Quarterly report pursuant to Section 13 or 15(d)

Selected Balance Sheet Data

v3.22.2.2
Selected Balance Sheet Data
 9 Months Ended
Sep. 30, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Selected Balance Sheet Data Selected Balance Sheet Data
Allowances on Advances and Loans
Allowance for credit losses for advances and loans as of September 30, 2022 and December 31, 2021 was $836,000 and $789,000, respectively.
Other Assets
Other assets consisted of the following (in thousands):
Current Non-Current
September 30,
2022		 December 31,
2021		 September 30,
2022		 December 31,
2021
Mortgage servicing rights (“MSRs”), net of amortization $ —  $ —  $ —  $ 1,855 
Security deposits —  —  1,680  1,395 
Employee notes receivable 1  40  —  — 
Securities, held-to-maturity(1)
—  —  9,500  9,500 
Loan performance fee receivable 564  —  3,990  — 
Prepaid lease costs and other 5,399  5,230  —  396 
$ 5,964  $ 5,270  $ 15,170  $ 13,146 
(1)Securities, held-to-maturity, are expected to mature on September 1, 2024 and accrue interest based on the 1-year treasury rate.
MSRs
The net change in the carrying value of MSRs consisted of the following (in thousands):
Nine Months Ended
September 30,
2022 2021
Beginning balance $ 1,855  $ 1,897 
Additions —  421 
Amortization (1,275) (399)
Reclassification to assets held for sale (280) — 
Loss on sale (300) — 
Ending balance $ —  $ 1,919 
In the six months ended June 30, 2022, the Company received cancellation notices on certain servicing contracts. Amortization of those contracts was adjusted to reflect the cancellations. In June 2022, the Company determined to discontinue its servicing activities and signed an agreement to sell the remaining servicing rights. The Company recorded a loss on the sale of the remaining rights in the second quarter of 2022 and had reclassified the remaining carrying value of the MSRs to assets held for sale. The loss on sale was recorded within selling, general and administrative expenses within the condensed consolidated statements of net income. The sale closed in the third quarter of 2022.
The portfolio of loans serviced by the Company aggregated $1.7 billion for the period ended December 31, 2021.
Deferred Compensation and Commissions
Deferred compensation and commissions consisted of the following (in thousands):
Current Non-Current
September 30,
2022		 December 31,
2021		 September 30,
2022		 December 31,
2021
Stock appreciation rights (“SARs”) liability (1)
$ 2,323  $ 2,241  $ 13,002  $ 14,918 
Commissions payable to investment sales and financing professionals 59,507  110,769  36,789  31,697 
Deferred compensation liability (1)
524  1,080  6,034  6,921 
Other 193  595  —  — 
$ 62,547  $ 114,685  $ 55,825  $ 53,536 
(1) The SARs and deferred compensation liabilities become subject to payout at the time the participant is no longer considered a service provider. As a result of the retirement of certain participants, estimated amounts to be paid to participants within the next twelve months have been classified as current.
SARs Liability
Prior to the IPO, certain employees of the Company were granted SARs under a stock-based compensation program assumed by MMC. In connection with the IPO, the SARs agreements were revised, the MMC liability of $20.0 million for the SARs was frozen as of March 31, 2013 and was transferred to MMI through a capital distribution. The SARs liability will be settled with each participant in ten annual installments in January of each year upon retirement or termination from service, or in full upon consummation of a change in control of the Company.
Under the revised agreements, MMI is required to accrue interest on the outstanding balance beginning on January 1, 2014, at a rate based on the 10-year treasury note, plus 2%. The rate resets annually. The rates at January 1, 2022 and 2021 were 3.63% and 2.93%, respectively. MMI recorded interest expense related to this liability of $135,000 and $122,000 for the three months ended September 30, 2022 and 2021, respectively, and $406,000 and $366,000 for the nine months ended September 30, 2022 and 2021, respectively.
Estimated payouts within the next twelve months for participants that have separated from service have been classified as current. During each of the nine months ended September 30, 2022 and 2021, the Company made total payments of $2.2 million, consisting of principal and accumulated interest.
Commissions Payable
Certain investment sales and financing professionals can earn additional commissions after meeting certain annual revenue thresholds. These commissions are recognized as cost of services in the period in which they are earned as they relate to specific transactions closed. The Company may defer payment of certain commissions, at its election, for up to three years. Commissions that are not expected to be paid within twelve months are classified as long-term.
Deferred Compensation Liability
A select group of management is eligible to participate in the Marcus & Millichap Deferred Compensation Plan (the “Deferred Compensation Plan”). The Deferred Compensation Plan is a non-qualified deferred compensation plan that is intended to comply with Section 409A of the Internal Revenue Code and permits participants to defer compensation up to the limits set forth in the Deferred Compensation Plan. Amounts are paid out generally when the participant is no longer a service provider; however, an in-service payout election is available to participants. Participants may elect to receive payouts as a lump sum or quarterly over a two to fifteen-year period. The Company elected to fund the Deferred Compensation Plan through company owned variable life insurance policies. The Deferred Compensation Plan is managed by a third-party institutional fund manager, and the deferred compensation and investment earnings are held as a Company asset in a rabbi trust, which is recorded in assets held in rabbi trust in the accompanying condensed consolidated balance
sheets. The assets in the trust are restricted unless the Company becomes insolvent, in which case the trust assets are subject to the claims of the Company’s creditors. The Company may also, in its sole and absolute discretion, elect to withdraw at any time a portion of the trust assets by an amount by which the fair market value of the trust assets exceeds 110% of the aggregate deferred compensation liability represented by the participants’ accounts. Estimated payouts within the next twelve months for participants that have separated from service or elected an in-service payout have been classified as current. During the nine months ended September 30, 2022 and 2021, the Company made total payments to participants of $807,000 and $1,200,000 respectively.
The assets held in the rabbi trust are carried at the cash surrender value of the variable life insurance policies, which represents its fair value. The net change in the carrying value of the assets held in the rabbi trust and the net change in the carrying value of the deferred compensation liability, each exclusive of additional contributions, distributions and trust expenses, consisted of the following (in thousands):
Three Months Ended
September 30,		 Nine Months Ended
September 30,
2022 2021 2022 2021
(Decrease) increase in the carrying value of the assets held in the rabbi trust (1)
$ (347) $ (59) $ (2,131) $ 932 
Decrease (increase) in the net carrying value of the deferred compensation obligation (2)
$ 317  $ 43  $ 2,108  $ (720)
(1)Recorded in other income, net in the condensed consolidated statements of net income.
(2)Recorded in selling, general and administrative expense in the condensed consolidated statements of net income.
Other Liabilities
Other liabilities consisted of the following (in thousands):
Current Non-Current
September 30,
2022		 December 31,
2021		 September 30,
2022		 December 31,
2021
Deferred consideration $ 4,692  $ 5,112  $ 1,467  $ 4,689 
Contingent consideration 2,414  2,681  5,610  6,631 
Dividends payable 10,784  —  1,627  — 
Stock repurchase payable 1,918  —  —  — 
Other 795  991  1,919  74 
$ 20,603  $ 8,784  $ 10,623  $ 11,394