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Fitch Rates Dryden 37 Senior Loan Fund/LLC

CHICAGO–(BUSINESS WIRE)–

Fitch Ratings assigns the following rating and Rating Outlook to Dryden 37 Senior Loan Fund/LLC:

–$320,000,000 class A notes ‘AAAsf’; Outlook Stable.

Fitch does not rate the class B, C, D, E, F or subordinated notes.

TRANSACTION SUMMARY

Dryden 37 Senior Loan Fund (the issuer) and Dryden 37 Senior Loan Fund LLC (the co-issuer) represent an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Prudential Investment Management, Inc. (Prudential). Net proceeds from the issuance of notes will be used to purchase a portfolio of approximately $500 million of leveraged loans. The CLO will have a four-year reinvestment period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 36% for class A, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the ‘AAAsf’ stress scenario. The level of CE for the class A notes is below the average for recent CLO issuances; however, cash flow modeling indicates performance in line with other ‘AAAsf’ rated CLO notes.

‘B+/B’ Asset Quality: The average credit quality of the indicative portfolio is ‘B+/B’, which is slightly better than that of recent CLOs. Issuers rated in the ‘B’ rating category denote relatively weak credit quality; however, in Fitch’s opinion, the class A notes are unlikely to be affected by the foreseeable level of defaults. The class A notes are robust against default rates of up to 57.4%.

Strong Recovery Expectations: The indicative portfolio consists of 96.4% first-lien senior-secured loans. Approximately 89.5% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned Recovery Rating of ‘RR2’ or higher, resulting in a base case recovery assumption of 76.1%. In determination of the class A note rating, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stress assumptions. The analysis of Dryden 37 class A notes assumed a 34.7% recovery rate in Fitch’s ‘AAAsf’ scenario.

RATING SENSITIVITIES

Fitch evaluated the structure’s sensitivity to the potential variability of key model assumptions including decreases in weighted average spread or recovery rates and increases in default rates or correlation. Fitch expects the class A notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between ‘A-sf’ and ‘AAAsf’ for the class A notes.

Sources of information used to assess these ratings were provided by the arranger, J.P. Morgan Securities LLC, and the public domain.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying new issue report, which will be available shortly to investors on Fitch’s website at ‘www.fitchratings.com‘.

For more information about Fitch’s comprehensive subscription service FitchResearch, which includes all presale reports, surveillance and credit reports on more than 20 asset classes, contact product sales at +1-212-908-0800 or at ‘webmaster@fitchratings.com‘.

Additional information is available at ‘www.fitchratings.com‘.

Applicable Criteria & Related Research:

–‘Global Structured Finance Rating Criteria’ (Aug. 4, 2014);

–‘Global Rating Criteria for Corporate CDOs’ (July 25, 2014);

–‘Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds’ (Dec. 19, 2014);

–‘Counterparty Criteria for Structured Finance and Covered Bonds’ (May 14, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Global Rating Criteria for Corporate CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753057

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=981238

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Investment & Company InformationFinanceFitch Ratings Contact:

Fitch Ratings

Primary Analyst

Aaron Hughes

Director

+1-312-368-2074

Fitch Ratings, Inc.

70 West Madison Street

Chicago, IL 60602

or

Secondary Analyst

Cristina Feracota

Associate Director

+1-312-606-2300

or

Committee Chairperson

Derek Miller

Senior Director

+1-312-368-2076

or

Media Relations:

Sandro Scenga, +1-212-908-0278

sandro.scenga@fitchratings.com […]

Fitch Rates GoldenTree Loan Opportunities IX, Limited/LLC

CHICAGO–(BUSINESS WIRE)–

Fitch Ratings assigns the following rating to GoldenTree Loan Opportunities IX, Limited/LLC:

–$409,500,000 class A notes ‘AAAsf’; Outlook Stable.

Fitch does not rate the class B-1, B-2, C, D, E or F notes or the subordinated notes.

TRANSACTION SUMMARY

GoldenTree Loan Opportunities IX, Limited (the issuer) and GoldenTree Loan Opportunities IX, LLC (the co-issuer) together comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by GoldenTree Asset Management LP (GoldenTree). Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $650 million of primarily senior-secured leveraged loans. The CLO will have a four-year reinvestment period and a two-year noncall period.

KEY RATING DRIVERS

Sufficient Credit Enhancement (CE): CE of 37% for the class A notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in a ‘AAAsf’ stress scenario. The degree of CE available to the class A notes is slightly lower than the average CE of recent CLO issuances; however, cash flow modeling indicates performance is in line with other ‘AAAsf’ CLO notes.

‘B/B-‘ Asset Quality: The average credit quality of the indicative portfolio is approximately ‘B/B-‘, which is comparable to recent CLOs. Issuers rated in the ‘B’ rating category denote a highly speculative credit quality; however, in Fitch’s opinion, class A notes are unlikely to be affected by the foreseeable level of defaults. Class A notes are projected to be able to withstand default rates of up to 64.2%.

Strong Recovery Expectations: The indicative portfolio consists of 96.9% first-lien senior-secured loans. Approximately 95% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned Recovery Rating of ‘RR2’ or higher, resulting in a base case recovery assumption of 76%. In determining the class A note rating, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stress scenarios. The analysis of GoldenTree IX class A notes assumed a 35.2% recovery rate in Fitch’s ‘AAAsf’ scenario.

RATING SENSITIVITIES

Fitch evaluated the structure’s sensitivity to the potential variability of key model assumptions, including decreases in weighted average spread or recovery rates and increases in default rates or correlation. Fitch expects the class A notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between ‘A-sf’ and ‘AAAsf’ for the class A notes.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying new issue report, which will be available shortly to investors on Fitch’s website at ‘www.fitchratings.com‘.

For more information about Fitch’s comprehensive subscription service FitchResearch, which includes all presale reports, surveillance and credit reports on more than 20 asset classes, contact product sales at +1-212-908-0800 or at ‘webmaster@fitchratings.com‘.

Additional information is available at ‘www.fitchratings.com‘.

The sources of information used to assess these ratings were the transaction documents provided by the arranger, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and the public domain.

Applicable Criteria and Related Research:

–‘Global Structured Finance Rating Criteria’ (Aug. 4, 2014);

–‘Global Rating Criteria for Corporate CDOs’ (July 25, 2014);

–‘Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds’ (Jan. 23, 2014);

–‘Counterparty Criteria for Structured Finance and Covered Bonds’ (May 14, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Global Rating Criteria for Corporate CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753057

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725537

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=917375

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Security Upgrades & DowngradesFinanceFitch Ratings Contact:

Fitch Ratings

Primary Analyst:

Robert Rhein, +1-312-606-2314

Director

Fitch Ratings, Inc.

70 West Madison Street

Chicago, IL 60602

or

Secondary Analyst:

Joseph Farfsing, +1-312-368-3346

Associate Director

or

Committee Chairperson:

Derek Miller, +1-312-368-2076

Senior Director

or

Media Relations:

Sandro Scenga, New York, +1-212-908-0278

sandro.scenga@fitchratings.com […]

Leveraged Loan Issuance Sinks to $2.9B As Market Navigates Rocky Terrain

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US leveraged loan issuance sunk to $2.9 billion this week as the market joined equities and high yield bonds in what was a dismal week, highlighted by a dramatic drop in loan returns and a nearly $1 billion investor cash withdrawal from the asset class.

With the paltry activity, leveraged loan issuance for the year now totals $475.1 billion, compared to $501.9 billion at this point in 2013. The $2.9 billion was the smallest weekly issuance since the dog days of August, and comprised only eight issuers, the largest of which was a $525 million credit backing INC Research, which services the biopharmaceutical and medical device industries.

It was a trying week, to say to be sure.

“Arrangers were cautious in terms of new business. Instead, it was a week to clean up and move on, with arrangers re-tailoring numerous deals to get them over the finish line,” says LCD’s Chris Donnelly, in his weekly market analysis.

One of the chief reasons for that caution, of course, is the generally gloomy economic outlook which, among other things, prompted a major sell-off in stocks earlier in the week. Leveraged loans followed suit, with the S&P LSTA Loan Index seeing its biggest one-day slide since 2012. What’s more, retail investors continue to shun the market. They pulled almost $1 billion from US loan funds this week, the 14th straight net withdrawal and the 25th in the last 27 weeks, totaling some $15 billion.

Unsurprisingly, yields in the loan market are widening as result. The average clearing yield on a single-B institutional deal increased to 5.79% this week from 5.57% a week ago, says Donnelly. Likewise, the average BB yield jumped, by 10 bps, to 4.63%, as even well-regarded transactions – including deals that would appear to be tailor-made for the always hungry CLO community – widened.

[…]

Fitch to Rate GoldenTree Loan Opportunities IX, Limited/LLC; Issues Presale

CHICAGO–(BUSINESS WIRE)–

Fitch Ratings expects to assign the following rating and Rating Outlook to GoldenTree Loan Opportunities IX, Limited/LLC:

–$409,500,000 class A notes ‘AAAsf’; Outlook Stable.

Fitch does not expect to rate the class B-1, B-2, C, D, E or F notes, or the subordinated notes.

TRANSACTION SUMMARY

GoldenTree Loan Opportunities IX, Limited (the issuer) and GoldenTree Loan Opportunities IX, LLC (the co-issuer) together comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by GoldenTree Asset Management LP (GoldenTree). Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $650 million of primarily senior secured leveraged loans. The CLO will have a four-year reinvestment period and a two-year noncall period.

KEY RATING DRIVERS

Sufficient Credit Enhancement (CE): CE of 37% for the class A notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in a ‘AAAsf’ stress scenario. The degree of CE available to the class A notes is slightly lower than the average CE of recent CLO issuances; however, cash flow modeling indicates performance is in line with other ‘AAAsf’ CLO notes.

‘B/B-‘ Asset Quality: The average credit quality of the indicative portfolio is approximately ‘B/B-‘, which is comparable to recent CLOs. Issuers rated in the ‘B’ rating category denote a highly speculative credit quality; however, in Fitch’s opinion, class A notes are unlikely to be affected by the foreseeable level of defaults. Class A notes are projected to be able to withstand default rates of up to 64.8%.

Strong Recovery Expectations: The indicative portfolio consists of 96.6% first-lien senior secured loans. Approximately 96.6% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned recovery rating of ‘RR2’ or higher, resulting in a base case recovery assumption of 76.2%. In determining the class A note rating, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stress scenarios. The analysis of GoldenTree IX class A notes assumed a 35.4% recovery rate in Fitch’s ‘AAAsf’ scenario.

RATING SENSITIVITIES

Fitch evaluated the structure’s sensitivity to the potential variability of key model assumptions, including decreases in recovery rates and increases in default rates or correlation. Fitch expects the class A notes to remain investment grade, even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between ‘A-sf’ and ‘AAAsf’ for the class A notes.

The expected ratings are based on information provided to Fitch as of Oct. 3, 2014. Sources of information used to assess these ratings were provided by the arranger, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and the public domain.

Key Rating Drivers and Rating Sensitivities are further detailed in the accompanying presale report, available at ‘www.fitchratings.com‘ or by clicking on the link.

Additional information is available at ‘www.fitchratings.com‘.

Applicable Criteria & Related Research:

–‘Global Structured Finance Rating Criteria’ (Aug. 4, 2014);

–‘Global Rating Criteria for Corporate CDOs’ (July 25, 2014);

–‘Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds’ (Jan. 23, 2014);

–‘Counterparty Criteria for Structured Finance and Covered Bonds’ (May 14, 2014).

Applicable Criteria and Related Research: GoldenTree Loan Opportunities IX, Limited/LLC

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=780648

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Global Rating Criteria for Corporate CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753057

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725537

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=889814

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Security Upgrades & DowngradesFinanceFitch Ratings Contact:

Fitch Ratings

Primary Analyst

Robert Rhein, +1 312-606-2314

Director

Fitch Ratings, Inc.

70 West Madison Street

Chicago, IL 60602

or

Secondary Analyst

Joseph Farfsing, +1 312-368-3346

Associate Director

or

Committee Chairperson

Derek Miller, +1 312-368-2076

Senior Director

or

Media Relations:

Sandro Scenga, +1 212-908-0278

sandro.scenga@fitchratings.com […]

Arbor Realty Trust Reports Second Quarter 2014 Results and Declares Common and Preferred Stock Dividends

Second Quarter Highlights:

FFO of $13.7 million, or $0.27 per diluted common share1 Net income attributable to common stockholders of $11.5 million, or $0.23 per diluted common share Declares a cash dividend of $0.13 per share of common stock Declares cash dividends of $0.515625 per share of Series A, $0.484375 per share of Series B and $0.53125 per share of Series C preferred stock Adjusted book value per common share of $9.21, GAAP book value per common share of $7.671 Closed a third collateralized loan obligation totaling $375 million Issued $58.6 million of 7.375% senior unsecured notes Recorded a $7.9 million gain from the sale of an equity investment Recorded $4.8 million in cash recoveries of previously recorded reserves Recorded $4.0 million in loan loss reserves

Recent Developments:

Recognized a $58.1 million gain in July related to the 450 West 33rd Street transaction resulting in proforma GAAP book value per common share of $8.82 as of June 30, 20141 Purchased 1.0 million outstanding warrants for $2.6 million in July

UNIONDALE, N.Y., Aug. 1, 2014 (GLOBE NEWSWIRE) — Arbor Realty Trust, Inc. (ABR), a real estate investment trust focused on the business of investing in real estate related bridge and mezzanine loans, preferred and direct equity investments, mortgage-related securities and other real estate related assets, today announced financial results for the second quarter ended June 30, 2014. Arbor reported net income attributable to common stockholders for the quarter of $11.5 million, or $0.23 per diluted common share, compared to $3.0 million, or $0.07 per diluted common share for the quarter ended June 30, 2013. Net income attributable to common stockholders for the six months ended June 30, 2014 was $17.3 million, or $0.35 per diluted common share, compared to $9.6 million, or $0.25 per diluted common share for the six months ended June 30, 2013. Funds from operations (“FFO”) for the quarter ended June 30, 2014 was $13.7 million, or $0.27 per diluted common share, compared to $4.8 million, or $0.11 per diluted common share for the quarter ended June 30, 2013. FFO for the six months ended June 30, 2014 was $21.7 million, or $0.43 per diluted common share, compared to $13.1 million, or $0.34 per diluted common share for the six months ended June 30, 2013.1

Portfolio Activity

Loan and investment portfolio activity during the second quarter of 2014 consisted of:

Originated 21 new loans totaling $170.3 million, of which 16 were bridge loans for $154.0 million. Payoffs and pay downs on 26 loans totaling $245.9 million. Extended 10 loans totaling $109.6 million.

At June 30, 2014, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was approximately $1.64 billion, with a weighted average current interest pay rate of 5.25%. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 5.93% at June 30, 2014.

As of June 30, 2014, Arbor’s loan portfolio consisted of 30% fixed-rate and 70% variable-rate loans.

The average balance of the Company’s loan and investment portfolio during the second quarter of 2014, excluding loan loss reserves, was $1.64 billion and the average yield on these assets for the quarter was 6.22%, compared to $1.62 billion and 6.23% for the first quarter of 2014.

The Company recorded $4.0 million in loan loss reserves related to three loans with a carrying value of $153.7 million before loan loss reserves. The Company also recorded $4.8 million of net recoveries of previously recorded loan loss reserves during the quarter. At June 30, 2014, the Company’s total loan loss reserves were $115.1 million relating to 14 loans with an aggregate carrying value before loan loss reserves of $237.6 million.

The Company had two non-performing loans with a carrying value of $6.3 million, net of related loan loss reserves of $34.0 million as of June 30, 2014, as compared to four loans with a carrying value of $10.2 million, net of related loan loss reserves of $39.6 million as of March 31, 2014.

Financing Activity

The balance of debt that finances the Company’s loan and investment portfolio at June 30, 2014 was approximately $1.22 billion with a weighted average interest rate including fees of 3.75%, as compared to approximately $1.21 billion and a rate of 3.52% at March 31, 2014. The average balance of debt that finances the Company’s loan and investment portfolio for the second quarter of 2014 was approximately $1.21 billion, as compared to approximately $1.17 billion for the first quarter of 2014. The average cost of borrowings for the second quarter was 3.73%, compared to 3.68% for the first quarter of 2014.

In April 2014, Arbor completed its third collateralized loan obligation (“CLO”) totaling approximately $375.0 million of real estate related assets and cash. An aggregate of $281.3 million of investment grade-rated debt was issued, and Arbor retained an equity interest in the portfolio with a notional amount of $93.8 million. The notes have an initial weighted average spread of 239 basis points over one-month LIBOR. Including fees and transaction costs, the initial weighted average note rate was 3.07%. The facility has a two and a half year replenishment period that allows the principal proceeds from repayments of the collateral assets to be reinvested in qualifying replacement assets, subject to certain conditions. The $375.0 million of collateral includes $67.7 million of additional capacity to finance future loans for a period of up to 120 days from the closing date of the CLO.

In May 2014, the Company issued $58.6 million aggregate principal amount of 7.375% senior unsecured notes in an underwritten public offering (ABRN), generating net proceeds of approximately $56.4 million after deducting the underwriting discount and other offering expenses. The notes are due in 2021 and can be redeemed by the Company after May 15, 2017. Including certain fees and costs, the weighted average note rate was 7.91% at June 30, 2014.

The Company amended a $50 million financing facility increasing the committed amount to $75 million, extended the maturity for one year and reduced the spread over LIBOR from 250 basis points to 225 basis points. Additionally, the Company amended another financing facility increasing the committed amount from $45 million to $60 million.

The Company repaid in full a $33 million warehouse credit facility as part of the issuance of the Company’s third CLO. In addition, the Company repaid in full a $20 million unsecured revolving line of credit primarily from proceeds received from the issuance of the Company’s senior unsecured notes.

The Company is subject to various financial covenants and restrictions under the terms of the Company’s CDO/CLO vehicles, credit facilities, and repurchase agreements. The Company’s CDO/CLO vehicles contain interest coverage and asset over collateralization covenants that must be met as of the waterfall distribution date in order for the Company to receive such payments. The Company believes that it was in compliance with all financial covenants and restrictions as of June 30, 2014 and as of the most recent determination dates in July 2014.

The chart below is a summary of the Company’s CDO/CLO compliance tests as of the most recent determination dates in July 2014:

Cash Flow Triggers CDO I CDO II CDO III CLO I CLO II CLO III Overcollateralization (1)

Current 171.01% 153.44% 109.20% 142.96% 146.89% 133.33%

Limit 145.00% 127.30% 105.60% 137.86% 144.25% 132.33%

Pass / Fail Pass Pass Pass Pass Pass Pass

Interest Coverage (2)

Current 553.88% 387.06% 498.96% 206.81% 279.82% 274.30%

Limit 160.00% 147.30% 105.60% 120.00% 120.00% 120.00%

Pass / Fail Pass Pass Pass Pass Pass Pass

(1) The overcollateralization ratio divides the total principal balance of all collateral in the CDO/CLO by the total principal balance of the bonds associated with the applicable ratio. To the extent an asset is considered a defaulted security, the asset’s principal balance for purposes of the overcollateralization test is the lesser of the asset’s market value or the principal balance of the defaulted asset multiplied by the asset’s recovery rate which is determined by the rating agencies.

(2) The interest coverage ratio divides interest income by interest expense for the classes senior to those retained by the Company.

Equity Investments

In May 2014, the Company sold its 12.5% interest in a joint venture that owns and operates a commercial property with a carrying value of approximately $0.1 million and received $7.9 million in cash. As a result, the Company recorded a gain from this transaction of approximately $7.9 million in gain on sale of equity interest.

As previously disclosed, the Company will recognize a $58.1 million net gain related to its investment in the 450 West 33rd Street property in its third quarter 2014 consolidated financial statements. In 2007, the Company received net proceeds of approximately $58.1 million from the closing of this transaction and recorded a corresponding net deferred gain as a result of guarantying a portion of the property’s indebtedness. In July 2014, the existing debt on the property was refinanced and the Company’s portion of the guarantee terminated, resulting in the recognition of the deferred gain for GAAP purposes.

Common Dividend

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.13 per share of common stock for the quarter ended June 30, 2014. The dividend is payable on September 2, 2014 to common shareholders of record on August 15, 2014. The ex-dividend date is August 13, 2014.

Preferred Dividends

The Company announced today that its Board of Directors has declared cash dividends on the Company’s Series A, Series B and Series C cumulative redeemable preferred stock reflecting accrued dividends from June 1, 2014 through August 31, 2014. The dividends are payable on September 2, 2014 to shareholders of record on August 15, 2014. The Company will pay total dividends of $0.515625, $0.484375 and $0.53125 per share on the Series A, Series B and Series C preferred stock, respectively.

Earnings Conference Call

Management will host a conference call today at 10:00 a.m. ET. A live webcast of the conference call will be available at www.arborrealtytrust.com in the investor relations area of the website. Those without web access should access the call telephonically at least ten minutes prior to the conference call. The dial-in numbers are (877) 280-4957 for domestic callers and (857) 244-7314 for international callers. Please use participant passcode 12621739.

After the live webcast, the call will remain available on the Company’s website, www.arborrealtytrust.com, through August 31, 2014. In addition, a telephonic replay of the call will be available until August 8, 2014. The replay dial-in numbers are (888) 286-8010 for domestic callers and (617) 801-6888 for international callers. Please use passcode 14799841.

About Arbor Realty Trust, Inc.

Arbor Realty Trust, Inc. is a real estate investment trust, which invests in a diversified portfolio of multi-family and commercial real estate related bridge and mezzanine loans, preferred equity investments, mortgage related securities and other real estate related assets. Arbor is externally managed and advised by Arbor Commercial Mortgage, LLC, a national commercial real estate finance company operating through 14 offices in the US that specializes in debt and equity financing for multi-family and commercial real estate. For more information about Arbor Realty Trust, Inc., please visit www.arborrealtytrust.com.

Safe Harbor Statement

Certain items in this press release may constitute forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Arbor can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from Arbor’s expectations include, but are not limited to, continued ability to source new investments, changes in interest rates and/or credit spreads, changes in the real estate markets, and other risks detailed in Arbor’s Annual Report on Form 10-K for the year ended December 31, 2013 and its other reports filed with the SEC. Such forward-looking statements speak only as of the date of this press release. Arbor expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Arbor’s expectations with regard thereto or change in events, conditions, or circumstances on which any such statement is based.

Non-GAAP Financial Measures

During the quarterly earnings conference call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G. In addition, the Company has used non-GAAP financial measures in this press release. A supplemental schedule of each non-GAAP financial measure and the comparable GAAP financial measure can be found on page 9 and 10 of this release.

1. See attached supplemental schedule of non-GAAP financial measures.

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME – (Unaudited)

Quarter Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013

Interest income $ 25,492,429 $ 24,329,116 $ 50,404,284 $ 47,317,938 Interest expense 11,222,597 10,333,073 21,813,975 20,975,317 Net interest income 14,269,832 13,996,043 28,590,309 26,342,621

Other revenue:

Property operating income 9,001,383 8,231,822 18,259,471 17,127,256 Other income, net 150,187 605,317 1,008,583 1,984,775 Total other revenue 9,151,570 8,837,139 19,268,054 19,112,031

Other expenses:

Employee compensation and benefits 3,552,548 2,968,678 6,938,497 6,052,317 Selling and administrative 3,194,845 2,969,733 5,177,064 5,159,016 Property operating expenses 7,423,080 7,161,334 14,420,203 14,031,493 Depreciation and amortization 2,158,353 1,827,595 3,970,036 3,459,726 Impairment loss on real estate owned — — 250,000 — Provision for loan losses (net of recoveries) (870,187) 821,722 (735,843) 3,321,877 Management fee – related party 2,500,000 2,800,000 4,950,000 5,600,000 Total other expenses 17,958,639 18,549,062 34,969,957 37,624,429

Income before gain on extinguishment of debt, gain on sale of equity interest and income (loss) from equity affiliates 5,462,763 4,284,120 12,888,406 7,830,223 Gain on extinguishment of debt — — — 3,763,000 Gain on sale of equity interest 7,851,266 — 7,851,266 — Income (loss) from equity affiliates 40,493 (81,804) 80,541 (163,689)

Net income 13,354,522 4,202,316 20,820,213 11,429,534

Preferred stock dividends 1,888,465 1,152,617 3,479,395 1,685,945 Net income attributable to noncontrolling interest — 53,833 — 107,484

Net income attributable to Arbor Realty Trust, Inc. common stockholders $ 11,466,057 $ 2,995,866 $ 17,340,818 $ 9,636,105

Basic earnings per common share $ 0.23 $ 0.07 $ 0.35 $ 0.25

Diluted earnings per common share $ 0.23 $ 0.07 $ 0.35 $ 0.25

Dividends declared per common share $ 0.13 $ 0.12 $ 0.26 $ 0.24

Weighted average number of shares of common stock outstanding:

Basic 50,267,462 43,113,898 49,804,457 38,468,718

Diluted 50,701,742 43,555,495 50,229,899 38,921,834

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

June 30, December 31,
2014 2013
(Unaudited)
Assets:

Cash and cash equivalents $ 47,813,740 $ 60,389,552 Restricted cash 156,795,469 54,962,316 Loans and investments, net 1,502,586,691 1,523,699,653 Available-for-sale securities, at fair value 2,805,471 37,315,652 Investments in equity affiliates 4,588,107 4,680,306 Real estate owned, net 120,830,942 111,718,177 Real estate held-for-sale, net — 11,477,676 Due from related party 358,110 98,058 Prepaid management fee – related party 19,047,949 19,047,949 Other assets 48,146,390 54,083,143 Total assets $ 1,902,972,869 $ 1,877,472,482

Liabilities and Equity:

Credit facilities and repurchase agreements $ 22,204,000 $ 159,125,023 Collateralized debt obligations 433,297,191 639,622,981 Collateralized loan obligations 545,750,000 264,500,000 Senior unsecured notes 58,637,625 — Junior subordinated notes to subsidiary trust issuing preferred securities 159,557,894 159,291,427 Notes payable 2,498,542 2,500,000 Mortgage note payable — real estate owned 53,538,637 42,745,650 Mortgage note payable — real estate held-for-sale — 11,005,354 Due to related party 1,666,667 2,794,087 Due to borrowers 16,979,900 20,326,030 Deferred revenue 77,123,133 77,123,133 Other liabilities 55,127,961 60,842,515 Total liabilities 1,426,381,550 1,439,876,200

Equity:

Arbor Realty Trust, Inc. stockholders’ equity:

Preferred stock, $0.01 par value: 100,000,000 shares authorized; 8.25% Series A

cumulative redeemable preferred stock, $38,787,500 aggregate liquidation preference;
1,551,500 issued and outstanding at June 30, 2014 and December 31, 2013;

7.75% Series B cumulative redeemable preferred stock, $31,500,000 aggregate

liquidation preference; 1,260,000 issued and outstanding at June 30, 2014 and

December 31, 2013; 8.50% Series C cumulative redeemable preferred stock,

$22,500,000 aggregate liquidation preference; 900,000 issued and outstanding at

June 30, 2014, no shares issued and outstanding at December 31, 2013 89,295,905 67,654,655 Common stock, $0.01 par value: 500,000,000 shares authorized; 53,128,075

shares issued, 50,477,308 shares outstanding at June 30, 2014 and

51,787,075 shares issued, 49,136,308 shares outstanding at December 31, 2013 531,280 517,870 Additional paid-in capital 631,889,669 623,993,245 Treasury stock, at cost – 2,650,767 shares at June 30, 2014 and December 31, 2013 (17,100,916) (17,100,916) Accumulated deficit (207,803,092) (212,231,319) Accumulated other comprehensive loss (20,221,527) (25,237,253) Total stockholders’ equity 476,591,319 437,596,282 Total liabilities and equity $ 1,902,972,869 $ 1,877,472,482

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
Supplemental Schedule of Non-GAAP Financial Measures– Adjusted and GAAP Book Value per Common Share (Actual and Pro Forma) (Unaudited)

Pro Forma
June 30, 2014 June 30, 2014

GAAP Arbor Realty Trust, Inc. Stockholders’ Equity $ 476,591,319 $ 534,666,503 Subtract: 8.25% Series A, 7.75% Series B and 8.50% Series C cumulative redeemable preferred stock (89,295,905) (89,295,905)

GAAP Arbor Realty Trust, Inc. Common Stockholders’ Equity 387,295,414 445,370,598

Add: 450 West 33rd Street transaction – deferred revenue 77,123,133 — Unrealized loss on derivative instruments 19,551,436 19,551,436

Subtract: 450 West 33rd Street transaction – prepaid management fee (19,047,949) —

Adjusted Arbor Realty Trust, Inc. Common Stockholders’ Equity $ 464,922,034 $ 464,922,034

Adjusted book value per common share $ 9.21 $ 9.21

GAAP book value per common share $ 7.67 $ 8.82

Common shares outstanding 50,477,308 50,477,308

Given the magnitude and the deferral structure of the 450 West 33rd Street transaction combined with the significance of the unrealized gain and/or loss position of our qualifying derivative instruments, Arbor has elected to report adjusted book value per common share for the affected period to currently reflect the impact of the 450 West 33rd Street transaction on the Company’s financial condition as well as the removal of the temporary nature of unrealized gains or losses as a component of equity from qualifying interest rate swaps on our financial position. Over time, as these qualifying interest rate swaps reach their maturity, the fair value of these swaps will return to their original par value. The table also presents pro forma GAAP book value per common share based on June 30, 2014 financial information adjusted for the recognition of the $58.1 million net deferred gain from the 450 West 33rd Street transaction which occurred in the third quarter of 2014. Management considers this non-GAAP financial measure to be an effective indicator, for both management and investors, of Arbor’s financial condition. Arbor’s management does not advocate that investors consider this non-GAAP financial measure in isolation from, or as a substitute for, financial measures prepared in accordance with GAAP.

GAAP book value per common share and adjusted book value per common share calculations do not take into account any dilution from the 1,000,000 warrants issued to Wachovia as part of the 2009 debt restructuring. These warrants were purchased in the third quarter of 2014 for $2.6 million.

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES

Supplemental Schedule of Non-GAAP Financial Measures (Continued) — Funds from Operations (Unaudited)

Quarter Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013

Net income attributable to Arbor Realty Trust, Inc. common stockholders $ 11,466,057 $ 2,995,866 $ 17,340,818 $ 9,636,105

Add:

Impairment loss on real estate owned — — 250,000 — Depreciation – real estate owned 2,158,353 1,827,595 3,970,036 3,459,726 Depreciation – investment in equity affiliate 69,370 22,599 138,740 45,198

Funds from operations (“FFO”) $ 13,693,780 $ 4,846,060 $ 21,699,594 $ 13,141,029

Diluted FFO per common share $ 0.27 $ 0.11 $ 0.43 $ 0.34

Diluted weighted average shares outstanding 50,701,742 43,555,495 50,229,899 38,921,834

Arbor is presenting funds from operations, or FFO, because management believes it to be an important supplemental measure of the Company’s operating performance in that it is frequently used by analysts, investors and other parties in the evaluation of REITs. The National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net income (loss) attributable to common stockholders (computed in accordance with GAAP), excluding gains (losses) from sales of depreciated real properties, plus impairments of depreciated real properties and real estate related depreciation and amortization, and after adjustments for unconsolidated ventures. The Company considers gains and losses on the sales of undepreciated real estate investments to be a normal part of its recurring operating activities in accordance with GAAP and should not be excluded when calculating FFO. Losses from discontinued operations are not excluded when calculating FFO.

FFO is not intended to be an indication of our cash flow from operating activities (determined in accordance with GAAP) or a measure of our liquidity, nor is it entirely indicative of funding our cash needs, including our ability to make cash distributions. Arbor’s calculation of FFO may be different from the calculation used by other companies and, therefore, comparability may be limited.

View photo.Financials IndustryFinance Contact: Arbor Realty Trust, Inc.
Paul Elenio, Chief Financial Officer
516-506-4422
pelenio@arbor.com
Media:
Bonnie Habyan, EVP of Marketing
516-506-4615
bhabyan@arbor.com
Investors:
Joseph Green
The Ruth Group
646-536-7013
jgreen@theruthgroup.com
[…]

Arbor Realty Trust Reports First Quarter 2014 Results and Declares Common and Preferred Stock Dividends

First Quarter Highlights:

– Declares a cash dividend of $0.13 per share of common stock

– Declares cash dividends of $0.515625 per share of Series A, $0.484375 per share of Series B and $0.5549 per share of Series C preferred stock

– FFO of $8.0 million, or $0.16 per diluted common share1

– Net income attributable to common stockholders of $5.9 million, or $0.12 per diluted common share

– Originated $275 million of new loans

– Raised $28 million of capital through two stock offerings

– Increased the capacity of financing facilities by $30 million

– Adjusted book value per common share of $9.15, GAAP book value per common share of $7.551

Recent Developments:

– Closed a third collateralized loan obligation totaling $375 million in April

– Increased the capacity of financing facilities by $40 million in April

UNIONDALE, N.Y., May 1, 2014 (GLOBE NEWSWIRE) — Arbor Realty Trust, Inc. (ABR), a real estate investment trust focused on the business of investing in real estate related bridge and mezzanine loans, preferred and direct equity investments, mortgage-related securities and other real estate related assets, today announced financial results for the first quarter ended March 31, 2014. Arbor reported net income attributable to common stockholders for the quarter of $5.9 million, or $0.12 per diluted common share, compared to $6.6 million, or $0.19 per diluted common share for the quarter ended March 31, 2013. Funds from operations (“FFO”) for the quarter ended March 31, 2014 was $8.0 million, or $0.16 per diluted common share, compared to $8.3 million, or $0.24 per diluted common share for the quarter ended March 31, 2013.1

Portfolio Activity

Loan and investment portfolio activity during the first quarter of 2014 consisted of:

Originated 18 new loans totaling $274.9 million, of which 16 were bridge loans for $263.9 million. Payoffs and pay downs on 13 loans totaling $226.8 million, of which $5.7 million was charged off against loan loss reserves related to one loan. Modified and/or extended seven loans totaling $35.2 million.

At March 31, 2014, the loan and investment portfolio’s unpaid principal balance, excluding loan loss reserves, was approximately $1.71 billion, with a weighted average current interest pay rate of 5.26%. Including certain fees earned and costs associated with the loan and investment portfolio, the weighted average current interest pay rate was 5.79% at March 31, 2014.

As of March 31, 2014, Arbor’s loan portfolio consisted of 29% fixed-rate and 71% variable-rate loans.

The average balance of the Company’s loan and investment portfolio during the first quarter of 2014, excluding loan loss reserves, was $1.62 billion and the average yield on these assets for the quarter was 6.23%, compared to $1.76 billion and 5.86% for the fourth quarter of 2013.

During the first quarter of 2014, the Company recorded a $1.0 million loan loss reserve related to a loan with a carrying value of $4.8 million before loan loss reserves. The $1.0 million of loan loss reserve was attributable to a loan on which the Company had previously recorded reserves and was fully reserved as of March 31, 2014. The Company also recorded $0.9 million of net recoveries of previously recorded loan loss reserves during the quarter. In addition, the Company charged off $5.7 million of a previously recorded loan loss reserve related to one loan during the quarter. At March 31, 2014, the Company’s total loan loss reserves were $116.7 million relating to 14 loans with an aggregate carrying value before loan loss reserves of $201.4 million. The Company recognizes income on impaired loans on a cash basis to the extent it is received.

The Company had four non-performing loans with a carrying value of $10.2 million, net of related loan loss reserves of $39.6 million as of March 31, 2014. Income recognition on non-performing loans has been suspended and will resume if and when the loans become contractually current.

During the first quarter of 2014, the Company recorded an impairment loss of $0.3 million on a real estate owned asset with a $4.4 million carrying value before cumulative impairments of $1.3 million.

During the first quarter of 2014, the Company sold the majority of its residential mortgage-backed securities with an aggregate carrying value of $81.2 million for $81.9 million, of which $47.8 million were accounted for as derivatives net of financings totaling $41.8 million.

Financing Activity

The balance of debt that finances the Company’s loan and investment portfolio at March 31, 2014 was approximately $1.21 billion with a weighted average interest rate of 3.52%, as compared to approximately $1.22 billion and a rate of 3.34% at December 31, 2013. The average balance of debt that finances the Company’s loan and investment portfolio for the first quarter of 2014 was approximately $1.17 billion, as compared to approximately $1.26 billion for the fourth quarter of 2013. The average cost of borrowings for the first quarter was 3.68%, compared to 3.28% for the fourth quarter of 2013.

During the first quarter of 2014, the Company amended one of its warehouse facilities increasing the committed amount from $75 million to $100 million.

In addition, during the quarter, the Company amended another financing facility increasing the committed amount from $40 million to $45 million.

On April 28, 2014, Arbor completed its third collateralized loan obligation (“CLO”) totaling approximately $375 million of real estate related assets and cash. An aggregate of $281 million of investment grade-rated debt was issued, and Arbor retained an equity interest in the portfolio with a notional amount of $94 million. The notes have an initial weighted average spread of approximately 239 basis points over one-month LIBOR, excluding fees and transaction costs. The facility has a two and a half year replenishment period that allows the principal proceeds from repayments of the collateral assets to be reinvested in qualifying replacement assets, subject to certain conditions. The $375 million of collateral includes $68 million of additional capacity to finance future loans for a period of up to 120 days from the closing date of the CLO. Arbor will account for this transaction on its balance sheet as a financing.

In April 2014, the Company amended a $50 million financing facility increasing the committed amount to $75 million, extended the maturity for one year and reduced the spread over LIBOR from 250 basis points to 225 basis points. Additionally, in April 2014, the Company amended another financing facility increasing the committed amount from $45 million to $60 million.

The Company is subject to various financial covenants and restrictions under the terms of the Company’s CDO/CLO vehicles, credit facilities, and repurchase agreements. The Company believes that it was in compliance with all financial covenants and restrictions as of March 31, 2014.

The Company’s CDO/CLO vehicles contain interest coverage and asset over collateralization covenants that must be met as of the waterfall distribution date in order for the Company to receive such payments. If the Company fails these covenants in any of its CDOs or CLOs, all cash flows from the applicable vehicle would be diverted to repay principal and interest on the outstanding bonds and the Company would not receive any residual payments until that vehicle regained compliance with such covenants. As of the most recent determination dates in April 2014, the Company was in compliance with all CDO/CLO covenants. In the event of a breach of the covenants that could not be cured in the near-term, the Company would be required to fund its non CDO/CLO expenses, including management fees and employee costs, distributions required to maintain REIT status, debt costs, and other expenses with (i) cash on hand, (ii) income from any CDO/CLO not in breach of a covenant test, (iii) income from real property and loan assets, (iv) sale of assets, or (v) accessing the equity or debt capital markets, if available.

The chart below is a summary of the Company’s CDO/CLO compliance tests as of the most recent determination dates in April 2014:

Cash Flow Triggers CDO I (3) CDO II (3) CDO III (3) CLO I CLO II

Overcollateralization (1)

Current 184.35% 138.15% 108.74% 142.96% 146.89% Limit 145.00% 127.30% 105.60% 137.86% 144.25% Pass / Fail Pass Pass Pass Pass Pass

Interest Coverage (2)

Current 541.25% 457.31% 495.38% 232.75% 365.43% Limit 160.00% 147.30% 105.60% 120.00% 120.00% Pass / Fail Pass Pass Pass Pass Pass

(1) The overcollateralization ratio divides the total principal balance of all collateral in the CDO/CLO by the total principal balance of the bonds associated with the applicable ratio. To the extent an asset is considered a defaulted security, the asset’s principal balance for purposes of the overcollateralization test is the lesser of the asset’s market value or the principal balance of the defaulted asset multiplied by the asset’s recovery rate which is determined by the rating agencies.

(2) The interest coverage ratio divides interest income by interest expense for the classes senior to those retained by the Company.

(3) CDO I, CDO II, and CDO III have reached the end of their replenishment periods. As such, investor capital is repaid quarterly from proceeds received from loan repayments held as collateral in accordance with the terms of the respective CDO.

Equity Offerings

In February 2014, Arbor completed an underwritten public offering of 900,000 shares of its 8.50% Series C cumulative redeemable preferred stock generating net proceeds of approximately $21.6 million after deducting underwriting fees and estimated offering costs.

In February 2014, the Company entered into an “At-The-Market” (“ATM”) equity offering sales agreement whereby, in accordance with the terms of the agreement, from time to time the Company could issue and sell up to 7,500,000 shares of its common stock. During the first quarter of 2014, the Company sold 1,000,000 shares under the ATM for net proceeds of $6.5 million.

Common Dividend

The Company announced today that its Board of Directors has declared a quarterly cash dividend of $0.13 per share of common stock for the quarter ended March 31, 2014. The dividend is payable on June 2, 2014 to common shareholders of record on May 15, 2014. The ex-dividend date is May 13, 2014.

Preferred Dividends

The Company announced today that its Board of Directors has declared cash dividends on the Company’s Series A, Series B and Series C cumulative redeemable preferred stock reflecting accrued dividends through May 31, 2014. The dividends are payable on June 2, 2014 to shareholders of record on May 15, 2014. The Company will pay total dividends of $0.515625, $0.484375 and $0.5549 per share on the 8.25% Series A, 7.75% Series B and 8.50% Series C preferred stock, respectively.

Earnings Conference Call

Management will host a conference call today at 9:30 a.m. ET. A live webcast of the conference call will be available online at http://www.arborrealtytrust.com/ in the investor relations area of the Website. Those without Web access should access the call telephonically at least ten minutes prior to the conference call. The dial-in numbers are (866) 515-2915 for domestic callers and (617) 399-5129 for international callers. Please use participant passcode 67648801.

After the live webcast, the call will remain available on the Company’s Website, www.arborrealtytrust.com, through May 31, 2014. In addition, a telephonic replay of the call will be available until May 8, 2014. The replay dial-in numbers are (888) 286-8010 for domestic callers and (617) 801-6888 for international callers. Please use passcode 65112338.

About Arbor Realty Trust, Inc.

Arbor Realty Trust, Inc. is a real estate investment trust, which invests in a diversified portfolio of multi-family and commercial real estate related bridge and mezzanine loans, preferred equity investments, mortgage related securities and other real estate related assets. Arbor is externally managed and advised by Arbor Commercial Mortgage, LLC, a national commercial real estate finance company operating through 14 offices in the US that specializes in debt and equity financing for multi-family and commercial real estate. For more information about Arbor Realty Trust, Inc., please visit www.arborrealtytrust.com.

Safe Harbor Statement

Certain items in this press release may constitute forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Arbor can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from Arbor’s expectations include, but are not limited to, continued ability to source new investments, changes in interest rates and/or credit spreads, changes in the real estate markets, and other risks detailed in Arbor’s Annual Report on Form 10-K for the year ended December 31, 2013 and its other reports filed with the SEC. Such forward-looking statements speak only as of the date of this press release. Arbor expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Arbor’s expectations with regard thereto or change in events, conditions, or circumstances on which any such statement is based.

Non-GAAP Financial Measures

During the quarterly earnings conference call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G. In addition, the Company has used non-GAAP financial measures in this press release. A supplemental schedule of each non-GAAP financial measure and the comparable GAAP financial measure can be found on page 10 and 11 of this release.

1. See attached supplemental schedule of non-GAAP financial measures.

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME – (Unaudited)

Quarter Ended
March 31,
2014 2013

Interest income $ 24,911,855 $ 22,988,822 Interest expense 10,591,378 10,642,244 Net interest income 14,320,477 12,346,578

Other revenue:

Property operating income 8,661,515 8,334,328 Other income, net 858,396 1,379,458 Total other revenue 9,519,911 9,713,786

Other expenses:

Employee compensation and benefits 3,385,949 3,083,639 Selling and administrative 1,982,219 2,189,283 Property operating expenses 6,524,138 6,343,313 Depreciation and amortization 1,811,683 1,496,299 Impairment loss on real estate owned 250,000 — Provision for loan losses (net of recoveries) 134,344 2,500,155 Management fee – related party 2,450,000 2,800,000 Total other expenses 16,538,333 18,412,689 Income from continuing operations before gain on extinguishment of debt, income (loss) from equity affiliates 7,302,055 3,647,675 Gain on extinguishment of debt — 3,763,000 Income (loss) from equity affiliates 40,048 (81,885) Income from continuing operations 7,342,103 7,328,790 Income (loss) from discontinued operations 123,588 (101,572) Net income 7,465,691 7,227,218 Preferred stock dividends 1,590,930 533,328 Net income attributable to noncontrolling interest — 53,651 Net income attributable to Arbor Realty Trust, Inc. common stockholders $ 5,874,761 $ 6,640,239

Basic earnings per common share:

Income from continuing operations, net of noncontrolling interest and preferred stock dividends $ 0.12 $ 0.20 Income (loss) from discontinued operations — — Net income attributable to Arbor Realty Trust, Inc. common stockholders $ 0.12 $ 0.20

Diluted earnings per common share:

Income from continuing operations, net of noncontrolling interest and preferred stock dividends $ 0.12 $ 0.19 Income (loss) from discontinued operations — — Net income attributable to Arbor Realty Trust, Inc. common stockholders $ 0.12 $ 0.19 Dividends declared per common share $ 0.13 $ 0.12 Weighted average number of shares of common stock outstanding:

Basic 49,336,308 33,771,925 Diluted 49,752,813 34,236,689
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

March 31, December 31,
2014 2013
(Unaudited)
Assets:

Cash and cash equivalents $ 32,704,172 $ 60,389,552 Restricted cash 97,161,850 54,962,316 Loans and investments, net 1,574,832,799 1,523,699,653 Available-for-sale securities, at fair value 2,776,077 37,315,652 Investments in equity affiliates 4,680,306 4,680,306 Real estate owned, net 110,791,226 111,718,177 Real estate held-for-sale, net 11,444,812 11,477,676 Due from related party 281,462 98,058 Prepaid management fee – related party 19,047,949 19,047,949 Other assets 46,589,572 54,083,143 Total assets $ 1,900,310,225 $ 1,877,472,482

Liabilities and Equity:

Repurchase agreements and credit facilities $ 248,206,026 $ 159,125,023 Collateralized debt obligations 519,770,974 639,622,981 Collateralized loan obligations 264,500,000 264,500,000 Junior subordinated notes to subsidiary trust issuing preferred securities 159,423,385 159,291,427 Notes payable 17,498,874 2,500,000 Mortgage note payable — real estate owned 42,745,650 42,745,650 Mortgage note payable — real estate held-for-sale 11,005,354 11,005,354 Due to related party 1,140,910 2,794,087 Due to borrowers 32,656,568 20,326,030 Deferred revenue 77,123,133 77,123,133 Other liabilities 58,349,055 60,842,515 Total liabilities 1,432,419,929 1,439,876,200 Equity:

Arbor Realty Trust, Inc. stockholders’ equity:

Preferred stock, $0.01 par value: 100,000,000 shares authorized; 8.25% Series A cumulative redeemable preferred stock, $38,787,500 aggregate liquidation preference; 1,551,500 issued and outstanding at March 31, 2014 and December 31, 2013; 7.75% Series B cumulative redeemable preferred stock, $31,500,000 aggregate liquidation preference; 1,260,000 issued and outstanding at March 31, 2014 and December 31, 2013, 8.50% Series C cumulative redeemable preferred stock, $22,500,000 aggregate liquidation preference; 900,000 issued and outstanding at March 31, 2014, no shares issued and outstanding at December 31, 2013 89,295,905 67,654,655 Common stock, $0.01 par value: 500,000,000 shares authorized; 52,787,075 shares issued, 50,136,308 shares outstanding at March 31, 2014 and 51,787,075 shares issued, 49,136,308 shares outstanding at December 31, 2013 527,870 517,870 Additional paid-in capital 630,644,261 623,993,245 Treasury stock, at cost – 2,650,767 shares at March 31, 2014 and December 31, 2013 (17,100,916) (17,100,916) Accumulated deficit (212,748,410) (212,231,319) Accumulated other comprehensive loss (22,728,414) (25,237,253) Total stockholders’ equity 467,890,296 437,596,282 Total liabilities and equity $ 1,900,310,225 $ 1,877,472,482
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES Supplemental Schedule of Non-GAAP Financial Measures– Adjusted and GAAP Book Value per Common Share (Unaudited)
March 31, 2014

GAAP Arbor Realty Trust, Inc. Stockholders’ Equity $ 467,890,296 Subtract: 8.25% Series A, 7.75% Series B and 8.50% Series C cumulative redeemable preferred stock (89,295,905) GAAP Arbor Realty Trust, Inc. Common Stockholders’ Equity $ 378,594,391 Add: 450 West 33rd Street transaction – deferred revenue 77,123,133 Unrealized loss on derivative instruments 21,921,045 Subtract: 450 West 33rd Street transaction – prepaid management fee (19,047,949) Adjusted Arbor Realty Trust, Inc. Common Stockholders’ Equity $ 458,590,620 Adjusted book value per common share $ 9.15 GAAP book value per common share $ 7.55 Common shares outstanding 50,136,308

Given the magnitude and the deferral structure of the 450 West 33rd Street transaction combined with the significance of the unrealized gain and/or loss position of our qualifying derivative instruments, Arbor has elected to report adjusted book value per common share for the affected period to currently reflect the future impact of the 450 West 33rd Street transaction on the Company’s financial condition as well as the removal of the temporary nature of unrealized gains or losses as a component of equity from qualifying interest rate swaps on our financial position. Over time, as these qualifying interest rate swaps reach their maturity, the fair value of these swaps will return to their original par value. Management considers this non-GAAP financial measure to be an effective indicator, for both management and investors, of Arbor’s financial condition. Arbor’s management does not advocate that investors consider this non-GAAP financial measure in isolation from, or as a substitute for, financial measures prepared in accordance with GAAP.

ARBOR REALTY TRUST, INC. AND SUBSIDIARIES Supplemental Schedule of Non-GAAP Financial Measures (Continued) — Funds from Operations (Unaudited)

Quarter Ended
March 31,
2014 2013

Net income attributable to Arbor Realty Trust, Inc. common stockholders, GAAP basis $ 5,874,761 $ 6,640,239 Add:

Impairment loss on real estate owned 250,000 — Depreciation – real estate owned and held-for-sale (1) 1,811,683 1,632,131 Depreciation – investment in equity affiliate 69,370 22,599 Funds from operations (“FFO”) $ 8,005,814 $ 8,294,969 Diluted FFO per common share $ 0.16 $ 0.24 Diluted weighted average shares outstanding 49,752,813 34,236,689

(1) Includes discontinued operations

Arbor is presenting funds from operations, or FFO, because management believes it to be an important supplemental measure of the Company’s operating performance in that it is frequently used by analysts, investors and other parties in the evaluation of REITs. The National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net income (loss) attributable to common stockholders (computed in accordance with GAAP), excluding gains (losses) from sales of depreciated real properties, plus impairments of depreciated real properties and real estate related depreciation and amortization, and after adjustments for unconsolidated ventures. The Company considers gains and losses on the sales of undepreciated real estate investments to be a normal part of its recurring operating activities in accordance with GAAP and should not be excluded when calculating FFO. Losses from discontinued operations are not excluded when calculating FFO. FFO is not intended to be an indication of our cash flow from operating activities (determined in accordance with GAAP) or a measure of our liquidity, nor is it entirely indicative of funding our cash needs, including our ability to make cash distributions. Arbor’s calculation of FFO may be different from the calculation used by other companies and, therefore, comparability may be limited. Financials IndustryFinancereal estate Contact:

Arbor Realty Trust, Inc.
Paul Elenio, Chief Financial Officer
516-506-4422
pelenio@arbor.com
Media:
Bonnie Habyan, EVP of Marketing
516-506-4615
bhabyan@arbor.com
Investors:
Stephanie Carrington
The Ruth Group
646-536-7017
scarrington@theruthgroup.com

[…]

JMP Group Reports First Quarter 2014 Financial Results

SAN FRANCISCO–(BUSINESS WIRE)–

JMP Group Inc. (NYSE: JMP), an investment banking and alternative asset management firm, reported financial results today for the quarter ended March 31, 2014.

Adjusted net revenues, which exclude certain non-cash items and non-controlling interests, were $44.1 million, an increase of 37.6% from $32.0 million for the first quarter of 2013. For more information on adjusted net revenues, including a reconciliation to net revenues, please see the section below titled “Non-GAAP Financial Measures.” Operating net income was $4.4 million, or $0.19 per diluted share, an increase of 21.1% from $3.6 million, or $0.16 per share, for the first quarter of 2013. For more information on operating net income, including a reconciliation to net income attributable to JMP Group, please see the section below titled “Non-GAAP Financial Measures.” Total net revenues under generally accepted accounting principles, or GAAP, were $37.7 million, compared to $23.2 million for the first quarter of 2013. Net income attributable to JMP Group on a GAAP basis was $4.0 million, or $0.17 per share, compared to a net loss of $1.7 million, or $0.08 per share, for the first quarter of 2013.

“JMP Group had a very good first quarter, driven by record earnings at JMP Securities, which jumped 350% year-over-year to $0.18 per share,” said Chairman and Chief Executive Officer Joe Jolson. “Total operating EPS of $0.19 exceeded expectations and provided a great start to 2014. Adjusted net revenues of $44.1 million grew 38% from a year ago, primarily due to record investment banking revenues of $25.1 million. Our adjusted operating margin improved to 16.0% for the quarter, compared to 14.1% for the whole of 2013, and our operating return on tangible equity increased to 13.6%.”

Segment Results of Operations

At JMP Securities, the broker-dealer segment, adjusted net revenues were $31.8 million, an increase of 83.3% from $17.4 million for the first quarter of 2013, due to in large part to a substantial increase in investment banking revenues. The broker-dealer segment’s operating margin on adjusted net revenues was 20.5% for the quarter, compared to 9.4% for the first quarter of 2013 and 14.5% for the full year of 2013.

At Harvest Capital Strategies, the asset management segment, adjusted net revenues of $6.2 million decreased 23.7% from $8.2 million for the first quarter of 2013. For the first quarter of 2014, JMP Group’s return on its capital invested in hedge funds managed by Harvest Capital Strategies was 2.3%.

At JMP Credit Advisors, the corporate credit management segment, adjusted net revenues totaled $1.1 million, an increase of 20.0% from $0.9 million for the first quarter of 2013. For the first quarter of 2014, there was no net gain or loss on the sale or payoff of loans acquired by JMP Credit in April 2009; while, for the first quarter of 2013, there was a net realized loss of $0.7 million, which included a loan loss provision of $0.9 million in connection with an impaired loan.

A summary of JMP Group’s operating net income per share by segment for the quarter ended March 31, 2014 and for comparable prior periods is set forth below.

Quarter Ended

($ as shown)

Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013 Broker-dealer $ 0.18 $ 0.12 $ 0.04 Asset management 0.00 0.04 0.03 Corporate credit management 0.00 0.01 0.00 Operating platform EPS 0.18 0.17 0.07 Investment income 0.13 0.15 0.20 Corporate costs (0.12 ) (0.15 ) (0.11 ) Operating EPS (diluted) $ 0.19 $ 0.17 $ 0.16

For more information on segment reporting; adjusted net revenues, including a reconciliation to net revenues; and operating net income, including a reconciliation to net income, please see the section below titled “Non-GAAP Financial Measures.”

Composition of Revenues

Investment Banking

Investment banking revenues were a record $25.1 million, an increase of 106.9% from $12.1 million for the first quarter of 2013.

A summary of the company’s investment banking revenues and transaction counts for the quarter ended March 31, 2014 and for comparable prior periods is set forth below.

Quarter Ended Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013 ($ in thousands) Count Revenues Count Revenues Count Revenues Public equity 33 $ 19,521 26 $ 10,503 33 $ 8,914 Debt and convertible securities 6 1,571 9 8,730 10 1,648 Private capital markets and other 1 698 – – – 145 Strategic advisory 3 3,263 3 2,639 1 1,400 Total 43 $ 25,053 38 $ 21,872 44 $ 12,107

Brokerage

Net brokerage revenues were $6.7 million, an increase of 28.1% from $5.2 million for the first quarter of 2013.

Asset Management

Asset management-related fee revenues were $6.1 million, a decrease of 22.2% from $7.9 million for the first quarter of 2013 due to a decline in incentive fees. For more information on asset management-related fee revenues, please see the section below titled “Non-GAAP Financial Measures.”

Client assets under management at March 31, 2014 totaled $1.8 billion, including $952.7 million of funds managed by Harvest Capital Strategies and HCAP Advisors and $845.4 million par value of loans and cash managed by JMP Credit Advisors. Client assets under management were $1.7 billion at December 31, 2013 and $1.2 billion at March 31, 2013. Including sponsored funds in which Harvest Capital Strategies owns an economic interest, client assets under management totaled $2.0 billion at March 31, 2014.

At March 31, 2014, private capital, including corporate credit, small business lending, venture capital and real estate-related advisory services, represented 60.8% of client assets under management, including sponsored funds.

Principal Transactions

Principal transactions generated a net realized and unrealized loss of $3.7 million, compared to a net realized and unrealized gain of $1.9 million for the first quarter of 2013.

A summary of the company’s principal transaction revenues for the quarter ended March 31, 2014 and for comparable prior periods is set forth below.

Quarter Ended (in thousands) Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013 Hedge fund investments $ 1,707 $ 2,317 $ 1,898 Principal investments: Investment in Harvest Capital Credit Corporation (163 ) – – Other principal investments 55 140 85 Total principal investments (108 ) 140 85 Venture investments: Investment in Harvest Growth Capital funds (302 ) 500 (19 ) Other venture investments and warrants 289 657 553 Total venture investments (13 ) 1,157 534

Principal transaction revenues net of non-controlling interests in Harvest Growth Capital funds

1,586 3,614 2,517 Non-controlling interests in Harvest Growth Capital funds (5,279 ) 12,264 (599 ) Total principal transaction revenues

$

(3,693

) $ 15,878 $ 1,918

Included in the net loss of $3.7 million for the quarter ended March 31, 2014 was a loss of $5.3 million attributable to non-controlling interests in net realized and unrealized gains at Harvest Growth Capital and Harvest Growth Capital II, venture capital funds managed by Harvest Capital Strategies that are consolidated under GAAP. GAAP accounting requires that JMP Group consolidate both funds due to Harvest Capital Strategies’ role as the funds’ manager and managing member, despite the company’s ownership of just 4.7% of Harvest Growth Capital and 2.2% of Harvest Growth Capital II. The presentation of adjusted net revenues elsewhere in this press release excludes JMP Group’s non-controlling interests in these funds; and, accordingly, the aforementioned loss of $5.3 million is not included in adjusted net revenues. Net of its non-controlling interests, JMP Group had a net realized and unrealized loss of $0.3 million on its investments in Harvest Growth Capital and Harvest Growth Capital II for the quarter. For more information on adjusted net revenues, including a reconciliation to net revenues, please see the section below titled “Non-GAAP Financial Measures.”

Collateralized Loan Obligations

The net return on invested capital managed by JMP Credit Advisors was 4.3% for the quarter, compared to 11.2% for the first quarter of 2013.

At March 31, 2014, discounts and reserves (including liquidity discounts, allowances for loan losses and deferred loan fees) equaled $9.1 million, or 1.2% of gross performing loans outstanding at JMP Credit. There were no impaired loans with associated discounts or reserves at March 31, 2014; while, at March 31, 2013, discounts and reserves (including credit discounts, liquidity discounts, and allowances for loan losses) with regard to impaired loans equaled $2.6 million, or 0.6% of gross loans outstanding.

A net loan loss provision of $0.5 million for the quarter was recorded at JMP Credit, which is consolidated under GAAP, primarily representing a general reserve in connection with the loan portfolio being accumulated for JMP Credit Advisors CLO III. At March 31, 2014, general loan loss reserves equaled 0.6% of gross performing loans at JMP Credit.

Net Interest Income

Net interest income was $3.8 million, compared to net interest expense of $3.1 million for the first quarter of 2013, when interest expense due to net amortization of liquidity discounts at JMP Credit equaled $8.7 million. Excluding the amortization-related expense for the period, net interest income would have been $5.6 million for the first quarter of 2013. Further excluding net interest income of $1.3 million attributable to Harvest Capital Credit, which, due to its May 2013 initial public offering, is no longer consolidated by JMP Group, net interest income would have been $4.3 million for the first quarter of 2013.

Expenses

Compensation and Benefits

Compensation and benefits expense was $31.4 million, compared to $19.6 million for the first quarter of 2013. Excluding the cost of stock-based awards but accelerating and recognizing the cost of net deferred compensation related to the quarter, compensation and benefits expense was 69.7% of adjusted net revenues, compared to 62.4% for the first quarter of 2013. Further excluding compensation expense related to strategic initiatives, the compensation ratio was 68.4%, compared to 58.5% for the first quarter of 2013. For more information on compensation ratios, please see the section below titled “Non-GAAP Financial Measures.”

Non-Compensation Expense

Non-compensation expense was $6.5 million, compared to $6.2 million for the first quarter of 2013.

Personnel

At March 31, 2014, the company had 232 full-time employees, compared to 235 at December 31, 2013 and 218 at March 31, 2013.

Non-GAAP Financial Measures

In addition to the GAAP financial results presented in this press release, JMP Group presents the non-GAAP financial measures discussed below. These non-GAAP measures are provided to enhance investors’ overall understanding of the company’s current financial performance. Furthermore, company management believes that this presentation enables more meaningful comparison of JMP Group’s financial performance in various periods. However, the non-GAAP financial results presented should not be considered a substitute for results that are presented in a manner consistent with GAAP. A limitation of the non-GAAP financial measures presented is that the adjustments concern gains, losses or expenses that JMP Group generally expects to continue to recognize. The adjustment of these non-GAAP items should not be construed as an inference that these gains or expenses are unusual, infrequent or non-recurring. Therefore, both GAAP measures of JMP Group’s financial performance and the respective non-GAAP measures should be considered together. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies.

Adjusted Net Revenue

Adjusted net revenue is a non-GAAP financial measure that (i) includes asset management fees, net interest income or expense, and other revenues eliminated upon the consolidation of Harvest Growth Capital, Harvest Growth Capital II and Harvest Capital Credit (until its IPO on May 2, 2013), (ii) excludes the net amortization of liquidity discounts on loans held and asset-backed securities issued by JMP Credit Advisors CLO I, (iii) reverses the general loan loss provision taken with regard to JMP Credit Advisors CLO II and JMP Credit Advisors CLO III, (iv) adjusts for unrealized mark-to-market gains and losses recorded at Harvest Capital Credit (prior to its IPO on May 2, 2013), (v) reverses net unrealized gains and losses on strategic equity investments and warrants, and (vi) excludes the non-controlling interest in net unrealized gains and losses on Harvest Growth Capital and Harvest Growth Capital II. In particular, adjusted net revenue adjusts for:

base management and incentive fees earned by Harvest Capital Strategies as manager of Harvest Growth Capital and Harvest Growth Capital II, both venture capital funds, and Harvest Capital Credit, a small business lending strategy; Harvest Capital Strategies is managing member of Harvest Growth Capital and Harvest Growth Capital II and was the external manager of Harvest Capital Credit, and, as a result of its ownership of each (until the IPO of Harvest Capital Credit on May 2, 2013), JMP Group has consolidated the three entities (for the appropriate periods) in accordance with GAAP accounting standards and has eliminated the fees in consolidation; presenting these fees as though Harvest Growth Capital, Harvest Growth Capital II and Harvest Capital Credit were deconsolidated presents the entities’ results in a manner similar to those of the other investment funds managed by Harvest Capital Strategies; the non-cash net amortization of liquidity discounts associated with JMP Credit Advisors CLO I, due to scheduled contractual principal repayments, for periods prior to that ended September 30, 2013; the non-specific, non-cash loan loss provision recorded with regard to loans acquired during the period by JMP Credit Advisors CLO II and JMP Credit Advisors III, which is required by GAAP; unrealized mark-to-market gains or losses on the investment portfolio at Harvest Capital Credit; unrealized mark-to-market gains or losses on the company’s strategic equity investments as well as certain warrant positions; and non-controlling interests in net unrealized gains and losses generated by Harvest Growth Capital and Harvest Growth Capital II, of which Harvest Capital Strategies is manager and managing member; under GAAP, JMP Group consolidates the two funds, however, as presented, unrealized gains and losses that do not accrue to the company are reversed.

A reconciliation of JMP Group’s net revenues to its adjusted net revenues for the quarter ended March 31, 2014 and for comparable prior periods is set forth below.

Quarter Ended (in thousands) Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013 Revenues: Non-interest revenues $ 34,397 $ 55,474 $ 27,338 Net interest income/(expense) 3,760 4,458 (3,141 ) General loan loss provision (497 ) (246 ) (949 ) Total net revenues 37,660 59,686 23,248

Asset management fees earned on Harvest Growth Capital funds and Harvest Capital Credit (1)(2)

378 386 858 Dividend distribution from Harvest Capital Credit (2) – – 257

Less: Net interest income and other revenues from Harvest Capital Credit (2)

– – (1,327 )

Total net revenues including fee revenues from consolidated entities

38,038 60,072 23,036

Add back/(subtract):

Net amortization of liquidity discounts on loans and asset-backed securities issued

– – 8,740 Loan loss provision – collateralized loan obligations 550 200 – Unrealized mark-to-market (gain) – Harvest Capital Credit – – (516 )

Net unrealized loss on strategic equity investments and warrants

174 21 157

Non-controlling interests in net unrealized losses/(gains) on Harvest Growth Capital funds

5,297 (12,248 ) 599 Adjusted net revenues $ 44,059 $ 48,045 $ 32,016

(1) Adjustments to reflect economic contributions from two Harvest Growth Capital funds and Harvest Capital Credit as though deconsolidated for purposes of financial reporting; upon deconsolidation, fee revenues and dividend payments would be recognized, while net interest income and other revenues generated by these entities would not be recorded by JMP Group.

(2) Subsequent to its IPO on May 2, 2013, Harvest Capital Credit is no longer consolidated; therefore, fees and dividends related to Harvest Capital Credit are included in non-interest revenues following that date.

Company management has utilized adjusted net revenue, adjusted in the manner described above, as an additional device to aid in understanding and analyzing JMP Group’s financial results for the periods presented. Management believes that adjusting net revenue in these ways is useful in that it allows for a better evaluation of the performance of JMP Group’s ongoing business and facilitates a meaningful comparison of the company’s results in a given period to those in prior and future periods.

Asset Management-Related Fee Revenues

Asset management-related fee revenue is a non-GAAP financial measure that sums asset management fees with certain fee revenues (in particular, asset management fundraising fees generated by JMP Securities, loan fees, and revenues from fee-sharing arrangements with other asset managers) that are reported in JMP Group’s financial statements as other income. In addition, asset management-related fee revenues incorporate base management and incentive fees earned by Harvest Capital Strategies as manager of Harvest Growth Capital, Harvest Growth Capital II and Harvest Capital Credit. JMP Group consolidates the two Harvest Growth Capital funds and Harvest Capital Credit (until its IPO on May 2, 2013) in accordance with GAAP accounting standards; however, asset management fees generated by these entities are included in asset management-related fee revenues as though deconsolidated.

A statement of JMP Group’s asset management-related fee revenues for the quarter ended March 31, 2014 and for comparable prior periods is set forth below.

Quarter Ended (in thousands) Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013 Base management fees: Fees reported as asset management fees $ 2,594 $ 2,612 $ 2,365

Fees earned at Harvest Growth Capital, Harvest Growth Capital II and Harvest Capital Credit/HCAP Advisors

768 697 508 Total base management fees 3,362 3,309 2,873 Incentive fees: Fees reported as asset management fees 2,919 7,423 4,387

Fees earned at Harvest Growth Capital, Harvest Growth Capital II and Harvest Capital Credit/HCAP Advisors

(359 ) – 350 Total incentive fees 2,560 7,423 4,737 Other fee income: Fundraising and other fees 223 217 288 Total other fee income 223 217 288 Asset management-related fee revenues: Fees reported as asset management fees 5,513 10,035 6,752 Fees reported as other income 223 217 288

Fees earned at Harvest Growth Capital, Harvest Growth Capital II and Harvest Capital Credit/HCAP Advisors

409 697 858

Total asset management-related fee revenues

$ 6,145 $ 10,949 $ 7,898

Company management has utilized asset management-related fee revenue as a means of assessing the performance of JMP Group’s combined asset management activities, including its fundraising and other services for third parties. Management believes that asset management-related fee revenues, as presented above, provide useful information by indicating the relative contributions of base management fees and performance-related incentive fees, thus facilitating a comparison of those fees in a given period to those in prior and future periods. Management also believes that asset management-related fee revenue is a more meaningful measure than standalone asset management fees as reported, because asset management-related fee revenues represent the combined impact of JMP Group’s various asset management activities on the company’s total net revenues.

Compensation Ratio

A compensation ratio expresses GAAP compensation expense as a percentage of GAAP net revenues in a given period. Adjusted compensation ratios are non-GAAP financial measures that utilize adjusted net revenues as the denominator in their calculation. Furthermore, these ratios adjust 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 related to stock-based awards and deferred compensation (so that the compensation expenses used in the numerator are those that correspond to the adjusted net revenues generated in the periods presented) as well as a one-time administrative cost incurred by JMP Group in connection with the initial public offering of Harvest Capital Credit Corporation in May 2013. The adjusted compensation ratio is further adjusted by excluding compensation paid to employees hired in connection with the company’s strategic investments in new business initiatives.

A statement of JMP Group’s compensation ratio for the quarter ended March 31, 2014 and for comparable prior periods is set forth below.

Quarter Ended ($ in thousands) Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013 Adjusted net revenues $ 44,059 $ 48,045 $ 32,016 Compensation and benefits $ 31,376 $ 33,366 $ 19,605 Subtract/(add back): Compensation expense – stock option grants 395 262 137 Compensation expense – post-IPO RSU grants 853 804 616 Compensation expense – net deferred compensation (597 ) (2,623 ) (1,124 ) IPO-related administrative expense – Harvest Capital Credit Corporation – 450 – Adjusted compensation and benefits 30,725 34,473 19,976 Subtract: Compensation expense – strategic initiatives 610 895 1,250

Adjusted non-compensation expense, excluding strategic initiatives

$ 30,115 $ 33,578 $ 18,726 Adjusted ratio of compensation expense to revenues 69.7 % 71.8 % 62.4 %

Adjusted ratio of compensation expense to revenues, excluding strategic initiatives

68.4 % 69.9 % 58.5 %

Company management has utilized compensation ratios, adjusted in the manners described above, to assess JMP Group’s personnel expenses as they relate to its revenues for the periods presented. Management believes that adjusted compensation ratios provide useful information by including or excluding certain expenses as a means of representing the company’s ongoing personnel costs resulting from its core business activities. Management also believes that compensation ratios are useful measures because they allow and facilitate meaningful comparisons of the company’s personnel expenses in a given period to those in prior and future periods.

Operating Net Income

Operating net income is a non-GAAP financial measure that (i) reverses compensation expense related to stock-based awards and deferred compensation, (ii) excludes the net amortization of liquidity discounts on loans held and asset-backed securities issued by JMP Credit Advisors CLO I, (iii) reverses the general loan loss provision taken with regard to JMP Credit Advisors CLO II and JMP Credit Advisors CLO III, (iv) adjusts for unrealized mark-to-market gains and losses recorded at Harvest Capital Credit, (v) reverses net unrealized gains and losses on strategic equity investments and warrants, and (vi) assumes an effective tax rate. In particular, operating net income adjusts for:

the grant of RSUs and stock options subsequent to the company’s IPO; net deferred compensation, which consists of (a) deferred compensation awarded at year-end 2012 and reflected in operating net income for 2012 though recognized as a GAAP expense in 2013 and 2014 less (b) compensation awarded at year-end 2013 and deferred into 2014 and 2015; the non-cash net amortization of liquidity discounts associated with JMP Credit Advisors CLO I, due to scheduled contractual principal repayments, for periods prior to that ended September 30, 2013; the non-specific, non-cash loan loss provision recorded with regard to loans acquired during the period by JMP Credit Advisors CLO II and JMP Credit Advisors III, which is required by GAAP; unrealized mark-to-market gains or losses on the investment portfolio at Harvest Capital Credit; unrealized mark-to-market gains or losses on the company’s strategic equity investments as well as certain warrant positions; and a combined federal, state and local income tax rate of 38%.

A reconciliation of JMP Group’s net income to its operating net income for the quarter ended March 31, 2014 and for comparable prior periods is set forth below.

Quarter Ended (in thousands, except per share amounts) Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013 Net income/(loss) attributable to JMP Group Inc. $ 3,998 $ 3,493

$

(1,719

) Add back: Income tax expense/(benefit) 1,696 3,772 (812 ) Income/(loss) before taxes 5,694 7,265 (2,531 ) Add back/(subtract): Compensation expense – stock options 395 262 137 Compensation expense – post-IPO RSUs 853 804 616 Compensation expense – deferred compensation (597 ) (2,623 ) (1,124 )

Net amortization of liquidity discounts – JMP Credit Advisors CLO I

– – 8,740 Loan loss provision – collateralized loan obligations 545 146 – IPO-related expense – Harvest Capital Credit – 450 –

Unrealized mark-to-market (gain) – Harvest Capital Credit

– – (162 )

Unrealized mark-to-market loss – strategic equity investments and warrants

174 21 157 Operating income before taxes 7,064 6,325 5,833 Income tax expense (assumed rate of 38%) 2,684 2,403 2,216 Operating net income $ 4,380 $ 3,922 $ 3,617 Operating net income per share: Basic $ 0.20 $ 0.18 $ 0.16 Diluted (1) $ 0.19 $ 0.17 $ 0.16 Weighted average shares outstanding: Basic 21,820 21,825 22,607 Diluted (1) 22,806 22,701 22,905

(1) In 2013 and the first quarter of 2014, JMP Group issued restricted stock units, or RSUs, bearing non-forfeitable dividend equivalent rights. GAAP requires RSUs with non-forfeitable dividend equivalent rights to be included in the diluted share count (without applying the treasury method). Management prefers to present a non-GAAP diluted share count for the period, in keeping with the presentation for quarters not impacted by this GAAP requirement for such RSUs. The non-GAAP diluted share count reflects the impact of such RSUs under the treasury method, which is consistent with the calculation of the dilutive impact of all other RSUs outstanding. On a GAAP basis, the weighted average number of diluted shares outstanding for the quarter ended March 31, 2014 was 23,611,899; given that denominator, operating net income per diluted share would have been unchanged, at $0.19.

Company management has utilized operating net income on a total and per share basis, adjusted in the manner described above, as an additional device to aid in understanding and analyzing JMP Group’s financial results for the periods presented. Management believes that operating net income provides useful information by excluding certain items that may not be representative of the company’s core operating results or core business activities. Management also believes that operating net income is a useful measure because it allows for a better evaluation of the performance of JMP Group’s ongoing business and facilitates a meaningful comparison of the company’s results in a given period to those in prior and future periods.

Segment Reporting

In order to demonstrate the contribution to the company’s results of each of its primary businesses on a standalone basis, JMP Group presents the operating net income generated by each segment in the tables that follow. Management believes that this presentation enables investors to better understand the separate but interrelated financial operations of the company’s various business lines and to more accurately assess the contribution of each to JMP Group’s aggregate results.

Total net revenues have been adjusted, in part, as detailed above in the section titled “Adjusted Net Revenue,” and the resulting adjusted net revenues (i) include asset management fees, net interest income or expense, and other revenues eliminated upon the consolidation of Harvest Growth Capital, Harvest Growth Capital II and Harvest Capital Credit (until its IPO on May 2, 2013), (ii) exclude the net amortization of liquidity discounts on loans held and asset-backed securities issued by JMP Credit Advisors CLO I, (iii) reverse the general loan loss provision taken in connection with the origination of JMP Credit Advisors CLO II, (iv) adjust for unrealized mark-to-market gains and losses recorded at Harvest Capital Credit; (v) reverse net unrealized gains and losses on strategic equity investments and warrants and (vi) exclude non-controlling interests in net unrealized gains and losses on Harvest Growth Capital and Harvest Growth Capital II. Total non-interest expenses have been adjusted, in part, as detailed above in the section titled “Operating Net Income,” and the resulting adjusted non-interest expense reverses compensation expense related to stock-based awards granted subsequent to JMP Group’s initial public offering. For the purposes of calculating operating net income, an effective tax rate of 38% is assumed.

A statement of JMP Group’s operating net income on a segment basis for the quarter ended March 31, 2014 is set forth below.

Quarter Ended March 31, 2014 Corp. Invest- HGC Consoli- Broker- Asset Credit Operating ment Corp. Elimin- JMP Consoli- dated JMP (in thousands, except per share amounts) Dealer Mgmt. Mgmt. Platforms Income Costs ations Group dation Group Revenues: Investment banking $ 25,143 – – $ 25,143 – –

$

(90

) $ 25,053 – $ 25,053 Brokerage 6,656 – – 6,656 – – – 6,656 – 6,656 Asset management-related fees (1) 50 $ 6,224 $ 1,061 7,335 – – (1,190 ) 6,145

$

(379

) 5,766 Principal transactions (2) – – – – $ 1,760 – – 1,760 (5,279 ) (3,519 ) Gain on sale and payoff of loans – – – – 380 – – 380 – 380 Net dividend income – – – – 235 – – 235 – 235 Net interest income – – – – 3,777 – – 3,777 (18 ) 3,759 Provision for loan losses – – – – 53 – – 53 – 53 Adjusted net revenues 31,849 6,224 1,061 39,134 6,205 – (1,280 ) 44,059 (5,676 ) 38,383 Expenses: Non-interest expense/(income) (3) 25,335 6,432 1,024 32,791 1,360 4,239 (1,190 ) 37,200 42 37,242 Less: Non-controlling interest (4) – (356 ) – (356 ) 150 – – (206 ) (5,718 ) (5,924 )

Operating income/(loss) before taxes

6,514 148 37 6,699 4,695 (4,239 ) (90 ) 7,065 – 7,065 Income tax expense/(benefit) 2,475 56 14 2,545 1,785 (1,611 ) (34 ) 2,685 – 2,685 Operating net income/(loss) $ 4,039 $ 92 $ 23 $ 4,154 $ 2,910

$

(2,628

)

$

(56

) $ 4,380 – $ 4,380

Operating net income/(loss) per share:

Basic $ 0.19 $ 0.00 $ 0.00 $ 0.19 $ 0.13

$

(0.12

)

$

(0.00

) $ 0.20 – $ 0.20 Diluted (5) $ 0.18 $ 0.00 $ 0.00 $ 0.18 $ 0.13

$

(0.12

)

$

(0.00

) $ 0.19 – $ 0.19

(1) Reflects revenues detailed in section above titled “Asset Management-Related Fee Revenues;” management fees of $0.4 million are eliminated upon consolidation of two Harvest Growth Capital funds.

(2) Reverses net unrealized gains and losses on strategic equity investments and warrants. Excludes non-controlling interests in net realized and unrealized gains totaling $5.3 million that are recognized upon consolidation of two Harvest Growth Capital funds.

(3) Reverses stock-based compensation expense as well as accounting adjustments related to deferred compensation expense and excludes fund-related expenses totaling $42,000 that are recognized upon consolidation of two Harvest Growth Capital funds.

(4) Excludes non-controlling interests totaling $5.7 million in the net realized and unrealized gains of two Harvest Growth Capital funds that are recognized upon consolidation of the entities.

(5) In 2013 and the first quarter of 2014, JMP Group issued restricted stock units, or RSUs, bearing non-forfeitable dividend equivalent rights. GAAP requires RSUs with non-forfeitable dividend equivalent rights to be included in the diluted share count (without applying the treasury method). Management prefers to present a non-GAAP diluted share count for the period, in keeping with the presentation for quarters not impacted by this GAAP requirement for such RSUs. The non-GAAP diluted share count reflects the impact of such RSUs under the treasury method, which is consistent with the calculation of the dilutive impact of all other RSUs outstanding. On a GAAP basis, the weighted average number of diluted shares outstanding for the quarter ended March 31, 2014 was 23,611,899; given that denominator, operating net income per diluted share would have been unchanged, at $0.19.

Book Value per Share

At March 31, 2014, JMP Group’s tangible book value per share was $5.97, as set forth below.

(in thousands, except per share amounts) Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2013 Total JMP Group stockholders’ equity $ 130,373 $ 126,385 $ 125,238 Less: Goodwill and intangible assets – – – Tangible stockholders’ equity $ 130,373 $ 126,385 $ 125,238 Tangible book value per share $ 5.97 $ 5.79 $ 5.54 Basic shares outstanding 21,833 21,819 22,609 Quarterly operating ROTE (1) 13.6 % 12.5 % 11.5 % LTM operating ROTE (1) 11.4 % 10.9 % 12.5 %

(1) Return on tangible equity (ROTE) equals annualized operating net income divided by average tangible stockholders’ equity.

Share Repurchase Activity

During the quarter, JMP Group repurchased 4,656 shares of its common stock at an aggregate price of approximately $33,000, or $7.04 per share. At March 31, 2014, approximately 1.1 million shares remained eligible for repurchase under the company’s existing repurchase authorization.

Cautionary Note Regarding Quarterly Financial Results

Due to the nature of its business, JMP Group’s quarterly revenues and net income may fluctuate materially depending on: the size and number of investment banking transactions on which it advises; the timing of the completion of those transactions; the size and number of securities trades which it executes for brokerage customers; the performance of its asset management funds and inflows and outflows of assets under management; gains or losses stemming from sales of or prepayments on, or losses stemming from defaults on, loans underlying the company’s collateralized loan obligations; and the effect of the overall condition of the securities markets and economy as a whole. Accordingly, revenues and net income in any particular quarter may not be indicative of future results. Furthermore, JMP Group’s compensation expense is generally based upon revenues and can fluctuate materially in any quarter, depending upon the amount and sorts of revenue recognized as well as other factors. The amount of compensation and benefits expense recognized in a particular quarter may not be indicative of such expense in any future period. As a result, the company suggests that its annual results may be the most meaningful gauge for investors in evaluating the performance of its business.

Cautionary Note Regarding Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements provide JMP Group’s current expectations or forecasts about future events, including beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expected or implied by the forward-looking statements. The company’s actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on March 13, 2014, 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, 2013 and all other periodic reports are available on JMP Group’s website at www.jmpg.com and on the Securities and Exchange Commission’s website at www.sec.gov. Unless required by law, JMP Group undertakes no obligation to publicly update or revise any forward-looking statement to reflect circumstances or events after the date of this press release.

Conference Call

JMP Group will hold a conference call to discuss the results detailed herein at 10:00 a.m. EDT on Wednesday, April 23, 2014. To participate in the call, dial (888) 566-6060 (domestic) or (973) 200-3100 (international). The conference identification number is 31646719.

The conference call will also be broadcast live over the Internet and will be accessible via a link in the investor relations section of the company’s website, at investor.jmpg.com/events.cfm. The Internet broadcast will be archived and will remain available on the website for future replay.

About JMP Group

JMP Group Inc. is an investment banking and asset management firm that provides investment banking, sales and trading, and equity research services to corporate and institutional clients as well as alternative asset management products and services to institutional and high-net-worth investors. JMP Group operates through three subsidiaries: JMP Securities, Harvest Capital Strategies and JMP Credit Advisors. For more information, visit www.jmpg.com.

JMP GROUP INC.

Consolidated Statements of Financial Condition

(Unaudited)

(in thousands) Mar. 31, 2014 Dec. 31, 2013 Assets Cash and cash equivalents $ 41,676 $ 65,906 Restricted cash and deposits 75,550 68,029 Marketable securities owned, at fair value 31,505 29,295 Other investments 180,678 161,773

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

783,326 727,270 Deferred tax assets 13,868 12,492 Other assets 37,212 57,166 Total assets $ 1,163,815 $ 1,121,931 Liabilities and Stockholders’ Equity Liabilities: Marketable securities sold, but not yet purchased, at fair value $ 14,506 $ 13,749 Accrued compensation 18,256 51,347 Asset-backed securities issued 713,508 716,423 Line of credit – 2,895 Note payable – 15,000 Warehouse credit facility – JMP Credit Advisors CLO III 50,413 – Bond payable 94,300 46,000 Deferred tax liability 3,841 3,625 Other liabilities 36,036 35,652 Total liabilities 930,860 884,691 Stockholders’ Equity: Total JMP Group Inc. stockholders’ equity 130,373 126,385 Non-redeemable non-controlling interest 102,582 110,855 Total equity 232,955 237,240 Total liabilities and stockholders’ equity $ 1,163,815 $ 1,121,931

JMP GROUP INC.

Consolidated Statements of Operations

(Unaudited)

Quarter Ended

(in thousands, except per share amounts)

Mar. 31, 2014 Mar. 31, 2013 Revenues: Investment banking $ 25,053 $ 12,107 Brokerage 6,656 5,194 Asset management fees 5,544 6,751 Principal transactions (3,693 ) 1,917 Gain on sale, payoff and mark-to-market of loans 380 1,089 Net dividend income/(expense) 235 (8 ) Other income 222 288 Non-interest revenues 34,397 27,338 Interest income 8,588 8,158 Interest expense (4,828 ) (11,299 ) Net interest income/(expense) 3,760 (3,141 ) Provision for loan losses (497 ) (949 ) Total net revenues 37,660 23,248 Non-interest expenses: Compensation and benefits 31,376 19,605 Administration 1,722 1,331 Brokerage, clearing and exchange fees 925 887 Travel and business development 851 958 Communications and technology 948 853 Occupancy 825 804 Professional fees 807 1,024 Depreciation 227 226 Other 212 83 Total non-interest expense 37,893 25,771 (Loss) before income tax expense (233 ) (2,523 ) Income tax expense 1,696 (812 ) Net (loss) (1,929 ) (1,711 ) Less: Net (loss)/income attributable to noncontrolling interests (5,927 ) 8 Net income/(loss) attributable to JMP Group Inc. $ 3,998

$

(1,719

) Net income/(loss) attributable to JMP Group Inc. per share: Basic $ 0.17

$

(0.08

) Diluted $ 0.17

$

(0.08

) Weighted average common shares outstanding: Basic 21,820 22,607 Diluted 23,612 22,607 Financials IndustryFinance Contact: Investor Relations Contact

JMP Group Inc.

Andrew Palmer, 415-835-8978

apalmer@jmpg.com

or

Media Relations Contact

Dukas Public Relations

Seth Linden, 212-704-7385

seth@dukaspr.com

Zach Leibowitz, 212-704-7385

zach@dukaspr.com […]

JMP Group Reports Fourth Quarter and Fiscal Year 2013 Financial Results

SAN FRANCISCO–(BUSINESS WIRE)–

JMP Group Inc. (NYSE: JMP ), an investment banking and alternative asset management firm, reported financial results today for the quarter and full fiscal year ended December 31, 2013.

Adjusted net revenues, which exclude certain non-cash items and non-controlling interests, were a record $48.0 million for the quarter, an increase of 43.7% from $33.4 million for the fourth quarter of 2012. For the year, adjusted net revenues were a record $154.3 million, an increase of 23.3% from $125.2 million for 2012. For more information on adjusted net revenues, including a reconciliation to net revenues, please see the section below titled Non-GAAP Financial Measures. Operating net income was $3.9 million, or $0.17 per diluted share, for the quarter, compared to $6.0 million, or $0.26 per share, for the fourth quarter of 2012. For the year, operating net income was $13.5 million, or $0.60 per share, compared to $16.5 million, or $0.72 per share, for 2012. For more information on operating net income, including a reconciliation to net income attributable to JMP Group, please see the section below titled Non-GAAP Financial Measures. Total net revenues under generally accepted accounting principles, or GAAP, were $59.7 million and $149.2 million for the quarter and year ended December 31, 2013, respectively, compared to $23.8 million and $100.9 million for the quarter and year ended December 31, 2012, respectively. Net income attributable to JMP Group on a GAAP basis was $4.0 million, or $0.17 per share, for the quarter, compared to $5.3 million, or $0.23 per share, for the fourth quarter of 2012. For the year, net income was $4.1 million, or $0.18 per share, compared to $2.8 million, or $0.12 per share, for 2012.

I am proud to report that JMP Securities had the best fourth quarter and full year in our companys history, said Chairman and Chief Executive Officer Joe Jolson. For the quarter and year ended in December, JMP Securities raised $6.3 billion and $27.6 billion, respectively, for a total of 128 businesses in four growth sectors of the U.S. economyhealthcare, technology, financial services and real estatecompared to 87 companies in 2012. We feel good that JMP Securities continues to help U.S. companies raise the capital needed to expand their activities and create job opportunities in this slower-growth economy.

JMP Groups adjusted net revenues also set records for both the quarter and the year, despite an expected decline in net investment income from JMP Credit Advisors CLO I. Excluding net investment income and corporate expenses, the earnings of the companys operating platforms jumped 113% year-over-year to $0.17 per share for the fourth quarter and nearly doubled to $0.47 per share for the full year. We ended 2013 with strong positive momentum in all of our businesses, and I am optimistic that the favorable trend will continue in 2014.

Segment Results of Operations

At JMP Securities, the broker-dealer segment, adjusted net revenues were $28.6 million for the quarter, an increase of 53.2% from $18.7 million for the fourth quarter of 2012, due to very strong investment banking results. The broker-dealer segments operating margins on adjusted net revenues were 15.6% and 14.5% for the quarter and year ended December 31, 2013, respectively, comparing favorably to 8.2% for the year ended December 31, 2012. JMP Securities focuses its resources on small and middle-market growth companies and their institutional investors. While JMP Securities has benefited from improved equity capital markets conditions, we believe that organic growth served to increase JMP Securities market share to 0.91% of U.S. equity underwriting fees in the firms four targeted industries, up from 0.27% in 2009.

At Harvest Capital Strategies, the asset management segment, adjusted net revenues of $11.1 million for the quarter increased 62.4% from $6.8 million for the fourth quarter of 2012. JMP Groups return on its capital invested in hedge funds managed by Harvest Capital Strategies was 2.8% for the quarter and 7.5% for the year ended December 31, 2013.

At JMP Credit Advisors, the corporate credit management segment, adjusted net revenues totaled $1.2 million for the quarter, an increase of 24.3% from $1.0 million for the fourth quarter of 2012. The gross return on invested capital at JMP Credit was 7.2% and 35.5% for the quarter and year ended December 31, 2013, respectively, compared to 11.6% and 53.2% for the quarter and year ended December 31, 2012, respectively. For the quarter, the net realized gain on the sale or payoff of loans acquired by JMP Credit in April 2009 was $0.1 million, compared to $1.7 million for the fourth quarter of 2012, which included a loan loss provision related to an impaired acquired loan of $1.0 million.

A summary of JMP Groups operating net income per share by segment for the quarter and year ended December 31, 2013 and for comparable prior periods is set forth below.

Quarter Ended Year Ended ($ as shown) Dec. 31, 2013 Sept. 30, 2013 Dec. 31, 2012 Dec. 31, 2013 Dec. 31, 2012 Broker-dealer $0.12 $0.09 $0.02 $0.39 $0.15 Asset management 0.04 0.02 0.05 0.05 0.06 Corporate credit management 0.01 0.01 0.01 0.03 0.03 Operating platform EPS 0.17 0.12 0.08 0.47 0.24 Investment income 0.15 0.07 0.29 0.57 0.83 Corporate costs (0.15 ) (0.07 ) (0.11 ) (0.44 ) (0.35 ) Operating EPS (diluted) $0.17 $0.12 $0.26 $0.60 $0.72

For more information on segment reporting; adjusted net revenues, including a reconciliation to net revenues; and operating net income, including a reconciliation to net income, please see the section below titled Non-GAAP Financial Measures.

Composition of Revenues

Investment Banking

Investment banking revenues were $21.9 million for the quarter, an increase of 68.6% from $13.0 million for the fourth quarter of 2012. For the year, investment banking revenues were a record $74.2 million, an increase of 45.5% from $51.0 million for 2012.

For the quarter and year ended December 31, 2013, JMP Securities raised $6.3 billion and $27.6 billion, respectively, for a total of 128 small and middle-market businesses in four growth sectors of the U.S. economy: healthcare, technology, financial services and real estate. For the quarter and year ended December 31, 2012, JMP Securities raised $3.1 billion and $16.0 billion, respectively, for a total of 87 companies. Productivity was broadly diversified by industry vertical and by product line, demonstrating the growing value of the franchise.

A summary of the companys investment banking revenues and transaction counts for the quarter and year ended December 31, 2013 and for comparable prior periods is set forth below.

Quarter Ended Year Ended Dec. 31, 2013 Sept. 30, 2013 Dec. 31, 2012 Dec. 31, 2013 Dec. 31, 2012 ($ in thousands) Count Revenues Count Revenues Count Revenues Count Revenues Count Revenues Public equity 26 $10,503 27 $10,822 15 $3,905 123 $39,756 82 $28,955

Debt and convertible securities

9 8,730 5 3,495 5 718 32 18,781 18 3,111

Private capital markets and other

– – 2 1,534 4 5,789 4 4,490 11 10,025 Strategic advisory 3 2,639 4 3,286 3 2,560 12 11,146 12 8,891 Total 38 $21,872 38 $19,137 27 $12,972 171 $74,173 123 $50,982

Brokerage

Net brokerage revenues were $6.7 million for the quarter, an increase of 19.1% from $5.6 million for the fourth quarter of 2012. For the year, net brokerage revenues were $24.6 million, an increase of 12.4% from $21.9 million for 2012, representing the first year-over-year improvement since 2008.

Asset Management

Asset management-related fee revenues were $10.9 million, an increase of 70.9% from $6.4 million for the fourth quarter of 2012. Harvest Small Cap Partners and Harvest Franchise Fund both had outstanding years and accounted for most of the increase, due to higher incentive fees earned. For 2013, asset management-related fee revenues were $28.9 million, an increase of 32.1% from $21.9 million for 2012. For more information on asset management-related fee revenues, please see the section below titled Non-GAAP Financial Measures.

Client assets under management at December 31, 2013 totaled $1.7 billion, including $912.3 million of funds managed by Harvest Capital Strategies and HCAP Advisors and $782.0 million par value of loans and cash underlying the two collateralized loan obligations managed by JMP Credit Advisors. Client assets under management were $1.6 billion at September 30, 2013 and $1.2 billion at December 31, 2012. Including sponsored funds, client assets under management totaled $1.9 billion at December 31, 2013, compared to $1.8 billion at September 30, 2013 and $1.8 billion at December 31, 2012.

At December 31, 2013, private capital, including corporate credit, small business lending, venture capital and real estate-related advisory services, represented 60.9% of client assets under management, including sponsored funds.

Principal Transactions

Principal transactions generated net realized and unrealized gains of $15.9 million and $20.7 million for the quarter and year ended December 31, 2013, respectively, compared to a net realized and unrealized loss of $1.8 million and a net realized and unrealized gain of $10.5 million for the quarter and year ended December 31, 2012, respectively.

A summary of the companys principal transaction revenues for the quarter and year ended December 31, 2013 and for comparable prior periods is set forth below.

Quarter Ended Year Ended (in thousands) Dec. 31, 2013 Sept. 30, 2013 Dec. 31, 2012 Dec. 31, 2013 Dec. 31, 2012 Hedge fund investments $2,317 $432 $821 $5,555 $4,897 Principal investments: Investment in Harvest Capital Credit – 205 – 69 – Other principal investments 140 (139 ) 17 140 637 Total principal investments 140 66 17 209 637 Venture investments: Investment in Harvest Growth Capital funds 500 (33 ) (192 ) 534 202 Other venture investments and warrants 657 794 1,140 2,488 1,501 Total venture investments 1,157 761 948 3,022 1,703

Principal transaction revenues net of non-controlling interests in Harvest Growth Capital funds

3,614 1,259 1,786 8,786 7,237

Non-controlling interests in Harvest Growth Capital funds

12,264 (619 ) (3,558 ) 11,941 3,300 Total principal transaction revenues $15,878 $640 ($1,772 ) $20,727 $10,537

Included in the net gain of $15.9 million for the quarter ended December 31, 2013 was a gain of $12.3 million attributable to non-controlling interests in net realized and unrealized gains at Harvest Growth Capital and Harvest Growth Capital II, venture capital funds managed by Harvest Capital Strategies that are consolidated under GAAP. GAAP accounting requires that JMP Group consolidate both funds due to Harvest Capital Strategies role as the funds manager and managing member, despite the companys ownership of just 4.7% of Harvest Growth Capital and 2.4% of Harvest Growth Capital II. The presentation of adjusted net revenues elsewhere in this press release excludes JMP Groups non-controlling interests in these funds; and, accordingly, the aforementioned gain of $12.3 million is not included in adjusted net revenues. Net of its non-controlling interests, JMP Group had a net realized and unrealized gain of $0.5 million on its investments in Harvest Growth Capital and Harvest Growth Capital II for the quarter. For more information on adjusted net revenues, including a reconciliation to net revenues, please see the section below titled Non-GAAP Financial Measures.

Collateralized Loan Obligations

The net return on invested capital at JMP Credit was 7.2% and 35.5% for the quarter and year ended December 31, 2013, respectively, compared to 11.6% and 53.2% for the quarter and year ended December 31, 2012, respectively. During 2013, the outsized profits from the loan portfolio acquired with JMP Credit Advisors CLO I in April 2009 began to normalize. In May 2013, CLO Is contractual reinvestment period ended, and the CLO began to delever as many corporate borrowers took advantage of opportunities to refinance, resulting in a material number of unscheduled prepayments and thus reducing JMP Credits weighted average net interest margin. JMP Credit Advisors CLO II closed in April 2013, but the capital was slow to be fully deployed due to high levels of competitive activity in the marketplace for syndicated middle-market corporate loans.

At December 31, 2013, discounts and reserves (including liquidity discounts, allowances for loan losses and deferred loan fees) equaled $8.6 million, or 1.2% of gross performing loans outstanding at JMP Credit. There were no impaired loans with associated discounts or reserves at December 31, 2013; while, at December 31, 2012, discounts and reserves (including credit discounts, liquidity discounts, and allowances for loan losses) with regard to impaired loans equaled $1.7 million, or 0.4% of gross loans outstanding.

A net loan loss provision of $0.2 million for the quarter ended December 31, 2013 was recorded at JMP Credit, which is consolidated under GAAP, primarily representing a general reserve in connection with the loan portfolio underlying JMP Credit Advisors CLO II. At December 31, 2013, general loan loss reserves equaled 0.5% of gross performing loans at JMP Credit, in line with 0.5% at December 31, 2012.

Other Income

Other income was $0.2 million and $0.8 million for the quarter and year ended December 31, 2013, respectively, compared to $0.3 million and $3.8 million for the quarter and year ended December 31, 2012, respectively. The year-over-year comparison is uneven in part because, in the second quarter of 2012, New York Mortgage Trust, Inc. paid a one-time fee of $1.7 million upon the termination of its advisory agreement with Harvest Capital Strategies.

Net Interest Income

Net interest income was $4.5 million for the quarter, compared to net interest expense of $1.6 million for the fourth quarter of 2012, when interest expense due to net amortization of liquidity discounts at JMP Credit Corporation equaled $7.6 million. Excluding the amortization-related expense for the period, net interest income would have been $6.0 million for the fourth quarter of 2012. Further excluding net interest income of $1.0 million attributable to Harvest Capital Credit, which, due to its IPO, is no longer consolidated by JMP Group, net interest income would have been $5.0 million for the fourth quarter of 2012. For the year, net interest income was $3.2 million, compared to net interest expense of $7.1 million for 2012; excluding interest expense due to net amortization of liquidity discounts, net interest income would have been $18.2 million and $22.1 million, respectively, for those periods. Further excluding net interest income of $1.8 million and $2.8 million attributable to Harvest Capital Credit for 2013 and 2012, respectively, net interest income would have been $16.4 million and $19.3 million, respectively, for those years.

Expenses

Compensation and Benefits

Compensation and benefits expense was $33.4 million for the quarter, compared to $10.6 million for the fourth quarter of 2012. For the year, compensation and benefits expense was $102.4 million, compared to $66.4 million for 2012. Excluding the cost of stock-based awards but accelerating and recognizing the cost of net deferred compensation related to the current period, compensation and benefits expense was 71.8% of adjusted net revenues for the quarter, compared to 48.2% for the fourth quarter of 2012, and was 67.6% for the year, compared to 57.0% for 2012. Further excluding compensation expense related to strategic initiatives, the compensation ratio was 64.9% for the year, compared to 56.2% for 2012. For more information on compensation ratios, please see the section below titled Non-GAAP Financial Measures.

Non-Compensation Expense

Non-compensation expense was $7.3 million for the quarter, compared to $7.0 million for the fourth quarter of 2012. For the year, non-compensation expense was $29.2 million, compared to $25.0 million for 2012. The year-over-year increase is in part due to one-time expenses totaling $2.5 million incurred by JMP Group in connection with Harvest Capital Credits initial public offering in May 2013.

Personnel

At December 31, 2013, the company had 235 full-time employees, up from 231 at September 30, 2013 and 224 at December 31, 2012.

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 companys current financial performance. Furthermore, company management believes that this presentation enables more meaningful comparison of JMP Groups 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 Groups financial performance and the respective non-GAAP measures should be considered together. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies.

Adjusted Net Revenue

Adjusted net revenue is a non-GAAP financial measure that (i) includes asset management fees, net interest income or expense, and other revenues eliminated upon the consolidation of Harvest Growth Capital, Harvest Growth Capital II and Harvest Capital Credit (until its IPO on May 2, 2013), (ii) excludes the net amortization of liquidity discounts on loans held and asset-backed securities issued by JMP Credit Advisors CLO I, (iii) reverses the general loan loss provision taken in connection with the origination of JMP Credit Advisors CLO II, (iv) adjusts for unrealized mark-to-market gains and losses recorded at Harvest Capital Credit (prior to its IPO on May 2, 2013), (v) reverses net unrealized gains and losses on strategic equity investments and warrants, and (vi) excludes the non-controlling interest in net unrealized gains and losses on Harvest Growth Capital and Harvest Growth Capital II. In particular, adjusted net revenue adjusts for:

base management and incentive fees earned by Harvest Capital Strategies as manager of Harvest Growth Capital and Harvest Growth Capital II, both venture capital funds, and Harvest Capital Credit, a small business lending strategy; Harvest Capital Strategies is managing member of Harvest Growth Capital and Harvest Growth Capital II and was the external manager of Harvest Capital Credit, and, as a result of its ownership of each (until the IPO of Harvest Capital Credit on May 2, 2013), JMP Group has consolidated the three entities (for the appropriate periods) in accordance with GAAP accounting standards and has eliminated the fees in consolidation; presenting these fees as though Harvest Growth Capital, Harvest Growth Capital II and Harvest Capital Credit were deconsolidated presents the entities results in a manner similar to those of the other investment funds managed by Harvest Capital Strategies; the non-cash net amortization of liquidity discounts associated with JMP Credit Advisors CLO I, due to scheduled contractual principal repayments, for periods prior to that ended September 30, 2013; the non-specific, non-cash loan loss provision recorded with regard to loans acquired during the period by JMP Credit Advisors CLO II, which is required by GAAP; unrealized mark-to-market gains or losses on the investment portfolio at Harvest Capital Credit by reversing them; then, reflecting the companys IPO, recognizing those previously reversed gains or losses as of May 2, 2013; unrealized mark-to-market gains or losses on the companys strategic equity investments as well as certain warrant positions; and non-controlling interests in net unrealized gains and losses generated by Harvest Growth Capital and Harvest Growth Capital II, of which Harvest Capital Strategies is manager and managing member; under GAAP, JMP Group consolidates the two funds, however, as presented, unrealized gains and losses that do not accrue to the company are reversed.

A reconciliation of JMP Groups net revenues to its adjusted net revenues for the quarter and year ended December 31, 2013 and for comparable prior periods is set forth below.

Quarter Ended Year Ended (in thousands) Dec. 31, 2013 Sept. 30, 2013 Dec. 31, 2012 Dec. 31, 2013 Dec. 31, 2012 Revenues: Non-interest revenues $55,474 $31,531 $26,409 $148,616 $110,222 Net interest income/(expense) 4,458 4,313 (1,573 ) 3,236 (7,095 ) General loan loss provision (246 ) (467 ) (1,071 ) (2,637 ) (2,206 ) Total net revenues 59,686 35,377 23,765 149,215 100,921

Asset management fees earned on Harvest Growth Capital funds and Harvest Capital Credit (1) (2)

386 386 1,060 2,151 2,342 Dividend distribution from Harvest Capital Credit (2) – – – 678 234

Less: Net interest income and other revenues from Harvest Capital Credit (2)

– – (1,202 ) (2,116 ) (2,789 )

Total net revenues including fee revenues from consolidated entities

60,072 35,763 23,623 149,928 100,708 Add back/(subtract):

Net amortization of liquidity discounts on loans and asset-backed securities issued

– – 7,577 14,979 29,208

Loan loss provision JMP Credit Advisors II

200 377

1,705

Unrealized mark-to-market (gain) Harvest Capital Credit

– – (1,608 ) (515 ) (1,981 )

Realization of mark-to-market gain Harvest Capital Credit

– – – 772 –

Net unrealized loss/(gain) on strategic equity investments and warrants

21 (531 ) 294 (596 ) 527

Non-controlling interests in net unrealized (gains)/losses on Harvest Growth Capital funds

(12,248 ) 619 3,559 (11,924 ) (3,300 ) Adjusted net revenues … $48,045 $36,228 $33,445 $154,349 $125,162 (1) Adjustments to reflect economic contributions from two Harvest Growth Capital funds and Harvest Capital Credit as though deconsolidated for purposes of financial reporting; upon deconsolidation, fee revenues and dividend payments would be recognized, while net interest income and other revenues generated by these entities would not be recorded by JMP Group. (2) Subsequent to its IPO on May 2, 2013, Harvest Capital Credit is no longer consolidated; therefore, fees and dividends related to Harvest Capital Credit are included in non-interest revenues following that date.

Company management has utilized adjusted net revenue, adjusted in the manner described above, as an additional device to aid in understanding and analyzing JMP Group’s financial results for the periods presented. Management believes that adjusting net revenue in these ways is useful in that it allows for a better evaluation of the performance of JMP Group’s ongoing business and facilitates a meaningful comparison of the company’s results in a given period to those in prior and future periods.

Asset Management-Related Fee Revenues

Asset management-related fee revenue is a non-GAAP financial measure that sums asset management fees with certain fee revenues (in particular, asset management fundraising fees generated by JMP Securities, loan fees, and revenues from fee-sharing arrangements with other asset managers) that are reported in JMP Group’s financial statements as other income. In addition, asset management-related fee revenues incorporate base management and incentive fees earned by Harvest Capital Strategies as manager of Harvest Growth Capital, Harvest Growth Capital II and Harvest Capital Credit. JMP Group consolidates the two Harvest Growth Capital funds and Harvest Capital Credit (until its IPO on May 2, 2013) in accordance with GAAP accounting standards; however, asset management fees generated by these entities are included in asset management-related fee revenues as though deconsolidated.

A statement of JMP Group’s asset management-related fee revenues for the quarter and year ended December 31, 2013 and for comparable prior periods is set forth below.

Quarter Ended Year Ended (in thousands) Dec. 31, 2013 Sept. 30, 2013 Dec. 31, 2012 Dec. 31, 2013 Dec. 31, 2012 Base management fees: Fees reported as asset management fees $2,612 $2,585 $2,339 $10,114 $9,433 Fees reported as other income 191 – 263 695 1,916

Fees earned at Harvest Growth Capital, Harvest Growth Capital II and Harvest Capital Credit/HCAP Advisors

697 636 435 2,437 1,154 Total base management fees 3,500 3,221 3,037 13,246 12,503 Incentive fees: Fees reported as asset management fees 7,423 2,493 2,715 15,139 6,342

Fees earned at Harvest Growth Capital, Harvest Growth Capital II and Harvest Capital Credit/HCAP Advisors

– – 624 417 1,188 Total incentive fees 7,423 2,493 3,339 15,556 7,530 Other fee income: Fundraising and other fees 26 267 30 103 109 New York Mortgage Trust termination fee – – – – 1,735 Total other fee income 26 267 30 103 1,844 Asset management-related fee revenues: Fees reported as asset management fees 10,035 5,078 5,054 25,253 15,775 Fees reported as other income 217 267 293 798 3,760

Fees earned at Harvest Growth Capital, Harvest Growth Capital II and Harvest Capital Credit/HCAP Advisors

697 636 1,059 2,854 2,342

Total asset management-related fee revenues

$10,949 $5,981 $6,406 $28,905 $21,877

Company management has utilized asset management-related fee revenue as a means of assessing the performance of JMP Group’s combined asset management activities, including its fundraising and other services for third parties. Management believes that asset management-related fee revenues, as presented above, provide useful information by indicating the relative contributions of base management fees and performance-related incentive fees, thus facilitating a comparison of those fees in a given period to those in prior and future periods. Management also believes that asset management-related fee revenue is a more meaningful measure than standalone asset management fees as reported, because asset management-related fee revenues represent the combined impact of JMP Group’s various asset management activities on the company’s total net revenues.

Compensation Ratio

A compensation ratio expresses GAAP compensation expense as a percentage of GAAP net revenues in a given period. Adjusted compensation ratios are non-GAAP financial measures that utilize adjusted net revenues as the denominator in their calculation. Furthermore, these ratios adjust 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 related to stock-based awards and deferred compensation (so that the compensation expenses used in the numerator are those that correspond to the adjusted net revenues generated in the periods presented) as well as a one-time administrative cost incurred by JMP Group in connection with the initial public offering of Harvest Capital Credit Corporation in May 2013. The adjusted compensation ratio is further adjusted by excluding compensation paid to employees hired in connection with the company’s strategic investments in new business initiatives.

A statement of JMP Group’s compensation ratios for the quarter and year ended December 31, 2013 and for comparable prior periods is set forth below.

Quarter Ended

Year Ended ($ in thousands) Dec. 31, 2013 Sept. 30, 2013 Dec. 31, 2012 Dec. 31, 2013 Dec. 31, 2012 Adjusted net revenues $48,045 $36,228 $33,445 $154,349 $125,162 Compensation and benefits $33,366 $24,685 $10,582 $102,432 $66,415 Subtract/(add back): Compensation expense – stock option grants 262 262 – 920 – Compensation expense – post-IPO RSU grants 804 699 1,910 2,823 2,492

Compensation expense – net deferred compensation

(2,623 ) (1,277 ) (6,985 ) (6,170 ) (6,985 )

IPO-related administrative expense – Harvest Capital Credit Corporation

450 – (450 ) 450 (450 ) Adjusted compensation and benefits 34,473 25,001 16,107 104,409 71,358 Subtract:

Compensation expense – strategic initiatives

895 648 250 4,313 1,000

Adjusted non-compensation expense, excluding strategic initiatives

$33,578 $24,353 $15,857 $100,096 $70,358

Adjusted ratio of compensation expense to revenues

71.8 % 69.0 % 48.2 % 67.6 % 57.0 %

Adjusted ratio of compensation expense to revenues, excluding strategic initiatives

69.9 % 67.2 % 47.4 % 64.9 % 56.2 %

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 expense levels in a given period to those in prior and future periods.

Operating Net Income

Operating net income is a non-GAAP financial measure that (i) reverses compensation expense related to stock-based awards and deferred compensation, (ii) excludes the net amortization of liquidity discounts on loans held and asset-backed securities issued by JMP Credit Advisors CLO I, (iii) reverses the general loan loss provision taken in connection with the origination of JMP Credit Advisors CLO II, (iv) adjusts for unrealized mark-to-market gains and losses recorded at Harvest Capital Credit, (v) reverses net unrealized gains and losses on strategic equity investments and warrants, and (vi) assumes an effective tax rate. In particular, operating net income adjusts for:

the grant of RSUs and stock options subsequent to the company’s IPO; net deferred compensation, which consists of (a) deferred compensation awarded at year-end 2012 and reflected in operating net income for 2012 though recognized as a GAAP expense in 2013 and 2014 less (b) compensation awarded at year-end 2013 and deferred into 2014 and 2015; the non-cash net amortization of liquidity discounts associated with JMP Credit Advisors CLO I, due to scheduled contractual principal repayments, for periods prior to that ended September 30, 2013; the non-specific, non-cash loan loss provision recorded with regard to the loan portfolio underlying JMP Credit Advisors CLO II, which is required by GAAP; unrealized mark-to-market gains or losses on the investment portfolio at Harvest Capital Credit by reversing them; then, reflecting the company’s IPO, recognizing those previously reversed gains or losses as of May 2, 2013; 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% for the quarter ended March 31, 2013 and all future periods, although an assumed rate of 42% was applied for all prior periods; the company’s effective tax rate has proved lower than anticipated as a result of geographic changes in the company’s revenue mix, with revenues generated in California (at the highest marginal rate) comprising less of the total in recent years than in the past.

A reconciliation of JMP Group’s net income to its operating net income for the quarter and year ended December 31, 2013 and for comparable prior periods is set forth below.

Quarter Ended Year Ended (in thousands, except per share amounts) Dec. 31, 2013 Sept. 30, 2013 Dec. 31, 2012 Dec. 31, 2013 Dec. 31, 2012 Net income attributable to JMP Group Inc. $3,971 $3,289 $5,327 $4,106 $2,756 Add back: Income tax expense 3,294 1,634 3,004 3,472 1,581 Income before taxes 7,265 4,923 8,331 7,578 4,337 Add back/(subtract): Compensation expense – stock options 262 262 – 920 – Compensation expense – post-IPO RSUs 804 699 1,910 2,823 2,492

Compensation expense – deferred compensation

(2,623 ) (1,277 ) (6,985 ) (6,170 ) (6,985 )

Net amortization of liquidity discounts – JMP Credit Advisors CLO I

– – 7,577 14,979 29,208

Loan loss provision – JMP Credit Advisors CLO II

146 274 – 1,241 –

IPO-related expense – Harvest Capital Credit

450 – (450 ) 450 (450 )

Unrealized mark-to-market (gain)/loss – Harvest Capital Credit

– – (380 ) (162 ) (626 )

Realization of mark-to-market gain – Harvest Capital Credit

– – – 772 –

Unrealized mark-to-market loss/(gain) – strategic equity investments and warrants

21 (531 ) 294 (596 ) 527 Operating income before taxes 6,325 4,350 10,297 21,835 28,503 Income tax expense assumed 2,403 1,653 4,325 8,296 11,971 Operating net income $3,922 $2,697 $5,972 $13,539 $16,532 Operating net income per share: Basic $0.18 $0.12 $0.26 $0.61 $0.73 Diluted $0.17 $0.12 $0.26 $0.60 $0.72 Weighted average shares outstanding: Basic 21,825 22,014 22,637 22,158 22,582 Diluted 22,701 22,713 22,722 22,650 22,906

Company management has utilized operating net income on a total and per share basis, adjusted in the manner described above, as an additional device to aid in understanding and analyzing JMP Group’s financial results for the periods presented. Management believes that operating net income provides useful information by excluding certain items that may not be representative of the company’s core operating results or core business activities. Management also believes that operating net income is a useful measure because it allows for a better evaluation of the performance of JMP Group’s ongoing business and facilitates a meaningful comparison of the company’s results in a given period to those in prior and future periods.

Segment Reporting

In order to demonstrate the contribution to the company’s results of each of its primary businesses on a standalone basis, JMP Group presents the operating net income generated by each segment in the tables that follow. Management believes that this presentation enables investors to better understand the separate but interrelated financial operations of the company’s various business lines and to more accurately assess the contribution of each to JMP Group’s aggregate results.

Total net revenues have been adjusted, in part, as detailed above in the section titled “Adjusted Net Revenue,” and the resulting adjusted net revenues (i) include asset management fees, net interest income or expense, and other revenues eliminated upon the consolidation of Harvest Growth Capital, Harvest Growth Capital II and Harvest Capital Credit (until its IPO on May 2, 2013), (ii) exclude the net amortization of liquidity discounts on loans held and asset-backed securities issued by JMP Credit Advisors CLO I, (iii) reverse the general loan loss provision taken in connection with the origination of JMP Credit Advisors CLO II, (iv) adjust for unrealized mark-to-market gains and losses recorded at Harvest Capital Credit; (v) reverse net unrealized gains and losses on strategic equity investments and warrants and (vi) exclude non-controlling interests in net unrealized gains and losses on Harvest Growth Capital and Harvest Growth Capital II. Total non-interest expenses have been adjusted, in part, as detailed above in the section titled “Operating Net Income,” and the resulting adjusted non-interest expense reverses compensation expense related to stock-based awards granted subsequent to JMP Group’s initial public offering. For the purposes of calculating operating net income, an effective tax rate of 38% is assumed.

A statement of JMP Group’s operating net income on a segment basis for the quarter ended December 31, 2013 is set forth below.

Quarter Ended December 31, 2013

Corp. Invest- HGC

HCC(1)

Consoli- Broker- Asset Credit Operating ment Corp. Elimin- JMP Consoli- Consoli- dated JMP (in thousands, except per share amounts) Dealer Mgmt. Mgmt. Platforms Income Costs ations Group dation dation Group Revenues: Investment banking $21,872 – – $21,872 – – – $21,872 – – $21,872 Brokerage 6,701 – – 6,701 – – – 6,701 – – 6,701 Asset management-related fees (2) – $11,069 $1,224 12,293 – – ($1,344) 10,949 ($387) – 10,562 Principal transactions (3) – – – – $3,641 – (6) 3,635 12,264 – 15,899 Gain on sale and payoff of loans – – – – 215 – – 215 – – 215 Net dividend income – – – – 245 – – 245 – – 245 Net interest income/(expense) – – – – 4,474 – – 4,474 (16) – 4,458 Provision for loan losses – – – – (46) – – (46) – – (46) Adjusted net revenues 28,573 11,069 1,224 40,866 8,529 – (1,350) 48,045 11,861 – 59,906 Expenses: Non-interest expense/(income) (4) 24,103 9,750 1,000 34,853 2,850 5,324 (1,350) 41,677 93 – 41,770 Less: Non-controlling interest (5) – (265) – (265) 307 – – 42 11,768 – 11,810

Operating income/(loss) before taxes

4,470 1,584 224 6,278 5,372 (5,324) – 6,326 – – 6,326

Income tax expense/(benefit) (assumed rate of 38%)

1,699

602

85 2,386 2,041 (2,023) – 2,404 – – 2,404 Operating net income/(loss) $2,771 $982 $139 $3,892 $3,331 ($3,301) – $3,922 – – $3,922

Operating net income/(loss) per share:

Basic $0.13 $0.04 $0.01 $0.18 $0.15 ($0.15) – $0.18 – – $0.18 Diluted $0.12 $0.04 $0.01 $0.17 $0.15 ($0.15) – $0.17 – – $0.17 (1) Harvest Capital Credit is deconsolidated as of its initial public offering on May 2, 2013. Upon that IPO, HCAP Advisors was formed to act as Harvest Capital Credit’s external manager; revenues and expenses generated by HCAP Advisors are aggregated in the results attributed to Harvest Capital Strategies in this presentation. (2) Reflects revenues detailed in section above titled “Asset Management-Related Fee Revenues;” management fees of $0.4 million are eliminated upon consolidation of two Harvest Growth Capital funds. (3) Reverses net unrealized gains and losses on strategic equity investments and warrants. Excludes non-controlling interests in net realized and unrealized gains totaling $12.3 million that are recognized upon consolidation of two Harvest Growth Capital funds. (4) Reverses stock-based compensation expense as well as accounting adjustments related to deferred compensation expense and excludes fund-related expenses totaling $93,000 that are recognized upon consolidation of two Harvest Growth Capital funds. (5) Excludes non-controlling interests totaling $11.8 million in the net realized and unrealized gains of two Harvest Growth Capital funds that are recognized upon consolidation of the entities.

A statement of JMP Group’s operating net income on a segment basis for the year ended December 31, 2013 is set forth below.

Year Ended December 31, 2013 Corp. Invest- HGC HCC (1) Consoli- Broker- Asset Credit Operating ment Corp. Elimin- JMP Consoli- Consoli- dated JMP (in thousands, except per share amounts) Dealer Mgmt. Mgmt. Platforms Income Costs ations Group dation dation Group Revenues: Investment banking $74,508 – – $74,508 – – ($335 ) $74,173 – – $74,173 Brokerage 24,625 – – 24,625 – – – 24,625 – – 24,625 Asset management-related fees (2) – $29,598 $4,735 34,333 – – (5,429 ) 28,904 ($1,570 ) ($584 ) 26,750 Principal transactions (3) – – – – $8,180 – – 8,180 11,941 356 20,477 Gain on sale and payoff of loans (4) – – – – 1,716 – – 1,716 – – 1,716 Net dividend income – – – – 1,213 – – 1,213 – (678 ) 535 Net interest income/(expense) (5) – – – – 16,470 – – 16,470 (15 ) 1,760 18,215 Provision for loan losses – – – – (932 ) – – (932 ) – – (932 ) Adjusted net revenues 99,133 29,598 4,735 133,466 26,647 – (5,764 ) 154,349 10,356 854 165,559 Expenses: Non-interest expense/(income) (6)(8) 84,785 29,628 3,691 118,104 4,864 16,039 (5,744 ) 133,263 234 144 133,641 Less: Non-controlling interest (7)(8) – (1,731 ) – (1,731 ) 981 – – (750 ) 10,122 710 10,082

Operating income/(loss) before taxes

14,348 1,701 1,044 17,093 20,802 (16,039 ) (20 ) 21,836 – – 21,836

Income tax expense/(benefit) (assumed rate of 38%)

5,452 646 397 6,495 7,905 (6,095 ) (8 ) 8,297 – – 8,297 Operating net income/(loss) $8,896 $1,055 $647 $10,598 $12,897 ($9,944 ) ($12 ) $13,539 – – $13,539

Operating net income/(loss) per share:

Basic $0.40 $0.05 $0.03 $0.48 $0.58 ($0.45 ) ($0.00 ) $0.61 – – $0.61 Diluted $0.39 $0.05 $0.03 $0.47 $0.57 ($0.44 ) ($0.00 ) $0.60 – – $0.60 (1) Harvest Capital Credit is deconsolidated as of its initial public offering on May 2, 2013. Upon that IPO, HCAP Advisors was formed to act as Harvest Capital Credit’s external manager; revenues and expenses generated by HCAP Advisors are aggregated in the results attributed to Harvest Capital Strategies in this presentation. (2) Reflects revenues detailed in section above titled “Asset Management-Related Fee Revenues;” management fees totaling $2.2 million are eliminated upon consolidation of two Harvest Growth Capital funds and Harvest Capital Credit (until its IPO on May 2, 2013). (3) Reverses net unrealized gains and losses on strategic equity investments and warrants and includes previously reversed net unrealized gains at Harvest Capital Credit. Excludes non-controlling interests in net realized and unrealized gains and losses related to two Harvest Growth Capital funds as well as other principal transaction revenues related to Harvest Capital Credit; net realized and unrealized gains totaling $12.3 million are recognized upon consolidation of those entities. (4) Excludes net unrealized mark-to-market gain of $0.1 million on the loan portfolio at Harvest Capital Credit. (5) Excludes expense related to the non-cash net amortization of liquidity discounts associated with JMP Credit Advisors CLO I. (6) Reverses stock-based compensation expense as well as accounting adjustments related to deferred compensation expense and excludes fund-related expenses totaling $0.4 million that are recognized upon consolidation of two Harvest Growth Capital funds and Harvest Capital Credit (until its IPO on May 2, 2013). (7) Excludes non-controlling interests totaling $10.8 million in the net realized and unrealized losses of two Harvest Growth Capital funds and Harvest Capital Credit (until its IPO on May 2, 2013) that are recognized upon consolidation. (8) Includes non-interest expense of $2.5 million and non-controlling interest of $1.2 million, equaling $0.03 per share after tax in the aggregate, related to the IPO of Harvest Capital Credit.

Adjusted Tangible Book Value per Share

At December 31, 2013, JMP Group’s tangible book value per share was $5.81. Adjusting book value by accelerating the recognition of deferred compensation expense, JMP Group’s adjusted tangible book value per share at December 31, 2013 would have been $5.44.

(in thousands, except per share amounts) Dec. 31, 2013 Sept. 30, 2013 Dec. 31, 2012 Total JMP Group stockholders’ equity $126,863 $123,740 $126,871 Less: Goodwill and intangible assets – – – Tangible stockholders’ equity 126,863 123,740 126,871 Liquidity discount on loans – – 4,331 Liquidity discount on asset-backed securities issued – – (15,548 ) Net liquidity discount – – (11,217 ) Compensation expense – deferred compensation (13,156 ) (10,533 ) (6,985 ) Pre-tax adjustments to equity (13,156 ) (10,533 ) (18,202 ) Income tax benefit (assumed rate of 38% for 2013) 4,999 4,003 7,645 After-tax adjustments to equity (8,157 ) (6,530 ) (10,557 ) Adjusted tangible stockholders’ equity $118,706 $117,210 $116,314 Tangible book value per share $5.81 $5.63 $5.62 Adjusted tangible book value per share $5.44 $5.34 $5.15 Basic shares outstanding 21,819 21,961 22,592 Quarterly operating ROATE (1) 13.3 % 9.3 % 21.0 % LTM operating ROATE (1) 11.6 % 13.5 % 15.0 % (1) Return on adjusted tangible equity (ROATE) equals annualized operating net income divided by average adjusted tangible stockholders’ equity.

Share Repurchase Activity

During the quarter ended December 31, 2013, JMP Group repurchased 219,443 shares of its common stock at an aggregate price of $1.4 million, or $6.57 per share. During the year ended December 31, 2013, JMP Group repurchased 890,376 shares of its common stock at an aggregate price of $5.8 million, or $6.50 per share. At year-end, approximately 1.1 million shares remained eligible for repurchase under the company’s existing repurchase authorization.

Cautionary Note Regarding Quarterly Financial Results

Due to the nature of its business, JMP Group’s quarterly revenues and net income may fluctuate materially depending on: the size and number of investment banking transactions on which it advises; the timing of the completion of those transactions; the size and number of securities trades which it executes for brokerage customers; the performance of its asset management funds and inflows and outflows of assets under management; gains or losses stemming from sales of or prepayments on, or losses stemming from defaults on, loans underlying the company’s collateralized loan obligations; and the effect of the overall condition of the securities markets and economy as a whole. Accordingly, revenues and net income in any particular quarter may not be indicative of future results. Furthermore, JMP Group’s compensation expense is generally based upon revenues and can fluctuate materially in any quarter, depending upon the amount and sorts of revenue recognized as well as other factors. The amount of compensation and benefits expense recognized in a particular quarter may not be indicative of such expense in any future period. As […]

July 2013: US Leveraged Loan Market Analysis; Video, Charts

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Loans traded lower in June, handing the S&P/LSTA Index its first loss since May 2012. The decline, in part, was part of the broader retreat across the capital markets. As well, high yield mutual fund managers sold loans to harvest cash in response to record outflows. Still, demand for loans continues to run hot as retail and institutional investors look for ways to hedge against rising rates.

Reviewing the details:

Loans traded lower in June, handing the S&P/LSTA Index its first loss since May 2012. The Index was down 59 bps during the month. The decline, in part, was part of the broader retreat across the capital markets. As well, HY mutual fund managers sold loans to harvest cash in response to record outflows. Finally, as we’ll discuss ahead, the loan market’s own technical situation cooled in June.

Before we get loan conditions, here’s a look at how loans performed in June relative to other asset classes amid the recent run up in interest rates. As is usually the case, higher rates helped loans outperform as this table demonstrates. The reason is clear. Loans offer investors a unique combination of short duration and relatively wide distributions that are particularly attractive in a rising rate environment.

For this reason, inflows into the loan market rose in June. Loan mutual funds took in an estimated $6.8 billion based on data from Lipper FMI. And, CLO issuance spiked to a three month high of $7.3 billion from $5 billion in May.

These figures paled beside supply in June. All told, the amount of S&P/LSTA Index loans outstanding increased $23 billion to near-record $594 billion. The increase was powered by the $9.5 billion loan for Heinz, which funded in June.

Given the technical and macro environment, new-issue clearing yields jumped about 75 bps in June to six-month highs. As July began, BB loans were printing 4% context with single B’s in a 5.5-6.5% range. With loans printing at wider yields, repricing volume fell to just $7 billion in June from an average of $36 billion a month earlier in the year.

Likewise, covenant-lite loans lost a step in June as several issuers were forced ante up a maintenance test to push loans across the goal line. As a result, covenant-lite accounted for just 27% of total institutional activity, a far cry from the commanding share from earlier in the year.

Turning to credit conditions, the default rate was effectively unchanged at 1.4% in June. Managers remain constructive on the near-term outlook. On average, they expect the rate to tick up to 1.8% or so by December according to LCD latest buy-side poll taken in mid-June.

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June 2013: US Leveraged Loan Market Analysis; Video, Charts

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Through the first weeks of May, the loan-market’s 2013 rally persisted, however, loan prices eased about a quarter point in the last week of May. On the whole, the loan market has been resilient, bolstered by inflows from retail and institutional investors looking to loans as a way to hedge against rising rates. Looking ahead, participants expect tone in the HY market to remain a key driver of loan market conditions.

Reviewing the details:

Through the first three weeks of May, the loan-market’s virtually uninterrupted 2013 rally persisted. During the final week of the month, however, loan prices eased about a quarter point. The reason was twofold. For one thing, high-beta names came under selling pressure from high-yield accounts seeking to build cash in the teeth of outflows. For another, an increase in loan supply helped soak up some of excess liquidity that has long kept prices aloft. Thus, after generating a 0.50% return during the first 22 days of May, the S&P/LSTA Index lost 0.31% during the final 9 days of the month. All told, then, the Index eked out a 0.19% gain in May – the smallest monthly advance in a year. Still, with the 10-year Treasury yield up about 50 bps in May, loans handily outperformed fixed-income products.

With CLO issuance still curtailed in May, visible inflows again fell short of the first quarter’s sky-high levels. In all, investors put $10.7 billion to work in the asset class in May, including $4.9 billion of new CLO prints and $5.8 billion in retail mutual fund subscriptions based on data from Lipper FMI.

On the other side of the technical ledger, the amount of S&P/LSTA Index loans outstanding increased $5.5 billion in May. But that was only the start. Owing to a slew of large M&A-driven executions in recent months, the backlog of new-money loans that have allocated but not yet funded into the index stood at $33 billion by the end of May, putting further pressure on loan prices.

The impact of the market’s late May swoon was felt mainly in the secondary. In the primary market, by contrast, clearing yields were largely stable with BB loans printed in a 3-3.5% band and single B’s in a 5.0% context. That said, managers were able to push back again some of the more aggressive transactions that launched in late May and early June.

Dividend financing was a major source of new primary product in May. Indeed, the amount of dividends financed by leveraged loans pushed to a record $7 billion during the month.

Turning to credit conditions, the default rate retreated to 1.4% in May from April in 1.9% and a 28-month high of 2.2% in March. Managers are constructive on the near-term outlook. On average, they expect the rate to tick up to 1.8% or so by December according to LCD latest buy-side poll taken in mid-March.

On the whole, the loan market has been resilient, bolstered by inflows from retail and institutional investors looking to loans as a way to hedge against rising rates.

[…]