Consolidated Non-Compensation Expenses (including Non-GAAP results)
Non-compensation expenses were $43.8 million ($22.7 million on a non-GAAP basis) for the second quarter of 2012, compared to $26.3 million for the first quarter of 2012 and $16.7 million for the second quarter of 2011. Non-GAAP results for the second quarter of 2012 exclude the $21.1 million goodwill impairment charge. Non-compensation expenses include ClearPoint broker fees and loan processing fees of $8.1 million, $12.9 million and $4.6 million for the second quarter of 2012, first quarter of 2012 and second quarter of 2011, respectively, driven by the level of ClearPoint loan commitment volumes in each respective period. Non-compensation expenses for the second quarter of 2012 were also impacted by higher legal, consulting and advisory fees when compared to the first quarter of 2012 and second quarter of 2011.
Provision for Income Taxes
Second Quarter 2012The Company’s effective income tax rate from continuing operations for the three months ended June 30, 2012 was negative 91.5%, resulting in income tax expense of approximately $29.1 million. The abnormal tax rate differs from the federal statutory tax rate of 35% primarily due to the establishment of a valuation allowance against substantially all of the Company’s deferred tax assets (negative 101%) as well as a non-deductible discrete item attributable to the write-off of goodwill (negative 25%). The Company provided for a valuation allowance of $32.1 million on its net deferred tax assets, as the Company entered into a cumulative loss in the most recent three-year period, inclusive of the current quarter operating results. Such an assessment generally weighs the Company’s recent financial reporting losses to a greater extent than its projections of future taxable income. Six Months Ended 2012 The Company’s effective income tax rate from continuing operations for the six months ended June 30, 2012 of negative 76.9% resulted in income tax expense of approximately $28.5 million. The abnormal tax rate differs from the federal statutory tax rate of 35% primarily due to the establishment of the previously mentioned valuation allowance against substantially all of the Company’s deferred tax assets during the three months ended June 30, 2012 (negative 87%), as well as the previously mentioned non-deductible discrete item attributable to the write-off of goodwill recorded during the three months ended June 30, 3012 (negative 21%) and tax expense associated with stock-based compensation shortfalls (negative 5%).
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