MuniMae Announces Third Quarter 2013 Results and Investor Conference Call

Municipal Mortgage & Equity, LLC

Adjusted Balance Sheets

(unaudited)

(in thousands, except per share data)

Adjusted

Balance Sheet

September 30, 2013

Adjusted

Balance Sheet

December 31, 2012

ASSETS

1

Cash and cash equivalents

$

45,605

$

50,857

2

Adjusted restricted cash⁽¹⁾

35,004

1,356

3

Adjusted bonds available–for-sale⁽¹⁾

288,914

1,083,200

4

Adjusted investment in SA Fund⁽¹⁾

3,608

3,389

5

Adjusted real estate held-for-use, net⁽¹⁾

24,302

24,022

6

Investment in preferred stock

31,371

31,371

7

Adjusted other assets⁽¹⁾

19,031

36,152

8

Total assets

$

447,835

$

1,230,347

LIABILITIES AND EQUITY

9

Adjusted debt⁽¹⁾       

$

364,984

$

987,526

10

Derivative liabilities

662

3,544

11

Accounts payable and accrued expenses

7,833

12,498

12

Adjusted deferred revenue⁽¹⁾

19,252

17,848

13

Adjusted other liabilities⁽¹⁾

4,958

10,031

14

Total liabilities

$

397,689

$

1,031,447

Equity:

15

Perpetual preferred shareholders' equity in a subsidiary company

$

-

$

155,033

16

Adjusted noncontrolling interests in CFVs and IHS⁽¹⁾⁽²⁾   

(1,451)

(1,034)

Common shareholders' equity:

17

    Common shares, no par value

15,741

(93,786)

18

    Accumulated other comprehensive income

35,856

138,687

19

        Total common shareholders' equity

51,597

44,901

20

            Total equity

50,146

198,900

21

            Total liabilities and equity

$

447,835

$

1,230,347

Common shareholders' equity per share

22

Total common shareholders' equity

$

51,597

$

44,901

23

Common shares outstanding⁽²⁾

42,213

42,512

24

Common shareholders' equity per common share

$

1.22

$

1.06

Fully diluted common shareholders' equity per share

25

Diluted common shareholders' equity⁽³⁾

$

53,922

$

45,270

26

Diluted common shares outstanding⁽⁴⁾

43,787

42,921

27

Fully diluted common shareholders' equity per common share

$

1.23

$

1.05

⁽¹⁾   

 Indicates a non-GAAP financial measure. See Exhibit C for a reconciliation between the Adjusted Balance Sheet at September 30, 2013 and December 31, 2012, as presented above, and the Consolidated Balance Sheets included with the Company's Third Quarter 2013 Report.  Rows not indicated by the footnote reflect amounts as presented on the Company's Consolidated Balance Sheets included with the Company's Third Quarter 2013 Report. 

⁽²⁾     

Includes shares issued and outstanding as well as non-employee directors' and employee vested deferred shares.

⁽³⁾   

Excludes the Company's liability for options held by employees ($2.1 million and $0.4 million at September 30, 2013 and December 31, 2012, respectively) and unvested time based deferred shares of $0.2 million at September 31, 2013.

⁽⁴⁾   

Includes the common stock equivalents associated with unvested share awards as well as in-the-money option awards unless they are contingent upon a certain share price that has not yet been achieved.  The common stock equivalents (and gross share awards outstanding) were 1.6 million (2.0 million) and 0.4 million (1.7 million) at September 30, 2013 and December 31, 2012, respectively.

Municipal Mortgage & Equity, LLC
Adjusted Income Statement

For the three months ended
Sept 30,

For the nine months ended
Sept 30,

(in thousands, unaudited)

2013

2012

2013

1

Adjusted bond interest income⁽¹⁾

$

4,488

$

17,932

$

37,564

$

53,605

2

Income on preferred stock investment

1,326

1,340

3,935

4,429

3

Adjusted asset management fees ⁽¹⁾

1,079

1,147

3,211

4,193

4

Adjusted other income⁽¹⁾

784

506

1,784

1,710

5

Total income

7,677

20,925

46,494

63,937

6

Adjusted interest expense⁽¹⁾

(6,009)

(14,520)

(38,012)

(44,366)

7

Adjusted operating expenses⁽¹⁾

(5,805)

(5,893)

(22,746)

(18,736)

8

Total expense

(11,814)

(20,413)

(60,758)

(63,102)

9

Net gains (losses) on assets and derivatives

76,404

(633)

78,509

(1,768)

10

Net (losses) gains on early extinguishment of liabilities

(84)

132

36,179

601

11

Net gains due to real estate consolidation and foreclosure

2,411

2,853

10,895

5,404

12

Adjusted other net (losses) gains ⁽¹⁾

(1,155)

(2,122)

(486)

1,967

13

Income tax (expense) benefit

(123)

(24)

1,309

(65)

14

Net income to common shareholders

$

73,316

$

718

$

112,142

$

6,974

15

Total other comprehensive (loss) income to common shareholders     

(83,050)

12,208

(102,831)

26,499

16

Comprehensive (loss) income to common shareholders

$

(9,734)

$

12,926

$

$    9,311

$

33,473

⁽¹⁾     

Indicates a non-GAAP financial measure.  See Exhibit D for a reconciliation between the adjusted measures presented above and the Consolidated Statements of Operations included with the Company's Third Quarter 2013 Report.

Municipal Mortgage & Equity, LLC
Reconciliation of Adjusted Balance Sheet

September 30, 2013

December 31, 2012

(in thousands, unaudited)

GAAP

Balance Sheet

Consolidation Adjustments

Adjusted

Balance Sheet

GAAP

Balance Sheet

Consolidation Adjustments

Adjusted

Balance Sheet

ASSETS

1

Cash and cash equivalents

$

45,605

$

−

$

45,605

$

50,857

$

−

$

50,857

2

Adjusted restricted cash

90,949

(55,945)

⁽¹⁾

35,004

55,313

(53,957)

⁽¹⁾

1,356

3

Adjusted bonds available-for-sale

196,485

92,429

⁽²⁾

288,914

969,394

113,806

⁽²⁾

1,083,200

4

Adjusted investments in Lower Tier Property Partnerships related to CFVs

299,730

(299,730)

⁽¹⁾

−

333,335

(333,335)

⁽¹⁾

−

5

Adjusted SA Fund investments

157,791

(157,791)

⁽¹⁾

−

161,433

(161,433)

⁽¹⁾

−

6

Adjusted investment in SA Fund

−

3,608

⁽³⁾

3,608

−

3,389

⁽³⁾

3,389

7

Adjusted real estate held-for-use, net

121,863

(97,561)

⁽⁴⁾

24,302

129,687

(105,665)

⁽⁴⁾

24,022

8

Adjusted real estate held-for-sale related to

   CFVs

51,836

(51,836)

⁽¹⁾

−

15,338

(15,338)

⁽¹⁾

−

9

Investment in preferred stock

31,371

−

31,371

31,371

−

31,371

10

Adjusted other assets

44,226

(25,195)

⁽⁵⁾

19,031

55,024

(18,872)

⁽⁵⁾

36,152

11

Total assets

$

1,039,856

$

(592,021)

$

447,835

$

1,801,752

$

(571,405)

$

1,230,347

LIABILITIES AND EQUITY

12

Adjusted debt         

$

461,126

$

(96,142)

⁽¹⁾

$

364,984

$

1,042,959

$

(55,433)

⁽¹⁾

$

987,526

13

Derivative liabilities

662

−

662

3,544

−

3,544

14

Accounts payable and accrued expenses

7,833

−

7,833

12,498

−

12,498

15

Adjusted unfunded equity commitments to Lower Tier Property Partnerships related to CFVs  

13,461

(13,461)

⁽¹⁾

−

15,881

(15,881)

⁽¹⁾

−

16

Adjusted deferred revenue

−

19,252

⁽⁶⁾

19,252

−

17,848

⁽⁶⁾

17,848

17

Adjusted other liabilities

17,281

(12,323)

⁽⁷⁾

4,958

15,145

(5,114)

⁽⁷⁾

10,031

18

Total liabilities

$

500,363

$

(102,674)

$

397,689

$

1,090,027

$

(58,580)

$

1,031,447

Equity:

19

Perpetual preferred shareholders' equity in a subsidiary company

$

−

$

−

$

−

$

155,033

$

−

$

155,033

20

Adjusted noncontrolling interests in CFVs and IHS

487,896

(489,347)

⁽⁸⁾

(1,451)

511,791

(512,825)

⁽⁸⁾

(1,034)

Common shareholders' equity:

21

    Common shares, no par value

15,741

−

15,741

(93,786)

−

(93,786)

22

    Accumulated other comprehensive income

35,856

−

35,856

138,687

−

138,687

23

        Total common shareholders' equity

51,597

−

51,597

44,901

−

44,901

24

            Total equity

539,493

(489,347)

50,146

711,725

(512,825)

198,900

25

            Total liabilities and equity

$

1,039,856

$

(592,021)

$

447,835

$

1,801,752

$

(571,405)

$

1,230,347

⁽¹⁾    

Each of these adjustments are reflected on the Company's Consolidated Balance Sheets included with the Third Quarter 2013 Report and denoted as balances related to CFVs.

⁽²⁾    

Represents the carrying basis of the bonds eliminated in consolidation.  This amount excludes net unrealized gains occurring since consolidation that have not been reflected in the Company's common shareholders' equity given that the Company is required to consolidate and account for the real estate, which prohibits an increase in value from its original cost basis until the real estate is sold ($32.5 million at September 30, 2013 and $10.7 million at December 31, 2012).

⁽³⁾     

Represents the Company's equity investment in the SA Fund that it manages that was eliminated in consolidation.

⁽⁴⁾     

Represents the removal of real estate related to CFVs as denoted on the Company's Consolidated Balance Sheets ($103.6 million at September 30, 2013 and $111.9 million at December 31, 2012).  This amount was offset by the addition of an investment in a real estate partnership which was included within other assets on the Company's Consolidated Balance Sheets ($6.0 million at September 30, 2013 and $6.2 million at December 31, 2012).

⁽⁵⁾     

Represents the removal of other assets related to CFVs as denoted on the Company's Consolidated Balance Sheets ($23.7 million at September 30, 2013 and $17.6 million at December 31, 2012) as well as the reclassification of an investment in a real estate partnership from other assets to real estate held-for-use, net (as discussed in note 4 above).  These amounts were offset by other assets attributable to the Company that were eliminated in consolidation of $4.5 million at September 30, 2013 and $4.9 million at December 31, 2012.

⁽⁶⁾     

Represents deferred revenue attributable to the Company that was eliminated in consolidation of $17.1 million at September 30, 2013 and $15.5 million at December 31, 2012 (primarily related to unamortized guarantee fees that the Company received in connection with its low income housing tax credit funds ("LIHTC Funds")).  This amount also includes deferred revenue of $2.2 million at September 30, 2013 and $2.3 million at December 31, 2012 which was included within other liabilities on the Company's Consolidated Balance Sheets.

⁽⁷⁾     

Represents the removal of other liabilities related to CFVs as denoted on the Company's Consolidated Balance Sheets ($10.2 million at September 30, 2013 and $6.2 million at December 31, 2012) as well as the reclassification of deferred revenue (as discussed in note 6 above).  These amounts were offset by the addition of other liabilities of $3.4 million at December 31, 2012 attributable to the Company that were eliminated in consolidation.

⁽⁸⁾     

Represents the amount of noncontrolling interest attributable to the Company's consolidated LIHTC Funds, SA Fund and Lower Tier Property Partnerships.  It does not include the noncontrolling interest attributable to IHS.

Municipal Mortgage & Equity, LLC
Reconciliation of Adjusted Income Statement

(in thousands, unaudited)

For the three months ended

September 30,

For the nine months ended
September 30,

2013

2012

2013

2012

Interest on bonds on the Consolidated Statements of Operations ("Income
    Statement" or "I/S")

$

4,214

$

15,998

$

34,677

$

49,467

2

Note 15 - Discontinued Operations - Interest income

−

^(b)

765

^(b)

1,108

^(b)

2,349

^(b)

3

Note 16 - CFVs - Interest income

274

^(a)

1,169

^(a)

1,779

^(a)

1,789

^(a)

4

Total              

$

4,488

$

17,932

$

37,564

$

53,605

Adjusted Asset Management Fees

5

Note 16 - CFVs - Asset management fees

$

888

^(a)

$

937

^(a)

$

2,629

^(a)

$

3,521

^(a)

6

Reported through Other income on the Income Statement

191

210

582

672

7

Total            

$

1,079

$

1,147

$

3,211

$

4,193

Adjusted Other Income

8

Interest on loans and short-term investments on the I/S

$

166

$

227

$

500

$

720

9

Reported through Other income on the Income Statement

618

279

1,284

990

10

Total

$

784

$

506

$

1,784

$

1,710

Adjusted Interest Expense

11

Total interest expense on the Income Statement

$

2,199

$

6,547

$

22,213

$

20,090

12

Interest expense on the Income Statement (reported through operating and other expenses)

3,628

4,639

11,374

14,179

13

Income allocable to perpetual preferred shareholders on the Income Statement

36

2,284

3,714

6,852

14

Reported through Net gains (losses ) on assets and derivatives on the Income Statement

146

1,050

711

3,245

15

Total

$

6,009

$

14,520

$

38,012

$

44,366

Adjusted Operating Expenses

16

Salaries and benefits on the Income Statement

$

2,895

$

2,457

$

10,045

$

7,757

17

General and administrative on the Income Statement

1,102

1,286

3,528

3,814

18

Professional fees on the Income Statement

1,375

1,525

6,777

5,163

19

Reported through Other expenses on the Income Statement

433

625

2,396

2,002

20

Total

$

5,805

$

5,893

$

22,746

$

18,736

(in thousands, unaudited)

For the three months ended

September 30,

For the nine months ended
September 30,

Adjusted Other Net Gains (Losses)

21

Reported through Other expense on the Income Statement

$

(745)

$

(330)

$

(2,569)

$

(948)

22

Reported through Net gains (losses) on assets and derivatives on the Income Statement

145

1,050

711

3,245

23

Reported through Impairment on bonds on the Income Statement

(939)

(2,282)

(1,772)

(3,369)

24

Reported through Net loan loss (recovery) on the Income Statement

(5)

1,363

(5)

5,647

25

Note 15 - Discontinued Operations - Other income

399

^(b)

478

^(b)

1,268

^(b)

1,476

^(b)

26

Note 15 - Discontinued Operations – Other expense

(245)

^(b)

(1,636)

^(b)

(1,161)

^(b)

(2,483)

^(b)

27

Note 15 - Discontinued Operations – Net gains on disposal of REO

95

^(b)

−

^(b)

95

^(b)

−

^(b)

28

Note 15 - Discontinued Operations - Net gains on redemption of bonds

25

^(b)

−

^(b)

3,905

^(b)

−

^(b)

29

Note 16 - CFVs - Guarantee fees

331

^(a)

331

^(a)

993

^(a)

1,042

^(a)

30

Note 16 - CFVs -  Equity in losses from LTPPs

(383)

^(a)

(1,092)

^(a)

(2,821)

^(a)

(3,031)

^(a)

31

Note 16 - CFVs -  Equity in income from SA Fund

151

^(a)

(99)

^(a)

643

^(a)

165

^(a)

32

Note 16 - CFVs -  Other expenses

(125)

^(a)

(44)

^(a)

(262)

^(a)

(135)

^(a)

33

Equity in income from IHS reported through an allocation of income

140

^(a)

139

^(a)

489

^(a)

358

^(a)

34

Total

$

(1,155)

$

(2,122)

$

(486)

$

1,967

Activity Related to CFVs

35

Revenue from CFVs on the Income Statement

$

7,475

$

4,067

$

16,880

$

8,458

36

Expense from CFVs on the Income Statement

(14,854)

(9,039)

(39,948)

(21,123)

37

Net gains (losses) related to CFVs on the Income Statement

3,812

(4,608)

27,732

5,407

38

Equity in losses from LTPPs of CFVs on the Income Statement

(6,343)

(6,486)

(20,129)

(25,917)

39

Net losses allocable to noncontrolling interest in CFVs and IHS - continuing
    perations on the Income Statement           

11,186

17,407

18,915

36,884

40

Total

$

1,276

$

1,341

$

3,450

$

3,709

41

Sum of note (a) line items

$

1,276

$

1,341

$

3,450

$

3,709

Discontinued operations

42

Income from discontinued operations, net of tax on the Income Statement

$

403

$

602

$

6,527

$

694

43

Net (income) losses allocable to noncontrolling interest in CFVs and IHS -
    discontinued operations on the Income Statement         

(129)

(995)

(1,312)

648

44

Total

$

274

$

(393)

$

5,215

$

1,342

45

Sum of note (b) line items

$

274

$

(393)

$

5,215

$

1,342