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 reviews 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, which provide investment advisory services to clients of similar type, are included in our Advisory segment along with Westwood Advisors, L.L.C.

Trust

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
Three Months Ended September 30, 2018
Net fee revenues from external sources	$	22,023	$	7,191		$	—		$	—		$	29,214
Net intersegment revenues	1,756		58			—			(1,814		)	—
Net interest and dividend revenue	187		52			—			—			239
Other, net	389		12			—			—			401
Total revenues	$	24,355	$	7,313		$	—		$	(1,814	)	$	29,854
Economic Earnings	$	10,553	$	1,357		$	(2,369	)	$	—		$	9,541
Less: Restricted stock expense												3,695
Intangible amortization												419
Deferred taxes on goodwill												59
Net income												$	5,368

Segment assets	$	220,138	$	60,658		$	16,839		$	(105,008	)	$	192,627
Segment goodwill	$	3,403	$	16,401		$	—		$	—		$	19,804

Three Months Ended September 30, 2017
Net fee revenues from external sources	$	25,334	$	7,858		$	—		$	—		$	33,192
Net intersegment revenues	2,026		57			—			(2,083		)	—
Net interest and dividend revenue	111		43			—			—			154
Other, net	157		(11		)	—			—			146
Total revenues	$	27,628	$	7,947		$	—		$	(2,083	)	$	33,492
Economic Earnings	$	8,786	$	1,560		$	(1,356	)	$	—		$	8,990
Less: Restricted stock expense												4,233
Intangible amortization												469
Deferred taxes on goodwill												156
Net income												$	4,132

Segment assets	$	208,444	$	73,170		$	18,388		$	(108,640	)	$	191,362
Segment goodwill	$	5,219	$	21,925		$	—		$	—		$	27,144



(in thousands)	Advisory		Trust			Westwood Holdings			Eliminations			Consolidated
Nine Months Ended September 30, 2018
Net fee revenues from external sources	$	72,963	$	22,265		$	—		$	—		$	95,228
Net intersegment revenues	5,639		171			—			(5,810		)	—
Net interest and dividend revenue	464		152			—			—			616
Other	331		6			—			—			337
Total revenues	$	79,397	$	22,594		$	—		$	(5,810	)	$	96,181
Economic Earnings	$	37,463	$	4,034		$	(7,069	)	$	—		$	34,428
Less: Restricted stock expense												11,658
Intangible amortization												1,255
Deferred taxes on goodwill												177
Net income												$	21,338

Nine Months Ended September 30, 2017
Net fee revenues from external sources	$	75,036	$	23,570		$	—		$	—		$	98,606
Net intersegment revenues	6,050		160			—			(6,210		)	—
Net interest and dividend revenue	391		67			—			—			458
Other	811		(4		)	—			—			807
Total revenues	$	82,288	$	23,793		$	—		$	(6,210	)	$	99,871
Economic Earnings	$	31,372	$	4,528		$	(4,592	)	$	—		$	31,308
Less: Restricted stock expense												12,298
Intangible amortization												1,449
Deferred taxes on goodwill												469
Net income												$	17,092

We are providing a performance measure that we refer to as Economic Earnings. Our management and the Board of Directors review Economic Earnings to evaluate our ongoing performance, allocate resources and determine our dividend policy. We also 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 tables provide a reconciliation of Net income to Economic Earnings (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Net income	$	5,368	$	4,132	$	21,338	$	17,092
Add: Stock-based compensation expense	3,695		4,233		11,658		12,298
Add: Intangible amortization	419		469		1,255		1,449
Add: Tax benefit from goodwill amortization	59		156		177		469
Economic Earnings	$	9,541	$	8,990	$	34,428	$	31,308