Welcome to JMP Group’s Second Quarter 2014 Earnings Conference Call. Please note that today’s call is being recorded. (Operator Instructions). I am now turning the call over to Andrew Palmer, the company’s Head of Investor Relations.

Good morning. Here with me today are Joe Jolson, JMP’s Chairman and Chief Executive Officer and Ray Jackson the Company’s Chief Financial Officer. They are joined by Carter Mack, President in JMP Group and Mark Lehmann President in JMP Securities. Before we get started I will note that some of this morning’s comments may contain forward-looking statements about future events that are out of JMP’s control. Actual results may differ materially from those indicated or implied. For a discussion of uncertainties that could affect JMP’s future performance please see the description of risk factors included in our most recent 10-K. That said I’ll turn things over to our Chairman and CEO, Joe Jolson.

Thanks Andrew. I am happy to report another solid quarter for JMP Group as JMP Securities continues to benefit from material market share gains since 2009 in combination with the research and equity capital markets environment. For the second quarter we generated record adjusted net revenues of $50.6 million and operating earnings of $0.18 a share. Excluding net investment income and corporate costs, our three operating platforms earned a record $0.65 per share for the latest 12 month period, an increase of 110% from $0.31 a share earned for the prior 12 month period. While we remain committed to active capital management, our tangible book value per share increased 13% in the past year to $6.16. In addition we returned 51% of our operating earnings in that period of time to stockholders through cash dividends and share buybacks. I am going to have Ray Jackson touch on some financial highlights and then Carter Mack will give some color on our strong investment banking results before I continue. Ray?

Thanks Joe. Our adjusted net revenues of $50.6 million for the second quarter and $94.5 million for the first half were both record amounts, each growing more than 30% year-over-year. Our second quarter operating net income of $4.0 million or $0.18 per share and our six months total of $8.4 million or $0.37 per share both rose 22% year-over-year. For the quarter our adjusted operating margin was 12.9% and for the first half it was 15.1%. JMP Securities contributed $0.13 to operating EPS and generated an adjusted operating margin of 16.8% for the quarter. Excluding net investment income Harvest Capital Strategies and JMP Credit Advisors each contributed $0.02. Net investment income added $0.12 while corporate costs deducted $0.11. From an expense standpoint our adjusted compensation ratio excluding any strategic hiring cost was 71.8% for the quarter and was skewed upward as a result of significant incentive fees produced by Harvest Small Cap Partners. Our adjusted non-compensation expense ratio was 14.2%. From a balance sheet perspective our recourse debt-to-total capital ratio was 42% at June 30. Net cash and liquid securities equaled $1.21 per share and net invested capital, which includes less liquid investments was $5.85 per share. Stockholders equity all of which was tangible was a $134 million or $6.16 per share, up from $5.97 at March 31. Now I will turn the discussion over to Carter.

Thanks Ray. JMP Securities produced excellent results in the second quarter with the investment banking group having its second best quarter in our history with $23.1 million of revenue for the quarter and $48.1 million for the first half of 2014, up 45% from the first half of 2013. JMP Securities as Joe said has benefitted from improved equity capital market conditions over the past year but has also benefited from continuing market share gains. JMP’s equity capital raising market share as measured by a percentage of total U.S. ECMPs earned were 57 basis points for the latest 12 months ended June 30, 2014 versus 44 basis points for the full year 2013. More importantly in our four targeted industry groups we grew ECMP market share to a 114 basis points in the latest 12 months versus 91 basis points for all of 2013. We continue to focus on wining a larger number of book managed transactions and increasing our economic fund co-managed transactions with the goal of achieving a 1% overall market share of all ECMPs by 2017. In the first half of 2014 we lead managed 16 public equity transactions versus 14 in the first half of 2013 and our share of lead managed transactions versus overall transactions increased to 25.4% up from 23.3% in the first half of 2013. An important factor driving these gains in JMP’s equity capital markets business has been a resurgent IPO market over the past year. We participated in 22 IPOs in the first half of 2014 versus 16 in the first half of 2013 and our current pipeline of IPOs on file is robust. JMP Securities has always benefited from a highly diverse investment banking platform, both in the industries that we cover and the range of investment banking products that…

Thanks Carter. Since early 2010 our strategic growth initiatives have been geared towards accelerating the revenue and earnings growth at our three operating platforms; JMP Securities, Harvest Capital Strategies and JMP Credit Advisors, thereby making net investment income an important but a smaller component of our total earnings. Our strategy was to grow JMP Securities market share opportunistically during the economic downturn through selected investment banking and research hires and by revamping our sales and trading distribution last year and by adding more high quality products. Our plan has been highly successful and has resulted in material revenue and earnings leverage as the capital markets normalized. In our four industry sectors, as Carter mentioned our share of common equity underwriting fees has grown from just 27 basis points in 2009 to a 114 basis points for the recent 12 month period. Also as Carter highlighted we’ve been successful at diversifying our investment banking revenues both by industry sector and by product during this period. Our share of institutional equities commissions revenues has also showed marked improvement in the past year according to the latest data available from [inaudible], increasing by 13.7% to an average of 35 basis points for trailing 12 months ended in March from an average of 31 basis points for the preceding 12 months. In asset management we’ve focused on our growing our assets under management at existing funds and selectively added new funds to the mix. Our sponsored client assets under management at Harvest Capital Strategy has grown at a compounded rate of just under 14% since the end of 2009. Asset management related fee revenues of $15.4 million for the quarter skyrocketed 277% from a year earlier largely due to a rise in hedge fund incentive fees to $11.2 million from $0.8 million a year…

(Operator Instructions). And your first question comes from the line of Joel Jeffrey with KBW.

Hello. Joel Jeffrey – KBW: Yes, Joe.

Hey Joel how are you. Joel Jeffrey – KBW: I am doing well. How are you?

Very good. Thanks. Joel Jeffrey – KBW: Just wanted to ask on the incentive fees, it’s my understanding it sounds like most of those are paid out to the portfolio managers. Exactly how much of that is paid out as comp and how much does the company actually keep?

Well we’ve never really disclosed that in part because it depends on the fund and the strategy. But I think that it’s fair to stay that our highest comp ratio at the firm by far would be incentive fees on our internally managed hedge funds. You can make your own judgment but I think if another way of looking at that might be that if our incentive fees for the same dollar amount is our principal income for a quarter the average of that would be more in line with the 60% to 65% comp ratio that we’re targeting longer-term for the company. So in a quarter like this where incentive fees were so large relative to the principal income you get a little distortion there in the overall comp ratio. Joel Jeffrey – KBW: Yeah, because when we just run the numbers quickly it seemed like if you backed out the 11.2 form the asset management fees and from the comp, the comp ratio actually looked sort of in the 65% range which seems like it would be consistent given the strong investment banking numbers that you guys had during the quarter. Is that kind of an appropriate way to think about it?

Yes, I think so. Joel Jeffrey – KBW: Okay.

We understand Joel, we understand that those OpEx are a little bit confusing and we’ve been thinking about maybe restructuring that business in a way that while it might reduce the overall revenues from a GAAP point of view and the volatility of those revenues it would lead to a similar bottom line and kind of take some of that distortion out of our numbers that is confusing to investors. Joel Jeffrey – KBW: Okay, and then I appreciate some of the color you guys gave us on the investment side, particularly the M&A side, just wondering I know you guys have a hired a few guys over the past few years and typically these bankers come on board and take some little while to get up to speed but given your sort of productivity per MD number is as strong as they are I’m just wondering have these guys gotten traction faster than you had expected or is there still potentially more upside to come as these guys ramp up?

I’ll Carter take that but let me just tell you kind of from a pop down point of view that the reason that our bankers are as productive as they are because the markets are strong but also because of all the different products that we’ve added to their mix over the last few years and that’s really helped I think so. I will turn it over to Carter.

Yeah. I think that’s true and I think the bankers that we’ve brought on board have kind of had a normal productivity level increases. We still expect some of the more recent hires to ramp up their contribution levels. But yeah we’re definitely producing at a higher level across the platform and it’s, as Joe said I think we’re benefiting from a lot of our products being in demand in our diverse industry groups.

I mean if you look at like in maybe as back as 2009 we really didn’t have a debt advisory business or any significant play in the convertible security side for instance and in a lot of our corporate relationships use those products. So adding those products to the relationships and calling efforts has been leveragable in that productivity number as opposed to just being more of a single product company focused on either M&A or equity capital markets.

Yeah, and the latest 12 months figure that I gave for $6.6 million per MD and $1.7 million per employee, captures a really strong second half of 2013 when we had a really good year on the convertible side and then a really strong first half of 2014, in both M&A and equity capital market. So it definitely is one of our stronger 12 month period. Joel Jeffrey – KBW: Okay and then sort of more.

I mean Joel not to belabor that but another way of looking at that is we don’t – obviously no one in our business controls the size of the equity capital market fee pie every year. There is some cyclicality to that obviously and we are enjoying a good cycle right now. But I do think that our penetration of lead managing more deals and getting better economics on the deals that we co-manage is also benefiting those numbers and so far number of deals doesn’t change over the next five years but our penetration of that does. You could see those productivity numbers continue to move up. Joel Jeffrey – KBW: On that point, what do you think has been the primary driver in your ability to get better economics on deals or get better positioning on some of these things. Has it been increased research coverage, has it been refusal to sort of take a co-manager role just sort of curious as to the strategy in that.

It’s kind of a combination of things, it takes a lot of time and it takes, being on a lot of covers and then it takes starting to have more discipline about what you will take on. As you said I mean we have started to really push back on lower economics, turning down deals when we are not getting the economics that we think make sense for what we are delivering. But that takes time. It has been a long process and I think we are at a position now where we have been quite active in the equity capital markets. I think we proved ourselves and done well on a number of lead managed transaction and that kind of built on itself. So that’s really just a process and having discipline about what you are willing to take on, what you are willing to turn down.

There is also just the model if you just step back of the kind of boutique model where it’s heavily focused on touches with companies away from just investment banking, with research and then corporate access and as good investment bankers that are experienced and focused on their space as opposed to product guys. That model over any period of time, if you execute on it successfully and stick with it should lead to greater market share of the wallet of the issuer. Joel Jeffrey – KBW: And then just lastly from me the improvement in the capital raising market, I mean is this still being driven by the increased opportunities from the jobs act or is this just a better economic environment and things are just rolling along regardless.

I will give you like kind of the really bold up answer here. Okay, is that you know the Jobs Act has benefited us by increasing the number of smaller IPOs which I think is a permanent or secular shift unless there’s lesser some regulation down the road that would change that, okay. But I do think that if you look at the high grade fixed income business, that’s for the most part has been in a very long term bull market right where you saw interest rates very high in the early 80s, late 70s inflation very high, disinflation and then essentially over a long period of time you got down to very low, at almost zero short term interest rates, very low kind of 10 years. So I mean without trying to forecast that a lot of money chased those returns and it’s sitting there in fixed income plan and there are some people – I am one of them that thinks over the next 10 years if the economy improves and inflation normalizes, you are likely to see money rotating out of these funds and back into better risk-adjusted return types of investments and so being in the equity side of the business for the most part we have had to suffer as everyone have else in our peer group to a better market essentially from a sector point of view compared to the bond side of the business and so if you want to be bullish about it longer term which we are we think there could be a long term rotation back to equities that we think we are very well positioned for it. Joel Jeffrey – KBW: Great, thanks for taking my questions.

No problem.

And your next question comes from the line of Alex Paris with Barrington Research. Alexander Paris – Barrington Research: Congratulations on a good quarter too.

Thank you. Alexander Paris – Barrington Research: Hey just kind of staying with the line of thought with Joel and his previous comments just on the pipeline and I think Carter called it robust. Are you seeing may be is that kind of sector weighted towards any one particular sector, is it kind of more broad-based and as we look into the back half of the year I know it’s hard to predict given what market activity will look like. But you’re kind of comping up a pretty good 2013 number, may be expectations as we move through and is that pipe when you say robust, is it – kind of where we were last year is it bigger or smaller or may be just some color on that would be helpful, thanks.

Yeah we don’t really give pipeline comparison numbers but just on a general tone, it’s we had an active last few weeks, I guess you could say in the IPO market with a number of deals in the market for us. We just priced a book run deal yesterday, another deal today that we were lead manager on. Now the composition currently is heavily weighted in the life sciences space and we are seeing a resurgence in the life sciences activity. So the near term pipeline, I guess you could say is more healthcare focused over the midterm, deals that we think will come out post Labor Day, I think it’s going to be much more diversified given the deals that we have – that are on file confidentially right now. And the pipeline on the M&A front we have a number of deals that are on track to close and one in particular with a fairly large fee. It feels better on the M&A front than it did mid-year last year and it feels as good or better on the IPO front. So that’s about much of a crystal ball as I can give. We were just starting to see a real resurgence in IPOs mid-year last year whereas this year we are seeing a steady level of activity from the beginning of the year. Alexander Paris – Barrington Research: Okay and then in terms of like headcount with bankers I know you have made investments in the advisory M&A space. Outside of advisory are you still looking to add, I know you are been opportunistic but has the headcount been moving higher?

Headcount’s been flat I think but it kind of varies because we have this mid-summer increase with corporate finance analysts and then we have some departures of analysts. But yes we are very much actively looking to add bankers. We added a few at the beginning of this year and we continue to have discussions. We would like to add people especially in technology and that’s an ongoing effort. So yeah we believe that given how we can get bankers up to the productivity levels we talked about, that’s the best way to grow our business and we think adding productive senior level bankers is going to mean meaningful revenue growth over the next few years. Alexander Paris – Barrington Research: Okay, great and one last question and I’ll jump back in queue, on the brokerage side of the house, we have talked in the past about the turnover, the disruption that’s caused with clients, you’ve kind of gone back up to critical mass from 200 names to 400 names, you mentioned we have 500 in the coverage, how has that been translating with the clients, are they starting to re-engage directionally may be as we look in the back half of the year, would you like to see that business grow? I mean I know you would like to but I mean your expectations are that it will grow?

Well I have Mark Lehmann here who is President at JMP Securities. So I will let him give you some color on that. But just generally speaking we are more focused on market share because we can’t really control the size of the pie and I guess what you say in the second quarter for industry, active institutional volume was a good size drop off right in terms of trading activity and we are not immune from that. I think we continue to pick up market share but when you have like a low to mid-teens drop industry wide kind of thing you know that from one quarter to the next it’s virtually impossible with an organic strategic to be able to offset that quickly. But I will turn it over to Mark.

Yeah. I agree with what Joe said. I’d also say the majority of our changes in headcount occurred in 2013. So the benefits of that should really start to inure to our platform I think in the back half of this year or next year.

Like in second half of 2014.

2014 and ‘15. I think it takes a little while for some of these people to get up to speed, account coverage changes happened and getting comfortable with your new sales person in your team. Fortunately we’ve had a lot of consistency on the research side. So we would expect those benefits to start to show. But Joe’s is right, the down double-digits in terms of overall volumes are painful to everybody but we do think our market share is heading in the right direction and will continue to because again those changes happened in 2013 and there is been some consistency. The other thing I think you will also see as Carter mentioned is when our capital market-to-market share goes up I think or just our brand goes up in front of people and the number of deals that we’re on and the number of successful deals. And life science has been a good vertical where there has not only been a lot of IPOs but there’s been a lot of M&A and a lot of great calls by our research analysts, I think we’re kind of top of mind where some of these funds were before. It just took some more time. So again I would expect that to happen in the back half of this year and next year given the fact that our personnel changes are basically over.

The other thing I’d add is that unlike a lot of firms including most boutiques we’re much more balanced with the traditional money managers that have a vote process then one would expect for a smaller company in this space that would tend of to be over-weighted to hedge funds. And so that’s good and bad but essentially when you have a vote process there is a little bit longer lag between stepping up your game and then seeing the resulting votes six to 12 months later. Alexander Paris – Barrington Research: Great. Thanks guys.

Okay

And there are no further questions at this time.

Hey, great. Well we appreciate you guys’ interest in JMP and we look forward to giving you updates as the quarter goes on. Thank you.

Thank you.

And thank you. This does conclude today’s conference call. You may now disconnect your lines.