Provision for Income Taxes

First Quarter 2012

The Company’s effective income tax rate from continuing operations for the quarter ended March 31, 2012 of 10.7% resulted in an income tax benefit of approximately $0.6 million. The Company’s tax rate differs from the federal statutory tax rate of 35% primarily due to non-deductible discrete tax expense associated with stock compensation shortfalls, partially offset by a state and local income tax benefit.

Discontinued Operations

First Quarter 2012 vs. 2011

The Company has classified the results of its Equities segment as discontinued operations due to the Company’s decision to exit this business on August 22, 2011. Results of this discontinued operation for the three months ended March 31, 2012 and 2011 are presented in the following table:
       

 

Three Months Ended

March 31,
(In thousands) 2012     2011
(unaudited)
 
Net revenues $ 37 $ 5,271
Total expenses (excluding interest)   73       (7,733 )
Income/(loss) from discontinued operations before income taxes 110 (2,462 )
Provision for income taxes   78       (1,068 )
Income/(loss) from discontinued operations, net of taxes $ 32     $ (1,394 )
 

ClearPoint Recent Developments

During the first quarter of 2012, the Company disclosed liquidity constraints experienced by ClearPoint, which were initially due to the rapid expansion of ClearPoint’s business, coupled with an unanticipated slow-down in loan purchases by one of ClearPoint’s principal loan purchasers. In connection with these matters, the Company entered into limited guaranties with Citibank (“Citibank Guaranty”) and with certain of ClearPoint’s warehouse lenders (“Curtailment Guaranties”). The Company has taken certain actions as described below that have substantially reduced the Company’s potential liabilities under these guaranties.

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