UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A
(Amendment No. 1)

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
April 1, 2015

WESTWOOD HOLDINGS GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)

 
 	 	 	 	 	
Delaware	 	001-31234	 	75-2969997	
(State or Other Jurisdiction
of Incorporation)	 	(Commission
File Number)	 	(I.R.S. Employer
Identification Number)	
200 Crescent Court, Suite 1200
Dallas, Texas 75201
(Address of principal executive offices, including zip code)
(214) 756-6900
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:
 
¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 

Explanatory Note
On April 1, 2015, Westwood Holdings Group, Inc. (“Westwood” or the “Company”) filed a Current Report on Form 8-K (the “Initial 8-K”) to report the completion of its acquisition of Woodway Financial Advisors, a Trust Company (“Woodway”) pursuant to a Reorganization Agreement and Agreement and Plan of Merger (the “Merger Agreement”), dated as of January 15, 2015, by and among Westwood, Westwood Trust, a Texas trust association wholly-owned by Westwood (“Westwood Trust”), Woodway and certain shareholders of Woodway.
This Amendment No. 1 (this “Amendment”) is being filed to amend and supplement Item 9.01 of the Initial 8-K to include (i) the audited financial statements of Woodway as of and for the year ended December 31, 2014 and the unaudited condensed financial statements of Woodway as of and for the three months ended March 31, 2015 and (ii) the unaudited pro forma condensed combined balance sheet of the Company as of March 31, 2015, the unaudited pro forma condensed combined statements of operations of the Company for the three months ended March 31, 2015 and the unaudited pro forma combined statements of operations of the Company for the year ended December 31, 2014, giving effect to transactions pursuant to the Merger Agreement.
 
Item 9.01	Financial Statements and Exhibits	
 
(a)	Financial statements of businesses acquired.	
The audited financial statements of Woodway as of and for the year ended December 31, 2014 and the unaudited condensed financial statements of Woodway as of and for the three months ended March 31, 2015 are filed as Exhibit 99.2 to this Amendment and are incorporated herein by reference.
 
(b)	Pro forma financial information.	
The unaudited pro forma condensed combined balance sheet of the Company as of March 31, 2015 and the unaudited pro forma condensed combined statements of operations of the Company for the three months ended March 31, 2015 and for the year ended December 31, 2014, giving effect to the transactions pursuant to the Merger Agreement, are filed as Exhibit 99.3 to this Amendment and are incorporated herein by reference.
 
(d)	Exhibits.	
The following Exhibits are furnished with this Current Report on Form 8-K/A:

Exhibit
Number	  	Description	
 	 	
23.1	  	Consent of Briggs and Veselka Co.	
 	 	
99.1	  	Press Release dated April 1, 2015, entitled “Westwood Holdings Group, Inc. Finalizes Acquisition of Woodway Financial Advisors in Houston, Expanding the Westwood Trust Private Wealth Platform” (incorporated by reference to Exhibit 99.1 to the Initial 8-K).	
 	 	
99.2	  	Audited financial statements of Woodway as of and for the year ended December 31, 2014 and unaudited condensed financial statements of Woodway as of and for the three months ended March 31, 2015.	
 	 	
99.3	  	Unaudited pro forma condensed combined balance sheet of the Company as of March 31, 2015 and unaudited pro forma condensed combined statements of operations of the Company for the three months ended March 31, 2015 and for the year ended December 31, 2014, giving effect to the transactions pursuant to the Merger Agreement.	
 
- 2 -

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 	 	 	 	WESTWOOD HOLDINGS GROUP, INC.	
 	 	 	
Date: June 10, 2015	 	 	 	/s/ Tiffany B. Kice	
 	 	 	 	Tiffany B. Kice,	
 	 	 	 	Chief Financial Officer and Treasurer	

EXHIBIT INDEX

Exhibit
Number	  	Description	
 	 	
23.1	  	Consent of Briggs and Veselka Co.	
 	 	
99.1	  	Press Release dated April 1, 2015, entitled “Westwood Holdings Group, Inc. Finalizes Acquisition of Woodway Financial Advisors in Houston, Expanding the Westwood Trust Private Wealth Platform” (incorporated by reference to Exhibit 99.1 to the Initial 8-K).	
 	 	
99.2	  	Audited financial statements of Woodway as of and for the year ended December 31, 2014 and unaudited condensed financial statements of Woodway as of and for the three months ended March 31, 2015.	
 	 	
99.3	  	Unaudited pro forma condensed combined balance sheet of the Company as of March 31, 2015 and unaudited pro forma condensed combined statements of operations of the Company for the three months ended March 31, 2015 and for the year ended December 31, 2014, giving effect to the transactions pursuant to the Merger Agreement.	

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated May 22, 2015, with respect to the financial statements of Woodway Financial Advisors, a Trust Company, as of December 31, 2014, and for the year then ended, appearing in this current report on Form 8-K/A. We also consent to the incorporation by reference of such report in the Registration Statements of Westwood Holdings Group, Inc. on Form S-8 (File Nos. 333-98841, 333-133963, 333-160337, 333-175696, 333-187998 and 333-188002).
/s/ Briggs & Veselka Co.
Houston, Texas
June 10, 2015

 	 	HOUSTON OFFICE 713.667.9147 Tel. ● 713.667.1697 Fax	 	 	
 	 	Nine Greenway Plaza, Suite 1700 ● Houston, Texas 77046 ● www.bvccpa.com	 	 	
    	 	 	 	 	
Member of the Center for Public Company Audit Firms of the American Institute of Certified Public Accountants	

Exhibit 99.2
Woodway Financial Advisors, A Trust Company
Financial Statements
For the Year Ended December 31, 2014

CONTENTS

 	  	Page	 	
 	 	
Independent Auditors’ Report	  	 	1	  	
 	 	
Balance Sheet	  	 	3	  	
 	 	
Statement of Income	  	 	4	  	
 	 	
Statement of Changes in Stockholders’ Equity	  	 	5	  	
 	 	
Statement of Cash Flows	  	 	6	  	
 	 	
Notes to Financial Statements	  	 	7	  	

INDEPENDENT AUDITORS’ REPORT
To the Board of Directors of
Woodway Financial Advisors, a Trust Company
Houston, Texas
We have audited the accompanying financial statements of Woodway Financial Advisors, a Trust Company (the “Company”), which comprise the balance sheet as of December 31, 2014, and the related statements of income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

To the Board of Directors of
Woodway Financial Advisors, a Trust Company
Re: Independent Auditors’ Report
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Woodway Financial Advisors, a Trust Company, as of December 31, 2014, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Correction of Error
As discussed in Note 2 to the financial statements, certain errors resulting in understatement of amounts previously reported for accounts receivable, and revenue as of December 31, 2013, were discovered by management of the Company during the current year. Accordingly, amounts reported for beginning retained earnings have been restated in the 2014 financial statements. Our opinion is not modified with respect to this matter.

/s/ Briggs & Veselka Co.	
Houston, Texas	
May 22, 2015
 
(2)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
BALANCE SHEET
DECEMBER 31, 2014

 	 	 	 	 	
ASSETS	 	 	 	 	
Current assets	 	 	 	 	
Cash and cash equivalents	 	$	2,457,546	  	
Accounts receivable	 	 	970,558	  	
Accrued interest receivable	 	 	12,082	  	
Prepaid expenses and other	 	 	181,015	  	
 	  	 	 	 	
Total current assets	 	 	3,621,201	  	
 	 	
Held-to-maturity investments	 	 	 	 	
U.S. government agency bonds	 	 	249,904	  	
Corporate bonds	 	 	1,414,826	  	
Municipal bonds	 	 	150,681	  	
 	  	 	 	 	
Total investments	 	 	1,815,411	  	
 	 	
Property and equipment, net	 	 	218,500	  	

TOTAL ASSETS	 	$	5,655,112	  	

LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	
Current liabilities	 	 	 	 	
Accounts payable and accrued expenses	 	$	536,041	  	
Other current liabilities	 	 	4,443	  	
 	  	 	 	 	
Total current liabilities	 	 	540,484	  	
 	 	
Other long-term liabilities	 	 	8,329	  	
 	  	 	 	 	
Total liabilities	 	 	548,813	  	
 	 	
Stockholders’ equity	 	 	 	 	
Common stock, $1 par value, 500,000 shares authorized; 389,850 issued and outstanding	 	 	389,850	  	
Additional paid-in capital	 	 	484,594	  	
Additional paid-in capital – stock options	 	 	24,862	  	
Retained earnings – restricted	 	 	844,755	  	
Retained earnings – unrestricted, $100,000 appropriated for contingencies	 	 	3,362,238	  	
 	  	 	 	 	
Total stockholders’ equity	 	 	5,106,299	  	

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	 	$	5,655,112	  	
 	  	 	 	 	
The accompanying notes are an integral part of these financial statements.
 
(3)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2014

 	 	 	 	 	
Income	 	 	 	 	
Fees	 	$	10,436,944	  	
Interest	 	 	51,082	  	
 	  	 	 	 	
Total income	 	 	10,488,026	  	
 	 	
Expenses	 	 	 	 	
Compensation and employee benefits	 	 	3,645,183	  	
Information technology	 	 	404,282	  	
Advertising and marketing	 	 	260,127	  	
Occupancy	 	 	313,198	  	
Other operating	 	 	672,585	  	
 	  	 	 	 	
Total expenses	 	 	5,295,375	  	

Income before income taxes	 	 	5,192,651	  	
 	 	
State income tax expense	 	 	59,917	  	

NET INCOME	 	$	5,132,734	  	
 	  	 	 	 	
The accompanying notes are an integral part of these financial statements.
 
(4)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2014

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	 	 	  	 	 	  	 	 	  	Additional	 	 	 	 	  	 	 	 	 	 	 	
 	  	Common Stock Issued	 	  	Additional
Paid-In
Capital	 	  	Paid-In
Capital –
Stock Options	 	 	Retained
Earnings –
Restricted	 	  	Retained
Earnings –
Unrestricted	 	 	Total
Stockholders’
Equity	 	 	
 	  	Number of
Shares	 	  	Par Value	 	  	 	 	  	 	 	 	 	 	  	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	
BALANCE, DECEMBER 31, 2013 AS PREVIOUSLY REPORTED	  	 	387,650	  	  	$	387,650	  	  	$	341,252	  	  	$	22,076	  	 	$	844,755	  	  	$	2,368,324	  	 	$	3,964,057	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	
Prior period adjustment (see Note 2)	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  	  	 	820,514	  	 	 	820,514	  	 	 	 	

BALANCE, DECEMBER 31, 2013 AS RESTATED	 	 	387,650	  	 	 	387,650	  	 	 	341,252	  	 	 	22,076	  	 	 	844,755	  	 	 	3,188,838	  	 	 	4,784,571	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	
Stock options exercised	 	 	2,200	  	 	 	2,200	  	 	 	143,342	  	 	 	(12,759	) 	 	 	—  	  	 	 	—  	  	 	 	132,783	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	
Stock option expense	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	15,545	  	 	 	—  	  	 	 	—  	  	 	 	15,545	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	5,132,734	  	 	 	5,132,734	  	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	
Dividends on common stock, $12.73 per share	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(4,959,334	) 	 	 	(4,959,334	) 	 	 	 	

BALANCE, DECEMBER 31, 2014	 	 	389,850	  	 	$	389,850	  	 	$	484,594	  	 	$	24,862	  	 	$	844,755	  	 	$	3,362,238	  	 	$	5,106,299	  	 	 	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	 	
The accompanying notes are an integral part of these financial statements.
 
(5)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2014

 	 	 	 	 	
Cash flows from operating activities	 	 	 	 	
Net income	 	$	5,132,734	  	
Adjustments to reconcile net income to net cash from operating activities:	 	 	 	 	
Depreciation	 	 	85,220	  	
Premium amortization	 	 	6,062	  	
Discount accretion	 	 	(1,409	) 	
Loss on disposal of property and equipment	 	 	814	  	
Stock option expense	 	 	15,545	  	
Fiduciary reserve provision	 	 	(164,220	) 	
Losses against fiduciary reserve	 	 	(2,990	) 	
Change in operating assets and liabilities:	 	 	 	 	
Accounts receivable	 	 	(125,303	) 	
Accrued interest receivable	 	 	3,742	  	
Prepaid expenses and other	 	 	67,746	  	
Accounts payable and accrued expenses	 	 	403,130	  	
Other current liabilities	 	 	(6,514	) 	
Other long-term liabilities	 	 	(4,443	) 	
 	  	 	 	 	
Net cash from operating activities	 	 	5,410,114	  	
 	 	
Cash flows from investing activities	 	 	 	 	
Purchase of marketable debt securities	 	 	(366,326	) 	
Proceeds from maturities of marketable debt securities	 	 	350,000	  	
Capital expenditures	 	 	(27,455	) 	
 	  	 	 	 	
Net cash from investing activities	 	 	(43,781	) 	
 	 	
Cash flows from financing activities	 	 	 	 	
Proceeds from issuance of common stock	 	 	132,783	  	
Dividends on common stock paid	 	 	(4,959,334	) 	
 	  	 	 	 	
Net cash from financing activities	 	 	(4,826,551	) 	

Net change in cash and cash equivalents	 	 	539,782	  	
 	 	
Cash and cash equivalents, beginning of year	 	 	1,917,764	  	

Cash and cash equivalents, end of year	 	$	2,457,546	  	

Supplemental cash flow information:	 	 	 	 	
State income taxes paid	 	$	49,342	  	
The accompanying notes are an integral part of these financial statements.
 
(6)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2014
 
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Woodway Financial Advisors, a Trust Company (the “Company”), a Texas subchapter S corporation, was organized to have full trust company powers as recognized by the Texas State Banking Commission. Financial services are provided to individuals and families, including corporate executives, professionals and closely-held businesses. Financial services include individual financial counseling, investment analysis and management, trust and estate services, and special financial services for organizations.
Summary of Significant Accounting Policies
Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Basis of Accounting – The Company maintains its accounts on the accrual method of accounting in accordance with GAAP.
Cash and Cash Equivalents – The Company considers cash in banks and other highly liquid investments with an original maturity of three months or less to be cash and cash equivalents. At December 31, 2014, cash equivalents consisted of money market accounts.
Accounts Receivable – Accounts receivable are stated at amount billed to clients or otherwise due in the normal course of business. Accounts receivable are ordinarily due when invoiced. Management believes accounts receivable to be fully collectible; therefore, no allowance for doubtful accounts has been established.
Investments – Investment securities consist of debt securities at December 31, 2014. The Company classifies its debt securities as either held-to-maturity or available-for-sale. Held-to-maturity debt securities are those securities for which the Company has the ability and intent to hold the security until its scheduled maturity date. All securities not included in held-to-maturity are classified otherwise as available-for-sale. Held-to-maturity debt securities are recorded at amortized cost, adjusted for amortization or accretion of premiums and discounts. Available-for-sale securities are recorded at fair value. Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and are reported as a separate component of accumulated other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific-identification basis.
 
(7)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2014

Premiums or discounts on debt securities purchased above or below par value are amortized or accreted over the life of the related held-to-maturity or available-for-sale securities as an adjustment to yield using the effective-interest method. Such amortization and accretion is included in the “interest income” line item in the statements of income. Dividend and interest income are recognized when earned.
Other-Than-Temporary Impairments – A decline in the market value of any held-to-maturity or available-for-sale security below cost that is deemed to be other-than-temporary will result in impairment of the security which reduces the carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery occurs and considers whether evidence that the cost of the investment is recoverable outweighs evidence to the contrary.
Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry in which the investee operates. At December 31, 2014, none of the Company’s investments were considered to be other-than-temporarily impaired.
Fair Value Measurements – Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
 
•	 	Level 1 – Quoted prices in active markets for identical assets or liabilities.	
 
•	 	Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.	
 
•	 	Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.	
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
As of December 31, 2014, there were no assets or liabilities measured at fair value on a recurring or nonrecurring basis.
 
(8)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2014

Property and Equipment – Property and equipment are recorded at cost less accumulated depreciation, including improvements that significantly extend the useful life of the related asset. Property and equipment consisted of the following at December 31, 2014:

Property and equipment, at cost	 	 	 	 	
Computer software	 	$	530,775	  	
Computer hardware	 	 	128,348	  	
Office furniture	 	 	222,723	  	
Office equipment	 	 	94,138	  	
Office fixtures	 	 	20,656	  	
Leasehold improvements	 	 	96,913	  	
 	  	 	 	 	
 	 	 	1,093,553	  	
Less: accumulated depreciation and amortization	 	 	(875,053	) 	

Total property and equipment, net	 	$	218,500	  	
 	  	 	 	 	
Depreciation is expensed using the straight-line method over the estimated useful lives of the related assets, ranging from three to fifteen years. When property or equipment is sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income. Maintenance and repairs are charged to expense in the period incurred. Depreciation expense for 2014 was $85,220.
Income Taxes – The Company has elected to be taxed as a subchapter S corporation under the Internal Revenue Code. In lieu of corporate income taxes, the stockholders of a subchapter S corporation are taxed individually on their proportionate shares of the Company’s taxable income; therefore, no provision for federal income taxes is recorded in the financial statements.
The state of Texas, where the Company conducts business, assesses a margin tax to legal entities conducting business in Texas. The tax is calculated by applying a tax rate to a base that considers both revenues and expenses; therefore, it has the characteristics of an income tax. As a result, for 2014, the Company recorded Texas margin tax of $59,917. At December 31, 2014, the Company’s tax returns open for review by state taxing authorities were 2010 to 2013.
Accrued interest and penalties associated with uncertain tax positions are recognized as part of the income tax provision. As of December 31, 2014, the Company had no uncertain tax provisions.
Revenue Recognition – Service fee revenue, generally calculated as an agreed-upon percentage of assets under management, is recorded monthly as the related services are performed.
Advertising Costs – Advertising costs are charged to expense in the period incurred. Advertising costs charged to expense were $151,005.
 
(9)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 2 – RESTATEMENT
In fiscal year 2015, management determined that the Company had incorrectly understated accounts receivable for periods prior to December 31, 2013 as fee revenue was recorded in the month billed and not in the month the fees were earned. The impact of this adjustment on statement of changes in stockholders’ equity for the year ended December 31, 2013 is restated as follows:

 	  	As Previously
Reported	 	  	Cummulative
Restatement
Impact	 	  	As
Restated	 	
 	 	 	 	
Statement of changes in stockholders’ equity	  	 	 	 	  	 	 	 	  	 	 	 	
Balance, December 31, 2012	  	$	3,529,886	 	  	$	737,496	  	  	$	4,267,382	  	
Net income, 2013	  	 	4,465,157	 	  	 	83,018	  	  	 	4,548,175	  	
Balance, December 31, 2013	  	 	3,964,057	 	  	 	820,514	  	  	 	4,784,571	  	
NOTE 3 – INVESTMENTS
Cost and fair value of investments in debt securities at December 31, 2014 are as follows:

 	  	Amortized
Cost	 	  	Gross
Unrealized
Gains	 	  	Gross
Unrealized
Losses	 	  	Approximate
Fair Value	 	
 	 	 	 	 	
Held-to-maturity	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
U.S. government agency bonds	  	$	249,904	  	  	$	—  	  	  	$	(4,501	) 	  	$	245,403	  	
Corporate bonds	  	 	1,414,826	  	  	 	21,563	  	  	 	(5,754	) 	  	 	1,430,635	  	
Municipal bonds	  	 	150,681	  	  	 	2,975	  	  	 	—  	  	  	 	153,656	  	

Totals	 	$	1,815,411	  	 	$	24,538	  	 	$	(10,255	) 	 	$	1,829,694	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Maturities of debt securities at December 31, 2014 are as follows:

 	  	Amortized
Cost	 	  	Approximate
Fair Value	 	
 	 	 	
One year or less	  	$	200,808	  	  	$	201,624	  	
After one through five years	  	 	856,047	  	  	 	875,912	  	
After five through ten years	  	 	758,556	  	  	 	752,158	  	

Totals	 	$	1,815,411	  	 	$	1,829,694	  	
 	  	 	 	 	  	 	 	 	
One U.S. government agency security and one corporate note together totaling $350,000 were called in 2014.
 
(10)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2014

Securities in an unrealized loss position at December 31, 2014 are summarized below:

 	  	Less Than 12 Months	 	  	12 Months or More	 	 	Total	 	
 	  	Fair Value	 	  	Gross
Unrealized
Losses	 	  	Fair Value	 	  	Gross
Unrealized
Losses	 	 	Fair Value	 	  	Gross
Unrealized
Losses	 	
 	 	 	 	 	 	 	
U.S. Goverment agency bonds	  	$	—  	  	  	$	—  	  	  	$	245,403	 	  	$	(4,501	) 	 	$	245,403	 	  	$	(4,501	) 	
Corporate bonds 	  	 	—  	  	  	 	—  	  	  	 	555,283	 	  	 	(5,754	) 	 	 	555,283	 	  	 	(5,754	) 	

Totals	 	$	—  	  	 	$	—  	  	 	$	800,686	 	 	$	(10,255	) 	 	$	800,686	 	 	$	(10,255	) 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	
NOTE 4 – OPERATING LEASE
The Company leases office space under a noncancelable operating lease, which expires December 31, 2016. The lease includes scheduled increases in the base rate over the term of the lease; therefore, the Company recognizes rent expense on a straight-line basis. The lease agreement contains provisions for escalation of base rates if the lessor’s operating costs exceed certain parameters and includes payments for leasehold improvements made by the lessor. The Company also leases certain office equipment and storage facilities under cancelable operating leases.
Minimum future lease payments under the above-mentioned agreements are as follows:

For the Year Ending December 31,	  	Amount	 	
 	 	
2015	  	$	271,810	  	
2016	  	 	275,696	  	

Total	 	$	547,506	  	
 	  	 	 	 	
Lease expense was $389,155 for 2014.
NOTE 5 – TREASURY STOCK
Shares of common stock issued pursuant to the Company’s 2008 Incentive Stock Option Plan (the “Plan”) are subject to repurchase under certain conditions such as the death or retirement of a stockholder. There were no share repurchases in 2014.
NOTE 6 – STOCK-BASED COMPENSATION
Stock options are granted to key employees under the Plan, which provides for the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code and nonqualified stock options.
 
(11)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2014

The Stock Option Committee of the Board of Directors administers the Plan. The administrator determines the exercise price of options granted. With respect to all incentive stock options, the exercise price may not be less than the fair market value of the Company’s common stock on the date of grant as determined by the administrator. The administrator has discretion to establish the vesting schedule. The term of an incentive stock option may not exceed 10 years. With respect to any participant who owns 10% of the voting power of all classes of outstanding stock, the term must not exceed five years, and the exercise price may not be less than 110% of the fair market value on the grant date. The Plan will automatically terminate in 2018 unless the Company terminates it sooner. Shares granted come from new shares reserved for issuance under the Plan.
The Company granted incentive stock options of 4,000 shares in 2014 at exercise prices of $85.44 per share.
The fair value of each option is estimated on the date of grant using the Black-Scholes model that uses the assumptions noted in the following table. The Company uses the Dow Jones to determine the volatility by noting the average daily change and then multiplying that by 260. The expected term of options granted is derived from the output of the Black-Scholes model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant.

Expected volatility	 	 	41.0	% 	
Expected dividends	 	 	13.5	% 	
Expected term (in years)	 	 	6	  	
Risk-free rate	 	 	2.1	% 	
Stock option compensation expense related to all outstanding options was $15,545 for 2014.
A summary of the status of the Company’s outstanding stock options and changes during 2014 is presented as follows:

 	  	Shares	 	  	Weighted-
Average
Exercise
Price	 	
 	 	 	
Outstanding, beginning of year	  	 	9,400	 	  	$	65.57	  	
Granted	  	 	4,000	 	  	 	85.44	  	
Exercised	  	 	(2,200	)	  	 	60.40	  	

Outstanding, end of year	 	 	11,200	 	 	$	77.45	  	

Options exercisable, end of year	 	 	4,200	 	 	$	74.60	  	
 	  	 	 	 	  	 	 	 	
The total intrinsic value of stock options exercised during 2014 was $132,783.
 
(12)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2014

The following table summarizes information about stock options outstanding at December 31, 2014:

Outstanding Options	 	  	Exercisable Options	 	
Range of Exercise Prices	  	Number
Outstanding
at 12/31/14	 	  	Weighted-
Average
Exercise
Price	 	  	Weighted-
Average
Remaining
Contractual Term	 	  	Number
Exercisable
at 12/31/14	 	  	Weighted-
Average
Exercise
Price	 	  	Weighted-
Average
Remaining
Contractual Term	 	
 	 	 	 	 	 	 	
$58.62 to $85.44	  	 	11,200	  	  	$	77.45	  	  	 	7.96	 	  	 	4,200	  	  	$	74.60	  	  	 	7.52	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
A summary of the status of the Company’s nonvested shares as of December 31, 2014, and changes during 2014, is presented below:

 	  	Shares	 	  	Weighted-
Average
Grant Date
Fair Value	 	
 	 	 	
Nonvested, beginning of year	  	 	5,600	  	  	$	5.46	  	
Granted	  	 	4,000	  	  	 	7.02	  	
Vested	  	 	(2,600	) 	  	 	6.08	  	

Nonvested at end of year	 	 	7,000	  	 	$	6.12	  	
 	  	 	 	 	  	 	 	 	
NOTE 7 – HEALTH REIMBURSEMENT ARRANGEMENT
The Company provides all employees with a Health Reimbursement Plan, which refunds claims for amounts which fall under the deductible of the group health plan in excess of $1,000 and up to $3,000.
NOTE 8 – PROFIT SHARING PLAN
The Company maintains a qualified cash or deferred compensation plan under Section 401(k) of the Internal Revenue Code. Under the plan, qualified employees who have met age and service requirements may elect to defer up to the maximum percentage allowable not to exceed Internal Revenue Service limitations. Participant contributions vest immediately. The Company makes a matching contribution of 100% up to 6% of an employee’s compensation. Company contributions vest according to a graded scale at the rate of 20% per year starting in year two through year six. Company matching contributions to the plan were $128,982 for 2014.
 
(13)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 9 – SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Economic Conditions – The Company’s revenues are based on market values of client assets and are subject to fluctuations in the general economic environment as reflected in active securities markets. Significant swings in these securities markets can have a direct impact on gross revenues received by the Company for its services and ultimately its liquidity.
Financial Instruments – Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash investments. The Company maintains its cash balances in financial institutions, which at times exceed the amount insured by the Federal Deposit Insurance Corporation (FDIC).
The standard maximum deposit insurance amount (SMDIA) of $250,000 applies to all noninterest and interest-bearing accounts. Management periodically assesses the financial condition of the financial institutions and believes that any possible credit risk is minimal. At December 31, 2014, the Company had no cash in banks that exceeded federally insured limits.
Cash equivalents are held in money market mutual funds with non-FDIC financial institutions. Management periodically assesses the types of underlying securities held in the money market accounts for credit quality and likelihood of price fluctuations. Management believes that any possible credit risk is minimal.
The Company invests its available cash, other than cash equivalents, in U.S. government agency securities or with top-rated corporate issuers. In accordance with Company policy, the amount of credit exposure to any one corporate issuer is limited.
Fiduciary Reserve – Until November 2014, the Company established a reserve for fiduciary errors equal to 1.5 basis points of total client assets. After evaluating historical losses and in anticipation of the significant event disclosed in  Note 12 , the Board elected to no longer maintain a specific reserve for potential fiduciary losses and to expense losses as they incur.
NOTE 10 – REGULATORY CAPITAL
The Company operates under a charter issued by the Texas Department of Banking and is required to maintain restricted capital of at least $1,500,000. The Company considers restricted capital to be capital stock, paid-in surplus, and a portion of retained earnings designated as restricted. As of December 31, 2014, restricted capital consists of the following:

Common stock	 	$	389,850	  	
Additional paid-in capital	 	 	484,594	  	
Additional paid-in capital – stock options	 	 	24,862	  	
Retained earnings designated as paid-in surplus	 	 	844,755	  	

Total permanent capital	 	$	1,744,061	  	

(14)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2014

NOTE 11 – COMMITMENTS AND CONTINGENCIES
The Company purchases certain services from unaffiliated third-parties in the normal course of business. A large number of these services are received under contracts with terms ranging from one to five years.
In exchange for keeping minimum balances of client funds in certain money market mutual funds, the Company receives securities custody and safekeeping services at no cost. In addition, certain investment services are paid for using commissions earned by the Company for directing securities trades to securities brokers.
NOTE 12 – SUBSEQUENT EVENT
In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through May 22, 2015, the date the financial statements were available to be issued.
On January 22, 2015, the Company announced that it had signed an agreement to be acquired by Westwood Holdings Group, Inc. The transaction, which was subject to approval by the Texas Department of Banking and other customary closing conditions, was effective April 1, 2015.
 
(15)

Woodway Financial Advisors, A Trust Company
Financial Statements
For the Three Months Ended March 31, 2015

CONTENTS

 	  	Page	 	
Balance Sheet as of March 31, 2015 (unaudited)	  	 	1	  	
 	 	
Statement of Income for the Three Months Ended March 31, 2015 (unaudited)	  	 	2	  	
 	 	
Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2015 (unaudited)	  	 	3	  	
 	 	
Statement of Cash Flows for the Three Months Ended March 31, 2015 (unaudited)	  	 	4	  	
 	 	
Notes to the Financial Statements (unaudited)	  	 	5	  	

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
BALANCE SHEET (UNAUDITED)
MARCH 31, 2015

 	 	 	 	 	
ASSETS	 	 	 	 	
Current assets	 	 	 	 	
Cash and cash equivalents	 	$	1,205,445	  	
Accounts receivable	 	 	940,538	  	
Prepaid expenses and other	 	 	248,106	  	
 	  	 	 	 	
Total current assets	 	 	2,394,089	  	
 	 	
Property and equipment, net	 	 	196,962	  	
 	  	 	 	 	
TOTAL ASSETS	 	$	2,591,051	  	
 	  	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	
Current liabilities	 	 	 	 	
Accounts payable and accrued expenses	 	$	81,587	  	
Other current liabilities	 	 	5,415	  	
 	  	 	 	 	
Total current liabilities	 	 	87,002	  	
 	 	
Other liabilities	 	 	6,246	  	
 	  	 	 	 	
Total liabilities	 	 	93,248	  	
 	 	
Stockholders’ equity	 	 	 	 	
Common stock, $1 par value, 500,000 shares authorized; 401,050 issued and outstanding	 	 	401,050	  	
Additional paid-in capital	 	 	562,602	  	
Retained earnings – restricted	 	 	844,755	  	
Retained earnings – unrestricted, $100,000 appropriated for contingencies	 	 	689,396	  	
 	  	 	 	 	
Total stockholders’ equity	 	 	2,497,803	  	
 	  	 	 	 	
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	 	$	2,591,051	  	

The accompanying notes are an integral part of these financial statements.
(1)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
STATEMENT OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2015

 	 	 	 	 	
Income	 	 	 	 	
Fees	 	$	2,665,558	  	
Interest	 	 	9,951	  	
 	  	 	 	 	
Total income	 	 	2,675,509	  	
 	 	
Expenses	 	 	 	 	
Compensation and employee benefits	 	 	1,037,180	  	
Information technology	 	 	125,403	  	
Advertising and marketing	 	 	74,315	  	
Occupancy	 	 	75,218	  	
Acquisition	 	 	138,397	  	
Other operating	 	 	160,632	  	
 	  	 	 	 	
Total expenses	 	 	1,611,145	  	
 	  	 	 	 	
Income before income taxes and gain on sale of investment	 	 	1,064,364	  	
Gain on sale of investment	 	 	16,857	  	
 	  	 	 	 	
Income before income taxes	 	 	1,081,221	  	
 	  	 	 	 	
Income tax expense	 	 	14,736	  	
 	  	 	 	 	
NET INCOME	 	$	1,066,485	  	

The accompanying notes are an integral part of these financial statements.
(2)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2015

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	 	 	  	 	 	  	 	 	  	Additional	 	 	 	 	  	 	 	 	 	 	 	
 	  	Common Stock Issued	 	  	Additional
Paid-In
Capital	 	  	Paid-In
Capital –
Stock Options	 	 	Retained
Earnings –
Restricted	 	  	Retained
Earnings –
Unrestricted	 	 	Total
Stockholders’
Equity	 	 	
 	  	Number of
Shares	 	  	Par Value	 	  	 	 	  	 	 	 	 	 	  	 	 	 	 	 	 	 	 	 	
BALANCE, DECEMBER 31, 2014	  	 	389,850	  	  	$	389,850	  	  	$	484,594	  	  	$	24,862	  	 	$	844,755	  	  	$	3,362,238	  	 	$	5,106,299	  	 	 	 	 	
Stock option expense	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	25,613	  	 	 	—  	  	  	 	—  	  	 	 	25,613	  	 	 	 	 	
Stock options exercised	  	 	11,200	  	  	 	11,200	  	  	 	78,008	  	  	 	(50,475	) 	 	 	—  	  	  	 	—  	  	 	 	38,733	  	 	 	 	 	
Net income	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  	  	 	1,066,485	  	 	 	1,066,485	  	 	 	 	 	
Distribution	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  	  	 	(436,120	) 	 	 	(436,120	) 	 	 	 	 	
Dividends on common stock, $8.46 per share	  	 	—  	  	  	 	—  	  	  	 	—  	  	  	 	—  	  	 	 	—  	  	  	 	(3,303,207	) 	 	 	(3,303,207	) 	 	 	 	 	

BALANCE, MARCH 31, 2015	 	 	401,050	  	 	$	401,050	  	 	$	562,602	  	 	$	—  	  	 	$	844,755	  	 	$	689,396	  	 	$	2,497,803	  	 	 	 	 	 	 	 	 	

The accompanying notes are an integral part of these financial statements.
(3)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2015

 	 	 	 	 	
Cash flows from operating activities	 	 	 	 	
Net income	 	$	1,066,485	  	
Adjustments to reconcile net income to net cash from operating activities:	 	 	 	 	
Depreciation	 	 	21,538	  	
Gain on sale of marketable securities	 	 	(16,857	) 	
Premium amortization	 	 	1,376	  	
Discount accretion	 	 	(234	) 	
Stock option expense	 	 	25,613	  	
Change in operating assets and liabilities:	 	 	 	 	
Accounts receivable	 	 	30,020	  	
Accrued interest receivable	 	 	12,082	  	
Prepaid expenses and other	 	 	(67,091	) 	
Accounts payable and accrued expenses	 	 	(454,454	) 	
Other current liabilities	 	 	972	  	
Other liabilities	 	 	(2,083	) 	
 	  	 	 	 	
Net cash from operating activities	 	 	617,367	  	
 	 	
Cash flows from investing activities	 	 	 	 	
Proceeds from sale of marketable securities	 	 	1,831,126	  	
 	  	 	 	 	
Net cash from investing activities	 	 	1,831,126	  	
 	 	
Cash flows from financing activities	 	 	 	 	
Proceeds from issuance of common stock	 	 	38,733	  	
Distributions paid	 	 	(436,120	) 	
Dividends on common stock paid	 	 	(3,303,207	) 	
 	  	 	 	 	
Net cash from financing activities	 	 	(3,700,594	) 	
 	  	 	 	 	
Net change in cash and cash equivalents	 	 	(1,252,101	) 	
 	 	
Cash and cash equivalents, beginning of year	 	 	2,457,546	  	
 	  	 	 	 	
Cash and cash equivalents, end of year	 	$	1,205,445	  	
 	  	 	 	 	
Supplemental cash flow information:	 	 	 	 	
State income taxes paid	 	$	59,409	  	
 
The accompanying notes are an integral part of these financial statements.
(4)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2015
 
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Woodway Financial Advisors, a Trust Company (the “Company”), a Texas subchapter S corporation, was organized to have full trust company powers as recognized by the Texas State Banking Commission. Financial services are provided to individuals and families, including corporate executives, professionals and closely-held businesses. Financial services include individual financial counseling, investment analysis and management, trust and estate services, and special financial services for organizations.
Basis of Accounting – The Company maintains its accounts on the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP).
Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements – The Company has implemented all new accounting pronouncements and does not believe there are any new pronouncements that have been issued that may have a material impact on the financial statements.
Descriptions of significant accounting policies are included in Note 1 to the audited financial statements as of and for the year ended December 31, 2014. There have been no significant changes to these policies.
Subsequent Event – In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through June 10, 2015, the date the financial statements were available to be issued.
On April 1, 2015, the Company was acquired by Westwood Holdings Group, Inc. (Westwood Trust), pursuant to a reorganization agreement and agreement and plan of merger dated January 15, 2015. Woodway merged with Westwood Trust, who is the surviving entity of the merger. Westwood Trust’s execution of the Merger Agreement was previously disclosed in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on January 16, 2015.
NOTE 2 – INVESTMENTS
During 2015, the Company liquidated its investment holdings in preparation of being acquired by Westwood Trust. The Company had proceeds from sales of $1,831,126 resulting in realized gains of $16,857.
NOTE 3 – STOCK-BASED COMPENSATION
During 2015, the remaining 7,000 of unvested shares were fully vested as part of the acquisition transaction. The remaining $25,613 of unrecognized compensation expense was recognized in the quarter ending March 31, 2015. In addition, all 11,200 vested shares were exercised during the quarter as part of the acquisition transaction. For the quarter ended March 31, 2015, 600 shares were exercised at the strike price for $38,733. The remaining 10,600 shares were exercised under cashless transaction provisions for net settlement upon close of the acquisition.
 
(5)

WOODWAY FINANCIAL ADVISORS, A TRUST COMPANY
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2015
 
NOTE 4 – DISTRIBUTIONS
In addition to its regular shareholder dividend, the Company paid a supplemental distribution of $2,435,224, representing the amount of working capital in excess of the net working capital requirement in the Merger Agreement.
NOTE 5 – REGULATORY CAPITAL
The Company operates under a charter issued by the Texas Department of Banking and is required to maintain restricted capital of at least $1,500,000. The Company considers restricted capital to be capital stock, paid-in surplus, and a portion of retained earnings designated as restricted. As of March 31, 2015, restricted capital consists of the following:

Common stock	 	$	401,050	  	
Additional paid-in capital	 	 	562,602	  	
Additional paid-in capital – stock options	 	 	—  	  	
Retained earnings designated as paid-in surplus	 	 	844,755	  	
 	  	 	 	 	
Total permanent capital	 	$	1,808,407	  	

(6)

Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On January 15, 2015, Westwood Holdings Group, Inc. (“Westwood” or the “Company”) entered into an agreement to acquire Woodway Financial Advisors, a Trust Company (“Woodway”), a Houston-based private wealth and trust company that managed assets of approximately $1.6 billion at December 31, 2014. Westwood completed the acquisition on April 1, 2015. Pursuant to the acquisition agreement, on April 1, 2015, Woodway merged with Westwood Trust, a wholly-owned subsidiary of Westwood, with Westwood Trust being the surviving entity (the “Merger”). The total Merger consideration consisted of (i) $31 million in cash and stock, as described below, and (ii) contingent consideration, or earn-out amount, equal to the annualized revenue from the post-closing business of Woodway for the twelve-month period ending March 31, 2016 (the “Earn-Out Period”), adjusted for certain clients or accounts that have terminated, and capped at $15 million (the “Earn-Out Amount”). The Earn-Out Amount will be paid 54.84% in cash and 45.16% in shares of Westwood’s common stock, valued using the average closing price during the last 30 calendar days of the Earn-Out Period. In relation to the Merger, Westwood entered into employment agreements with certain Woodway employees, which, among other things, provided for specified compensation and benefits for the related employees.
The preliminary estimated Merger consideration of $40.3 million consisted of (i) closing date consideration of $25.3 million paid in cash and the issuance of 109,712 shares of Westwood common stock, valued at $5.7 million (discounted from $6.7 million due to certain required holding periods), and (ii) preliminary estimated contingent consideration of $9.3 million, based on estimates and assumptions as of the closing date of the acquisition, to be paid after the Earn-Out Period. The acquired assets were deemed to constitute a business in a transaction using the purchase method of accounting for business combinations.
The unaudited pro forma condensed combined financial statements presented below are based on, and should be read in conjunction with, the historical information that Westwood has presented in filings with the Securities and Exchange Commission (“SEC”) and the audited and unaudited financial statements of Woodway as provided in Exhibit 99.2 of the Current Report on Form 8-K/A. The unaudited pro forma condensed combined balance sheet as of March 31, 2015 gives effect to the Merger described in note (1) to the unaudited pro forma condensed combined financial statements as if it had occurred on March 31, 2015, and combines the historical balance sheets of Westwood and Woodway as of March 31, 2015. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2015 and for the year ended December 31, 2014 are presented as if the merger had occurred on January 1, 2014, and combine the historical results of Westwood and Woodway for the periods presented.
The historical financial information is adjusted to give effect to pro forma events that are directly attributable to the Merger, factually supportable, and can be estimated. The unaudited pro forma condensed combined statements of operations do not include any items not expected to have a continuing impact on the combined results of the businesses.
It is management’s opinion that these pro forma financial statements include all adjustments necessary for the fair presentation, in all material respects, of the proposed transaction described above in accordance with generally accepted accounting principles in the United States applied on a basis consistent with Westwood’s accounting policies. In order to determine the fair value of the assets acquired, management engaged an independent third-party expert to provide a valuation using the income approach. A final valuation of the purchase price to the assets acquired and the liabilities assumed in the acquisition has not been completed, and the allocation reflected in the unaudited pro forma condensed combined financial statements should be considered preliminary and is subject to the completion of the valuation of the assets acquired and liabilities assumed. The final purchase price and final allocation of the purchase price could differ materially from the pro forma information included herein. The fair value of contingent consideration and amounts preliminarily allocated to intangible assets and goodwill may change materially. Additionally, amortization methods and useful lives may differ from the assumptions used in this unaudited pro forma condensed combined financial information, which could result in a material change in amortization expense.

The unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements and were prepared in accordance with the regulations of the SEC and should not be considered indicative of the financial position or results of operations that would have occurred if the acquisition had been consummated on the dates indicated, nor are they indicative of the expected future financial position or results of operations of the condensed combined company.

Unaudited Pro Forma Condensed Combined Balance Sheet
March 31, 2015

 	  	Westwood
Holdings
Group, Inc.	 	 	Woodway
Financial
Advisors	 	  	Pro Forma
Adjustments	 	 	Pro Forma
Combined	 	
 	  	(in thousands)	 	
ASSETS	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Current Assets:	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Cash and cash equivalents	  	$	19,607	  	 	$	1,205	  	  	$	(234	)(a) 	 	$	20,578	  	
Accounts receivable	  	 	14,840	  	 	 	936	  	  	 	—  	  	 	 	15,776	  	
Investments, at fair value	  	 	64,039	  	 	 	—  	  	  	 	(25,331	)(a) 	 	 	38,708	  	
Deferred income taxes	  	 	4,826	  	 	 	—  	  	  	 	—  	  	 	 	4,826	  	
Other current assets	  	 	2,538	  	 	 	253	  	  	 	—  	  	 	 	2,791	  	
 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total current assets	 	 	105,850	  	 	 	2,394	  	 	 	(25,565	) 	 	 	82,679	  	
Goodwill	 	 	11,255	  	 	 	—  	  	 	 	11,655	(b) 	 	 	22,910	  	
Deferred income taxes	 	 	3,542	  	 	 	—  	  	 	 	—  	  	 	 	3,542	  	
Intangible assets, net	 	 	3,340	  	 	 	—  	  	 	 	26,099	(c) 	 	 	29,439	  	
Property and equipment, net	 	 	2,871	  	 	 	197	  	 	 	—  	  	 	 	3,068	  	
 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total assets	 	$	126,858	  	 	$	2,591	  	 	$	12,189	  	 	$	141,638	  	
 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable and accrued liabilities	 	$	3,694	  	 	$	61	  	 	$	9,175	(d) 	 	$	12,930	  	
Dividends payable	 	 	4,792	  	 	 	—  	  	 	 	—  	  	 	 	4,792	  	
Compensation and benefits payable	 	 	5,284	  	 	 	—  	  	 	 	—  	  	 	 	5,284	  	
Income taxes payable	 	 	2,031	  	 	 	20	  	 	 	—  	  	 	 	2,051	  	
 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total current liabilities	 	 	15,801	  	 	 	81	  	 	 	9,175	  	 	 	25,057	  	
Accrued dividends	 	 	914	  	 	 	—  	  	 	 	—  	  	 	 	914	  	
Deferred rent	 	 	1,216	  	 	 	12	  	 	 	(12	)(e) 	 	 	1,216	  	
 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total liabilities	 	 	17,931	  	 	 	93	  	 	 	9,163	  	 	 	27,187	  	
 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Commitments and contingencies	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stockholders’ Equity:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common stock	 	 	93	  	 	 	401	  	 	 	(400	)(f) 	 	 	94	  	
Additional paid-in capital	 	 	125,661	  	 	 	563	  	 	 	5,104	(f) 	 	 	131,328	  	
Treasury stock	 	 	(35,893	) 	 	 	—  	  	 	 	—  	  	 	 	(35,893	) 	
Accumulated other comprehensive loss	 	 	(2,619	) 	 	 	—  	  	 	 	—  	  	 	 	(2,619	) 	
Retained earnings	 	 	21,685	  	 	 	1,534	  	 	 	(1,678	)(f) 	 	 	21,541	  	
 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total stockholders’ equity	 	 	108,927	  	 	 	2,498	  	 	 	3,026	  	 	 	114,451	  	
 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	 	$	126,858	  	 	$	2,591	  	 	$	12,189	  	 	$	141,638	  	

Unaudited Pro Forma Condensed Combined Statement of Operations
Three Months Ended March 31, 2015

 	  	Westwood
Holdings
Group, Inc.	 	  	Woodway
Financial
Advisors	 	  	Pro Forma
Adjustments	 	 	Pro
Forma
Combined	 	
 	  	(in thousands, except per share data and share amounts)	 	
REVENUES:	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Advisory fees	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Asset based	  	$	23,929	  	  	$	—  	  	  	$	—  	  	 	$	23,929	  	
Performance based	  	 	288	  	  	 	—  	  	  	 	—  	  	 	 	288	  	
Trust fees	  	 	5,150	  	  	 	2,666	  	  	 	—  	  	 	 	7,816	  	
Other, net	  	 	241	  	  	 	26	  	  	 	—  	  	 	 	267	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Total revenues	 	 	29,608	  	 	 	2,692	  	 	 	—  	  	 	 	32,300	  	

EXPENSES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Employee compensation and benefits	 	 	15,309	  	 	 	1,023	  	 	 	186	(a) 	 	 	16,518	  	
Sales and marketing	 	 	395	  	 	 	70	  	 	 	—  	  	 	 	465	  	
Westwood mutual funds	 	 	827	  	 	 	—  	  	 	 	—  	  	 	 	827	  	
Information technology	 	 	1,037	  	 	 	135	  	 	 	—  	  	 	 	1,172	  	
Professional services	 	 	2,072	  	 	 	184	  	 	 	(835	)(b) 	 	 	1,421	  	
General and administrative	 	 	1,590	  	 	 	199	  	 	 	373	(c) 	 	 	2,162	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Total expenses	 	 	21,230	  	 	 	1,611	  	 	 	(276	) 	 	 	22,565	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Income before income taxes	 	 	8,378	  	 	 	1,081	  	 	 	276	  	 	 	9,735	  	
Provision for income taxes	 	 	2,768	  	 	 	15	  	 	 	454	(d) 	 	 	3,237	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Net income	 	$	5,610	  	 	$	1,066	  	 	$	(178	) 	 	$	6,498	  	

Earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	0.74	  	 	 	 	 	 	 	 	 	 	$	0.84	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Diluted	 	$	0.71	  	 	 	 	 	 	 	 	 	 	$	0.82	  	

Weighted average shares outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	7,596,223	  	 	 	 	 	 	 	109,712	(e) 	 	 	7,705,935	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Diluted	 	 	7,861,090	  	 	 	 	 	 	 	109,712	(e) 	 	 	7,970,802	  	

Unaudited Pro Forma Condensed Combined Statement of Operations
Year Ended December 31, 2014

 	  	Westwood
Holdings
Group, Inc.	 	  	Woodway
Financial
Advisors	 	  	Pro Forma
Adjustments	 	 	Pro
Forma
Combined	 	
 	  	(in thousands, except per share data and share amounts)	 	
REVENUES:	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Advisory fees	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Asset based	  	$	88,473	  	  	$	—  	  	  	$	—  	  	 	$	88,473	  	
Performance based	  	 	3,806	  	  	 	—  	  	  	 	—  	  	 	 	3,806	  	
Trust fees	  	 	20,525	  	  	 	10,437	  	  	 	—  	  	 	 	30,962	  	
Other, net	  	 	437	  	  	 	51	  	  	 	—  	  	 	 	488	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Total revenues	 	 	113,241	  	 	 	10,488	  	 	 	—  	  	 	 	123,729	  	

EXPENSES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Employee compensation and benefits	 	 	52,847	  	 	 	3,581	  	 	 	829	(a) 	 	 	57,257	  	
Sales and marketing	 	 	1,673	  	 	 	270	  	 	 	—  	  	 	 	1,943	  	
Westwood mutual funds	 	 	2,543	  	 	 	—  	  	 	 	—  	  	 	 	2,543	  	
Information technology	 	 	3,469	  	 	 	509	  	 	 	—  	  	 	 	3,978	  	
Professional services	 	 	4,905	  	 	 	329	  	 	 	(580	)(b) 	 	 	4,654	  	
General and administrative	 	 	5,768	  	 	 	606	  	 	 	1,490	(c) 	 	 	7,864	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Total expenses	 	 	71,205	  	 	 	5,295	  	 	 	1,739	  	 	 	78,239	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Income before income taxes	 	 	42,036	  	 	 	5,193	  	 	 	(1,739	) 	 	 	45,490	  	
Provision for income taxes	 	 	14,787	  	 	 	60	  	 	 	1,179	(d) 	 	 	16,026	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Net income	 	$	27,249	  	 	$	5,133	  	 	$	(2,918	) 	 	$	29,464	  	

Earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	3.63	  	 	 	 	 	 	 	 	 	 	$	3.87	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Diluted	 	$	3.45	  	 	 	 	 	 	 	 	 	 	$	3.68	  	

Weighted average shares outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	7,512,348	  	 	 	 	 	 	 	109,712	(e) 	 	 	7,622,060	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Diluted	 	 	7,906,545	  	 	 	 	 	 	 	109,712	(e) 	 	 	8,016,257	  	

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
 
1.	Description of Transaction	
On January 15, 2015, Westwood Holdings Group, Inc. (“Westwood” or the “Company”) entered into an agreement to acquire Woodway Financial Advisors, a Trust Company (“Woodway”), a Houston-based private wealth and trust company that managed assets of approximately $1.6 billion at December 31, 2014. Westwood completed the acquisition on April 1, 2015. Pursuant to the acquisition agreement, on April 1, 2015, Woodway merged with Westwood Trust, a wholly-owned subsidiary of Westwood, with Westwood Trust being the surviving entity (the “Merger”). The total Merger consideration consisted of (i) $31 million in cash and stock, as described below, and (ii) contingent consideration, or earn-out amount, equal to the annualized revenue from the post-closing business of Woodway for the twelve-month period ending March 31, 2016 (the “Earn-Out Period”), adjusted for certain clients or accounts that have terminated, and capped at $15 million (the “Earn-Out Amount”). The Earn-Out Amount will be paid 54.84% in cash and 45.16% in shares of Westwood’s common stock, valued using the average closing price during the last 30 calendar days of the Earn-Out Period. In relation to the Merger, Westwood entered into employment agreements with certain Woodway employees, which, among other things, provided for specified compensation and benefits for the related employees.
The preliminary estimated Merger consideration of $40.3 million consisted of (i) closing date consideration of $25.3 million paid in cash and issuance of 109,712 shares of Westwood common stock, valued at $5.7 million (discounted from $6.7 million due to certain required holding periods), and (ii) preliminary estimated contingent consideration of $9.3 million, based on estimates and assumptions on the closing date of the acquisition, to be paid no later than 75 days after the last day of the Earn-Out Period.
The acquisition of Woodway will be accounted for using the purchase method of accounting. Accordingly, the purchase price will be allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values as of the acquisition date. For purposes of this pro forma analysis, estimated consideration of $40.3 million has been preliminarily allocated using Woodway’s historical balance sheet at March 31, 2015, based on a third party valuation of acquired assets and assumed liabilities in connection with the acquisition. The preliminary allocation is based on estimates, assumptions and valuations that have not been finalized, and therefore the final consideration and final amounts allocated to assets acquired and liabilities assumed could differ materially from the amounts presented in the pro forma financial statements.

The preliminary allocation of the purchase price is as follows (in thousands):

Cash and cash equivalents	  	$	1,205	  	
 	 	
Accounts receivable	  	 	936	  	
 	 	
Other current assets	  	 	252	  	
 	 	
Goodwill (i)	  	 	11,655	  	
 	 	
Identifiable intangibles (ii)	  	 	26,099	  	
 	 	
Property and equipment	  	 	197	  	
 	 	
Accounts payable and accrued liabilities	  	 	(61	) 	
 	 	
Income tax payable	  	 	(20	) 	

Preliminary purchase price	 	$	40,263	  	

(i)	The excess of the preliminary purchase price over the fair value amounts assigned to assets acquired and liabilities assumed represents the goodwill amount resulting from the acquisition.	
(ii)	The fair value of the acquired identifiable intangibles consists of (in thousands, except useful lives):	

 	  	 	 	  	Estimated
Useful Lives	 	
 	 	 	
Customer accounts	  	$	25,085	  	  	 	20 years	  	
 	 	 	
Non-compete agreements	  	 	248	  	  	 	3 years	  	
 	 	 	
Trade name	  	 	766	  	  	 	5 years	  	

2.	Pro Forma Adjustments	
Pro forma adjustments are necessary to reflect the purchase price and amounts related to Woodway’s tangible and intangible assets acquired and liabilities assumed at an amount equal to the preliminary estimate of their fair values. There were no intercompany balances or transactions between Westwood and Woodway as of the dates or for the periods of these pro forma condensed combined financial statements.
Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments as of March 31, 2015
The pro forma adjustments included in the unaudited pro forma condensed combined balance sheet are as follows:
 
 	(a)	To record the initial cash consideration of $25.3 million, funded through the sale of certain short-term investments, and related transaction costs paid after March 31, 2015 of $227,000. As the acquisition-related costs will not have a continuing impact, these costs are not reflected in the unaudited pro forma condensed combined statements of operations.	
 
 	(b)	To record the estimated fair value of goodwill resulting from the preliminary valuation of acquired assets and assumed liabilities, as if the acquisition had occurred on March 31, 2015. Goodwill resulting from the acquisition is not amortized and will be assessed for impairment at least annually.	
 
 	(c)	To record the estimated fair value of identifiable intangible assets resulting from the preliminary valuation of acquired assets and assumed liabilities as if the acquisition had occurred on March 31, 2015. Intangible assets are amortized over their estimated useful lives.	
 
 	(d)	To record the preliminarily-estimated $9.3 million Earn-Out Amount to be paid after the Earn-Out Period and to record the payment of $82,000 of acquisition-related transaction costs accrued at March 31, 2015. As the acquisition-related costs will not have a continuing impact, these costs are not reflected in the unaudited pro forma condensed combined statements of operations.	
 
 	(e)	To eliminate Woodway’s deferred rent as of March 31, 2015, as non-cash liabilities are eliminated in purchase accounting.	
 
 	(f)	To eliminate the stockholders’ equity of Woodway, to record the issuance of 109,712 shares of Westwood common stock ($1,097 common stock and $5,667,000 additional paid-in capital), as part of the consideration for the acquisition of Woodway, and to record the expense for acquisition-related transaction costs of $145,000 expensed and paid after March 31, 2015. As the acquisition-related costs will not have a continuing impact, these costs are not reflected in the unaudited pro forma condensed combined statements of operations.	
Unaudited Pro Forma Condensed Combined Statement of Operations Adjustments for the Three Months Ended March 31, 2015
The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2015 are as follows:
 
 	(a)	To record additional compensation costs related to employment contracts entered into as a result of the acquisition.	
 
 	(b)	To remove acquisition-related transaction costs expensed during the three months ended March 31, 2015, as such costs will not have a continuing impact on the combined results of operations.	
 
 	(c)	To record the estimated amortization expense on the fair value of the identifiable intangible assets acquired.	
 
 	(d)	To adjust the provision for income taxes using an estimated effective tax rate of 33.3% for the three months ended March 31, 2015.	
 
 	(e)	To adjust for the issuance of 109,712 shares of Westwood common stock as part of the closing consideration for the acquisition of Woodway. This adjustment does not include Westwood common stock to be issued for the contingent consideration related to the Earn-Out Amount.	

Unaudited Pro Forma Condensed Combined Statement of Operations Adjustments for the Year Ended December 31, 2014
The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2014 are as follows:
 
 	(a)	To record additional compensation costs related to employment contracts entered into as a result of the acquisition.	
 
 	(b)	To remove acquisition-related transaction costs expensed during the year ended December 31, 2014, as such costs will not have a continuing impact on the combined results of operations.	
 
 	(c)	To record the estimated amortization expense on the fair value of the identifiable intangible assets acquired.	
 
 	(d)	To adjust the provision for income taxes using an estimated effective tax rate of 35.2% for the year ended December 31, 2014.	
 
 	(e)	To adjust for the issuance of 109,712 shares of Westwood common stock as part of the closing consideration for the acquisition of Woodway. This adjustment does not include Westwood common stock to be issued for the contingent consideration related to the Earn-Out Amount.