Segment Analysis

12 Months Ended

Dec. 31, 2011

Segment Analysis

Segment Analysis

NOTE 27. Segment Analysis

        Currently, we operate our businesses through the following four business segments:

• •

  MBS/ABS & Rates—This division provides sales, trading, research and advisory services on a wide range of mortgage and asset-backed securities, U.S. Treasury and government agency securities, structured products such as CLOs and CDOs, whole loans, and other securities. Revenues are generated from spreads on principal transactions executed to facilitate trades for clients. Revenues are also generated from changes in fair value and interest income on securities held in inventory.

  •

  Corporate Credit—This division provides analysis, sales and trading on a wide range of debt securities including bank debt and loans, investment grade debt, high-yield debt, treasuries, convertibles, distressed debt, preferred debt, emerging market debt and reorganization equities to corporate and institutional investor clients. The division also provides trade execution services, liability management, corporate debt repurchase programs and new issue distributions. Revenues are generated primarily from spreads on riskless principal transactions, and to a lesser extent, principal trading and commissions on trades executed on behalf of clients. In addition, revenues are also generated on a smaller scale from interest income on securities held in inventory.

  •

  Investment Banking—This division provides financial advisory and capital raising services in connection with mergers, acquisitions and other strategic matters. The division is being reorganized around existing M&A expertise, expanded capital markets capabilities and key industry verticals, including real estate, financial services, aerospace and defense, technology, media and telecom, general industrial and financial sponsor coverage.

  •

  ClearPoint—This division originates, processes and underwrites single and multi-family residential mortgage loans within 43 states across the country. The loans are underwritten using standards prescribed by conventional mortgage lenders and loan buyers such as the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation. Revenues are generated primarily from the sale of the residential mortgage loans with servicing released.

        The Company's sales and trading revenues consist of revenues derived from commissions, principal transactions and other fee related revenues. Investment banking consists of revenues derived from capital raising and financial advisory services. Investment gains/(losses) primarily reflect gains and losses on the Company's FATV investment.

        The Equities segment results have been reclassified as a discontinued operation and is no longer reported below. In connection with this development, the goodwill and intangible asset impairment and any previously reported intangible asset amortization related to the Equities reporting unit which was included within "Other" has also been reclassified within discontinued operations. The realignment of the Investment Banking segment had no impact on comparability to prior period results.

        Items of revenues and expenses not allocated to one of the reportable segments are aggregated under the caption "Other" in the table below. Included within "Other" are investment gains/(losses) and fees related to the Company's investment in and management of FATV. In addition, "Other" reflects expenses not directly associated with specific reportable segments, including costs related to corporate overhead and support, such as various fees associated with financing, legal and settlement expenses and amortization of intangible assets from business acquisitions not reported within discontinued operations.

        Information concerning operations in these segments is as follows for the year ended December 31:

(In thousands)	2011			2010			2009
Net revenues
MBS/ABS & Rates
Sales and trading	$	53,769		$	77,114		$	117,702
Interest income		60,919			55,565			45,229
Interest expense		(14,755	)		(15,535	)		(18,567	)
Total MBS/ABS & Rates		99,933			117,144			144,364
Corporate Credit
Sales and trading		67,255			79,430			113,647
Interest income		1,817			1,878			946
Interest expense		(551	)		(632	)		(205	)
Total Corporate Credit		68,521			80,676			114,388
Investment Banking
Investment banking		33,070			45,347			46,156
Other		—			90			168
Total Investment Banking		33,070			45,437			46,324
ClearPoint
Sales and trading		46,405			—			—
Interest income		3,446			—			—
Interest expense		(2,927	)		—			—
Total ClearPoint		46,924			—			—
Total net revenues—Reportable segments		248,448			243,257			305,076
Other
Investment gains, net		2,996			7			5,698
Sales and trading		1,068			620			1,406
Gain from bargain purchase—ClearPoint acquisition		2,330			—			—
Interest income		11			(151	)		187
Interest expense		(1,231	)		(3,476	)		(3,944	)
Interest expense—Intersegment allocations		7,550			8,325			10,193
Total Other		12,724			5,325			13,540
Total net revenues	$	261,172		$	248,582		$	318,616
(Loss)/income from continuing operations before income taxes
MBS/ABS & Rates	$	31,452		$	32,597		$	56,283
Corporate Credit		8,532			1,782			14,876
Investment Banking		5,164			2,084			12,031
ClearPoint		(3,686	)		—			—
Income from continuing operations before income taxes—Reportable segments		41,462			36,463			83,190
Other		(103,339	)		(62,246	)		(21,834	)
(Loss)/income from continuing operations before income taxes	$	(61,877	)	$	(25,783	)	$	61,356

        Information concerning the assets of these segments is as follows for the year ended December 31, 2011:

(In thousands)	2011			2010
Total Assets
MBS/ABS & Rates	$	2,929,879		$	1,387,725
Corporate Credit		29,930			33,897
Investment Banking		10,916			100,305
ClearPoint		242,350			—
Total assets—Reporting segments		3,213,075			1,521,927
Other		126,358			391,065
Intersegment eliminations		(35,877	)		(255,060	)
Total assets	$	3,303,556		$	1,657,932

        Total assets for the year ended December 31, 2010, was not previously utilized by the chief operating decision maker. Substantially all assets and operations are located in the United States.

        The Company's segments financial policies are the same as those described in Note 1. Refer to Note 26 herein for information related to the Company's Equities segment which is being reported as a discontinued operation.