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Selected Balance Sheet Data | 6 Months Ended
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Jun. 30, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Selected Balance Sheet Data |
5. | Selected Balance Sheet Data
Allowances on Advances and Loans, and Commissions Receivable Allowance for credit losses for advances and loans and commissions receivable as of June 30, 2022 and December 31, 2021 was $1,110,000 and $794,000, respectively. Other Assets Other assets consisted of the following (in thousands):
|  | Current |  |  | Non-Current |
|  | June 30, 2022 |  |  | December 31, 2021 |  |  | June 30, 2022 |  |  | December 31, 2021 |
Mortgage servicing rights (“MSRs”), net of amortization |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,855 |
Security deposits |  |  | — |  |  |  | — |  |  |  | 1,681 |  |  |  | 1,395 |
Employee notes receivable |  |  | 16 |  |  |  | 40 |  |  |  | — |  |  |  | — |
Securities, held-to-maturity (1) |  |  | — |  |  |  | — |  |  |  | 9,500 |  |  |  | 9,500 |
Customer trust accounts and other |  |  | 5,864 |  |  |  | 5,230 |  |  |  | 2,392 |  |  |  | 396 |
|  | $ | 5,880 |  |  | $ | 5,270 |  |  | $ | 13,573 |  |  | $ | 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):
|  | Six Months Ended June 30, |
|  | 2022 |  |  | 2021 |
Beginning balance |  | $ | 1,855 |  |  | $ | 1,897 |
Additions |  |  | — |  |  |  | 366 |
Amortization |  |  | (1,275 | ) |  |  | (270 | )
Reclassification to assets held for sale |  |  | (280 | ) |  |  | — |
Loss on sale |  |  | (300 | ) |  |  | — |
Ending balance |  | $ | — |  |  | $ | 1,993 |
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 sale closed on July 21, 2022. The Company recorded a loss on the sale of the remaining rights in the second quarter 2022 and has reclassified the remaining carrying value of the MSRs to assets held for sale. The loss on sale has been recorded within selling, general and administrative expenses within the condensed consolidated statements of net and comprehensive income. 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 |
|  | June 30, 2022 |  |  | December 31, 2021 |  |  | June 30, 2022 |  |  | December 31, 2021 |
Stock appreciation rights (“SARs”) liability (1) |  | $ | 2,323 |  |  | $ | 2,241 |  |  | $ | 12,866 |  |  | $ | 14,918 |
Commissions payable to investment sales and financing professionals |  |  | 52,316 |  |  |  | 110,769 |  |  |  | 28,813 |  |  |  | 31,697 |
Deferred compensation liability ( 1 ) |  |  | 622 |  |  |  | 1,080 |  |  |  | 6,417 |  |  |  | 6,921 |
Other |  |  | 126 |  |  |  | 595 |  |  |  | — |  |  |  | — |
|  | $ | 55,387 |  |  | $ | 114,685 |  |  | $ | 48,096 |  |  | $ | 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 $136,000 and $122,000 for the three months ended June 30, 2022 and 2021, respectively , and $271,000 and $244,000 for the six months ended June 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 six months ended June 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 six months ended June 30, 2022 and 2021, the Company made total payments to participants o f $625,000 and $815,000, 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 June 30, |  |  | Six Months Ended June 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
(Decrease) increase in the carrying value of the assets held in the rabbi trust (1) |  | $ | (1,259 | ) |  | $ | 657 |  |  | $ | (1,784 | ) |  | $ | 990 |
Decrease (increase) in the net carrying value of the deferred compensation obligation (2) |  | $ | 1,259 |  |  | $ | (503 | ) |  | $ | 1,791 |  |  | $ | (763 | )
(1) | Recorded in other (expense) income, net in the condensed consolidated statements of net and comprehensive income.
(2) | Recorded in selling, general and administrative expense in the condensed consolidated statements of net and comprehensive income.
Other Liabilities Other liabilities consisted of the following (in thousands):
|  | Current |  |  | Non-Current |
|  | June 30, 2022 |  |  | December 31, 2021 |  |  | June 30, 2022 |  |  | December 31, 2021 |
Deferred consideration |  | $ | 2,863 |  |  | $ | 5,112 |  |  | $ | 3,300 |  |  | $ | 4,689 |
Contingent consideration |  |  | 2,466 |  |  |  | 2,681 |  |  |  | 5,313 |  |  |  | 6,631 |
Dividends payable |  |  | 612 |  |  |  | — |  |  |  | 1,443 |  |  |  | — |
Other |  |  | 1,626 |  |  |  | 991 |  |  |  | 32 |  |  |  | 74 |
|  | $ | 7,567 |  |  | $ | 8,784 |  |  | $ | 10,088 |  |  | $ | 11,394 |

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- Definition The entire disclosure for supplemental balance sheet disclosures, including descriptions and amounts for assets, liabilities, and equity. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -URI https://asc.fasb.org/topic&trid=2122208 + Details
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