On Wednesday, JMP Group, Inc. (NYSE:JMP) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Joel Jeffrey – KBW: Just thinking about – on the fact that you guys are on track for another record year in terms of operating EPS. How do you feel about your businesses? What do you think is the one that could be most at risk if the market sort of stay in that current state?
Joseph A. Jolson – Chairman and CEO: I think if you just look at the – take the three businesses, the way we break them out, JMP Securities and I’ll have Carter comment on that as well, but has gained quite a bit of market share in the Equity Capital Markets business, and that was very weak in the second quarter, as well as in the first half, it was down I think over 20% year-over-year in the first half of this year versus the first half of last year, so we don’t have any better crystal ball than you do, so I don’t know what your projection is for that pie, for the second half of the year, but we’ve gained enough market share thus far to have – to offset a lot of that. We have a pretty good M&A pipeline that we’re hoping to bring to the finish line in the second half of the year that probably needs reasonable stability to close. The Commissions business is kind of flat sequentially. We have increased as you guys know our research coverage a lot. We’ve added some sales people recently, and continue to look for additions to the research department on a selective basis. So we’re continuing to try to build our market share in that business and hopefully and we’ll show some progress if the decline in the overall industry moderates to 5% to 10% level. On the Harvest Capital Strategies business, obviously New York Mortgage and Expo, were profit contributors to that business and losing those two is a negative. We are building our small business lending areas as well, which is a positive. I didn’t address it in my remarks, but in the press release you could see that our hedge funds were down 40 basis points in the second quarter and they are up 6.6% for the first half and we typically have a goal of a 10% gross return. So, had they been up 2.5% in the quarter as opposed to down 40 basis points, that would have been a swing of a $0.02 a share after tax on that. So those are kind of the moving parts there. The credit business would like to execute another COL, but the markets are very volatile right now and so we’re getting the capital together to proceed with that based on getting comfortable that we would have maybe a three to six-month window of reasonable stability so that maybe pushing off till later this year or early next year and hopefully that’s not more detailed than you wanted, but I think, so the credit business should – barring an increase in short rates, should continue to improve quarter-to-quarter as Harvest Capital Credit grows. Carter, I don’t know if you wanted to add anything to the security side?
Carter D. Mack – Director & President, JMP Group: No, I mean I think you hit it on the head. We do expect that we would see a bigger contribution from M&A in the second half of the year. We had a pretty low contribution in the second quarter, but we do have a number of deals in the pipeline. As Joe stated, we continue to – on equity deals that are coming to market, we continue to play a role in the industries that we cover, I would say an area of strength that we’ve seen in the first half of the year is our biotech practice and we’re seeing a fair degree of activity there, in fact just announced another deal today that we are co-lead placement agent on. So, very encouraged by that area, financial services continues to do well and technology is picking up with this increase in IPO activity. So, we feel relatively good as the market is constructive.
Joel Jeffrey – KBW: I mean sort of sticking with the ECM activity, given the passage of this Act JOBS Act, which should relax on the Sarbanes-Oxley regulations. I mean are you guys seeing increased conversations from smaller companies about coming to market?
Carter D. Mack – Director & President, JMP Group: Sure. I think it’s definitely been a help. The thing you can’t tell us is a lot of IPOs are getting filed without – confidentially. So, it’s hard to tell the backlog, but we are actively talking to (other) companies and I think there is a renewed interest in the IPO market because of the less owners – being able to file confidentially and also having less regulatory burden.
Joseph A. Jolson – Chairman and CEO: Carter was involved in that whole panel, just in case you weren’t aware of that. So we helped, we being Carter helped and JMP helped to craft that legislation. We don’t know how positive that will be for us, but it will definitely be positive. So, time will tell us, it’s hugely positive or just modestly positive.
Carter D. Mack – Director & President, JMP Group: I mean, unfortunately we had a lot of momentum, especially in the technology IPO market pre-Facebook. Facebook kind of sucked the air out of the market for a while, but as you’ve seen over the last few weeks, we’ve seen some really nice performance especially in the technology IPO side and we have a few of those deals coming to market, so we (could get) about that and good pipeline about deal activity as the market sets.
Joel Jeffrey – KBW: Then lastly I mean in terms of headcount, I know you’ve said you had hired in some selective areas and it looks like it’s up slightly. I mean how do you think about headcount growth in a market like we’re in right now?
Joseph A. Jolson – Chairman and CEO: Well, we’ll always hire people that we think can be accretive producers on our platform. We, even in 2008, 2009, not only didn’t we have any mass reductions in our workforce, (we prefer) to looking to hire people and I think that nothing has changed for the way we have been doing it for pretty much a decade. I would say that the competition to hire people today is less than it was a year or two ago, which is a positive for us, but that isn’t an invitation to start hiring dozens and dozens of people just to drive headcount. I mean what we are looking for is productivity per person not – obviously not just to add to headcount. So we are actively recruiting people.
Carter D. Mack – Director & President, JMP Group: Yeah, and I wouldn’t say there is any plans to increase headcount dramatically, or really much at all from these levels that we are looking, especially on the sales and trading side for senior producers…
Joseph A. Jolson – Chairman and CEO: Selected M&A bankers.
Carter D. Mack – Director & President, JMP Group: Selected M&A bankers; research, where we think we can have an impact, but it’s all kind of normal course.
Joseph A. Jolson – Chairman and CEO: In asset management the fund managers kind of run their own businesses the way we have it set up and so as we raise more assets under management some of these funds that we started in last few years that were one person or one person plus a junior are going to look to add a person or two as well I suspect
Devin Ryan – Sandler O’Neill: Most of my questions were just asked, and maybe I’ll ask one on the brokerage business. We’ve obviously been having the discussion and then talked about in the past about the cyclical pressure versus how much is secular. And you guys are still investing in the business and then talk about still looking to hire there, while other firms are either cutting back or capitulating. So, is it fair to say that you still believe there is a lot of upside cyclically in that business all things equal? And I guess is there anything that may change your view of that just given how long this drought in that business has lasted?
Joseph A. Jolson – Chairman and CEO: Well, I think that some of things that have – shares traded until the last few years hasn’t been down, so it’s really been – the percentage of those share that have been traded by active equity – institutional managers, right, and that’s our available sub-segment. It’s hard to get exact numbers on that, but if you just take the total shares traded which once again isn’t a good proxy for what we do, our market share has only – it’s around 10 basis points. It’s very small, and so I think that the – there is a opportunity we think to grow that market share and we could double or triple it and no one would notice that we existed in the marketplace other than us and our shareholders. So, we think that quality ideas and quality relationships are valuable to fund managers in what they do every day, and if we can help people make money, then that’s a business where we’re going to gain market share over time, and that’s why we’re investing in it. Now, the other side of it too is that – I can’t quantify it exactly, but some piece of our increase in market share in investment banking is related to our expansion of the research product. So, we have been aligned – we try to be reasonably aligned in terms of coverage in investment banking over the areas that we’re researching, and because of that, more analysts, more coverage in research, we’re assuming in our business model that that leads to more equity capital markets business over some period of time. So, when you look at our market share more than doubling in the last three years, as we’ve grown the research, some of that’s related to the expansion of the product, right.
Devin Ryan – Sandler O’Neill: I get that and it makes sense in terms of that you are starting from a small base, and so any kind of improvements can be significant for you or maybe other small nodes, but I guess I’m just more getting at like your view of the cyclicality of the business versus secular. Obviously, no crystal ball, but do you feel like things are – we talked about this before, the secular drivers kind of played out – a lot of them have played out, but there is some just cyclical compeller too. So I was just trying to get your balance between the two?
Joseph A. Jolson – Chairman and CEO: I obviously have an opinion on those things, so take it for all, I’ll tell you what it is. You can heavily discount that for what it’s worth, okay, but there have been significant outflows for equity funds. That’s obviously a negative driver of commissions’ business, right. Commission weights have stabilized, they stabilized a while ago so that was negative, but that’s not negative anymore. So, the primary decline in trading activity for what we do in our kind of area and other people do as they reduce shares traded by fund managers. So, electronic trading has gone from under 10% a decade ago to over 60% today. It could go to 65% for those managers maybe, but the negative headwind from going from 10% to 60% has been pretty brutal. So, that’s kind of stabilizing as well. So, I think we’re kind of down to just what’s going to make fund managers trade more, and one of it is to have more assets under management and that’s going the long way, another is something that inspires fear and greed. One of the two like causes people who want to reposition their portfolios and we’ve been in this relative uncertain environment for a while that isn’t just right now, but this had a few false starts improving. So, clearly if the economic picture got clearer positively or negatively I suspect it would cause a lot of fund managers to look to reposition with their holdings. I don’t know that’s what you are looking for, but generally speaking I think that the secular trends have bottomed out and the secular headwinds are still there, but I’m optimistic that they could improve after the election in November. I think there’ll be a lot of – there is the potential for a lot of change in perception about the outlook after the election and I think a lot of fund managers are going to guess long going into it or potentially and they’re going to need to revaluate for how they’re positioned.
Devin Ryan – Sandler O’Neill: Just secondly, sorry if I missed this. Any update on fund raising efforts? I know you guys have kind of increased your marketing effort for (indiscernible) and kind of looked at some other ways to raise money. So just any update on how that is going and any specific funds that are maybe gaining more or less traction?
Joseph A. Jolson – Chairman and CEO: Yeah, I think have a – I think in the first half of the year we’re up about (18%) in assets under management in the hedge funds side of it, and not includes our small cap fund that decided to return some capital. He returned roughly $65 million of capital, which is a little bit counterintuitive for our Company that’s trying to raise assets under management, but like I mentioned earlier our fund managers kind of run their own business and we have a good alignment not just as a company with a lot of our capital invested in the funds, but culturally with our outside LPs and we try to balance these strategies with the opportunity set and has been closed for five years. This is I think the second or third time he has actually returned his appreciation back to his investors, so he is back to about $275 million, $280 million and pretty much that was last year’s ups through the middle of this year. So I think – including that we had that kind of improvement in the first half of the year in AUM, and so it would have been better, obviously if he hadn’t returned the capital. Obviously, I mentioned the Expo $500 million that was in our GAAP AUM, but that was in our sponsored assets, that was by far the biggest share of our sponsored assets, and that was a great investment, and unfortunately it was decided by the manager to hit the beach for a while. I think the – we’re currently marketing a second fund for our venture strategy, the first one was $50 million, and it’s been a big winner in the last couple of years, and we’re hopeful that we can raise $75 million to $100 million in the next – by year-end for that fund. We are constantly evaluating new managers to potentially bring on to our platform. I think I’ve said in the past, we typically are looking at one year or maybe two a year of new strategies. So we’re looking at that right now with or evaluating a couple of opportunities there. On the credit side, I think that the market opened up a little bit for CLO issuance. We had some – three global banks that wanted to underwrite our next deal, our second deal based on the quality of the team and their track record with the one they manage now. So we were looking at that, but we’re a little nervous just about the fiscal cliff and the European situation. So, the way that business works as you accumulate some assets for three months and kind of effectively on line of credits and you (add) list for the marks on that, but then – and then you price the deal and fill up the CLO, and all else being equal you would like to be able to time it with the three-month period of an expectation of stability and given the current global situation that isn’t the case. So, hopefully they’ll still be interested in working with us and we’ll be able to launch something later this year, early next year there. Obviously our small business lending company, Harvest Capital Credit started in September of last year, so that’s up to about $23 million, $24 million of assets under management and that’s a business where they spent three months plus doing due diligence on each investment and it’s been growing nicely sequentially and we’ve raised more money for that in the quarter. So with $30 million roughly of equity now and $30 million of debt, so they have $24 million out with the capacity right now to go to $60 million. I don’t know if there is anyone else in the queue operator.