6,425       5,911  

Principal transactions

    (3,620 )     (1,893 )
       Gain (loss) on sale, payoff and mark-to-market of loans     (182 )     847  

Net dividend income

    296       266  

Other income

    49       445  

Non-interest revenues

    28,294       24,462  
                 

Interest income

    12,710       9,067  

Interest expense

    (9,702 )     (8,095 )

Net interest income

    3,008       972  
                 
           Gain (loss) on repurchase or early retirement of debt     (2,626 )     210  

Provision for loan losses

    (1,465 )     (1,266 )

Total net revenues after provision for loan losses

    27,211       24,378  
                 

Non-interest expenses

               

Compensation and benefits

    24,261       21,798  

Administration

    2,233       1,819  

Brokerage, clearing and exchange fees

    777       759  

Travel and business development

    954       915  

Communications and technology

    1,062       1,053  
       Managed deal expense     1,566       -  

Occupancy

    1,117       1,111  

Professional fees

    1,905       1,162  

Depreciation

    264       311  

Other

    387       677  

Total non-interest expenses

    34,526       29,605  

Net loss before income tax expense

    (7,315 )     (5,227 )

Income tax benefit

    (5,568 )     (1,084 )

Net loss

    (1,747 )     (4,143 )

Less: Net income (loss) attributable to nonredeemable non-controlling interest

    (1,464 )     597  

Net loss attributable to JMP Group LLC

  $ (283 )   $ (4,740 )
                 

Net loss attributable to JMP Group LLC per common share:

               

Basic

  $ (0.01 )   $ (0.22 )

Diluted

  $ (0.01 )   $ (0.22 )
                 

Distributions declared per common share

  $ 0.090     $ 0.090  
                 

Weighted average common shares outstanding:

               

Basic

    21,666       21,573  

Diluted

    21,666       21,573  

 

See accompanying notes to condensed consolidated financial statements. 

 

6

 
 

 

JMP Group LLC

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

(In thousands)

  

   

JMP Group LLC's Equity

                 
                           

Additional

           

Nonredeemable

         
   

Common Shares

   

Treasury

   

Paid-In

   

Accumulated

   

Non-controlling

         
   

Shares

   

Amount

   

Shares

   

Capital

   

Deficit

   

Interest

   

Total Equity

 

Balance, December 31, 2017

    22,780     $ 23     $ (5,955 )   $ 134,719     $ (32,452 )   $ 13,844     $ 110,179  

Net income (loss)

    -       -       -       -       (283 )     (1,464 )     (1,747 )

Additional paid-in capital - share-based compensation

    -       -       -       365       -       -       365  

Distributions and distribution equivalents declared on common shares and restricted share units

    -       -       -       -       (2,038 )     -       (2,038 )

Purchases of shares of common shares for treasury

    -       -       (1,044 )     -       -       -       (1,044 )

Reissuance of shares of common shares from treasury

    -       -       83       -       -       -       83  

Distributions to non-controlling interest holders

    -       -       -       -       -       (108 )     (108 )

Capital contributions from non-controlling interest holders

    -       -       -       -       -       446       446  

Balance, March 31, 2018

    22,780     $ 23     $ (6,916 )   $ 135,084     $ (34,773 )   $ 12,718     $ 106,136  

 

 

   

JMP Group LLC's Equity

                 
                           

Additional

           

Nonredeemable

         
   

Common Shares

   

Treasury

   

Paid-In

   

Accumulated

   

Non-controlling

         
   

Shares

   

Amount

   

Shares

   

Capital

   

Deficit

   

Interest

   

Total Equity

 

Balance, December 31, 2016

    22,780     $ 23     $ (7,792 )   $ 135,945     $ (8,799 )   $ 15,917     $ 135,294  

Net income (loss)

    -       -       -       -       (4,740 )     597       (4,143 )

Additional paid-in capital - share-based compensation

    -       -       -       301       -       -       301  

Distributions and distribution equivalents declared on common shares and restricted share units

    -       -       -       -       (1,948 )     -       (1,948 )

Purchases of shares of common shares for treasury

    -       -       (184 )     -       -       -       (184 )

Reissuance of shares of common shares from treasury

    -       -       1,368       -       -       -       1,368  
   Distributions to non-controlling interest holders     -       -       -       -       -       (2,040 )     (2,040 )

Capital contributions from non-controlling interest holders

    -       -       -       -       -       92       92  

Balance, March 31, 2017

    22,780     $ 23     $ (6,608 )   $ 136,246     $ (15,487 )   $ 14,566     $ 128,740  

 

See accompanying notes to condensed consolidated financial statements.

 

7

 
 

 

JMP Group LLC

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

   

Three Months Ended March 31,

 
   

2018

   

2017

 

Cash flows from operating activities:

               

Net loss

  $ (1,747 )   $ (4,143 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

               

Provision for loan losses

    1,465       1,266  

(Gain) loss on sale and payoff of loans and mark-to-market of loans

    182       (1,027 )

Loss (gain) on repurchase or early retirement of debt

    2,626       (210 )

Change in other investments:

               

Income from investments in equity method investees

    2,021       690  

Fair value on other equity investments

    318       1,462  

Realized (gain) loss on other investments

    278       (371 )

Depreciation and amortization

    251       278  

Share-based compensation expense

    448       780  

Other

    (79 )     90  

Net change in operating assets and liabilities:

               

Decrease (increase) in interest receivable

    (180 )     880  

Decrease (increase) in receivables

    1,413       (1,739 )

Decrease (increase) in marketable securities

    1,185       (1,836 )

Decrease (increase) in deposits and other assets

    1,077       (9,894 )

Increase (decrease) in marketable securities sold, but not yet purchased

    (1,639 )     459  

Decrease in interest payable

    (469 )     (548 )

Decrease in accrued compensation

    (33,067 )     (27,638 )

Increase in other liabilities

    3,535       3,120  

Net cash used in operating activities

    (22,382 )     (38,381 )
                 

Cash flows from investing activities:

               

Purchases of fixed assets

    (111 )     (31 )

Purchases of other investments

    (994 )     (990 )

Sales of other investments

    768       6,612  

Funding of loans collateralizing asset-backed securities issued

    (72,642 )     (50,122 )

Funding of loans held for investment

    (63,245 )     -  

Sale, payoff and Principal receipts of loans collateralizing asset-backed securities issued

    82,909       128,471  

Principal payments on loans held for investment

    1,431       -  

Net changes in cash collateral posted for derivative transactions

    -       (940 )

Net cash provided by (used in) investing activities

    (51,884 )     83,000  

 

See accompanying notes to condensed consolidated financial statements.

 

8

 

 

JMP Group LLC

Condensed Consolidated Statements of Cash Flows - (Continued)

(Unaudited)

(In thousands)

 

   

Three Months Ended March 31,

 
   

2018

   

2017

 

Cash flows from financing activities:

               

Proceeds from issuance of Repurchase Agreement

    3,878       -  

Proceeds from drawdowns on CLO V warehouse facility

    51,550       -  

Proceeds from drawdowns on line of credit

    8,000       -  
       Proceeds from sale of note to affiliate     829       -  

Payment of debt issuance costs

    (1,837 )     -  

Repayment of asset-backed securities issued

    (332,100 )     (206,202 )

Proceeds of issuance from asset-backed securities issued

    327,646       -  

Distributions and distribution equivalents paid on common shares and RSUs

    (2,038 )     (1,954 )

Capital contributions of nonredeemable non-controlling interest holders

    445       92  

Proceeds from exercise of stock options

    -       889  

Purchase of shares of common shares for treasury

    (1,044 )     -  

Distributions to non-controlling interest shareholders

    (108 )     (2,040 )

Employee taxes paid on shares withheld for tax-withholding purposes

    -       (184 )

Net cash provided by (used in) financing activities

    55,222       (209,399 )

Net decrease in cash, cash equivalents, and restricted cash

    (19,044 )     (164,780 )

Cash, cash equivalents, and restricted cash, beginning of period

    137,321       313,148  

Cash, cash equivalents, and restricted cash, end of period

  $ 118,277     $ 148,368  
                 

Supplemental disclosures of cash flow information:

               

Cash paid during the period for interest

  $ 10,171     $ 8,643  

Cash paid during the period for taxes

  $ -     $ 2  
                 

Non-cash investing and financing activities:

               

Reissuance of shares of common share from treasury related to vesting of restricted share units and exercises of share options

  $ 83     $ 1,368  

Distributions declared but not yet paid

  $ 646     $ 650  
       Redemption of investments in hedge funds   $ 8,560     $ -  

 

See accompanying notes to condensed consolidated financial statements. 

 

9

 

 

JMP Group LLC

Notes to Condensed Consolidated Financial Statements

March 31, 2018

(Unaudited)

 

 

1. Organization and Description of Business

 

       JMP Group LLC, together with its subsidiaries (collectively, the “Company”), is a diversified capital markets firm headquartered in San Francisco, California. The Company conducts its brokerage business through JMP Securities LLC (“JMP Securities”) and its asset management business through Harvest Capital Strategies LLC (“HCS”), HCAP Advisors LLC (“HCAP Advisors”), JMP Asset Management LLC (“JMPAM”), and JMP Credit Advisors LLC (“JMPCA”). The Company conducts certain principal investment transactions through JMP Investment Holdings LLC (“JMP Investment Holdings”) and other subsidiaries. The above entities, other than HCAP Advisors, are wholly-owned subsidiaries. JMP Securities is a U.S. registered broker-dealer under the Securities Exchange Act of 1934, as amended (“the Exchange Act”), and is a member of the Financial Industry Regulatory Authority (“FINRA”). JMP Securities operates as an introducing broker and does not hold funds or securities for, or owe any money or securities to customers and does not carry accounts for customers. All customer transactions are cleared through another broker-dealer on a fully disclosed basis. HCS is a registered investment advisor under the Investment Advisers Act of 1940, as amended, and provides investment management services for sophisticated investors in investment partnerships and other entities managed by HCS. HCAP Advisors provides investment advisory services to Harvest Capital Credit Corporation (“HCC”). JMPAM currently manages two fund strategies: one that invests in real estate and real estate-related enterprises and another that provides credit to small and midsized private companies. JMPCA is an asset management platform that underwrites and manages investments in senior secured debt. JMPCA currently manages two collateralized loan obligations (“CLO”) vehicles and one CLO warehouse. The Company completed a Reorganization Transaction in  January 2015 pursuant to which JMP Group Inc. became a wholly owned subsidiary of JMP Group LLC (the “Reorganization Transaction”). The Company entered into a Contribution Agreement in November 2017 pursuant to which JMP Group Inc. became a wholly owned subsidiary of JMP Investment Holdings, which is a wholly owned subsidiary of JMP Group LLC. 

 

Recent Transactions

 

      In February 2018, the Company closed a refinancing of the asset back securities issued by JMP Credit Advisors CLO III Ltd ("CLO III"), which lowered the weighted average cost of funds by 55 basis points and extended the reinvestment period for two years. In connection with the reset, the Company recorded losses on early retirement of debt related to unamortized debt issuance costs of $2.6 million for the quarter ended March 31, 2018.  

 

 

2. Summary of Significant Accounting Policies 

 

Basis of Presentation

 

These condensed consolidated financial statements and related notes are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2017 (the “Annual Report”). The results of operations for any interim period are not necessarily indicative of the results to be expected for a full year. In the opinion of management, all normal, recurring adjustments have been included for a fair statement of this interim financial information.

 

The consolidated accounts of the Company include the wholly-owned subsidiaries and the partially-owned subsidiaries of which we are the majority owner or the primary beneficiary. All material intercompany accounts and transactions have been eliminated in consolidation. Non-controlling interests on the Consolidated Statements of Financial Condition at March 31, 2018 and December 31, 2017 relate to the interest of third parties in the partially-owned subsidiaries. Certain prior year amounts have been reclassified to conform to current year presentation.

 

See Note 2 - Summary of Significant Accounting Policies in the Company's Annual Report for the Company's significant accounting policies.

 

For the three months ended March 31, 2018, there were no significant changes made to the Company’s significant accounting policies other than those described below. The accounting policy changes are attributable to the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The Company adopted this standard on January 1, 2018 using a modified retrospective approach. Accordingly, the new revenue standard was applied prospectively in the Company’s financial statements from January 1, 2018 forward and reported financial information for historical comparable periods was not revised and will continue to be reported under the accounting standards in effect during those historical periods.

 

Refer to Note 3, Recent Accounting Pronouncements, for additional information.

 

Securities Financing Arrangements

 

Securities sold under agreements to repurchase ("Repurchase Agreement") are reported as financing transactions, and thus the related payables are presented in the accompanying Statements of financial condition at the amounts at which the securities subsequently will be reacquired as specified in the respective agreements. Such amounts include accrued interest. The Company’s agreements with third parties specify their rights to request additional collateral.

 

 

10

 

 

 

3. Recent Accounting Pronouncements

 

Accounting Standards to be adopted in Future Periods

 

ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), was issued in  June 2016 to replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This standard will become effective for fiscal years beginning after December 31, 2019. The Company is still in the process of determining the impact of the adoption of this standard.

 

ASU 2017-08Receivables-Nonrefundable Fees and Other Costs (Sub-topic 310-20): Premium Amortization on Purchased Callable Debt Securities, was issued in March 2017 to shorten the amortization period for certain purchased callable debt securities held at a premium. It requires the premium to be amortized over the period until the earliest call date. The amendment does not make any changes for securities held at a discount. The new guidance will be effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. The Company is evaluating the impact of the adoption of this standard.

 

ASU 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall (Sub-Topic - 825-10) was issued in February 2018 to address the questions raised by stakeholders to clarify the guidance issued in ASU 2016-01. The Financial Accounting and Standards Board amended the guidance on using the measurement alternative for equity securities without readily determinable fair value and clarifies the presentation requirements for entities that elect the fair value option. The amendments in the update are effective for public business entities for fiscal periods beginning after December 15, 2017, and interim periods beginning after June 15, 2018. The Company is currently evaluating the impact of the adoption of this standard.

 

Recently Adopted Accounting Guidance

 

ASU 2014-09, Revenue from Contracts with Customers (Topic 606), was issued in May 2014, with subsequent amendments, to provide a more robust framework for addressing revenue issues, and to clarify the implementation guidance on principal versus agent considerations. The standard is effective for annual reporting periods beginning after December 15, 2017 and allows either a full retrospective or modified retrospective approachThe Company adopted this standard on January 1, 2018 using a modified retrospective approach. Accordingly, the new revenue standard will be applied prospectively in the Company’s financial statements from January 1, 2018 forward and reported financial information for historical comparable periods will not be revised and will continue to be reported under the accounting standards in effect during those historical periods. The new standard does not apply to revenue from financial instruments, including loans and securities, and as a result, did not have an impact on revenues closely associated with financial instruments, including principal transactions, interest income, and interest expense. The new standard primarily impacts the presentation of our investment banking revenues, specifically our underwriting revenues, strategic advisory revenues, and private placement fees. Certain investment banking revenues have historically been presented net of related expenses. Under the new standard, revenues and expenses related to investment banking transactions are presented gross in the Consolidated Statements of Operations.

 

For the quarter ended March 31, 2018, there was no significant impact as a result of adoption of the new revenue standard to our consolidated financial statements. The new revenue standard primarily impacted the presentation of our investment banking revenue and expenses. The table below presents the impact to revenues and expenses as a result of the change in presentation of investment banking expenses (in thousands):

 

(in thousands)   Three months ended March 31, 2018  
    As Reported     ASC 606 Impact     Pre-Adoption (1)  
Revenues                        
  Investment banking $ 20,662     $ 2,040     $ 18,622  
  Total non-interest revenues   28,294       2,040       26,254  
  Total net revenues after loan losses    27,211        2,040        25,171  
                         
Expenses                        
  Travel and business development   958       346       612  
  Managed deal expenses   1,566       1,566       -  
  Professional fees   1,905       128       1,777  
  Total non-comp expenses   10,265       2,040       8,225  
  Total expenses   34,526       2,040       32,486  
                         

 

 (1)  Amounts reflect each impacted consolidated financial statement line item as they would have been reported under accounting principals generally accepted in the United States of America prior to the adoption of the new revenue standard.     

 

ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10), was issued in  January 2016. The amendments address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. They require equity securities that are neither accounted by equity method nor consolidated to be measured at fair value with changes of fair values recognized as net income. Those equity securities that do not have readily determinable fair value  may be measured at cost less impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. In addition, the amendments simplify the impairment assessment of equity investments without determinable fair values by requiring a qualitative assessment at each reporting period. This standard was effective for fiscal years beginning after  December 15, 2017, and interim periods within those fiscal years. The adoption of ASU 2016-01 did not have a material impact on the Company’s financial statements.

 

ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230), was issued in  August 2016 to address diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This standard addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The amendments in this standard are effective for fiscal years beginning after  December 15, 2017, and interim periods within those fiscal years. The adoption of ASU 2016-15 did not have a material impact on the Company’s financial statements.

 

ASU 2016-16, Income Taxes (Topic 740), was issued in  October 2016 to improve the accounting for income tax consequences of intra-entity transfers of assets other than inventory and to reduce the complexity/cost in accounting standards. The Financial Accounting Standards Board decided to recognize the income tax consequences to intra-entity transfers when the transfer occurs. The amendment is effective for annual reporting periods beginning after  December 15, 2017 including interim reporting periods within those annual reporting periods. Early adoption is permitted and is applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption. The adoption of ASU 2016-16 did not have a material impact on the Company’s financial statements.

 

ASU 2016-18, Statement of Cash Flows (Topic 230addresses the diversity that exists in the classification and presentation of changes in restricted cash and transfers between cash and restricted cash on the statement of cash flows. The amendment applies to all entities that report restricted cash or restricted cash equivalents and present a statement of cash flows. The provisions of this update require the explanation of the changes during the period. The amendments in this update are effective for public business entities for fiscal years beginning after  December 15, 2017 and interim periods within those fiscal years. Additionally, early adoption is permitted with a retrospective transition method and all adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The adoption of ASU 2016-18 resulted in a decrease of cash provided by operating activities of $0.9 million and a decrease in cash provided by investing activities of $159.6 million for the quarter ended March 31, 2017.

 

11

 

 

 

 

4. Fair Value Measurements

 

The following tables provide fair value information related to the Company’s financial instruments at March 31, 2018 and December 31, 2017:

 

   

At March 31, 2018

 

(In thousands)

 

Carrying Value

   

Fair Value

 
           

Level 1

   

Level 2

   

Level 3

   

Total

 

Assets:

                                       

Cash and cash equivalents

  $ 47,858     $ 47,858     $ -     $ -     $ 47,858  

Restricted cash and deposits

    70,419       70,419       -       -       70,419  

Marketable securities owned

    19,640       19,640       -       -       19,640  

Other investments (1)

    1,290       -       1,290       -       1,290  

Other investments measured at net asset value (1)

    8,754       -       -       -       -  

Loans held for investment, net of allowance for loan losses

    145,253       -       143,756       2,684       146,440  

Loans collateralizing asset-backed securities issued, net of allowance for loan losses

    754,632       -       759,211       -       759,211  

Total assets:

  $ 1,047,846     $ 137,917     $ 904,257     $ 2,684     $ 1,044,858  
                                         

Liabilities:

                                       

Marketable securities sold, but not yet purchased

  $ 6,280     $ 6,280     $ -     $ -     $ 6,280  
Repurchase agreement     3,878       -       3,878       -       3,878  
Notes payable     8,829       -       8,829       -       8,829  

Asset-backed securities issued

    735,058       -       740,235       -       740,235  

Bond payable

    93,069       96,148       -       -       96,148  

CLO V warehouse credit facility

    112,800       -       112,800       -       112,800  

Total liabilities:

  $ 959,914     $ 6,280     $ 961,890     $ -     $ 968,170  

 

 

   

At December 31, 2017

 

(In thousands)

 

Carrying Value

   

Fair Value

 
           

Level 1

   

Level 2

   

Level 3

   

Total

 

Assets:

                                       

Cash and cash equivalents

  $ 85,594     $ 85,594     $ -     $ -     $ 85,594  

Restricted cash and deposits

    51,727       51,727       -       -       51,727  

Marketable securities owned

    20,825       20,825       -       -       20,825  
    Receivable from clearing broker     6,801       6,801       -               6,801  

Other investments (1)

    10,226       -       10,226       -       10,226  

Other investments measured at net asset value (1)

    8,224       -       -       -       -  

Loans held for investment, net of allowance for loan losses

    83,948       -       80,956       3,342       84,298  

Loans collateralizing asset-backed securities issued, net of allowance for loan losses

    765,583       -       766,298       -       766,298  

Total assets:

  $ 1,032,928     $ 164,947     $ 857,480     $ 3,342     $ 1,025,769  
                                         

Liabilities:

                                       

Marketable securities sold, but not yet purchased

  $ 7,919     $ 7,919     $ -     $ -     $ 7,919  

Asset-backed securities issued

    738,248       -       748,015       -       748,015  

Bond payable

    93,103       -       97,014       -       97,014  
   CLO V warehouse credit facility     61,250       -       61,250       -       61,250  

Total liabilities:

  $ 900,520     $ 7,919     $ 906,279     $ -     $ 914,198  

 

 

(1)

In accordance with ASC 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position. The carrying values of these lines reconciles to the parenthetical disclosure of other investments on the Statements of Financial Condition.

 

Recurring Fair Value Measurement

 

The following tables provide information related to the Company’s assets and liabilities carried at fair value on a recurring basis at March 31, 2018 and December 31, 2017: 

 

(In thousands)

         

March 31, 2018

 
   

Carrying Value

   

Level 1

   

Level 2

   

Level 3

   

Total

 
                                         

Marketable securities owned

  $ 19,640     $ 19,640     $ -     $ -     $ 19,640  

Other investments:

                                       

Investments in hedge funds managed by the Company

    1,290       -       1,290       -       1,290  

Investments in other funds managed by the Company (1)

    4,453       -       -       -       -  

Total investment in funds managed by the Company (1)

    5,745       -       1,290       -       1,290  

Limited partnership in investments in private equity/ real estate funds (1)

    4,301       -       -       -       -  

Total other investments

    10,044       -       1,290       -       1,290  

Total assets:

  $ 29,684     $ 19,640     $ 1,290     $ -     $ 20,930  
                                         

Marketable securities sold, but not yet purchased

  $ 6,280     $ 6,280     $ -     $ -     $ 6,280  
                                         

Total liabilities:

  $ 6,280     $ 6,280     $ -     $ -     $ 6,280  

 

 

12

 

 

 

(In thousands)

         

December 31, 2017

 
   

Carrying Value

   

Level 1

   

Level 2

   

Level 3

   

Total

 
                                         

Marketable securities owned

  $ 20,825     $ 20,825     $ -     $ -     $ 20,825  

Other investments:

                                       

Investments in hedge funds managed by the Company

    10,226       -       10,226       -       10,226  
    Investments in other funds managed by the Company (1)     4,463       -       -       -       -  

Total investment in funds managed by the Company (1)

    14,689       -       10,226       -       10,226  

Limited partnership in investments in private equity/ real estate funds (1)

    3,761       -       -       -       -  

Total other investments

    18,450       -       10,226       -       10,226  

Total assets:

  $ 39,275     $ 20,825     $ 10,226     $ -     $ 31,051  
                                         

Marketable securities sold, but not yet purchased

    7,919       7,919       -       -       7,919  
                                         

Total liabilities:

  $ 7,919     $ 7,919     $ -     $ -     $ 7,919  

 

 

(1)

In accordance with ASC 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) have not been classified in the fair value hierarchy. 

 

 

Transfers between levels of the fair value hierarchy result from changes in the observability of fair value inputs used in determining fair values for different types of financial assets and are recognized at the beginning of the reporting period in which the event or change in circumstances that caused the transfer occurs. The Company’s policy is to recognize the fair value of transfers among Levels 1, 2 and 3 as of the end of the reporting period. For recurring fair value measurements, there were no transfers between Levels 1, 2 and 3 for the three months ended March 31, 2018 and year ended December 31, 2017.

 

The Company’s Level 2 assets held in other investments consist of investments in hedge funds managed by HCS. The carrying value of investments in hedge funds is calculated using the equity method and approximates fair value. Earnings or losses attributable to these investments are recorded in principal transactions. These assets are considered Level 2 as the underlying hedge funds are mainly invested in publicly traded stocks whose value is based on quoted market prices. The Company’s proportionate share of those investments is included in the tables above.

 

The investments in private equity funds managed by HCS and JMPAM are recognized using the fair value option. The Company uses the reported net asset value per share as a practical expedient to estimate the fair value of the funds. The risks associated with these investments are limited to the amounts of invested capital, remaining capital commitment and any management and incentive fees receivable.

 

The Company determined the fair value of short-term debt, which includes notes payable, the repurchase agreement, and the CLO V warehouse credit facility, to approximate their carrying values. This was determined as the debt has either (1) a variable interest rate tied to LIBOR and therefore reflects market conditions, or (2) a term less than one year and there have been no observable changes in the credit quality of the Company since the issuance of the debt. Based on the fair value methodology, the Company has identified short-term debt as Level 2 liabilities.

 

The Company determined the fair value of loans collateralizing asset-backed securities and loans held for investments identified as Level 2 assets primarily using the average market bid and ask quotation obtained from a loan pricing service. The valuations are received from a pricing service to which the Company subscribes. The pricing service's analysis incorporates comparable loans traded in the marketplace, the obligors industry, future business prospects, capital structure, and expected credit losses. Significant declines in the performance of the obligor would result in decrease to the fair value measurement. The fair value of loans held for investment identified as Level 3 assets are determined using the discounted cash flow model using the treasury rate, loan interest rate, and an internally generated risk rate.

 

The Company determined the fair value of asset-backed securities issued based upon pricing from published market research for equivalent-rated CLO notes. Based on the fair value methodology, the Company has identified the asset-backed securities issued as Level 2 liabilities.

 

As of  March 31, 2018 and December 31, 2017, $8.8 million and $7.9 million of assets were measured using the net asset value as a practical expedient. Investments for which fair value was estimated using net asset value as a practical expedient were as follows:

 

   

 

   

 

   

Fair Value at

   

Unfunded Commitments

 

Dollars in thousands

 

Redemption

Frequency

   

Redemption

Notice Period

   

March 31, 2018

   

December 31, 2017

   

March 31, 2018

   

December 31, 2017

 
                                                

Limited partner investments in private equity/real estate funds

 

Nonredeemable

      N/A     $ 4,301     $ 3,761     $ 667     $ 1,235  

Investment in other funds managed by the Company

 

Nonredeemable

      N/A     $ 4,453     $

4,173

    $ -     $ -  

 

 

Non-recurring Fair Value Measurements

 

The Company's assets that are measured at fair value on a non-recurring basis result from the application of lower of cost or market accounting or write-downs of individual assets. The Company held loans measured at fair value on a non-recurring basis of $0.9 million and $2.0 million as of December 31, 2017 and March 31, 2018, respectively.

 

Loans Held for Investment

 

 At March 31, 2018 and December 31, 2017, loans held for investment outside of the CLO portfolios were eight and ten, respectively. The Company reviews credit quality of these loans within this portfolio segment on a loan by loan basis mainly focusing on the borrower’s financial position and results of operations as well as the current and expected future cash flows on the loans. In addition, as of March 31, 2018, the Company held $139.7 million of loans held for investment in the CLO V warehouse portfolio. The credit quality of the CLO V warehouse loans is evaluated in the same manner as the credit quality of loans collateralizing asset-backed securities issued. 

 

13

 

 

There were no loans past due as of March 31, 2018 or March 31, 2017. A summary of activity in loan losses for the periods ended March 31, 2018 and 2017 is as follows:

 

(in thousands)

 

Three months ended March 31,

 
   

2018

   

2017

 
   

Impaired

   

Non-impaired

   

Impaired

   

Non-impaired

 

Balance, at beginning of the period

  $ (2,279 )   $ (494 )   $ (823 )   $ -  

Provision for loan losses

                               

Specific

    (205 )     -       (711 )     -  

General

    -       (364 )     -       -  

Charge off

    2,279       -       -       -  
Balance, at the end of the period   $ (205 )   $ (858 )   $ (1,534 )   $ -  

 

A loan is considered to be impaired when, based on current information, it is probable that the Company will be unable to collect all amounts due in accordance with the contractual terms of the original loan agreement, including scheduled principal and interest payments. The Company classified all of its loans as Cash Flow loans, as their funding decisions were all primarily driven by the cash flows of the borrower. $0.2 million and $ 1.4 million of recorded investment amount of loans issued were individually evaluated for impairment as of March 31, 2017 and December 31, 2017, respectivelyThe table below presents certain information pertaining to the loans on non-accrual status as of March 31, 2018 and December 31, 2017:

 

   

Recorded

Investment

   

Unpaid

Principal

   

Related

Allowance

   

Average

recorded

Investment

   

Interest

Income

Recognized

 

March 31, 2018

                                       

Impaired loans with an allowance recorded

  $ 205     $ 205     $
205
    $ 205     $ -  

Impaired loans with no related allowance recorded

    -       -       -       -       -  

Total impaired loans

  $ 205     $ 205     $
205
    $ 205     $ -  

 

   

Recorded

Investment

   

Unpaid

Principal

   

Related

Allowance

   

Average

recorded

Investment

   

Interest

Income

Recognized

 

December 31, 2017

                                       

Impaired loans with an allowance recorded

  $ 1,379     $ 1,448     $ 391     $ 1,411     $ 32  

Impaired loans with no related allowance recorded

    -       -       -       -       -  

Total impaired loans

  $ 1,379     $ 1,448     $ 391     $ 1,411     $ 32  

 

The Company's management, at least on a quarterly basis, reviews each loan and evaluates the credit quality of the loan. The review primarily includes the following credit quality indicators with regard to each loan: 1) Moody's rating, 2) current internal rating, 3) trading price of the loan, and 4) performance of the obligor. The tables below present, by credit quality indicator, the Company's recorded investment in loans held for investment at March 31, 2018 and December 31, 2017:

 

(In thousands)

 

Held for Investment -
Cash Flow (CF)

 
   

March 31,

   

December 31,

 
   

2018

   

2017

 
                 

Moody's rating:

               

Baa1 - Baa3

  $ -     $    

Ba1 - Ba3

    25,833       12,174  

B1 - B3

    113,738       64,170  

Caa1 - Caa3

    3,868       5,310  

Not Rated

    2,669       4,595  

Total:

  $ 146,108     $ 86,249  
                 

Internal rating (1) :

               
2   $ 139,815     $ 77,525  
3     3,491       384  
4     -       2,613  
5     383       1,379  

Not rated

    2,419       4,348  

Total:

  $ 146,108     $ 86,249  
                 

Performance:

               

Performing

  $ 146,093     $ 83,161  

Non-performing

    15       3,088  

Total:

  $ 146,108     $ 86,249  

 

(1)

Loans with an internal rating of 3 or below are reviewed individually to identify loans to be designated for non-accrual status. 

 

14

 

 

 

5. Loans Collateralizing Asset-backed Securities Issued

 

Allowance for Loan Losses

 

A summary of the activity in the allowance for loan losses for the three months ended March 31, 2018 and 2017 is as follows:

 

(In thousands)

 

Three Months Ended March 31,

 
   

2018

 

2017

 
     

Impaired

      Non-Impaired       Impaired       Non-Impaired  

Balance at beginning of period

  $ (391 )   $ (6,533 )   $ (937 )   $ (5,603 )

Provision for loan losses:

                               

Specific reserve

    (953 )     -       (971 )     -  

General reserve

    -       41       -       416  
Charge off     135       -       -       -  

Balance at end of period

  $ (1,209 )   $ (6,492 )   $ (1,908 )   $ (5,187 )

 

Impaired Loans, Non-Accrual, Past Due Loans and Restructured Loans

 

A loan is considered to be impaired when, based on current information, it is probable that the Company will be unable to collect all amounts due in accordance with the contractual terms of the original loan agreement, including scheduled principal and interest payments. As of March 31, 2018 and December 31, 2017, $2.8 million and $1.4 million of the recorded investment amount in loans collateralizing asset-backed securities issued were individually evaluated for impairment. The remaining $759.5 million and $771.1 million of recorded investment amount of loans collateralizing asset-backed securities issued were collectively evaluated for impairment as of March 31, 2018 and December 31, 2017, respectively.

 

As of March 31, 2018 and December 31, 2017, the Company classified all its loans as Cash Flow loans, as their funding decisions were all primarily driven by the cash flows of the borrower. The table below presents certain information pertaining to the loans on non-accrual status at March 31, 2018 and December 31, 2017:

 

(In thousands)

 

Recorded

Investment

   

Unpaid Principal

Balance

   

Related

Allowance

   

Average

Recorded

Investment

   

Interest Income

Recognized

 

March 31, 2018

                                       

Impaired loans with an allowance recorded

  $ 2,789     $ 2,848     $ 1,209     $ 3,110     $ 9  

Impaired loans with no related allowance recorded

    -       -       -       -       -  
Total Impaired Loans   $ 2,789     $ 2,848     $ 1,209     $ 3,110     $ 9  
                                         

December 31, 2017

                                       

Impaired loans with an allowance recorded

  $ 1,379     $ 1,448     $ 391     $ 1,411     $ 32  

Impaired loans with no related allowance recorded

    -       -       -       -       -  
Total Impaired Loans   $ 1,379     $ 1,448     $ 391     $ 1,411     $ 32  

 

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. No loans were past due at March 31, 2018 or December 31, 2017. During the year 2017, the Company had two loans which were modified in a troubled debt restructuring. The principal balances of the loans were reduced from $2.5 million to $0.5 million, the maturity dates of the loans were extended from 2021 to 2022, and the interest rates on the loans were increased by 1.30% and 3.00% percent. In addition the Company received $0.4 million of cash and $0.5 million worth of equity shares in connection with the restructuring. The Company has no commitments to lend additional funds for the loans that were restructured. The Company has no troubled debt restructures as of March 31, 2018.

 

Credit Quality of Loans

 

The Company’s management, at least on a quarterly basis, reviews each loan and evaluates the credit quality of the loan. The review primarily includes the following credit quality indicators with regard to each loan: 1) Moody’s rating, 2) current internal rating, 3) the trading price of the loan and 4) performance of the obligor. The tables below present, by credit quality indicator, the Company’s recorded investment in loans collateralizing asset-backed securities issued at March 31, 2018 and December 31, 2017:

 

(In thousands)

   

Cash Flow Loans

 
     

March 31,

   

December 31,

 
     

2018

   

2017

 
                   

Moody's rating:

                 

Baa1 - Baa3

    $ 4,492     $ 8,880  

Ba1 - Ba3

      151,790       134,061  

B1 - B3

      553,889       579,091  

Caa1 - Caa3

      50,280       50,475  

Ca

      1,905       -  

Total:

    $ 762,356     $ 772,507  
                   

Internal rating: (1)

                 
2     $ 677,045     $ 692,198  
3       68,810       70,217  
4       11,927       8,713  
5       4,574       1,379  

Total:

    $ 762,356     $ 772,507  
                   

Performance:

                 

Performing

    $ 759,567     $ 771,128  

Non-Performing

      2,789       1,379  

Total:

    $ 762,356     $ 772,507  

 

(1)

Loans with an internal rating of 3 or below are reviewed individually to identify loans to be designated for non-accrual status.

 

15

 

 

 

6. Debt

 

Bond Payable

 

(In thousands)  

March 31, 2018

   

December 31, 2017

 
                 

$46 million, 8.00%, issued in January 2013, due on January 15, 2023

  $ 45,905     $ 45,905  

$50 million, 7.25%, issued in November 2017, due on November 15, 2027

    50,000       50,000  

Total remaining principal

  $ 95,905     $ 95,905  

Less: Debt issuance costs

    (2,836 )     (2,810 )

Total debt obligations

  $ 93,069     $ 93,095  

 

The $46 million 8% Senior Notes and the $50 million 7.25% Senior Notes (collectively, the “Senior Notes”) were issued pursuant to indentures with U.S. Bank National Association, as trustee. The $46 million 8% Senior Notes indentures contain a minimum liquidity covenant that obligates JMP Group Inc. to maintain liquidity of at least an amount equal to the lesser of (i) the aggregate amount due on the next eight scheduled quarterly interest payments on the $46 million 8% Senior Notes, or (ii) the aggregate amount due on all remaining scheduled quarterly interest payments on the $46 million 8% Senior Notes until the maturity of the Senior Notes. The Senior Notes indenture also contains customary event of default and cure provisions. If an uncured default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the Senior Notes may declare the Senior Notes immediately due and payable. The Senior Notes are JMP Group Inc.’s general unsecured senior obligations, and rank equally with all existing and future senior unsecured indebtedness and are senior to any other indebtedness expressly made subordinate to the notes. At both March 31, 2018 and December 31, 2017, the Company was in compliance with the debt covenants in the indentures.

 

      The future scheduled principal payments of the debt obligations were as follows:

 

(In thousands)

 

March 31, 2018

 
       

2018

  $
-
 

2019

   
-
 

2020

   
-
 

2021

   
-
 

2022

   
-
 

Thereafter

   
95,905
 

Total

  $
95,905
 

 

Note Payable, Lines of Credit and Credit Facilities

 

(In thousands)  

Outstanding Balance

 
   

March 31, 2018

   

December 31, 2017

 
                 
$200 million CLO V Warehouse Credit Facility through July 31, 2018   $ 112,800     $ 61,250  

$25 million, 4.50% as of March 31, 2018, JMP Holding Credit Agreement through July 29, 2018

    8,000       -  
$3.9 million, 2.99%, Repurchase Agreement through June 14, 2018     3,878       -  

$20 million, JMP Securities Revolving LOC through June 6, 2018 (1)

    -       -  

Other

    829       -  

Total Credit Facilities

  $ 125,507     $ 61,250  
                 
(1)  The line of credit bears interest at a rate to be agreed upon at the time of advance between the Company and CNB.

 

The Company's Credit Agreement ("the Credit Agreement") dated as of August 3, 2016, was entered by and between JMP Holding and City National Bank ("CNB"). The Credit Agreement contains financial and other covenants, including, but not limited to, limitations on debt, liens and investments, as well as the maintenance of certain financial covenants. A violation of any one of these covenants could result in a default under the Credit Agreement, which would permit CNB to terminate the Company’s note and require the immediate repayment of any outstanding principal and interest. At both March 31, 2018 and December 31, 2017, the Company was in compliance with the loan covenants. As of March 31, 2018 and December 31, 2017, the outstanding balance on the Credit Agreement was $8.0 million and zero, respectively. The $25 million line of credit will convert to a term loan after July 29, 2018, which will be repaid in quarterly installments of 3.75% of funded debt for the first two years, 5.00% of funded debt for the next two years, and the remainder due at maturity.

 

JMP Securities holds a $20 million revolving line of credit with CNB to be used for regulatory capital purposes during its securities underwriting activities.

 

The net loans collateralizing asset-backed securities CLO V warehouse facility was $139.7 million and $76.8 million as of March 31, 2018 and December 31, 2017, respectively. The CLO V warehouse facility has a market standard advance rate and the outstanding balances bear interest at LIBOR plus 1.375% until July 31, 2018, which marks the end of the revolving period on the facility. The facility has a 10 month amortization period after the revolving period in which the outstanding balances bear interest rate at LIBOR plus 2.30%. 

 

On February 28, 2018, the Company entered into a Repurchase Agreement with BNP Paribas. In connection with the Agreement, BNP took custody of asset-back securities issued by CLO III that had a par-value of $4.5 million. The Repurchase Agreement specifies that a significant decline of the fair market value of the asset-backed securities would result in a call of additional cash collateral. As of March 31, 2018, the Repurchase Agreement had an outstanding balance of $3.9 million.

 

 

16

 

 

 

7. Asset-backed Securities Issued

 

 The table below sets forth the outstanding debt obligations of CLO III and CLO IV as of March 31, 2018 and December 31, 2017:

 

 

(In thousands)

As of March 31, 2018

 

As of December 31, 2017

   

Outstanding
Principal Balance

   

 

Interest Rate
Spread to LIBOR

   

 

Weighted Average Remaining Maturity
(years)

   

 

Outstanding
Principal Balance

   

 

Interest Rate
Spread to LIBOR

   

 

Weighted Average Remaining Maturity
(years)

 
                                                         

Class A Senior Secured Floating Rate Notes

  $ 513,750       1.37% - 1.53%       10.56     $ 513,750       1.24% - 1.37%       9.22  

Class B Senior Secured Floating Rate Notes

    95,700       1.90% - 2.05%       10.56       95,700       1.80% - 1.90%       9.26  

Class C Senior Secured Deferrable Floating Rate Notes

    49,500       2.65% - 2.90%       10.55       49,500       2.60% - 2.65%       9.18  

Class D Senior Secured Deferrable Floating Rate Notes

    46,350       4.15% - 5.10%       10.53       46,350       3.90% - 4.15%       9.14  

Class E Senior Secured Deferrable Floating Rate Notes

    40,800       6.80% - 7.35%       10.55       40,800       6.80% - 7.10%       9.21  

Total secured notes sold to investors

  $ 746,100                         $ 746,100                      
                                                         

Less: Debt issuance cost

    (6,589 )                         (7,852 )                    

Less: Repurchase of debt

    (4,453 )                         -                      

Total CLOs asset-backed securities issued

  $
735,058