Segment Reporting

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Segment Reporting

13. 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 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 and the Westwood Funds®, as well as investment subadvisory services to mutual funds and our Trust segment. Westwood Management and Westwood International, which provide investment advisory services to clients of similar type, are included in our Advisory segment along with Westwood Advisors, LLC.

Trust

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

						Westwood
	Advisory			Trust		Holdings			Eliminations			Consolidated
Three months ended September 30, 2014
Net fee revenues from external sources	$	22,857		$	5,282	$	—		$	—		$	28,139
Net intersegment revenues		3,493			—		—			(3,493	)		—
Net interest and dividend revenue		42			—		—			—			42
Other revenue		(59	)		—		—			—			(59	)
Total revenues	$	26,333		$	5,282	$	—		$	(3,493	)	$	28,122
Economic Earnings	$	11,610		$	514	$	(1,243	)	$	—		$	10,881
Less:   Restricted stock expense													3,635
Intangible amortization													90
Deferred taxes on goodwill													38
Net income												$	7,118
Segment assets	$	141,030		$	17,780	$	7,819		$	(34,014	)	$	132,615
Segment goodwill	$	5,219		$	6,036	$	—		$	—		$	11,255
Three months ended September 30, 2013
Net fee revenues from external sources	$	17,982		$	4,672	$	—		$	—		$	22,654
Net intersegment revenues		2,937			—		—			(2,937	)		—
Net interest and dividend revenue		140			—		—			—			140
Other revenue		203			1		—			—			204
Total revenues	$	21,262		$	4,673	$	—		$	(2,937	)	$	22,998
Economic Earnings	$	8,269		$	525	$	(1,450	)	$	—		$	7,344
Less:   Restricted stock expense													2,915
Intangible amortization													90
Deferred taxes on goodwill													38
Net income												$	4,301
Segment assets	$	103,502		$	13,849	$	5,651		$	(18,100	)	$	104,902
Segment goodwill	$	5,219		$	6,036	$	—		$	—		$	11,255

					Westwood
	Advisory		Trust		Holdings			Eliminations			Consolidated
Nine months ended September 30, 2014
Net fee revenues from external sources	$	69,147	$	15,461	$	—		$	—		$	84,608
Net intersegment revenues		10,157		—		—			(10,157	)		—
Net interest and dividend revenue		207		1		—			—			208
Other revenue		159		1		—			—			160
Total revenues	$	79,670	$	15,463	$	—		$	(10,157	)	$	84,976
Economic Earnings	$	34,871	$	1,341	$	(4,454	)	$	—		$	31,758
Less:   Restricted stock expense												10,103
Intangible amortization												270
Deferred taxes on goodwill												114
Net income											$	21,271
Nine months ended September 30, 2013
Net fee revenues from external sources	$	52,550	$	13,463	$	—		$	—		$	66,013
Net intersegment revenues		7,194		9		—			(7,203	)		—
Net interest and dividend revenue		417		1		—			—			418
Other revenue		142		—		—			—			142
Total revenues	$	60,303	$	13,473	$	—		$	(7,203	)	$	66,573
Economic Earnings	$	23,902	$	1,418	$	(4,350	)	$	—		$	20,970
Less:   Restricted stock expense												8,512
Intangible amortization												270
Deferred taxes on goodwill												114
Net income											$	12,074

The segment presentation above has been updated from the prior presentation to show Economic Earnings, a non-U.S. generally accepted accounting principles (“non-GAAP”) performance measure of segment profit or loss. We provide this measure in addition to, but not as a substitute for, net income, which is reported on a U.S. GAAP basis. Our management and Board of Directors review Economic Earnings to evaluate our ongoing performance, allocate resources and review dividend policy. We believe that this non-GAAP performance measure of segment profit or loss, while not a substitute for GAAP net income, is useful for management and investors when evaluating our underlying operating and financial performance and our available resources. We do not advocate that investors consider this non-GAAP measure of segment profit or loss without considering the financial information prepared in accordance with GAAP.

In calculating Economic Earnings, we add to net income the non-cash expense associated with equity-based compensation awards of restricted stock and stock options, 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.