22.

Business Segments

The Company’s business results are categorized into the following

four

business segments: Broker-Dealer, Asset Management Fee Income, Investment Income, and Corporate costs. The Broker-Dealer segment includes a broad range of services, such as underwriting and acting as a placement agent for public and private capital markets raising transactions and financial advisory services in M&A, restructuring and other strategic transactions. The Broker-Dealer segment also includes institutional brokerage services and equity research services to our institutional investor clients. The Asset Management Fee Income segment includes the management of a broad range of pooled investment vehicles, including the Company’s hedge funds, private equity funds, hedge funds of funds, and collateralized loan obligations. The Investment income segment includes income from the Company’s principal investments in public and private securities and investment funds managed by HCS, as well as any other net interest and income from investing activities, and interest expense related to the Company's bond issuance. The Corporate Costs segment also includes expenses related to JMP Group LLC, JMP Holding LLC and JMP Group Inc., and is mainly comprised of corporate overhead expenses.

During the year ended

2018,

the Company changed its internal reporting which resulted in changes to the Company's segment information. The Company has restated the prior period presented herein to conform to the new presentation.

Management uses operating net income as a key metric when evaluating the performance of JMP Group’s core business strategy and ongoing operations. This measure adjusts the Company’s net income as follows: (i) reverses share-based compensation expense related to historical equity awards granted in prior periods, (ii) recognizes

100%

of the cost of deferred compensation in the period for which such compensation was awarded, instead of recognizing such cost over the vesting period as required under GAAP, (iii) reverses amortization expense related to an intangible asset resulting from the repurchase of a portion of the equity of CLO III; (iv) unrealized gains or losses on commercial real estate investments, adjusted for non-cash expenditures, including depreciation and amortization; (v) reverses net unrealized gains and losses on strategic equity investments and warrants, (vi) excludes general loan loss provisions related to the CLOs, (vii) reverses

one

-time transaction costs related to the refinancing of the debt; (viii)

one

time expense associated with redemption of debt underlying the CLOs, the redemption of other debt, and the resulting acceleration of amortization of remaining capitalized issuance costs for each; and (ix) presents revenues and expenses on a basis that deconsolidates the CLOs and removes any non-controlling interest in consolidated but less than wholly owned subsidiaries. These charges

may

otherwise obscure the Company’s operating income and complicate an assessment of the Company’s core business activities. The operating pre-tax net income facilitates a meaningful comparison of the Company’s results in a given period to those in prior and future periods.

The Company’s segment information for the quarters and

three

months ended

March 31, 2019

and

2018

was prepared using the following methodology:

•

Revenues and expenses directly associated with each segment are included in determining segment operating income.

•

Revenues and expenses

not

directly associated with a specific segment are allocated based on the most relevant measures applicable, including revenues, headcount and other factors.

	•		Each segment’s operating expenses include: a) compensation and benefits expenses that are incurred directly in support of the segments and b) other operating expenses, which include expenses for premises and occupancy, professional fees, travel and entertainment, communications and information services, equipment and indirect support costs (including compensation and other operating expenses related thereto) for administrative services.

	•		Assets directly associated with each segment are allocated to the respective segment. One exception is depreciable assets, which are held at the Corporate segment. The associated depreciation is allocated to the related segment.

	•		Investment Income segment assets are presented net of an intercompany loan.

Segment Operating Results

Management believes that the following information provides a reasonable representation of each segment’s contribution to revenues, income and assets:

(In thousands)	Three Months Ended March 31,
	2019			2018
Broker-Dealer
Non-interest revenues	$	16,420		$	25,329
Total net revenues after provision for loan losses	$	16,420		$	25,329
Non-interest expenses		17,900			22,916
Segment operating pre-tax net income (loss)	$	(1,480	)	$	2,413
Segment assets	$	46,764		$	59,619
Asset Management Fee Income
Non-interest revenues	$	2,361		$	3,989
Total net revenues after provision for loan losses	$	2,361		$	3,989
Non-interest expenses		3,090			5,020
Segment operating pre-tax net loss	$	(729	)	$	(1,031	)
Segment assets	$	11,053		$	19,004
Investment Income
Non-interest revenues	$	5,751		$	2,168
Net interest income		3,322			2,127
Provision for loan losses		-			(893	)
Total net revenues after provision for loan losses	$	9,073		$	3,402
Non-interest expenses		2,549			4,189
Segment operating pre-tax net income (loss)	$	6,524		$	(787	)
Segment assets	$	116,358			1,017,558
Corporate Costs
Non-interest expenses	$	2,060		$	2,258
Segment operating pre-tax net loss	$	(2,060	)	$	(2,258	)
Segment assets	$	304,719		$	293,057
Eliminations
Non-interest revenues	$	(1,014	)	$	(979	)
Total net revenues after provision for loan losses	$	(1,014	)	$	(979	)
Non-interest expenses		(1,014	)		(981	)
Segment operating pre-tax net income	$	-		$	2
Segment assets	$	(257,129	)	$	(287,419	)
Consolidating adjustments and reconciling items
Non-interest revenues	$	132	(a)	$	(2,213	)	(a)
Net interest income		195	(b)		881		(b)
Loss on repurchase or early retirement of debt		-			(2,626	)
Provision for loan losses		-			(572	)
Total net revenues after provision for loan losses	$	327		$	(4,530	)
Non-interest expenses		1,545	(c)		1,124		(c)
Non-controlling interest expense		70			(1,464	)
Segment operating pre-tax net loss	$	(1,288	)	$	(4,190	)
Segment assets		-			-
Total Segments
Non-interest revenues		23,649			28,294
Net interest income		3,518			3,008
Loss on repurchase, reissuance or early retirement of debt		-			(2,626	)
Provision for loan losses		-			(1,465	)
Total net revenues after provision for loan losses	$	27,167		$	27,211
Non-interest expenses		26,130			34,526
Non-controlling interest expense		70			(1,464	)
Consolidated net income (loss) attributable to JMP Group LLC	$	967		$	(5,851	)
Total assets	$	221,765		$	1,101,818

(a)	Non-interest revenue adjustments are comprised of mark-to-market gains/losses on strategic equity investments and warrants, deferred compensation invested in funds, and unrealized gains or losses on commercial real estate investments, adjusted for non-cash expenditures, included depreciation and amortization.
(b)	The net interest income adjustment is comprised of costs related to refinancing and early retirement of debt.
(c)	Non-interest expense adjustments relate to reversals of share-based and deferred compensation and the amortization expense related to an intangible asset.

(In thousands)	Three Months Ended March 31,
	2019			2018
Operating net income (loss)	$	1,669		$	(1,631	)
Addback (subtract) of segment income tax expense (benefit)		586			(30	)
Total segments adjusted operating pre-tax net income (loss)	$	2,255		$	(1,661	)
Subtract (add back)
Share-based awards and deferred compensation		844			144
General loan loss provision – CLOs, CLO warehouse		-			329
Early debt retirement/reissuance		-			1,318
Restructuring costs – CLOs		-			64
Amortization of intangible asset – CLO III		277			69
Unrealized loss – real estate-related depreciation and amortization		557			1,628
Unrealized mark-to-market (gain) loss - strategic equity investments		(390	)		638
Total consolidation adjustments and reconciling items		1,288			4,190
Consolidated pre-tax net income (loss) attributable to JMP Group LLC	$	967		$	(5,851	)

Income tax benefit		(4,102	)		(5,568	)
Consolidated net income (loss) attributable to JMP Group LLC	$	5,069		$	(283	)