Discontinued Operations (Notes)

3 Months Ended

Mar. 31, 2017

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

3.    Discontinued operations

OMHHF historically was engaged in the business of originating and servicing FHA-insured multifamily and healthcare facility loans and securitizing these loans into GNMA mortgage backed securities. OMHHF offered mortgage services to developers of commercial properties including apartments, elderly housing and nursing homes that satisfy FHA criteria. OMHHF maintained a mortgage servicing portfolio for which it provided a full array of services, including the collection of mortgage payments from mortgagors which were passed on to the mortgage holders, construction loan management and asset management.

The Company owns an 83.68% controlling interest in OMHHF. The 16.32% noncontrolling interest belongs to one related party who is the President and Chief Executive Officer of OMHHF.

On June 2, 2016, OMHHF entered into a definitive agreement to sell OMHHF's entire portfolio of permanent mortgage loans (consisting of over 480 permanent loans insured by the U.S. Department of Housing and Urban Development), including the associated mortgage servicing rights. On June 20, 2016, OMHHF completed the transaction for cash consideration of approximately $45.0 million. An amount equal to $1.4 million was withheld from the purchase price until such time as one loan in the mortgage loan portfolio becomes current or is modified. The Company recorded a net gain of $14.9 million related to this transaction which was included in discontinued operations in the condensed consolidated statement of operations during the second quarter of 2016. During the second quarter of 2016, OMHHF also sold its business pipeline of mortgage loans for approximately $1.5 million.

During the third quarter of 2016, the Company recognized the $1.4 million that was withheld from the purchase price of the permanent mortgage loans as a result of the loan being modified as a gain. Also, OMHHF sold its construction loan portfolio and the associated mortgage servicing rights for approximately $3.8 million.

OMHHF made a dividend distribution to the noncontrolling interest in the amount of $816,000 during the three month period ended March 31, 2017.

The Company determined that the sale of the assets of OMHHF met the criteria to be classified within discontinued operations, and the results of OMHHF are reported as discontinued operations in the condensed consolidated statement of operations. Prior-period amounts have been recast for discontinued operations.

The following is a summary of the assets and liabilities held for sale of OMHHF as of March 31, 2017 and December 31, 2016:

(Expressed in thousands)
	March 31, 2017		December 31, 2016
ASSETS
Securities owned	$	562	$	3,560
Other assets	768		1,628
Total assets	$	1,330	$	5,188
LIABILITIES
Accounts payable and other liabilities	$	1,421	$	1,217

The following is a summary of revenue and expenses of OMHHF for the three months ended March 31, 2017 and 2016:

(Expressed in thousands)
	For the Three Months Ended March 31,
	2017		2016
REVENUE
Interest	$	3	$	337
Principal transactions, net	—		(5,087		)
Other (1)	995		8,488
Total revenue	998		3,738
EXPENSES
Compensation and related expenses	11		2,918
Communications and technology	8		101
Occupancy and equipment costs	—		75
Interest	—		221
Other	3		1,080
Total expenses	22		4,395
Income (loss) before income taxes	$	976	$	(657	)
Income (loss) attributable to noncontrolling interest before income taxes	$	159	$	(107	)

(1) Other revenue for the three months ended March 31, 2017 was primarily due to earn-out from the sale of the pipeline business in 2016.

The following is a summary of cash flows of OMHHF for the three months ended March 31, 2017 and 2016:

(Expressed in thousands)
	For the Three Months Ended March 31,
	2017			2016
Cash provided by operating activities	$	4,649		$	4,143
Cash provided by investing activities	—			1
Cash used in financing activities (1)(2)	(10,035		)	(62		)
Net (decrease) increase in cash and cash equivalents	$	(5,386	)	$	4,082

(1) Includes cash dividends paid to its parent (E.A. Viner International Co.) and noncontrolling interest of $4.2 million and $816,000, respectively, for the three months ended March 31, 2017.

(2) Includes $5.0 million paid to its parent due to redemption of its outstanding preferred stock.

Intraperiod U.S. GAAP tax allocation rules require that the Company allocates its provision for income taxes between continuing operations and other categories of earnings, such as discontinued operations. The tax effect related to categories other than continuing operations is generally their incremental tax effect. As a result, since the Company has a loss before income taxes from continuing operations and income from discontinued operations, the Company must first allocate an income tax benefit for the loss in continuing operations and then the incremental tax effect in discontinued operations.