Discontinued Operations

6 Months Ended

Jun. 30, 2017

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

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 six month period ended June 30, 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.

The following is a summary of revenue and expenses of OMHHF for the three and six months ended June 30, 2017 and 2016:

(Expressed in thousands)
	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2017		2016			2017		2016
REVENUE
Interest	$	2	$	472		$	5	$	809
Principal transactions, net	—		(1,541		)	—		(6,628		)
Gain on sale of assets	—		14,916			—		14,916
Other (1)	109		4,070			1,104		12,558
Total revenue	111		17,917			1,109		21,655
EXPENSES
Compensation and related expenses	6		734			17		3,652
Communications and technology	4		60			12		161
Occupancy and equipment costs	—		287			—		362
Interest	—		159			—		380
Other	12		1,311			15		2,391
Total expenses	22		2,551			44		6,946
Income before income taxes	$	89	$	15,366		$	1,065	$	14,709
Income attributable to noncontrolling interest before income taxes	$	15	$	2,508		$	174	$	2,401

(1) Other revenue for the three and six months ended June 30, 2017 was primarily due to an earn-out from the sale of the Company's pipeline business in 2016.

The following is a summary of cash flows of OMHHF for the six months ended June 30, 2017 and 2016:

(Expressed in thousands)
	For the Six Months Ended June 30,
	2017			2016
Cash provided by operating activities	$	4,231		$	5,624
Cash provided by investing activities	—			43,252
Cash used in financing activities (1)(2)	(10,035		)	(124		)
Net (decrease) increase in cash and cash equivalents	$	(5,804	)	$	48,752

(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 six months ended June 30, 2017.

(2) Includes $5.0 million paid to its parent due to redemption of its outstanding preferred stock for the six months ended June 30, 2017.

Intraperiod U.S. GAAP tax allocation rules require that the Company allocate 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.