Segment Analysis

3 Months Ended

Mar. 31, 2013

Segment Analysis

Segment Analysis

25.  Segment Analysis

As of March 31, 2013, the Company’s business model operated through the following three business segments:

· Investment Banking — This division provides financial advisory and capital raising services in connection with mergers, acquisitions and other strategic matters. The division covers key industry verticals, including real estate, 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. The activities of the MBS & Rates division will be discontinued in the second quarter of 2013. Refer to Note 27 herein for additional information.

· 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 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. The activities of the Credit Products division will be discontinued in the second quarter of 2013. Refer to Note 27 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.

The results of ClearPoint have been reclassified as discontinued operations and are therefore no longer reported below.  In connection with this development,  any previously reported intangible asset amortization related ClearPoint and certain other ClearPoint related items, which were previously included within “Other,” have 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 certain intangible assets from business acquisitions not reported within discontinued operations.

Information concerning operations in these reportable segments is as follows:

	Three Months Ended March 31,
(In thousands of dollars)	2013			2012
Net revenues
Investment Banking
Investment banking	$	15,012		$	4,533
Other revenue	20			—
Total Investment Banking	15,032			4,533
MBS & Rates
Sales and trading	(7,629		)	8,004
Investment banking	161			237
Interest income	8,611			16,427
Interest expense	(1,812		)	(4,337		)
Other revenue	(53		)	—
Total MBS & Rates	(722		)	20,331
Credit Products
Sales and trading	10,821			19,638
Investment banking	—			1,908
Interest income	257			132
Interest expense	(71		)	(99		)
Other revenue	818			137
Total Credit Products	11,825			21,716
Total net revenues — Reportable segments	$	26,135		$	46,580
Other
Investment gains/(losses), net	172			132
Sales and trading	(10		)	8
Interest income	98			202
Interest expense	(244		)	(59		)
Interest expense — Intersegment allocations	520			1,726
Other revenue	179			377
Total Other	715			2,386
Total net revenues	$	26,850		$	48,966
(Loss)/income from continuing operations before income taxes
Investment Banking	$	3,345		$	579
MBS & Rates	(8,254		)	5,487
Credit Products	(417		)	(688		)
(Loss)/income from continuing operations before income before income taxes — Reportable segments	$	(5,326	)	$	5,378
Other	(8,252		)	(7,736		)
Loss from continuing operations before income taxes	$	(13,578	)	$	(2,358	)

Information concerning the assets of these segments is as follows:

	March 31,			December 31,
(In thousands)	2013			2012
Total Assets
Investment Banking	$	8,874		$	15,907
MBS & Rates	528,227			1,026,987
Credit Products	13,636			40,952
Total assets — Reportable segments	550,737			1,083,846
Other(1)	113,299			197,455
Intersegment eliminations	(38,640		)	(51,663		)
Total assets	$	625,396		$	1,229,638

(1) Includes assets of ClearPoint of $19.1 million and $102.1 million at March 31, 2013 and December 31, 2012, respectively, now reported as discontinued operations.

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, 2012.