Segment Analysis

12 Months Ended

Dec. 31, 2012

Segment Analysis

Segment Analysis

NOTE 27. Segment Analysis

        During the year ended December 31, 2012, we operated our businesses through the following four business segments:

• •

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

  •

  MBS & 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 currently generated from spreads on principal transactions executed to facilitate trades for clients, including on a riskless principal basis. Revenues are also generated from changes in fair value and interest income on securities held in inventory. In addition, this division is integrating its advanced analytics and quantitative research capabilities through its platform acquired from RangeMark. RangeMark's integration may also provide for revenues earned through advisory services.

  •

  Credit Products—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.

  •

  ClearPoint—This division originated, processed and underwrote single and multi-family residential mortgage loans within a number of states across the country. The loans were 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 were generated primarily from the sale of the residential mortgage loans with servicing released. On February 14, 2013, the Company entered into the Homeward Transaction, an agreement to sell substantially all of ClearPoint's assets to Homeward. This transaction closed on February 22, 2013, and all remaining business activities of ClearPoint are being wound down. Refer to Note 29 herein for additional information.

        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. Other revenues reflect management fees received from FATV and other miscellaneous revenues, including clawbacks of certain stock-based compensation grants subject to non-competition provisions.

        Prior period results have been revised to reclassify investment banking revenues and related expenses into the segments within which they are generated, as this is how the segments are currently evaluated. Such revenues were all previously presented within the Investment Banking reportable segment.

        The Company's Equities segment results have been reclassified as discontinued operations and are therefore no longer reported below. In connection with this development, the goodwill and intangible asset impairment of related to the Equities segment and any previously reported intangible asset amortization related the Equities segment, which was previously 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 goodwill impairment charges, costs related to corporate overhead and support, such as various fees associated with financing, legal and settlement expenses and amortization of certain 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)	2012			2011			2010
Net revenues
Investment Banking
Investment banking	$	27,441		$	26,610		$	37,276
Other		—			—			90
Total Investment Banking		27,441			26,610			37,366
MBS & Rates
Sales and trading		7,348			53,753			76,897
Investment banking		682			3,924			1,513
Interest income		42,910			60,920			55,565
Interest expense		(12,758	)		(14,754	)		(15,535	)
Other revenue		2,456			15			217
Total MBS & Rates		40,638			103,858			118,657
Credit Products
Sales and trading		70,639			66,688			79,357
Investment banking		2,430			2,535			6,558
Interest income		882			1,817			1,878
Interest expense		(496	)		(551	)		(632	)
Other revenue		977			567			73
Total Credit Products		74,432			71,056			87,234
ClearPoint
Sales and trading		46,283			40,119			—
Interest income		4,935			3,446			—
Interest expense		(5,131	)		(2,927	)		—
Other revenue		7,288			6,286			—
Total ClearPoint		53,375			46,924			—
Total net revenues—Reportable segments		195,886			248,448			243,257
Other
Investment gains, net		1,233			2,996			7
Sales and trading		(81	)		(104	)		(3	)
Gain from bargain purchase—ClearPoint acquisition		—			2,330			—
Interest income		69			11			(151	)
Interest expense		(109	)		(1,231	)		(3,476	)
Interest expense—Intersegment allocations		5,667			7,550			8,325
Other revenue		930			1,172			623
Total Other		7,709			12,724			5,325
Total net revenues	$	203,595		$	261,172		$	248,582
(Loss)/income from continuing operations before income taxes
Investment Banking	$	4,578		$	2,290		$	(2,220	)
MBS & Rates		127			33,120			33,347
Credit Products		3,745			9,738			5,336
ClearPoint		(5,891	)		(3,686	)		—
Income from continuing operations before income taxes—Reportable segments		2,559			41,462			36,463
Other		(55,912	)		(103,339	)		(62,246	)
Loss from continuing operations before income taxes	$	(53,353	)	$	(61,877	)	$	(25,783	)

        Information concerning the assets of these segments is as follows:

(In thousands)	2012			2011
Total Assets
Investment Banking	$	15,907		$	10,916
MBS & Rates		1,026,987			2,929,879
Credit Products		40,952			29,930
ClearPoint		102,110			242,350
Total assets—Reporting segments		1,185,956			3,213,075
Other		95,345			126,358
Intersegment eliminations		(51,663	)		(35,877	)
Total assets	$	1,229,638		$	3,303,556

        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.