Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2011

NOTE 12. Goodwill and Intangible Assets

The Company has designated its annual goodwill impairment testing dates for its MBS/ABS & Rates, Equities and Investment Banking reporting units to be December 31, October 1, and June 1, respectively. The fair value of the MBS/ABS & Rates reporting unit exceeded its carrying amount by approximately 70% as of December 31, 2011.

On August 22, 2011, the Company announced that it was implementing a new strategic plan, which included the realignment of its core investment banking practice and the termination of 32 investment banking employees as well as certain administrative positions. As a result of the realignment of the business and associated employee terminations, the Company performed an interim goodwill impairment test related to the Investment Banking reporting unit.

In addition, during the three months ended June 30, 2011, the Company performed an interim goodwill impairment test related to the Equities reporting unit as a result of the impact of the current market environment on the segment's net revenues coupled with the higher operating costs associated with the expansion of our equities trading and sales trading capabilities announced in the third quarter of 2010. These factors resulted in a shortfall of actual revenues and operating results in relation to current year projections.

The following table sets forth the rollforward of goodwill for the MBS/ABS & Rates, Equities and Investment Banking reporting units at December 31, 2011 and 2010:

Goodwill

(In thousands)	Reporting Unit MBS/ABS & Rates		Reporting Unit Equities			Reporting Unit Investment Banking			Total

Goodwill
Balance at December 31, 2009	$	17,364	$	8,928		$	79,402		$	105,694
Contingent consideration		—		—			—			—

Balance at December 31, 2010	$	17,364	$	8,928		$	79,402		$	105,694
Impairment of goodwill		—		(8,928	)		(75,670	)		(84,598	)
Contingent consideration		—		—			—			—

Balance at December 31, 2011	$	17,364	$	—		$	3,732		$	21,096

During the years ended December 31, 2011 and 2010, there was no contingent consideration associated with the Company's AmTech acquisition as a result of the performance of the division. Refer to Note 28 herein for additional information.

The Company considered a combination of the market and income approaches to determine the fair value of its reporting units. Key assumptions utilized in the market approach included the use of multiples of earnings before interest and taxes and earnings before interest, taxes, depreciation and amortization based upon available comparable company market data. The income approach, which is a discounted cash flow analysis, utilized a discount rate which included an estimated cost of debt and cost of equity and capital structure. The outcome of these interim goodwill impairment tests, which relies on significant unobservable inputs to determine the goodwill's fair value, resulted in approximately $75.7 million of the goodwill allocated to the Investment Banking reporting unit and all of the goodwill of the Equities reporting unit (classified as part of discontinued operations) being written off during the year ended December 31, 2011.

There is a degree of uncertainty associated with the key assumptions utilized within the annual goodwill impairment tests. The discounted cash flow assumptions included an estimated growth rate which may not be indicative of actual future results. In addition, a downturn in the market may widen credit spreads resulting in a larger discount rate being utilized in the discounted cash flow analysis and could also have an adverse effect on the market multiples of our guideline companies. Such uncertainties may cause varying results in future periods.

Intangible Assets

(In thousands)	December 31, 2011			December 31, 2010

Intangible assets (amortizable):
Descap Securities, Inc.—Customer relationships
Gross carrying amount	$	641		$	641
Accumulated amortization		(410	)		(356	)

Net carrying amount		231			285

Corporate Credit—Customer relationships
Gross carrying amount		795			795
Accumulated amortization		(610	)		(451	)

Net carrying amount		185			344

Equities—Customer relationships
Gross carrying amount		6,960			6,960
Accumulated amortization—May 31, 2011		(1,614	)		(1,362	)
Impairment of intangible asset—June 1, 2011		(5,346	)		—

Net carrying amount		—			5,598

Equities—Covenant not to compete
Gross carrying amount		330			330
Accumulated amortization—May 31, 2011		(293	)		(247	)
Impairment of intangible asset—June 1, 2011		(37	)		—

Net carrying amount		—			83

Investment Banking—Trade name
Gross carrying amount		7,300			7,300
Accumulated amortization		(874	)		(573	)
Impairment of intangible asset—September 1, 2011		(3,234	)		—

Net carrying amount		3,192			6,727

Investment Banking—Covenant not to compete
Gross carrying amount		700			700
Accumulated amortization		(522	)		(366	)
Impairment of intangible asset—September 1, 2011		(178	)		—

Net carrying amount		—			334

Investment Banking—Customer relationships
Gross carrying amount		6,500			6,500
Accumulated amortization		(5,338	)		(4,306	)
Impairment of intangible asset—September 1, 2011		(1,162	)		—

Net carrying amount		—			2,194

ClearPoint—Customer relationships
Gross carrying amount		803			—
Accumulated amortization		(100	)		—

Net carrying amount		703			—

Total Intangible assets	$	4,311		$	15,565

In connection with the interim goodwill impairment tests related to the Investment Banking and Equities reporting units, the Company evaluated the recoverability of the intangible assets allocated to these reporting units, by comparing the sum of the undiscounted cash flows expected to result from the use and eventual disposition of such assets to their carrying amounts. These outcomes resulted in the write-off of approximately $4.6 million of the intangible assets allocated to the Investment Banking reporting unit and all of the intangible assets allocated to the Equities reporting unit (classified as part of discontinued operations) during the year ended December 31, 2011.

Customer-related intangible assets are being amortized from 3 to 12 years and trademark assets are being amortized over 20 years (with approximately 18 years remaining). Excluding the impairment related to the intangible assets allocated to the Investment Banking and Equities reporting units discussed above, total amortization expense for the years ended December 31, 2011, 2010 and 2009 was approximately $1.8 million, $3.0 million and $3.1 million, respectively and is recorded within Other in the Consolidated Statements of Operations.

Future amortization expense is estimated as follows:

(In thousands)

2012	$	496
2013		364
2014		337
2015		337
2016		301
Thereafter		2,476

Total	$	4,311

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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