SEGMENT REPORTING:

We operate two segments: Advisory and Trust. These segments are managed separately based on the types of products and services offered and their related client bases. The Company’s segment information is prepared on the same basis that management uses to review the financial information for operational decision-making purposes. The Company's chief operating decision maker, our Chief Executive Officer, evaluates the performance of our segments based primarily on fee revenues and Economic Earnings. Westwood Holdings Group, Inc., the parent company of Advisory and Trust, does not have revenues and is the entity in which we record typical holding company expenses including employee compensation and benefits for holding company employees, directors’ fees and investor relations costs. All segment accounting policies are the same as those described in the summary of significant accounting policies. Intersegment balances that eliminate in consolidation have been applied to the appropriate segment.

Advisory

Our Advisory segment provides investment advisory services to corporate retirement plans, public retirement plans, endowments, foundations, individuals, the Westwood Funds®, and the UCITS Fund, as well as investment subadvisory services to mutual funds and our Trust segment. Westwood Management Corp. and Westwood International Advisors, which provide investment advisory services to clients of similar type, are included in our Advisory segment, along with Westwood Advisors, L.L.C.

Trust

Westwood Trust provides trust and custodial services and participation in common trust funds that it sponsors to institutions and high net worth individuals. Westwood Trust is included in our Trust segment.



(in thousands)	Advisory		Trust			Westwood Holdings			Eliminations			Consolidated
Year Ended December 31, 2017
Revenues:
Net fee revenues from external sources	$	100,612	$	31,621		$	—		$	—		$	132,233
Net intersegment revenues	8,120		218			—			(8,338		)	—
Net interest and dividend revenue	546		90			—			—			636
Other revenue	911		5			—			—			916
Total revenues	110,189		31,934			—			(8,338		)	133,785
Expenses:
Depreciation and amortization	548		1,900			468			—			2,916
Other operating expenses	58,950		28,580			17,784			(8,338		)	96,976
Total expenses	59,498		30,480			18,252			(8,338		)	99,892
Income (loss) before income taxes	50,691		1,454			(18,252		)	—			33,893
Income tax expense (benefit)	17,120		(47		)	(3,169		)	—			13,904
Net income (loss)	$	33,571	$	1,501		$	(15,083	)	$	—		$	19,989
Add: Restricted stock expense	$	9,140	$	2,641		$	4,649		$	—		$	16,430
Intangible amortization	138		1,734			—			—			1,872
Deferred taxes on goodwill	38		588			—			—			626
Economic Earnings (Loss)	$	42,887	$	6,464		$	(10,434	)	$	—		$	38,917

Segment assets	$	207,792	$	69,174		$	18,437		$	(102,744	)	$	192,659
Segment goodwill	$	5,219	$	21,925		$	—		$	—		$	27,144
Expenditures for long-lived assets	$	151	$	530		$	203		$	—		$	884

Year Ended December 31, 2016
Revenues:
Net fee revenues from external sources	$	92,127	$	30,313		$	—		$	—		$	122,440
Net intersegment revenues	7,533		130			—			(7,663		)	—
Net interest and dividend revenue	534		13			—			—			547
Other revenue	294		(260		)	—			—			34
Total revenues	100,488		30,196			—			(7,663		)	123,021
Expenses:
Depreciation and amortization	575		1,975			379			—			2,929
Other operating expenses	50,824		27,348			15,573			(7,663		)	86,082
Total expenses	51,399		29,323			15,952			(7,663		)	89,011
Income (loss) before income taxes	49,089		873			(15,952		)	—			34,010
Income tax expense (benefit)	16,331		426			(5,394		)	—			11,363
Net income	$	32,758	$	447		$	(10,558	)	$	—		$	22,647
Add: Restricted stock expense	$	9,632	$	3,026		$	3,296		$	—		$	15,954
Intangible amortization	160		1,800			—			—			1,960
Deferred taxes on goodwill	38		509			—			—			547
Economic Earnings	$	42,588	$	5,782		$	(7,262	)	$	—		$	41,108

Segment assets	$	174,951	$	67,330		$	13,985		$	(76,588	)	$	179,678
Segment goodwill	$	5,219	$	21,925		$	—		$	—		$	27,144
Expenditures for long-lived assets	$	705	$	530		$	584		$	—		$	1,819



(in thousands)	Advisory			Trust		Westwood Holdings			Eliminations			Consolidated
Year Ended December 31, 2015
Revenues:
Net fee revenues from external sources	$	101,973		$	28,795	$	—		$	—		$	130,768
Net intersegment revenues	19,001			—		—			(19,001		)	—
Net interest and dividend revenue	425			1		—			—			426
Other revenue	(341		)	83		—			—			(258		)
Total revenues	121,058			28,879		—			(19,001		)	130,936
Expenses:
Depreciation and amortization	773			1,724		99			—			2,596
Other operating expenses	63,658			25,882		15,581			(19,001		)	86,120
Total expenses	64,431			27,606		15,680			(19,001		)	88,716
Income (loss) before income taxes	56,627			1,273		(15,680		)	—			42,220
Income tax expense (benefit)	19,330			517		(4,732		)	—			15,115
Net income (loss)	$	37,297		$	756	$	(10,948	)	$	—		$	27,105
Add: Restricted stock expense	$	11,877		$	2,613	$	3,084		$	—		$	17,574
Intangible amortization	161			1,385		—			—			1,546
Deferred taxes on goodwill	38			233		—			—			271
Economic Earnings (Loss)	$	49,373		$	4,987	$	(7,864	)	$	—		$	46,496

Segment assets	$	183,004		$	60,459	$	8,816		$	(70,943	)	$	181,336
Segment goodwill	$	5,219		$	21,925	$	—		$	—		$	27,144
Expenditures for long-lived assets	$	369		$	180	$	267		$	—		$	816

We provide a performance measure that we refer to as Economic Earnings. Our management and Board of Directors review Economic Earnings to evaluate our ongoing performance, allocate resources and determine our dividend policy. We believe that this performance measure is useful for management and investors when evaluating our underlying operating and financial performance and our available resources.

In calculating Economic Earnings, we add to Net income the non-cash expense associated with equity-based compensation awards of restricted stock, amortization of intangible assets and the deferred taxes related to the tax-basis amortization of goodwill. Although depreciation on property and equipment is a non-cash expense, we do not add it back when calculating Economic Earnings because depreciation charges represent a decline in the value of the related assets that will ultimately require replacement.

The following table provides a reconciliation of Net income to Economic Earnings (in thousands):



	For the years ended December 31,
	2017		2016		2015
Net Income	$	19,989	$	22,647	$	27,105
Add: Restricted stock expense	16,430		15,954		17,574
Add: Intangible amortization	1,872		1,960		1,546
Add: Tax benefit from goodwill amortization	626		547		271
Economic Earnings	$	38,917	$	41,108	$	46,496

Geographical information



	Years ended December 31,
(in thousands)	2017		2016		2015
Revenues by geographic location of client:
U.S.	$	111,097	$	103,261	$	109,816
Canada	9,169		7,714		9,238
Europe	3,873		5,416		6,019
Asia	6,312		4,872		4,538
Australia	3,334		1,758		1,325
Total Revenues	$	133,785	$	123,021	$	130,936



	As of December 31,
(in thousands)	2017		2016
Property and equipment, net, by geographic area:
U.S.	$	4,107	$	4,002
Canada	83		278
Total Property and equipment, net	$	4,190	$	4,280