Segment Analysis

6 Months Ended

Jun. 30, 2012

Segment Analysis

Segment Analysis

25.Segment Analysis

Currently, our business model operates 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, financial services, aerospace and defense, technology, media and telecom, general industrial and financial sponsor coverage.

· MBS & Rates (formerly known as 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.

· Credit Products (formerly known as 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.

· ClearPoint — This division originates, processes and underwrites single and multi-family residential mortgage loans within 45 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 financial advisory services and capital raising.  Investment gains/(losses) primarily reflect gains and losses on the Company’s FATV investment.

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 Equities segment results have been reclassified as discontinued operations and are no longer reported below.  In connection with this development, any previously reported intangible asset amortization related to the Equities reporting unit which was previously included within “Other” has also been reclassified within discontinued operations.

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 intangible assets from business acquisitions not reported within discontinued operations.

Information concerning operations in these reportable segments are as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands of dollars)	2012			2011			2012			2011
Net revenues
Investment Banking
Investment banking	$	8,730		$	8,956		$	13,263		$	16,600
Other	—			—			—			—
Total Investment Banking	8,730			8,956			13,263			16,600
MBS & Rates
Sales and trading	(1,653		)	12,246			6,350			52,997
Investment banking	385			1,128			623			1,300
Interest income	10,340			13,908			26,767			28,197
Interest expense	(3,790		)	(3,512		)	(8,127		)	(7,018		)
Total MBS & Rates	5,282			23,770			25,613			75,476
Credit Products
Sales and trading	17,769			14,679			37,546			32,320
Investment banking	—			(42		)	1,907			2,464
Interest income	223			386			355			848
Interest expense	(120		)	(172		)	(219		)	(316		)
Total Credit Products	17,872			14,851			39,589			35,316
ClearPoint
Sales and trading	11,396			6,990			26,579			13,323
Interest income	993			587			3,437			902
Interest expense	(1,073		)	(569		)	(3,155		)	(859		)
Total ClearPoint	11,316			7,008			26,861			13,366
Total net revenues — Reportable segments	43,200			54,585			105,326			140,758
Other
Investment (losses)/gains, net	(139		)	368			(7		)	(318		)
Sales and trading	103			225			487			424
Gain from bargain purchase — ClearPoint acquisition	—			—			—			2,330
Interest income	2			3			203			5
Interest expense	(40		)	(827		)	(97		)	(1,420		)
Interest expense — Intersegment allocations	1,521			2,025			3,478			3,989
Total Other	1,447			1,794			4,064			5,010
Total net revenues	$	44,647		$	56,379		$	109,390		$	145,768
(Loss)/income before income taxes from continuing operations
Investment Banking	$	2,195		$	3,728		$	2,774		$	4,991
MBS & Rates	(1,746		)	6,542			3,741			25,407
Credit Products	1,285			631			597			2,843
ClearPoint	(2,512		)	(1,451		)	(5,365		)	(2,571		)
(Loss)/income before income taxes from continuing operations — Reportable segments	$	(778	)	$	9,450		$	1,747		$	30,670
Other	(30,973		)	(7,034		)	(38,780		)	(13,526		)
(Loss)/income before income taxes from continuing operations	$	(31,751	)	$	2,416		$	(37,033	)	$	17,144

Information concerning the assets of these segments is as follows:

	June 30,			December 31,
(In thousands of dollars)	2012			2011
Total Assets
MBS & Rates	$	2,608,324		$	2,929,879
Credit Products	36,705			29,930
Investment Banking	14,092			10,916
ClearPoint	85,278			242,350
Total assets — Reportable segments	2,744,399			3,213,075
Other	79,791			126,358
Intersegment eliminations	(33,437		)	(35,877		)
Total assets	$	2,790,753		$	3,303,556

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 within the footnotes to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.