UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934	
For the quarterly period ended September 30, 2014
OR
¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934	
For the transition period from              to             .
Commission file number 1-31234
 
WESTWOOD HOLDINGS GROUP, INC.
(Exact name of registrant as specified in its charter)

DELAWARE	 	75-2969997	
(State or other jurisdiction of incorporation or organization)	 	(IRS Employer Identification No.)	
 	 	 	
200 CRESCENT COURT, SUITE 1200
DALLAS, TEXAS	 	75201	
(Address of principal executive office)	 	(Zip Code)	
(214) 756-6900
(Registrant’s telephone number, including area code)
 
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “ smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer	 	¨	  	Accelerated filer	 	x	
 	 	 	 	
Non-accelerated filer	 	¨ (Do not check if a smaller reporting company)	  	Smaller reporting company	 	¨	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ¨    No  x
Shares of common stock, par value $0.01 per share, outstanding as of October 17, 2014: 8,290,018.

 

 

 
WESTWOOD HOLDINGS GROUP, INC.
INDEX
 
PART I	 	FINANCIAL INFORMATION	PAGE	
 	 	 	 	
Item 1.	 	Financial Statements	 	
 	 	 	 	
 	 	Condensed Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013	1	
 	 	 	 	
 	 	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2014 and 2013	2	
 	 	 	 	
 	 	Condensed Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2014	3	
 	 	 	 	
 	 	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013	4	
 	 	 	 	
 	 	Notes to Condensed Consolidated Financial Statements	5	
 	 	 	 	
Item 2.	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16	
 	 	 	 	
Item 3.	 	Quantitative And Qualitative Disclosures About Market Risk	24	
 	 	 	 	
Item 4.	 	Controls and Procedures	24	
 	 	 	 	
PART II	 	OTHER INFORMATION	 	
 	 	 	 	
Item 1.	 	Legal Proceedings	25	
 	 	 	 	
Item 1A.	 	Risk Factors	25	
 	 	 	 	
Item 2.	 	Unregistered Sales of Equity Securities and Use of Proceeds	26	
 	 	 	 	
Item 6.	 	Exhibits	27	
 	 	 	 	
Signatures	28	

 

 
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts)
 
 	September 30,	 	 	 	 	 	
 	2014	 	 	December 31,	 	
 	(unaudited)	 	 	2013	 	
ASSETS	 	 	 	 	 	 	 	
Current Assets:	 	 	 	 	 	 	 	
Cash and cash equivalents	$	16,485	 	 	$	10,864	 	
Accounts receivable	 	13,784	 	 	 	14,468	 	
Investments, at fair value	 	73,099	 	 	 	64,554	 	
Deferred income taxes	 	4,161	 	 	 	3,812	 	
Other assets	 	1,948	 	 	 	2,521	 	
Total current assets	 	109,477	 	 	 	96,219	 	
Goodwill	 	11,255	 	 	 	11,255	 	
Deferred income taxes	 	5,740	 	 	 	2,041	 	
Intangible assets, net	 	3,520	 	 	 	3,789	 	
Property and equipment, net of accumulated depreciation of $2,585 and $2,155	 	2,623	 	 	 	2,746	 	
Total assets	$	132,615	 	 	$	116,050	 	
LIABILITIES AND STOCKHOLDERS' EQUITY	 	 	 	 	 	 	 	
Current Liabilities:	 	 	 	 	 	 	 	
Accounts payable and accrued liabilities	$	2,098	 	 	$	2,082	 	
Dividends payable	 	4,272	 	 	 	3,935	 	
Compensation and benefits payable	 	13,551	 	 	 	17,805	 	
Income taxes payable	 	5,433	 	 	 	1,031	 	
Total current liabilities	 	25,354	 	 	 	24,853	 	
Accrued dividends	 	1,204	 	 	 	1,266	 	
Deferred rent	 	1,157	 	 	 	1,268	 	
Total liabilities	 	27,715	 	 	 	27,387	 	
Commitments and contingencies (Note 12)	 	 	 	 	 	 	 	
Stockholders' Equity:	 	 	 	 	 	 	 	
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 8,989,877 and
outstanding 8,288,082 shares at September 30, 2014; issued 8,778,613 and outstanding
     8,176,417 shares at December 31, 2013	 	90	 	 	 	88	 	
Additional paid-in capital	 	116,189	 	 	 	103,853	 	
Treasury stock, at cost - 701,795 shares at September 30, 2014; 602,196 shares at December 31, 2013	 	(29,028	)	 	 	(23,169	)	
Accumulated other comprehensive loss	 	(857	)	 	 	(257	)	
Retained earnings	 	18,506	 	 	 	8,148	 	
Total stockholders' equity	 	104,900	 	 	 	88,663	 	
Total liabilities and stockholders' equity	$	132,615	 	 	$	116,050	 	

 
See notes to condensed consolidated financial statements.

 
1

 
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data and share amounts)
(unaudited)
 
 	Three months ended	 	 	Nine months ended	 	
 	September 30,	 	 	September 30,	 	
 	2014	 	 	2013	 	 	2014	 	 	2013	 	
REVENUES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Advisory fees	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Asset based	$	22,857	 	 	$	17,956	 	 	$	65,341	 	 	$	49,989	 	
Performance based	 	—	 	 	 	26	 	 	 	3,806	 	 	 	2,561	 	
Trust fees	 	5,282	 	 	 	4,672	 	 	 	15,461	 	 	 	13,463	 	
Other, net	 	(17	)	 	 	344	 	 	 	368	 	 	 	560	 	
Total revenues	 	28,122	 	 	 	22,998	 	 	 	84,976	 	 	 	66,573	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EXPENSES:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Employee compensation and benefits	 	13,309	 	 	 	12,508	 	 	 	39,026	 	 	 	36,163	 	
Sales and marketing	 	430	 	 	 	326	 	 	 	1,092	 	 	 	947	 	
Westwood mutual funds	 	591	 	 	 	599	 	 	 	1,965	 	 	 	1,465	 	
Information technology	 	807	 	 	 	690	 	 	 	2,536	 	 	 	2,024	 	
Professional services	 	983	 	 	 	887	 	 	 	3,554	 	 	 	2,966	 	
General and administrative	 	1,410	 	 	 	1,250	 	 	 	4,242	 	 	 	3,723	 	
Total expenses	 	17,530	 	 	 	16,260	 	 	 	52,415	 	 	 	47,288	 	
Income before income taxes	 	10,592	 	 	 	6,738	 	 	 	32,561	 	 	 	19,285	 	
Provision for income taxes	 	3,474	 	 	 	2,437	 	 	 	11,290	 	 	 	7,211	 	
Net income	$	7,118	 	 	$	4,301	 	 	$	21,271	 	 	$	12,074	 	
Other comprehensive income (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign currency translation adjustments	 	(578	)	 	 	104	 	 	 	(600	)	 	 	(131	)	
Total comprehensive income	$	6,540	 	 	$	4,405	 	 	$	20,671	 	 	$	11,943	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	$	0.95	 	 	$	0.58	 	 	$	2.83	 	 	$	1.64	 	
Diluted	$	0.92	 	 	$	0.57	 	 	$	2.73	 	 	$	1.57	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average shares outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	7,525,489	 	 	 	7,374,600	 	 	 	7,507,937	 	 	 	7,347,376	 	
Diluted	 	7,734,309	 	 	 	7,597,001	 	 	 	7,801,073	 	 	 	7,667,851	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash dividends declared per share	$	0.44	 	 	$	0.40	 	 	$	1.32	 	 	$	1.20	 	

 

 

 
 
See notes to condensed consolidated financial statements.

 
2

 
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
For the Nine Months Ended September 30, 2014
(in thousands, except share amounts)
(unaudited)
 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Accumulated	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	Additional	 	 	 	 	 	 	Other	 	 	 	 	 	 	 	 	 	
 	Common Stock, Par	 	 	Paid-In	 	 	Treasury	 	 	Comprehensive	 	 	Retained	 	 	 	 	 	
 	Shares	 	 	Amount	 	 	Capital	 	 	Stock	 	 	Loss	 	 	Earnings	 	 	Total	 	
BALANCE, January 1, 2014	 	8,176,417	 	 	$	88	 	 	$	103,853	 	 	$	(23,169	)	 	$	(257	)	 	$	8,148	 	 	$	88,663	 	
Net income	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	21,271	 	 	 	21,271	 	
Other comprehensive loss	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(600	)	 	 	—	 	 	 	(600	)	
Issuance of restricted stock, net of forfeitures	 	211,264	 	 	 	2	 	 	 	(2	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Dividends declared	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(10,913	)	 	 	(10,913	)	
Stock based compensation expense	 	—	 	 	 	—	 	 	 	10,103	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	10,103	 	
Reclassification of compensation liability to be
     paid in shares	 	—	 	 	 	—	 	 	 	170	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	170	 	
Tax benefit related to stock based compensation	 	—	 	 	 	—	 	 	 	2,065	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	2,065	 	
Purchase of treasury stock	 	(11,476	)	 	 	—	 	 	 	—	 	 	 	(669	)	 	 	—	 	 	 	—	 	 	 	(669	)	
Restricted stock returned for payment of taxes	 	(88,123	)	 	 	—	 	 	 	—	 	 	 	(5,190	)	 	 	—	 	 	 	—	 	 	 	(5,190	)	
BALANCE, September 30, 2014	 	8,288,082	 	 	$	90	 	 	$	116,189	 	 	$	(29,028	)	 	$	(857	)	 	$	18,506	 	 	$	104,900	 	

 

 

 

 

 

 

 

 

 

 
 
See notes to condensed consolidated financial statements.

 
3

 
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
 	For the	 	
 	Nine months ended	 	
 	September 30,	 	
 	2014	 	 	2013	 	
CASH FLOWS FROM OPERATING ACTIVITIES:	 	 	 	 	 	 	 	
Net income	$	21,271	 	 	$	12,074	 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	
Depreciation	 	436	 	 	 	288	 	
Amortization of intangible assets	 	270	 	 	 	270	 	
Unrealized (gains) losses on trading investments	 	(29	)	 	 	430	 	
Stock based compensation expense	 	10,103	 	 	 	8,512	 	
Deferred income taxes	 	(4,227	)	 	 	75	 	
Excess tax benefits from stock based compensation	 	(1,850	)	 	 	(696	)	
Net (purchases) sales of investments - trading securities	 	(8,528	)	 	 	4,202	 	
Change in operating assets and liabilities:	 	 	 	 	 	 	 	
Accounts receivable	 	478	 	 	 	(3,241	)	
Other current assets	 	367	 	 	 	(480	)	
Accounts payable and accrued liabilities	 	10	 	 	 	369	 	
Compensation and benefits payable	 	(3,887	)	 	 	(668	)	
Income taxes payable and prepaid income taxes	 	6,496	 	 	 	(1,922	)	
Other liabilities	 	(42	)	 	 	20	 	
Net cash provided by operating activities	 	20,868	 	 	 	19,233	 	
CASH FLOWS FROM INVESTING ACTIVITIES:	 	 	 	 	 	 	 	
Purchase of property and equipment	 	(337	)	 	 	(651	)	
Net cash used in investing activities	 	(337	)	 	 	(651	)	
CASH FLOWS FROM FINANCING ACTIVITIES:	 	 	 	 	 	 	 	
Purchase of treasury stock	 	(669	)	 	 	(878	)	
Restricted stock returned for payment of taxes	 	(5,190	)	 	 	(3,789	)	
Excess tax benefits from stock based compensation	 	1,850	 	 	 	696	 	
Cash dividends	 	(10,637	)	 	 	(6,346	)	
Net cash used in financing activities	 	(14,646	)	 	 	(10,317	)	
Effect of currency rate changes on cash	 	(264	)	 	 	(73	)	
NET INCREASE IN CASH AND CASH EQUIVALENTS	 	5,621	 	 	 	8,192	 	
Cash and cash equivalents, beginning of period	 	10,864	 	 	 	3,817	 	
Cash and cash equivalents, end of period	$	16,485	 	 	$	12,009	 	
Supplemental cash flow information:	 	 	 	 	 	 	 	
Cash paid during the period for income taxes	$	9,073	 	 	$	9,093	 	

 

 
 
See notes to condensed consolidated financial statements.

 
4

 
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1. DESCRIPTION OF THE BUSINESS
Westwood Holdings Group, Inc. (“Westwood”, the “Company”, “we”, “us” or “our”) was incorporated under the laws of the State of Delaware on December 12, 2001. Westwood provides investment management services to institutional investors, private wealth clients and financial intermediaries through its subsidiaries, Westwood Management Corp. (“Westwood Management”), Westwood Trust (“Westwood Trust”), Westwood International Advisors Inc. (“Westwood International”) and Westwood Advisors, LLC. Revenue is largely dependent on the total value and composition of assets under management (“AUM”). Accordingly, fluctuations in financial markets and in the composition of AUM impact revenues and results of operations.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited and are presented in accordance with the requirements for quarterly reports on Form 10-Q and consequently do not include all of the information and footnote disclosures required by accounting principles generally accepted in the United States of America (“GAAP”).  The Company’s consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary in the opinion of management to present fairly our interim financial position and results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements are presented in accordance with GAAP and the rules and regulations of the Securities and Exchange Commission (“SEC”).
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our consolidated financial statements, and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2013. Operating results for the periods in these condensed consolidated financial statements are not necessarily indicative of the results for any future period. The accompanying condensed consolidated financial statements include the accounts of Westwood and its subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation.
Correction of Immaterial Errors
Pursuant to Staff Accounting Bulletin (“SAB”) No. 99, Materiality, the Company concluded that certain misstatements were not material to any of its prior period financial statements, including its financial statements for the first and second quarters of 2014.  Although the misstatements were immaterial to prior periods, the prior period financial statements have been revised in this report in accordance with SAB No. 108,  Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , due to the significance of the out-of-period correction of this non-cash adjustment to the third quarter of 2014. See Note 3 for further discussion.
5

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
Revenue Recognition
Investment advisory and trust fees are recognized as services are provided. These fees are determined in accordance with contracts between our subsidiaries and their clients and are generally based on a percentage of AUM. A limited number of our clients have contractual performance-based fee arrangements, which pay us an additional fee if we outperform a specified index over a specific period of time. We record revenue for performance-based fees at the end of the measurement period. Most advisory and trust fees are payable in advance or in arrears on a calendar quarterly basis. Advance payments are deferred and recognized over the periods services are performed. Since billing periods for most of our advance paying clients coincide with the calendar quarter to which payment relates, revenue is recognized within the quarter. Consequently, no significant amount of deferred revenue is contained in our condensed consolidated financial statements. Deferred revenue is shown on the condensed consolidated balance sheets under the heading of “Accounts payable and accrued liabilities”. Other revenues generally consist of interest and investment income and are recognized as earned.
Accounts Receivable
Accounts receivable represents balances arising from services provided to customers and are recorded on an accrual basis, net of any allowance for doubtful accounts. Accounts receivable are written off when determined to be uncollectible. Any allowance for doubtful accounts is estimated based on the Company’s historical write-off experience, existing conditions in the industry, and the customer’s financial stability. Most of our accounts receivable balances consist of advisory and trust fees receivable from customers that we believe and have experienced to be fully collectible. Accordingly, our condensed consolidated financial statements do not include an allowance for bad debt or any bad debt expense.

Recent Accounting Pronouncements
In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08,  Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity , which changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. The ASU is intended to reduce the frequency of disposals reported as discontinued operations by focusing on strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. The standard will be effective for annual reporting periods beginning after December 15, 2014, although early adoption is permitted. We do not currently expect the adoption of this ASU to have a significant impact on our financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which resulted from a joint project by the FASB and International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The issuance of a comprehensive and converged standard on revenue recognition is expected to improve the ability of financial statement users to understand and consistently analyze an entity’s revenue across industries, transactions, and geographies. The standard will require additional disclosures to help financial statement users better understand the nature, amount, timing, and potential uncertainty of the revenue being recognized. ASU 2014-09 will be effective for annual reporting periods beginning after December 15, 2016, and will require either retrospective application to each prior reporting period presented or retrospective application with the cumulative effect of initially applying the standard recognized at the date of adoption. Early application is prohibited. We are currently evaluating the impact that the application of ASU 2014-09 will have on our financial statements and disclosures.
In June 2014, the FASB issued ASU 2014-12 Compensation—Stock Compensation (Topic 718) Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period , which establishes specific guidance on how to account for share-based payments for awards with performance targets after the employee completes the requisite service period. Current U.S. GAAP does not contain explicit guidance on how to account for those share-based payments. The standard will be effective for annual reporting periods beginning after December 15, 2015, although early adoption is permitted. We do not currently expect the adoption of this ASU to have a significant impact on our financial statements.
 
3. CORRECTION OF IMMATERIAL ERRORS
During the third quarter we discovered an understatement of non-cash stock based compensation expense for restricted stock grants subject to both service and performance conditions that had no net effect on total stockholders' equity as of June 30, 2014.  Measurement dates used for fair value determination of the non-cash expense for such grants between 2006 and the second quarter of
6

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
2014 were not set in accordance with Financial Accounting Standards Board Accounting Standards Codification No. 718, Compensation-Stock  Compensation , and non-cash stock based compensation was thereby understated during such periods.
The cumulative non-cash impact of additional stock based compensation expense from January 1, 2006 to June 30, 2014, resulted in an approximate $3.3 million overstatement of net income. The non-cash net income impact for each of the first and second quarters of 2014 was an overstatement of approximately $0.2 million for an overstatement of approximately $0.4 million for the first half of 2014.  The non-cash net income impact for each of the first, second and third quarters of 2013 was less than $0.1 million representing less than $0.1 million for the first nine months of 2013.
A reconciliation of the effects of the adjustments to the previously reported condensed consolidated balance sheet and condensed consolidated statement of stockholders' equity at December 31, 2013 follows (in millions):
  
 	December 31, 2013	 	
 	As Reported	 	 	Adjustment	 	 	As Adjusted	 	
Additional paid-in-capital	$	101.0	 	 	$	2.9	 	 	$	103.9	 	
Retained earnings	 	11.0	 	 	 	(2.9	)	 	 	8.1	 	
Total stockholder’s equity	$	88.7	 	 	$	—	 	 	$	88.7	 	

4. EARNINGS PER SHARE
Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding for the applicable period. Diluted earnings per share is computed based on the weighted average number of shares outstanding plus the effect of any dilutive shares of restricted stock granted to employees and non-employee directors. There were approximately 5,400 and 6,500 anti-dilutive restricted shares as of September 30, 2014 and September 30, 2013, respectively.
The following table sets forth the computation of basic and diluted shares (in thousands, except per share and share amounts):
 
 	Three months ended	 	 	Nine months ended	 	
 	September 30,	 	 	September 30,	 	
 	2014	 	 	2013	 	 	2014	 	 	2013	 	
Net income	$	7,118	 	 	$	4,301	 	 	$	21,271	 	 	$	12,074	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average shares outstanding - basic	 	7,525,489	 	 	 	7,374,600	 	 	 	7,507,937	 	 	 	7,347,376	 	
Dilutive potential shares from unvested restricted shares	 	208,820	 	 	 	222,401	 	 	 	293,136	 	 	 	320,475	 	
Weighted average shares outstanding - diluted	 	7,734,309	 	 	 	7,597,001	 	 	 	7,801,073	 	 	 	7,667,851	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	$	0.95	 	 	$	0.58	 	 	$	2.83	 	 	$	1.64	 	
Diluted	$	0.92	 	 	$	0.57	 	 	$	2.73	 	 	$	1.57	 	

7

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
5. INVESTMENTS
Investment balances are presented in the table below (in thousands). All investments are carried at fair value and are accounted for as trading securities.
 
 	 	 	 	 	Gross	 	 	Gross	 	 	Estimated	 	
 	 	 	 	 	Unrealized	 	 	Unrealized	 	 	Market	 	
 	Cost	 	 	Gains	 	 	Losses	 	 	Value	 	
September 30, 2014:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Government and Government agency obligations	$	59,654	 	 	$	24	 	 	$	—	 	 	$	59,678	 	
Money market funds	 	7,819	 	 	 	—	 	 	 	—	 	 	 	7,819	 	
Equity funds	 	2,441	 	 	 	136	 	 	 	(21	)	 	 	2,556	 	
Fixed income funds	 	3,090	 	 	 	—	 	 	 	(44	)	 	 	3,046	 	
Marketable securities	$	73,004	 	 	$	160	 	 	$	(65	)	 	$	73,099	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2013:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Government and Government agency obligations	$	42,595	 	 	$	16	 	 	$	—	 	 	$	42,611	 	
Money market funds	 	8,584	 	 	 	—	 	 	 	—	 	 	 	8,584	 	
Equity funds	 	2,130	 	 	 	200	 	 	 	(54	)	 	 	2,276	 	
Fixed income funds	 	10,984	 	 	 	99	 	 	 	—	 	 	 	11,083	 	
Marketable securities	$	64,293	 	 	$	315	 	 	$	(54	)	 	$	64,554	 	

As of September 30, 2014 $5.6 million in corporate funds were invested in Westwood Funds and Westwood Common Trust Funds. See Note 9.
 
6. FAIR VALUE MEASUREMENTS
We determine estimated fair values for our financial instruments using available information. The fair value amounts discussed in our condensed consolidated financial statements are not necessarily indicative of either amounts realizable upon disposition of these instruments or our intent or ability to dispose of these assets. The estimated fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, dividends payable, compensation and benefits payable and income taxes payable approximates their carrying value due to their short-term maturities and are classified as level 1 fair value measurements. The carrying amount of investments designated as “trading” securities, primarily U.S. Government and Government agency obligations, money market funds, Westwood Funds ®  mutual funds and Westwood Trust common trust fund shares, equals their fair value based on prices quoted in active markets and, with respect to funds, the net asset value of the shares held as reported by each fund. Market values of our money market holdings generally do not fluctuate.
ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value and requires additional disclosures regarding certain fair value measurements. ASC 820 establishes a three-tier hierarchy for measuring fair value as follows:
·	level 1 – quoted market prices in active markets for identical assets	

·	level 2 – inputs other than quoted prices that are directly or indirectly observable	

·	level 3 – unobservable inputs where there is little or no market activity	
8

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
The following table summarizes the values of our assets as of the dates indicated within the fair value hierarchy (in thousands).
 
 	Level 1	 	 	Level 2	 	 	Level 3	 	 	Total	 	
As of September 30, 2014:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments in securities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Trading	$	70,925	 	 	$	2,174	 	 	$	—	 	 	$	73,099	 	
Total financial instruments	$	70,925	 	 	$	2,174	 	 	$	—	 	 	$	73,099	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
As of December 31, 2013:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investments in securities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Trading	$	64,554	 	 	$	—	 	 	$	—	 	 	$	64,554	 	
Total financial instruments	$	64,554	 	 	$	—	 	 	$	—	 	 	$	64,554	 	
 
Investments categorized as level 2 assets consist of investments in common trust funds sponsored by Westwood Trust. Common trust funds are private investment vehicles comprised of commingled investments held in trusts that are valued using the Net Asset Value (“NAV”) calculated by us as administrator of the funds. The NAV is quoted on an inactive private market however the unit price is based on the market value of the underlying investments that are traded on an active market. Westwood Trust sponsors common trust funds for most of the investment strategies managed by Westwood Management. These strategies are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013. Investments in the funds are generally redeemable on a daily basis. There are no current plans to sell any of these investments.

7. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of the cost of acquired assets over the fair value of the underlying identifiable assets at the date of acquisition. Goodwill is not amortized but is tested for impairment at least annually. We completed our annual goodwill impairment assessment during the third quarter of 2014 and determined that no impairment loss was required. No impairments were recorded during any of the periods presented.
Our intangible assets, which totaled $3.5 million (net of accumulated amortization of $1.5 million) at September 30, 2014, represent the acquisition date fair value of acquired client relationships, trade names and non-compete agreements and are reflected net of amortization. In valuing these assets, we made significant estimates regarding their useful lives, growth rates and potential attrition. We periodically review intangible assets for events or circumstances that would indicate impairment. The estimated annual amortization for these assets is $0.4 million for the next five years.
 
8. BALANCE SHEET COMPONENTS
Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) were as follows (in thousands):
 
 	As of	 	 	As of	 	
 	September 30,	 	 	December 31,	 	
 	2014	 	 	2013	 	
Foreign currency translation adjustment	$	(857	)	 	$	(257	)	
Accumulated other comprehensive loss	$	(857	)	 	$	(257	)	

9. VARIABLE INTEREST ENTITIES
Westwood Trust sponsors common trust funds (“CTFs”) for its clients. These funds allow clients to commingle assets to achieve economies of scale. Westwood International provides investment advisory services to Westwood Investment Funds PLC (the “UCITS Fund”), which was authorized by the Central Bank of Ireland on June 18, 2013 pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (“UCITS”), and which is an Ireland domiciled umbrella-type open-ended self-managed investment company. Westwood Management provides investment advisory services to the Westwood Funds ® , a family of mutual funds, and to two collective investment trusts (“CITs”). Some clients of Westwood Management hold their investments in ten limited liability companies (“LLCs”) that were formed and sponsored by McCarthy Group Advisors, LLC.
9

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
The CTFs, Westwood Funds®, CITs and LLCs (“Westwood VIEs”) are considered variable interest entities (“VIEs”) because our clients, who hold the equity at risk, do not have a direct or indirect ability through voting or similar rights to make decisions about the funds that would have a significant effect on their success. We receive fees for managing assets in these entities commensurate with market rates.
We evaluate all of our advisory relationships and CTFs to determine whether or not we qualify as the primary beneficiary based on whether there is an obligation to absorb the majority of expected losses or a right to receive the majority of expected residual returns. Since all losses and returns are distributed to the shareholders of the Company’s VIEs, we are not the primary beneficiary and consequently the Westwood VIEs are not included in our condensed consolidated financial statements.
Otherwise, we have not provided any financial support we were not previously contractually obligated to provide and there are no arrangements that would require us to provide additional financial support to any of these VIEs. Our investments in the Westwood Funds ®  and the CTFs are accounted for as investments in accordance with our other investments described in Note 5.
The following table displays assets under management, corporate money invested and risk of loss in each vehicle (in millions).

 	As of September 30, 2014	 	
 	Assets	 	 	 	 	 	 	 	 	 	
 	Under	 	 	Corporate	 	 	Risk of	 	
 	Management	 	 	Investment	 	 	Loss	 	
VIE's:	 	 	 	 	 	 	 	 	 	 	 	
Westwood Funds®	$	3,407	 	 	$	3.4	 	 	$	3.4	 	
Common Trust Funds	 	2,666	 	 	 	2.2	 	 	 	2.2	 	
Collective Investment Trusts	 	306	 	 	 	—	 	 	 	—	 	
LLCs	 	244	 	 	 	—	 	 	 	—	 	
UCITS Fund	 	829	 	 	 	—	 	 	 	—	 	
VIE totals	 	7,452	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
All other assets:	 	 	 	 	 	 	 	 	 	 	 	
Trust Services	 	1,129	 	 	 	 	 	 	 	 	 	
Advisory Services	 	11,189	 	 	 	 	 	 	 	 	 	
Total AUM	$	19,770	 	 	 	 	 	 	 	 	 	

 
 
10. LONG-TERM INCENTIVE COMPENSATION
Restricted Stock Awards
We have issued restricted shares to our employees and non-employee directors. The Third Amended and Restated Westwood Holdings Group, Inc. Stock Incentive Plan, as amended  (the “Plan”) reserves shares of Westwood common stock for issuance to eligible employees, directors and consultants of Westwood or its subsidiaries in the form of restricted stock. The total number of shares issuable under the Plan (including predecessor plans to the Plan) may not exceed 3,898,100 shares. At September 30, 2014, approximately 505,000 shares remain available for issuance under the Plan.
Under the Plan, we have granted to employees and non-employee directors restricted stock subject to service conditions and to certain key employees restricted stock subject to both service and performance conditions. As of September 30, 2014, there was approximately $18.8 million of unrecognized compensation expense for restricted stock grants under the Plan that is expected to be recognized over a remaining weighted-average period of 2 years. Our two types of restricted stock grants under the Plan are discussed below.
10

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
The following table presents the total stock based compensation expense recorded for stock based compensation arrangements for the periods indicated (in thousands):
 
 	Nine months ended	 	
 	September 30,	 	
 	2014	 	 	2013	 	
Service condition stock based compensation expense	$	5,612	 	 	$	5,687	 	
Performance condition stock based compensation expense	 	4,202	 	 	 	2,653	 	
Stock based compensation expense under the Plan	 	9,814	 	 	 	8,340	 	
Canada EB Plan stock based compensation expense	 	289	 	 	 	172	 	
Total stock based compensation expense	$	10,103	 	 	$	8,512	 	
 
Restricted Stock Subject Only to a Service Condition
We calculate compensation cost for restricted stock grants by using the fair market value of our common stock at the date of grant, the number of shares issued, an adjustment for restrictions on dividends and an estimate of shares that will not vest due to forfeitures. This compensation cost is amortized on a straight-line basis over the applicable vesting period.
  
 	 	 	 	 	Weighted Average	 	
 	 	 	 	 	Grant Date Fair	 	
Restricted shares subject only to a service condition:	Shares	 	 	Value	 	
 	 	 	 	 	 	 	 	
Non-vested, January 1, 2014	 	511,060	 	 	$	40.49	 	
Granted	 	182,990	 	 	 	58.78	 	
Vested	 	(186,680	)	 	 	38.76	 	
Forfeited	 	(31,291	)	 	 	47.87	 	
Non-vested, September 30, 2014	 	476,079	 	 	 	47.72	 	
 
Restricted Stock Subject to Service and Performance Conditions
Under the Plan, certain key employees were provided agreements for grants of restricted shares that vest over a five year period provided that annual performance goals established by the Compensation Committee of Westwood’s board of directors are met. Each year the Compensation Committee establishes a specific goal for that year’s vesting of the restricted shares, which historically has been based upon Westwood’s adjusted pre-tax income, as defined. The date that the Compensation Committee establishes the annual goal is considered to be the grant date and the fair value measurement date to determine expense on the shares that are likely to vest. The vesting period ends when the Compensation Committee formally approves the performance-based restricted stock vesting based on the final calculation of adjusted pre-tax income, which is derived from the Company’s audited financial statements. If a portion of the performance-based restricted shares does not vest, no compensation expense is recognized for that portion and any previously recognized compensation expense related to shares that do not vest is reversed. In February 2014, the Compensation Committee established the 2014 goal as adjusted pre-tax income of at least $34.0 million, representing a five-year compound annual growth rate in excess of 10% over annual adjusted pre-tax income recorded in 2009. Our adjusted pre-tax income is determined based on our audited financial statements and is equal to income before income taxes increased by expenses incurred for the year for (i) incentive compensation for all officers and employees and (ii) performance-based restricted stock awards, excluding start up, non-recurring and similar expense items. In the first quarter of 2014, we concluded that it was probable that we would meet the performance goals required to vest the applicable performance based restricted shares this year and began recording expense related to those shares. If a portion of the performance-based restricted shares does not vest, no compensation expense is recognized for that portion and any previously recognized compensation expense related to shares that do not vest is reversed. 
11

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)

 	 	 	 	 	Weighted Average	 	
 	 	 	 	 	Grant Date Fair	 	
Restricted shares subject to service and performance conditions:	Shares	 	 	Value	 	
 	 	 	 	 	 	 	 	
Non-vested, January 1, 2014	 	93,000	 	 	$	44.55	 	
Granted	 	101,313	 	 	 	58.59	 	
Vested	 	(93,000	)	 	 	44.55	 	
Forfeited	 	—	 	 	 	—	 	
Non-vested, September 30, 2014	 	101,313	 	 	 	58.59	 	
The above amounts as of September 30, 2014 do not include 185,252 non-vested restricted shares that potentially vest over performance years subsequent to 2014 in as much as the annual performance goals for those years have not been set by the Compensation Committee and therefore no grant date has been established.
    
Canadian Plan
We have compensation arrangements with certain employees of Westwood International pursuant to which these employees can earn cash awards based on the performance of certain investment products. A portion of such awards may be paid in shares of our stock that vest over a multi-year period. We accrue a liability for these awards over both the annual period in which we determine it is probable that the award will be earned and, for the portion to be settled in shares, over the following three-year vesting period. Cash awards expected to be settled in shares are funded into a trust pursuant to The Share Award Plan of Westwood Holdings Group, Inc. for Service provided in Canada to its Subsidiaries (the “Canadian Plan”).  Generally, the Canadian trust subsequently acquires Westwood common shares in market transactions and holds such shares until the shares are vested and distributed, or until forfeited. Shares held in the trust are shown on our condensed consolidated balance sheets as treasury shares. During the first quarter of 2014 and the second quarter of 2013, the trust purchased in the open market 11,476 and 20,251 Westwood common shares for approximately $670,000 and $880,000, respectively.  Until shares are acquired by the trust, we measure the liability as a cash-based award included in “Compensation and benefits payable” on our condensed consolidated balance sheets. When the number of shares related to an award is determinable, the award becomes an equity award accounted for similarly to restricted stock. The trust formed pursuant to the Canadian Plan holds 31,727 shares of Westwood common stock. Under the Canadian Plan, no more than $10 million CAD (or USD $8.9 million using an exchange rate on September 30, 2014) may be funded to the Plan Trustee to fund purchases of common stock with respect to awards granted under the Canadian Plan. At September 30, 2014, the remaining amount available to be paid to the trustee of the Canadian Plan to fund purchases of Westwood common stock was approximately $7.5 million.
Mutual Fund Share Incentive Awards
We grant annually to certain employees mutual fund incentive awards, which are bonus awards based on our mutual funds achieving certain performance goals. Awards granted are notionally credited to a participant account maintained by us that contains a number of mutual fund shares equal to the award amount divided by the net closing value of a fund share on the date the amount is credited to the account.
These awards vest after approximately one year of service following the year in which the participant earns the award. We begin accruing a liability for mutual fund incentive awards when we believe it is probable that the award will be earned and record expense for these awards over the service period of the award, which is approximately two years. During the year in which the amount of the award is determined, we record expense based on the expected value of the award. After the award is earned, we record expense based on the value of the shares awarded and the percentage of the vesting period that has transpired. Our liability under these awards may increase or decrease based on changes in the value of the mutual fund shares awarded, including reinvested income from the mutual funds during the vesting period. Upon vesting, participants receive the value of the mutual fund share awards adjusted for earnings or losses attributable to the underlying mutual funds. For the nine months ended September 30, 2014 and 2013, we recorded expense of $0.7 million and $1.8 million, respectively, related to mutual fund share incentive awards. As of September 30, 2014 and December 31, 2013, we had an accrued liability of $0.6 million and $1.9 million, respectively, related to mutual fund incentive awards.
 
12

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
11. RELATED PARTY TRANSACTIONS
The Company engages in transactions with its affiliates in the ordinary course of business.  Westwood International provides investment advisory services to the UCITS Fund. Certain members of our management and board of directors serve on the board of directors of the UCITS Fund, which began operations in August 2013. Under the terms of the investment advisory agreements, the Company earns quarterly fees paid by clients of the UCITS Fund and, in certain cases, by the UCITS Fund. The fees are based on negotiated fee schedules applied to AUM. These fees are commensurate with market rates and are negotiated and contracted at arm’s length. For the nine months ended September 30, 2014, the Company earned approximately $645,000 in fees directly from the UCITS Fund. This does not include fees paid directly to Westwood International by certain clients invested in the UCITS Fund that have entered into an investment management agreement with Westwood International.
 
12. COMMITMENTS AND CONTINGENCIES
On August 3, 2012, AGF Management Limited and AGF Investments Inc. (collectively, “AGF”) filed a lawsuit in the Ontario Superior Court of Justice against Westwood, certain Westwood employees and the executive recruiting firm of Warren International, LLC. (“Warren”). The action relates to the hiring of certain members of Westwood’s global and emerging markets investment team previously employed by AGF. AGF is alleging that the former employees breached certain obligations when they resigned from AGF and that Westwood and Warren induced such breaches. AGF is seeking an unspecified amount of damages and punitive damages of $10 million (CAD) in the lawsuit. On November 5, 2012, Westwood responded to AGF’s lawsuit with a counterclaim against AGF for defamation. Westwood is seeking $1 million (CAD) in general damages, $10 million (CAD) in special damages, $1 million (CAD) in punitive damages, and costs. On November 6, 2012, AGF filed a second lawsuit against Westwood, Westwood Management and an employee of a Westwood subsidiary, alleging that the employee made defamatory statements about AGF. In this second lawsuit, AGF is seeking $5 million (CAD) in general damages, $1 million (CAD) per defendant in punitive damages, unspecified special damages, interest and costs. The pleadings phase is complete and we are now in the discovery phase, which we hope to complete by the end of 2015.
While we intend to vigorously defend both actions and pursue our counterclaims, we are currently unable to estimate the ultimate aggregate amount of monetary gain, loss or financial impact of these actions and counterclaims. Defending these actions and pursuing these counterclaims may be expensive for us and time consuming for our personnel. While we do not currently believe these proceedings will have a material impact, adverse resolution of these actions and counterclaims could have a material adverse effect on our business, financial condition or results of operations.
Our policy is to not accrue legal fees and directly related costs as part of potential loss contingencies. We have agreed with our Directors & Officers insurance provider that 50% of the defense costs related to both AGF claims, excluding Westwood’s counterclaim against AGF, are covered by insurance. We expense legal fees and directly related costs as incurred. We have received insurance proceeds of approximately $240,000 to date and have recorded a receivable of $325,000 as of September 30, 2014, which represents the current estimate of expenses related to this lawsuit that we expect to recover under our insurance policies. This receivable is part of “Other current assets” on our condensed consolidated balance sheets.
 
13. SEGMENT REPORTING
We operate two segments: Advisory and Trust. These segments are managed separately based on the types of products and services offered and their related client bases. The Company’s segment information is prepared on the same basis that management reviews the financial information for operational decision-making purposes. The Company’s Chief Operating Decision Maker evaluates the performance of our segments based primarily on fee revenues and economic earnings. Westwood Holdings Group, Inc., the parent company of Advisory and Trust, does not have revenues and is the entity in which we record typical holding company expenses including employee compensation and benefits for holding company employees, directors’ fees and investor relations costs. All segment accounting policies are the same as those described in the summary of significant accounting policies. Intersegment balances that eliminate in consolidation have been applied to the appropriate segment.
Advisory
Our Advisory segment provides investment advisory services to corporate retirement plans, public retirement plans, endowments, foundations, individuals and the Westwood Funds ® , as well as investment subadvisory services to mutual funds and our Trust segment. Westwood Management and Westwood International, which provide investment advisory services to clients of similar type, are included in our Advisory segment along with Westwood Advisors, LLC.
13

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
Trust
Trust provides trust and custodial services to its clients and to our Advisory segment and participates in common trust funds that it sponsors to institutions and high net worth individuals. Westwood Trust is included in our Trust segment.

 	 	 	 	 	 	 	 	 	Westwood	 	 	 	 	 	 	 	 	 	
 	Advisory	 	 	Trust	 	 	Holdings	 	 	Eliminations	 	 	Consolidated	 	
Three months ended September 30, 2014	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net fee revenues from external sources	$	22,857	 	 	$	5,282	 	 	$	—	 	 	$	—	 	 	$	28,139	 	
Net intersegment revenues	 	3,493	 	 	 	—	 	 	 	—	 	 	 	(3,493	)	 	 	—	 	
Net interest and dividend revenue	 	42	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	42	 	
Other revenue	 	(59	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(59	)	
Total revenues	$	26,333	 	 	$	5,282	 	 	$	—	 	 	$	(3,493	)	 	$	28,122	 	
Economic Earnings	$	11,610	 	 	$	514	 	 	$	(1,243	)	 	$	—	 	 	$	10,881	 	
Less:   Restricted stock expense	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3,635	 	
Intangible amortization	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	90	 	
Deferred taxes on goodwill	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	38	 	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	7,118	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Segment assets	$	141,030	 	 	$	17,780	 	 	$	7,819	 	 	$	(34,014	)	 	$	132,615	 	
Segment goodwill	$	5,219	 	 	$	6,036	 	 	$	—	 	 	$	—	 	 	$	11,255	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Three months ended September 30, 2013	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net fee revenues from external sources	$	17,982	 	 	$	4,672	 	 	$	—	 	 	$	—	 	 	$	22,654	 	
Net intersegment revenues	 	2,937	 	 	 	—	 	 	 	—	 	 	 	(2,937	)	 	 	—	 	
Net interest and dividend revenue	 	140	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	140	 	
Other revenue	 	203	 	 	 	1	 	 	 	—	 	 	 	—	 	 	 	204	 	
Total revenues	$	21,262	 	 	$	4,673	 	 	$	—	 	 	$	(2,937	)	 	$	22,998	 	
Economic Earnings	$	8,269	 	 	$	525	 	 	$	(1,450	)	 	$	—	 	 	$	7,344	 	
Less:   Restricted stock expense	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2,915	 	
Intangible amortization	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	90	 	
Deferred taxes on goodwill	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	38	 	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	4,301	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Segment assets	$	103,502	 	 	$	13,849	 	 	$	5,651	 	 	$	(18,100	)	 	$	104,902	 	
Segment goodwill	$	5,219	 	 	$	6,036	 	 	$	—	 	 	$	—	 	 	$	11,255	 	

14

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
 	 	 	 	 	 	 	 	 	Westwood	 	 	 	 	 	 	 	 	 	
 	Advisory	 	 	Trust	 	 	Holdings	 	 	Eliminations	 	 	Consolidated	 	
Nine months ended September 30, 2014	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net fee revenues from external sources	$	69,147	 	 	$	15,461	 	 	$	—	 	 	$	—	 	 	$	84,608	 	
Net intersegment revenues	 	10,157	 	 	 	—	 	 	 	—	 	 	 	(10,157	)	 	 	—	 	
Net interest and dividend revenue	 	207	 	 	 	1	 	 	 	—	 	 	 	—	 	 	 	208	 	
Other revenue	 	159	 	 	 	1	 	 	 	—	 	 	 	—	 	 	 	160	 	
Total revenues	$	79,670	 	 	$	15,463	 	 	$	—	 	 	$	(10,157	)	 	$	84,976	 	
Economic Earnings	$	34,871	 	 	$	1,341	 	 	$	(4,454	)	 	$	—	 	 	$	31,758	 	
Less:   Restricted stock expense	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	10,103	 	
Intangible amortization	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	270	 	
Deferred taxes on goodwill	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	114	 	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	21,271	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Nine months ended September 30, 2013	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net fee revenues from external sources	$	52,550	 	 	$	13,463	 	 	$	—	 	 	$	—	 	 	$	66,013	 	
Net intersegment revenues	 	7,194	 	 	 	9	 	 	 	—	 	 	 	(7,203	)	 	 	—	 	
Net interest and dividend revenue	 	417	 	 	 	1	 	 	 	—	 	 	 	—	 	 	 	418	 	
Other revenue	 	142	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	142	 	
Total revenues	$	60,303	 	 	$	13,473	 	 	$	—	 	 	$	(7,203	)	 	$	66,573	 	
Economic Earnings	$	23,902	 	 	$	1,418	 	 	$	(4,350	)	 	$	—	 	 	$	20,970	 	
Less:   Restricted stock expense	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	8,512	 	
Intangible amortization	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	270	 	
Deferred taxes on goodwill	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	114	 	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	12,074	 	
 
The segment presentation above has been updated from the prior presentation to show Economic Earnings, a non-U.S. generally accepted accounting principles (“non-GAAP”) performance measure of segment profit or loss. We provide this measure in addition to, but not as a substitute for, net income, which is reported on a U.S. GAAP basis. Our management and Board of Directors review Economic Earnings to evaluate our ongoing performance, allocate resources and review dividend policy. We believe that this non-GAAP performance measure of segment profit or loss, while not a substitute for GAAP net income, is useful for management and investors when evaluating our underlying operating and financial performance and our available resources. We do not advocate that investors consider this non-GAAP measure of segment profit or loss without considering the financial information prepared in accordance with GAAP.
In calculating Economic Earnings, we add to net income the non-cash expense associated with equity-based compensation awards of restricted stock and stock options, amortization of intangible assets and the deferred taxes related to the tax-basis amortization of goodwill. Although depreciation on property and equipment is a non-cash expense, we do not add it back when calculating Economic Earnings because depreciation charges represent a decline in the value of the related assets that will ultimately require replacement.
In addition, we have modified the 2013 periods for Economic Earnings of Westwood Holdings to include typical holding company expenses so as to be comparable to the amounts reported in the 2014 periods.
 
14. SUBSEQUENT EVENT
In October 2014 Westwood’s Board of Directors declared a quarterly cash dividend of $0.50 per common share, an increase of 14% from the previous quarterly dividend rate, payable on January 2, 2015 to stockholders of record on December 15, 2014.

 
15

 
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	
Forward-Looking Statements
Statements in this report and the Annual Report to Stockholders that are not purely historical facts, including, without limitation, statements about our expected future financial position, results of operations or cash flows, as well as other statements including, without limitation, words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “should,” “could,” “goal,” “may,” “target,” “designed,” “on track,” “comfortable with,” “optimistic” and other similar expressions, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results and the timing of some events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, without limitation, the risks described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013 and Quarterly Reports on Form 10-Q for the periods ended March 31, 2014 and June 30, 2014, filed with the SEC and those risks set forth below:
·	our ability to identify and market services that appeal to our customers;	

·	the significant concentration of our revenues in a small number of our customers;	

·	our relationships with investment consulting firms;	

·	our relationships with current and potential customers;	

·	our ability to retain qualified personnel;	

·	our ability to develop and market new investment strategies successfully;	

·	our ability to maintain our fee structure in light of competitive fee pressures;	

·	competition in the marketplace;	

·	downturns in financial markets;	

·	new legislation adversely affecting the financial services industries;	

·	interest rates;	

·	changes in our effective tax rate;	

·	our ability to maintain an effective system of internal controls; and	

·	other risks as detailed from time to time in our SEC reports.	
You should not unduly rely on these forward-looking statements, which speak only as of the date of this report. We are not obligated and do not undertake an obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events or otherwise.
Overview
We manage investment assets and provide services for our clients through our subsidiaries, Westwood Management, Westwood Trust and Westwood International. Westwood Management provides investment advisory services to corporate and public retirement plans, endowments and foundations, the Westwood Funds ® , other mutual funds, individuals and clients of Westwood Trust. Westwood Trust provides trust and custodial services and participation in common trust funds that it sponsors to institutions and high net worth individuals. Westwood International was established in the second quarter of 2012 and provides global equity and emerging markets investment advisory services to institutional clients, mutual funds and an Ireland-domiciled UCITS fund and common trust funds sponsored by Westwood Trust. Our revenues are generally derived from fees based on a percentage of assets under management. We believe we have established a track record of delivering competitive risk-adjusted returns for our clients. Approximately 80 percent of our investment strategies have delivered above-benchmark performance and more than 90 percent have experienced below-benchmark volatility over the past ten years. Percentages stated in this section are rounded to the nearest whole percent.
16

 
Revenues
We derive our revenues from investment advisory fees, trust fees, and other revenues. Our advisory fees are generated by Westwood Management and Westwood International, which manage client accounts under investment advisory and subadvisory agreements. Advisory fees are calculated based on a percentage of assets under management and are paid in accordance with the terms of the agreements. Advisory fees are paid quarterly in advance based on assets under management on the last day of the preceding quarter, quarterly in arrears based on assets under management on the last day of the quarter just ended, or are based on a daily or monthly analysis of assets under management for the stated period. We recognize advisory fee revenues as services are rendered. A limited number of our clients have a contractual performance-based fee component in their contract, which generates additional revenues if we outperform a specified index over a specific period of time. We record revenue from performance-based fees when we determine that the fees are probable. This determination is typically made at the end of the measurement periods. Since our advance paying clients’ billing periods coincide with the calendar quarter to which such payments relate, revenue is recognized within the quarter and our consolidated financial statements contain no deferred advisory fee revenues.
Our trust fees are generated by Westwood Trust pursuant to trust or custodial agreements. Trust fees are separately negotiated with each client and are generally based on a percentage of assets under management. Westwood Trust also provides trust services to a small number of clients on a fixed fee basis. Most trust fees are paid quarterly in advance and are recognized as services are rendered. Since billing periods for most of Westwood Trust’s advance paying clients coincide with the calendar quarter, revenue is fully recognized within the quarter and our consolidated financial statements do not contain a significant amount of deferred revenue.
Our other revenues generally consist of interest and investment income. Although we generally invest most of our cash in U.S. Treasury securities, we also invest in equity and fixed income instruments and money market funds.
Employee Compensation and Benefits
Employee compensation and benefits costs generally consist of salaries, incentive compensation, equity-based compensation expense and benefits.
Sales and Marketing
Sales and marketing costs relate to our marketing efforts, including travel and entertainment, direct marketing and advertising costs.
Westwood Mutual Funds
Westwood Mutual Funds expenses relate to our marketing, distribution, administration and acquisition efforts related to the Westwood Funds ® .
Information Technology
Information technology expenses are generally costs associated with proprietary investment research tools, maintenance and support, computing hardware, software licenses, telecommunications and other related costs.
Professional Services
Professional services expenses generally consist of costs associated with subadvisory fees, audit, legal and other professional services.
General and Administrative
General and administrative expenses generally consist of costs associated with the lease of our office space, investor relations, licenses and fees, depreciation, insurance, office supplies and other miscellaneous expenses.
Assets Under Management
Assets under management increased $2.7 billion to $19.8 billion at September 30, 2014 compared with $17.1 billion at September 30, 2013. The average of beginning and ending assets under management for the third quarter of 2014 was $19.9 billion compared to $16.5 billion for the third quarter of 2013, an increase of 21%.
17

 
The following table displays assets under management as of September 30, 2014 and 2013:
 
 	 	 	 	 	 	 	 	 	% Change	 	
 	As of September 30,	 	 	September 30, 2014
vs.	 	
 	(in millions)	 	 	September 30,	 	
 	2014	 	 	2013	 	 	2013	 	
Institutional	$	12,325	 	 	$	10,929	 	 	 	13	%	
Private Wealth	 	4,038	 	 	 	3,821	 	 	 	6	 	
Mutual Funds	 	3,407	 	 	 	2,372	 	 	 	44	 	
Total Assets Under Management	$	19,770	 	 	$	17,122	 	 	 	15	%	

·	Institutional includes separate accounts of corporate pension and profit sharing plans, public employee retirement funds, Taft Hartley plans, endowments, foundations and individuals; subadvisory relationships where Westwood provides investment management services for funds offered by other financial institutions; pooled investment vehicles, including UCITS funds and collective investment trusts; and managed account relationships with brokerage firms and other registered investment advisors that offer Westwood products to their customers.	

·	Private Wealth includes assets for which Westwood Trust provides trust and custodial services and participation in common trust funds that it sponsors to institutions and high net worth individuals pursuant to trust or agency agreements. Investment subadvisory services are provided for the common trust funds by Westwood Management and external, unaffiliated subadvisors. For certain assets in this category, Westwood Trust currently provides limited custody services for a minimal or no fee, but views these assets as potentially converting to fee-generating managed assets in the future. As an example, some assets in this category consist of low-basis stock currently being held in custody for clients, but we believe there is potential for these assets to convert to fee-generating managed assets during an inter-generational transfer of wealth at a future date.	

·	Mutual Funds include the Westwood Funds®, a family of mutual funds for which Westwood Management serves as advisor.	
18

 
Roll-Forward of Assets Under Management

 	Three Months Ended	 	 	Nine Months Ended	 	
($ millions)	September 30,	 	 	September 30,	 	
 	2014	 	 	2013	 	 	2014	 	 	2013	 	
Institutional	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning of period assets	$	12,705	 	 	$	10,084	 	 	$	12,139	 	 	$	9,225	 	
Inflows	 	744	 	 	 	756	 	 	 	1,723	 	 	 	1,650	 	
Outflows	 	(830	)	 	 	(437	)	 	 	(2,227	)	 	 	(1,480	)	
Net flows	 	(86	)	 	 	319	 	 	 	(504	)	 	 	170	 	
Market appreciation/(depreciation)	 	(294	)	 	 	526	 	 	 	690	 	 	 	1,534	 	
Net change	 	(380	)	 	 	845	 	 	 	186	 	 	 	1,704	 	
End of period assets	 	12,325	 	 	 	10,929	 	 	 	12,325	 	 	 	10,929	 	
Private Wealth	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning of period assets	 	4,107	 	 	 	3,640	 	 	 	4,008	 	 	 	3,339	 	
Inflows	 	119	 	 	 	87	 	 	 	294	 	 	 	387	 	
Outflows	 	(101	)	 	 	(46	)	 	 	(353	)	 	 	(278	)	
Net flows	 	18	 	 	 	41	 	 	 	(59	)	 	 	109	 	
Market appreciation/(depreciation)	 	(87	)	 	 	140	 	 	 	89	 	 	 	373	 	
Net change	 	(69	)	 	 	181	 	 	 	30	 	 	 	482	 	
End of period assets	 	4,038	 	 	 	3,821	 	 	 	4,038	 	 	 	3,821	 	
Mutual Funds	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning of period assets	 	3,290	 	 	 	2,121	 	 	 	2,784	 	 	 	1,603	 	
Inflows	 	234	 	 	 	257	 	 	 	700	 	 	 	676	 	
Outflows	 	(70	)	 	 	(63	)	 	 	(253	)	 	 	(135	)	
Net flows	 	164	 	 	 	194	 	 	 	447	 	 	 	541	 	
Market appreciation/(depreciation)	 	(47	)	 	 	57	 	 	 	176	 	 	 	228	 	
Net change	 	117	 	 	 	251	 	 	 	623	 	 	 	769	 	
End of period assets	 	3,407	 	 	 	2,372	 	 	 	3,407	 	 	 	2,372	 	
Total	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning of period assets	 	20,102	 	 	 	15,845	 	 	 	18,931	 	 	 	14,167	 	
Inflows	 	1,097	 	 	 	1,100	 	 	 	2,717	 	 	 	2,713	 	
Outflows	 	(1,001	)	 	 	(546	)	 	 	(2,833	)	 	 	(1,893	)	
Net flows	 	96	 	 	 	554	 	 	 	(116	)	 	 	820	 	
Market appreciation/(depreciation)	 	(428	)	 	 	723	 	 	 	955	 	 	 	2,135	 	
Net change	 	(332	)	 	 	1,277	 	 	 	839	 	 	 	2,955	 	
End of period assets	$	19,770	 	 	$	17,122	 	 	$	19,770	 	 	$	17,122	 	
Three months ended September 30, 2014 and 2013
The $332 million decrease in assets under management for the three months ended September 30, 2014 was due to market depreciation of $428 million and asset outflows of $1.0 billion, partially offset by inflows of $1.1 billion. Inflows were primarily driven by investments into institutional accounts in our Income Opportunity strategy and our Emerging Markets strategies as well as inflows into our Income Opportunity mutual fund. Outflows were primarily related to our LargeCap Value strategy.
The $1.3 billion increase in assets under management for the three months ended September 30, 2013 was due to market appreciation of $723 million and inflows of $1.1 billion, partially offset by outflows of $546 million. Inflows were primarily driven by inflows into institutional accounts in our Emerging Markets strategies and the Westwood Income Opportunity mutual fund and inflows from certain clients into our Master Limited Partnership (“MLP”) strategy. Outflows were primarily related to withdrawals and rebalancing by certain clients in our LargeCap Value strategy.
19

 
Nine months ended September 30, 2014 and 2013
The $839 million increase in assets under management for the nine months ended September 30, 2014 was due to market appreciation of $955 million and asset inflows of $2.7 billion, offset by outflows of $2.8 billion. Inflows were primarily driven by investments into institutional accounts in our Emerging Markets strategies as well as our Income Opportunity and MLP strategies.  Inflows into our mutual funds were comprised of investments primarily in our Income Opportunity fund as well as our Short Duration High Yield, SMidCap Plus and SmallCap Value funds. Outflows were primarily related to our LargeCap strategy.
The $3.0 billion increase in assets under management for the nine months ended September 30, 2013 was due to market appreciation of $2.1 billion and inflows of $2.7 billion, partially offset by outflows of $1.9 billion. Inflows were primarily driven by inflows into institutional accounts in our Emerging Markets strategies and the Westwood Income Opportunity mutual fund together with inflows from certain clients to our MLP strategy. Outflows were primarily related to withdrawals and rebalancing by certain clients in our LargeCap Value strategy.
Correction of Immaterial Errors
During the third quarter the Company discovered an understatement of non-cash stock based compensation expense for restricted stock grants subject to both service and performance conditions that had no net effect on total stockholders' equity as of June 30, 2014.  Measurement dates used for fair value determination of the non-cash expense for such grants between 2006 and the second quarter of 2014 were not set in accordance with Financial Accounting Standards Board Accounting Standards Codification No. 718,  Compensation-Stock Compensation , and non-cash stock based compensation was thereby understated during such periods.
The cumulative non-cash impact of additional stock based compensation expense from January 1, 2006 to June 30, 2014, resulted in an approximate $3.3 million overstatement of net income. The non-cash net income impact for each of the first and second quarters of 2014 was an overstatement of approximately $0.2 million for an overstatement of approximately $0.4 million for the first half of 2014.  The non-cash net income impact for each of the first, second and third quarters of 2013 was less than $0.1 million representing less than $0.1 million for the first nine months of 2013.
Pursuant to Staff Accounting Bulletin (“SAB”) No. 99, Materiality, the Company concluded that the misstatements were not material to any of its prior period financial statements, including its financial statements for the first and second quarters of 2014.  Although the misstatements were immaterial to prior periods, the prior period financial statements have been revised in this report in accordance with SAB No. 108,  Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , due to the significance of the out-of-period correction of this non-cash adjustment to the third quarter of 2014.
Prior period amounts stated in this Form 10-Q have been revised to facilitate comparability between current and prior year periods.
 
20

 
Results of Operations
The following table (dollars in thousands) and discussion of our results of operations for the three and nine months ended September 30, 2014 is based upon data derived from the condensed consolidated statements of comprehensive income contained in our condensed consolidated financial statements and should be read in conjunction with those statements, included elsewhere in this report.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	% Change	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Three months ended	 	 	Nine months ended	 	
 	Three months ended	 	 	Nine months ended	 	 	September 30, 2014	 	 	September 30, 2014	 	
 	September 30,	 	 	September 30,	 	 	vs.	 	 	vs.	 	
 	2014	 	 	2013	 	 	2014	 	 	2013	 	 	September 30, 2013	 	 	September 30, 2013	 	
Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Advisory fees - asset based	$	22,857	 	 	$	17,956	 	 	$	65,341	 	 	$	49,989	 	 	 	27	%	 	 	31	%	
Advisory fees - performance based	 	—	 	 	 	26	 	 	 	3,806	 	 	 	2,561	 	 	 	(100	)	 	 	49	 	
Trust fees	 	5,282	 	 	 	4,672	 	 	 	15,461	 	 	 	13,463	 	 	 	13	 	 	 	15	 	
Other revenues	 	(17	)	 	 	344	 	 	 	368	 	 	 	560	 	 	 	(105	)	 	 	(34	)	
Total revenues	 	28,122	 	 	 	22,998	 	 	 	84,976	 	 	 	66,573	 	 	 	22	 	 	 	28	 	
Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Employee compensation and benefits	 	13,309	 	 	 	12,508	 	 	 	39,026	 	 	 	36,163	 	 	 	6	 	 	 	8	 	
Sales and marketing	 	430	 	 	 	326	 	 	 	1,092	 	 	 	947	 	 	 	32	 	 	 	15	 	
Westwood mutual funds	 	591	 	 	 	599	 	 	 	1,965	 	 	 	1,465	 	 	 	(1	)	 	 	34	 	
Information technology	 	807	 	 	 	690	 	 	 	2,536	 	 	 	2,024	 	 	 	17	 	 	 	25	 	
Professional services	 	983	 	 	 	887	 	 	 	3,554	 	 	 	2,966	 	 	 	11	 	 	 	20	 	
General and administrative	 	1,410	 	 	 	1,250	 	 	 	4,242	 	 	 	3,723	 	 	 	13	 	 	 	14	 	
Total expenses	 	17,530	 	 	 	16,260	 	 	 	52,415	 	 	 	47,288	 	 	 	8	 	 	 	11	 	
Income before income taxes	 	10,592	 	 	 	6,738	 	 	 	32,561	 	 	 	19,285	 	 	 	57	 	 	 	69	 	
Provision for income taxes	 	3,474	 	 	 	2,437	 	 	 	11,290	 	 	 	7,211	 	 	 	43	 	 	 	57	 	
Net income	$	7,118	 	 	$	4,301	 	 	$	21,271	 	 	$	12,074	 	 	 	65	%	 	 	76	%	
Three months ended September 30, 2014 compared to three months ended September 30, 2013
Total Revenues. Our total revenues increased $5.1 million or 22% to $28.1 million for the three months ended September 30, 2014 compared with $23.0 million for the three months ended September 30, 2013. Asset-based advisory fees increased $4.9 million or 27% to $22.9 million for the three months ended September 30, 2014 compared with $18.0 million for the three months ended September 30, 2013 as a result of increased average assets under management due to market appreciation and asset inflows from new and existing clients, partially offset by the withdrawal of assets by certain clients. Trust fees increased $0.6 million or 13% to $5.3 million for the three months ended September 30, 2014 compared with $4.7 million for the three months ended September 30, 2013 as a result of increased assets under management at Westwood Trust, primarily due to market appreciation and net client asset inflows. Other revenues, which generally consist of interest and investment income, decreased by $0.4 million for the three months ended September 30, 2014 compared with the three months ended September 30, 2013. Other revenues decreased due to a decrease in net realized and unrealized gains on investments and dividend income of $94,000.
Employee Compensation and Benefits. Employee compensation and benefits costs increased $0.8 million or 6% to $13.3 million for the three months ended September 30, 2014 compared with $12.5 million for the three months ended September 30, 2013. The increase was primarily due to increases in salary expense attributable to increased average headcount and salary increases as well as stock based compensation expense. We had 121 full-time employees as of September 30, 2014 compared to 103 full-time employees as of September 30, 2013.
Provision for Income Taxes. The effective tax rate decreased to 32.8% for the three months ended September 30, 2014 from 36.2% for the three months ended September 30, 2013 primarily due to operating income generated by Westwood International in the 2014 period and operating losses generated by Westwood International in the 2013 period, which are taxed at a lower Canadian tax rate.
21

 
Nine months ended September 30, 2014 compared to nine months ended September 30, 2013
Total Revenues. Our total revenues increased $18.4 million or 28% to $85.0 million for the nine months ended September 30, 2014 compared with $66.6 million for the nine months ended September 30, 2013. Asset-based advisory fees increased $15.3 million or 31% to $65.3 million for the nine months ended September 30, 2014 compared with $50.0 million for the nine months ended September 30, 2013 as a result of increased average assets under management due to market appreciation and asset inflows from new and existing clients, partially offset by the withdrawal of assets by certain clients. Performance-based advisory fees were $3.8 million in the nine months ended September 30, 2014 compared with $2.6 million in the nine months ended September 30, 2013. Trust fees increased $2.0 million or 15% to $15.5 million for the nine months ended September 30, 2014 compared with $13.5 million for the nine months ended September 30, 2013 as a result of increased assets under management at Westwood Trust primarily due to market appreciation and net client asset inflows. Other revenues, which generally consist of interest and investment income, decreased primarily due to a decrease in dividend income.
Employee Compensation and Benefits. Employee compensation and benefits costs increased $2.8 million or 8% to $39 million for the nine months ended September 30, 2014 compared with $36.2 million for the nine months ended September 30, 2013. The increase was primarily due to increases of $1.8 million in cash-based incentive compensation expense, $1.4 million in salary expense due primarily to increased average headcount and salary increases and $1.6 million in stock based compensation expense, partially offset by decreases in special performance award incentives and signing bonuses. We had 121 full-time employees as of September 30, 2014 compared to 103 full-time employees as of September 30, 2013.
Westwood Mutual Funds. Westwood Mutual Funds expenses increased $0.5 million to $2.0 million for the nine months ended September 30, 2014 compared with $1.5 million for the nine months ended September 30, 2013 primarily due to increases in shareholder servicing and subadvisor fees based on a percentage of assets under management as such assets have increased substantially. The expense has remained consistent as a percentage of total revenues.
Information Technology. Information technology costs increased by $0.5 million to $2.5 million for the nine months ended September 30, 2014 compared with $2.0 million for the nine months ended September 30, 2013 primarily due to increased research expenses and maintenance and support expenses. The expense has remained consistent as a percentage of total revenues.
Professional Services. Professional services expenses increased by $0.6 million to $3.6 million for the nine months ended September 30, 2014 compared with $3.0 million for the nine months ended September 30, 2013 primarily due to increases in subadvisory fees and other professional services expense, partially offset by a decrease in legal and tax advisory expenses.
General and Administrative. General and administrative expenses increased by $0.5 million to $4.2 million for the nine months ended September 30, 2014 compared with $3.7 million for the nine months ended September 30, 2013 due to increases in various support services.
Provision for Income Taxes. The effective tax rate decreased to 34.7% for the nine months ended September 30, 2014 from 37.4% for the nine months ended September 30, 2013 primarily due to operating income generated by Westwood International in the 2014 period and operating losses generated by Westwood International in the 2013 period, which are taxed at a lower Canadian tax rate.
Supplemental Financial Information
As supplemental information, we are providing a non-U.S. generally accepted accounting principles (“non-GAAP”) performance measure that we refer to as Economic Earnings. We provide this measure in addition to, but not as a substitute for, net income reported on a U.S. generally accepted accounting principles (“GAAP”) basis. Both our management and Board of Directors review Economic Earnings to evaluate our ongoing performance, allocate resources and review dividend policy. We believe that this non-GAAP performance measure, while not a substitute for GAAP net income, is useful for management and investors when evaluating our underlying operating and financial performance and our available resources. We do not advocate that investors consider this non-GAAP measure without considering financial information prepared in accordance with GAAP.
In calculating Economic Earnings, we add to net income the non-cash expense associated with equity-based compensation awards of restricted stock and stock options, amortization of intangible assets and the deferred taxes related to the tax-basis amortization of goodwill. Although depreciation on property and equipment is a non-cash expense, we do not add it back when calculating Economic Earnings because depreciation charges represent a decline in the value of the related assets that will ultimately require replacement.
22

 
Our Economic Earnings increased by 48% to $10.9 million for the three months ended September 30, 2014 compared with $7.3 million for the three months ended September 30, 2013, primarily due to increases in advisory fees. For the nine months ended September 30, 2014, Economic Earnings increased by 51% to $31.8 million compared with $21.0 million for the nine months ended September 30, 2013, primarily due to increases in advisory fees.
The following tables provide a reconciliation of net income to Economic Earnings (in thousands):
 
 	Three Months Ended	 	 	 	 	 	
 	September 30,	 	 	%	 	
 	2014	 	 	2013	 	 	Change	 	
Net Income	$	7,118	 	 	$	4,301	 	 	 	65	%	
Add: Stock based compensation expense	 	3,635	 	 	 	2,915	 	 	 	25	 	
Add: Intangible amortization	 	90	 	 	 	90	 	 	 	—	 	
Add: Tax benefit from goodwill amortization	 	38	 	 	 	38	 	 	 	—	 	
Economic Earnings	$	10,881	 	 	$	7,344	 	 	 	48	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Diluted weighted average shares outstanding	 	7,734,309	 	 	 	7,597,001	 	 	 	 	 	
Economic Earnings per share	$	1.41	 	 	$	0.97	 	 	 	 	 	

 	Nine Months Ended	 	 	 	 	 	
 	September 30,	 	 	%	 	
 	2014	 	 	2013	 	 	Change	 	
Net Income	$	21,271	 	 	$	12,074	 	 	 	76	%	
Add: Stock based compensation expense	 	10,103	 	 	 	8,512	 	 	 	19	 	
Add: Intangible amortization	 	270	 	 	 	270	 	 	 	—	 	
Add: Tax benefit from goodwill amortization	 	114	 	 	 	114	 	 	 	—	 	
Economic Earnings	$	31,758	 	 	$	20,970	 	 	 	51	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Diluted weighted average shares outstanding	 	7,801,073	 	 	 	7,667,851	 	 	 	 	 	
Economic Earnings per share	$	4.07	 	 	$	2.73	 	 	 	 	 	
Liquidity and Capital Resources
We fund our operations and cash requirements with cash generated from operating activities. As of September 30, 2014, we had no debt. The changes in net cash provided by operating activities generally reflect the changes in earnings plus the effects of non-cash items and changes in working capital. Changes in working capital, especially accounts receivable and accounts payable, are generally the result of timing differences between collection of fees billed and payment of operating expenses.
During the nine months ended September 30, 2014, cash flow provided by operating activities, principally our investment advisory business, was $20.9 million. Cash flow used in investing activities during the nine months ended September 30, 2014 of $337,000 was related to the purchases of fixed assets. Cash flow used in financing activities during the nine months ended September 30, 2014 of $14.6 million was due to the payment of dividends and restricted stock returned for payment of taxes partially offset by tax benefits from stock based compensation.
We had cash and investments of $89.6 million as of September 30, 2014 and $75.4 million as of December 31, 2013. At September 30, 2014 and December 31, 2013, working capital aggregated $84.1 million and $71.4 million respectively. As required by the Texas Finance Code, Westwood Trust maintains current assets in an amount equal to the required minimum restricted capital of $1.25 million, which is included in Investments in the accompanying condensed consolidated balance sheets. We had no liabilities for borrowed money at September 30, 2014.
23

 
Our future liquidity and capital requirements will depend upon numerous factors, including our results of operations, the timing and magnitude of capital expenditures or strategic initiatives, our dividend policy and other business and risk factors described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013 and our Quarterly Reports on Form 10-Q for the periods ended March 31, 2014 and June 30, 2014, filed with the SEC. We believe that current cash and short-term investment balances and cash generated from operations will be sufficient to meet the operating and capital requirements of our ordinary business operations through at least the next twelve months. However, there can be no assurance that we will not require additional financing within this time frame. The failure to raise needed capital on attractive terms, if at all, could have a material adverse effect on our business, financial condition and results of operations.
Contractual Obligations
As of September 30, 2014, there have been no material changes outside the ordinary course of business to our contractual obligations since December 31, 2013. For information regarding our contractual obligations, refer to “Contractual Obligations” in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 30, 2013.
Critical and Significant Accounting Policies and Estimates
There have been no significant changes in our critical or significant accounting policies and estimates since December 31, 2013. Information with respect to our critical accounting policies and estimates, which we believe could have the most significant effect on our reported consolidated results and require difficult, subjective or complex judgment by management are described under “Critical Accounting Policies and Estimates” in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 30, 2013. As of September 30, 2014, there has been no material change to the information concerning our critical accounting policies and estimates.
Accounting Developments
Refer to Note 2 “Summary of Significant Accounting Policies” in our condensed consolidated financial statements included in Part I, Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q for a description of recently issued accounting guidance.
 
ITEM  3.	QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK	
There have been no significant changes in our Quantitative and Qualitative Disclosures about Market Risk from those previously reported in our Annual Report on Form 10-K for the year ended December 31, 2013.
 
ITEM 4.	CONTROLS AND PROCEDURES	
Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure. An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our management, including our Chief Executive Officer and our Chief Financial Officer, concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
For the quarter ended September 30, 2014, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
24

 
PART II. OTHER INFORMATION
 
ITEM  1.	LEGAL PROCEEDINGS	
We are subject from time to time to certain claims and legal proceedings arising in the ordinary course of our business.
On August 3, 2012, AGF Management Limited and AGF Investments Inc. (collectively, “AGF”) filed a lawsuit in the Ontario Superior Court of Justice against Westwood, certain Westwood employees and the executive recruiting firm of Warren International, LLC. (“Warren”). The action relates to the hiring of certain members of Westwood’s global and emerging markets investment team previously employed by AGF. AGF is alleging that the former employees breached certain obligations when they resigned from AGF and that Westwood and Warren induced such breaches. AGF is seeking an unspecified amount of damages and punitive damages of $10 million (CAD) in the lawsuit. On November 5, 2012, Westwood issued a response to AGF’s lawsuit with a counterclaim against AGF for defamation. Westwood is seeking $1 million (CAD) in general damages, $10 million (CAD) in special damages, $1 million (CAD) in punitive damages, and costs. On November 6, 2012, AGF filed a second lawsuit against Westwood, Westwood Management and an employee of a Westwood subsidiary, alleging that the employee made defamatory statements about AGF. In this second lawsuit, AGF is seeking $5 million (CAD) in general damages, $1 million (CAD) per defendant in punitive damages, unspecified special damages, interest and costs. The pleadings phase is complete and we are now in the discovery phase, which we hope to complete by the end of 2015.
While we intend to vigorously defend both actions and pursue the counterclaims, we are currently unable to estimate the ultimate aggregate amount of monetary gain, loss or financial impact of these actions and counterclaims. We have agreed with our Directors & Officers insurance provider that 50% of the defense costs related to both AGF claims, but not including Westwood’s counterclaim against AGF, will be covered by insurance. Defending these actions and pursuing these counterclaims may be expensive for us and time consuming for our personnel. While we do not currently believe these proceedings will have a material impact, adverse resolution of these actions and counterclaims could have a material adverse effect on our business, financial condition or results of operations.
 
ITEM  1A.	RISK FACTORS	
We face a number of significant risks and uncertainties in our business, which are detailed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013 and our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2014 and June 30, 2014 and summarized in this report under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These risks and uncertainties may affect our current position and future prospects and should be considered carefully in evaluating us and an investment in our common stock.
25

 
ITEM  2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	
The following table displays information with respect to the treasury shares we purchased during the three months ended September 30, 2014.
 
Period	 	Total
number of
shares
purchased	 	 	Average
price paid
per share	 	 	Total number
of shares
purchased as
part of publicly
announced
plans or
programs	 	 	 	Maximum
number (or
approximate
dollar value)
of shares that
may yet be
purchased
under the
plans or
programs (1)	 	
July 1 through September 30, 2014	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Repurchase program (1)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	$	10,000,000	 	
Canada Share Plan (2)	 	 	—	 	 	 	—	 	 	 	—	 	CAD	 	$	8,368,500	 	
Employee transactions (3)	 	 	332	 	 	$	60.04	 	 	 	—	 	 	 	 	—	 	

(1)	On July 20, 2012, our board of directors authorized management to repurchase up to $10 million of our outstanding common stock on the open market or in privately negotiated transactions. The share repurchase program has no expiration date and may be discontinued at any time by the board of directors.	

(2)	On April  18, 2013, our stockholders approved the Share Award Plan of Westwood Holdings Group, Inc. for Service Provided in Canada to its Subsidiaries (the “Canada Share Plan”), which contemplates a trustee purchasing up to $10 million (CAD) of our outstanding common stock on the open market for the purpose of making share awards to our Canadian employees. The Canada Share Plan has no expiration date and may be discontinued at any time by the board of directors.	

(3)	Consists of shares of common stock tendered by an employee at the market close price on the date of vesting in order to satisfy the employee’s tax withholding obligations from vested restricted shares. We anticipate having additional shares tendered in subsequent periods for the same purpose.	

 
26

 
ITEM 6.	EXHIBITS	

31.1*	 	 
Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a)	
 
31.2*	 	 
Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a)	
 
32.1**	 	 
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	
 
32.2**	 	 
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	
 
101.INS*	 	 
XBRL Instance Document	
 
101.SCH*	 	 
XBRL Taxonomy Extension Schema Document	
 
101.CAL*	 	 
XBRL Taxonomy Extension Calculation Linkbase Document	
 
101.DEF*	 	 
XBRL Taxonomy Extension Definition Linkbase Document	
 
101.LAB*	 	 
XBRL Taxonomy Extension Label Linkbase Document	
 
101.PRE*	 	 
XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith.	

**	Furnished herewith.	

 
27

 
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 thereunto duly authorized.
 
Dated: October 23, 2014	WESTWOOD HOLDINGS GROUP, INC. 	
 	 	 	 	
 	By:	 	/s/ Brian O. Casey	
 	 	 	Brian O. Casey	
 	 	 	President & Chief Executive Officer	
 	 	 	 	
 	By:	 	/s/ Tiffany B. Kice	
 	 	 	Tiffany B. Kice	
 	 	 	Chief Financial Officer and Treasurer	
 
28

Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
SECURITIES EXCHANGE ACT RULE 13a-14(a)
I, Brian O. Casey, certify that:
1.	I have reviewed this report on Form 10-Q of Westwood Holdings Group, Inc.;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: October 23, 2014

/s/ Brian O. Casey	
Brian O. Casey	
President & Chief Executive Officer	

Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a)
I, Tiffany B. Kice, certify that:
1.	I have reviewed this report on Form 10-Q of Westwood Holdings Group, Inc.;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: October 23, 2014

/s/ Tiffany B. Kice	
Tiffany B. Kice	
Chief Financial Officer and Treasurer	

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Westwood Holdings Group, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian O. Casey, President & Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.78m or 78o(d)); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
October 23, 2014
 
 	/s/ Brian O. Casey	
 	Brian O. Casey	
 	President & Chief Executive Officer	
A signed original of this written statement required by Section 906 has been provided to Westwood Holdings Group, Inc. and will be retained by Westwood Holdings Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Westwood Holdings Group, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tiffany B. Kice, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15U.S.C. 78m or 78o(d)); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
October 23, 2014
 
 	/s/ Tiffany B. Kice	
 	Tiffany B. Kice	
 	Chief Financial Officer and Treasurer	
A signed original of this written statement required by Section 906 has been provided to Westwood Holdings Group, Inc. and will be retained by Westwood Holdings Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.