Goodwill and Intangibles

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill

In accordance with US GAAP, the Company tests goodwill for impairment on an annual basis or at an interim period if events or changed circumstances would more likely than not reduce the fair value of a reporting unit below its carrying amount. Under US GAAP, the Company first assesses the qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amounts as a basis for determining if it is necessary to perform the two-step approach. Periodically estimating the fair value of a reporting unit requires significant judgment and often involves the use of significant estimates and assumptions. These estimates and assumptions could have a significant effect on whether or not an impairment charge is recorded and the magnitude of such a charge.

The Company estimated the fair value using the income and market approach which involves estimates of future cash flows, discount rates, economic forecast and other assumption which are then used in the market approach (earning and / or transactions multiples) and / or income approach (discounted cash flow method).

In connection with the CRT transaction (See Note 2), in May 2016, the Company recognized goodwill of $3.5 million. Goodwill, which primarily relates to expected synergies from combining operations, is fully deductible for tax purposes and has been assigned to the broker-dealer segment of the Company.

On September 23, 2016, the Company and the portfolio managers of RASL completed the sale of their respective ownership interests in RASL, an investment advisor. In contemplation with the sale transaction, the Company allocated $1.2 million of goodwill to the RASL disposal group (See Note 2) which was included in the investment management reporting unit.

Based on the results of the impairment analysis as of December 31, 2017, the Company did not recognize any impairment relating to the investment management or broker-dealer reporting units. No impairment charges for goodwill were recognized during the years ended December 31, 2016 and 2015, respectively.

The following table presents the changes in the Company's goodwill balance, by reporting unit for the years ended December 31, 2017, 2016, and 2015:



	Investment Management			Broker- Dealer			Total
	(dollars in thousands)
Beginning balance - December 31, 2015
Goodwill	$	30,228		$	47,818		$	78,046
Accumulated impairment charges	(10,200		)	(9,485		)	(19,685		)
Net	20,028			38,333			58,361

Activity: 2016
Recognized goodwill	—			3,519			3,519
Goodwill allocated to disposal group	(1,202		)	—			(1,202		)
Goodwill impairment charges	—			—			—

Ending balance: December 31, 2016
Goodwill	29,026			51,337			80,363
Accumulated impairment charges	(10,200		)	(9,485		)	(19,685		)
Net	18,826			41,852			60,678

Activity: 2017
Recognized goodwill	—			—			—
Goodwill allocated to disposal group	—			—			—
Goodwill impairment charges	—			—			—

Ending balance: December 31, 2017
Goodwill	29,026			51,337			80,363
Accumulated impairment charges	(10,200		)	(9,485		)	(19,685		)
Net	$	18,826		$	41,852		$	60,678

Intangible assets

Information for the Company's intangible assets that are subject to amortization is presented below as of December 31, 2017 and 2016.



		December 31, 2017							December 31, 2016
	Amortization Period	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(in years)	(in thousands)							(in thousands)
Trade names	0.6 - 7.5	$	10,622	$	(10,555	)	$	67	$	9,962	$	(9,689	)	$	273
Customer relationships	3 - 14	41,134		(15,733		)	25,401		33,874		(12,948		)	20,926
Customer contracts	1.2	800		(800		)	—		800		(800		)	—
Non compete agreements and covenants with limiting conditions acquired	3 - 5	2,237		(1,479		)	758		2,268		(818		)	1,450
Intellectual property	3 - 10	8,243		(4,514		)	3,729		8,283		(5,163		)	3,120
		$	63,036	$	(33,081	)	$	29,955	$	55,187	$	(29,418	)	$	25,769

The Company tests intangible assets for impairment if events or circumstances suggest that the asset groups carrying value may not be fully recoverable. For the years ended December 31, 2017 and 2016, no impairment charge for intangible assets was recognized.

In connection with the CRT transaction (See Note 2), in May 2016, the Company recognized intangible assets (including customer relationships, trade name, intellectual property and non-compete arrangements) with an estimated fair value of $5.1 million which are included within intangible assets, net in the consolidation statements of financial condition with the expected useful lives ranging from 1 to 9 years with a weighted average useful life of 8.1 years.

In connection with Convergex acquisition (See Note 2), in June 2017, the Company recognized intangible assets (including customer relationships, trade name, and intellectual property) with an estimated fair value of $10.3 million which are included within intangible assets, net in the consolidation statements of financial condition with the expected useful lives ranging from 0.6 years to 9.0 years with a weighted average useful life of 7.7 years.

Amortization expense related to intangible assets was $6.1 million, $5.0 million, and $2.7 million for the years ended December 31, 2017, 2016, and 2015, respectively, which is included in depreciation and amortization expense in the accompanying consolidated statements of operations. All of the Company's intangible assets have finite lives.

The estimated future amortization expense for the Company's intangible assets as of December 31, 2017 is as follows:



	(dollars in thousands)
2018	$	4,946
2019	4,168
2020	3,950
2021	3,890
2022	3,108
Thereafter	9,893
	$	29,955

- 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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