Notes to Condensed Consolidated Financial Statements (unaudited)
1. Organization and basis of presentation
Organization
Oppenheimer Holdings Inc. ("OPY") is incorporated under the laws of the State of Delaware. The condensed consolidated financial statements include the accounts of OPY and its subsidiaries (together, the "Company"). The Company engages in a broad range of activities in the financial services industry, including retail securities brokerage, institutional sales and trading, investment banking (both corporate and public finance), research, market-making, trust services, and investment advisory and asset management services.
The principal subsidiaries of OPY are Oppenheimer & Co. Inc. ("Oppenheimer"), a registered broker dealer in securities and investment adviser under the Investment Advisers Act of 1940, Oppenheimer Asset Management Inc. ("OAM") and its wholly- owned subsidiary, Oppenheimer Investment Management LLC ("OIM"), both registered investment advisers under the Investment Advisers Act of 1940, Oppenheimer Trust Company of Delaware ("Oppenheimer Trust"), a limited purpose trust company that provides fiduciary services such as trust and estate administration and investment management, OPY Credit Corp., which offers syndication as well as trading of issued corporate loans, Oppenheimer Europe Ltd., based in the United Kingdom, with offices in the Isle of Jersey and Switzerland, which provides institutional equities and fixed income brokerage and corporate financial services and is regulated by the Financial Conduct Authority, and Oppenheimer Investments Asia Limited, based in Hong Kong, China, which provides assistance in accessing the U.S. equities markets and limited mergers and acquisitions advisory services to Asia-based companies, as well as offering fixed income brokerage services to institutional investors, and is regulated by the Securities and Futures Commission. Oppenheimer Multifamily Housing & Healthcare Finance, Inc. ("OMHHF") was formerly engaged in Federal Housing Administration ("FHA")-insured commercial mortgage origination and servicing and is in the process of selling its remaining operating assets and discontinuing its business.
Oppenheimer provides its services from
94
offices in
24
states located throughout the United States and in
5
foreign jurisdictions. Oppenheimer owns Freedom Investments, Inc. ("Freedom"), a registered broker dealer in securities, which provides discount brokerage services, and Oppenheimer Israel (OPCO) Ltd., which is engaged in offering investment services in the State of Israel. Oppenheimer holds a trading permit on the New York Stock Exchange and is a member of several other regional exchanges in the United States.
Basis of Presentation
The accompanying condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC") regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America ("U.S. GAAP") for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 (the "Form 10-K"). The accompanying December 31, 2015 condensed consolidated balance sheet data was derived from the audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP for annual financial statement purposes. The accompanying condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. Preparing financial statements requires management to make estimates and assumptions that affect the amounts that are reported in the financial statements and the accompanying disclosures. Although these estimates are based on management's knowledge of current events and actions that the Company may undertake in the future, actual results may differ materially from the estimates. The condensed consolidated results of operations for the
six
month period ended
June 30, 2016
are not necessarily indicative of the results to be expected for any future interim or annual period.
Certain prior period amounts have been reclassified to conform to the current period presentation.
Accounting standards require the Company to present noncontrolling interests as a separate component of stockholders' equity on the Company's condensed consolidated balance sheet. As of
June 30, 2016
, the Company owned
83.68%
of OMHHF and the noncontrolling interest recorded in the condensed consolidated balance sheet was
$8.2 million
.
2. New accounting pronouncements
Recently Adopted
In January 2015, the FASB issued ASU No. 2015-01, "Income Statement - Extraordinary and Unusual Items," to simplify income statement classification by removing the concept of extraordinary items. Under the existing guidance, an entity is required to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is of an unusual nature and occurs infrequently. This separate, net-of-tax presentation (and corresponding earnings per share impact) will no longer be allowed. However, the existing requirement to separately present items that are of an unusual nature or occur infrequently on a pre-tax basis within income from continuing operations has been retained. The ASU became effective for the interim and annual reporting periods in the fiscal year that began after December 15, 2015. The adoption of the ASU did not have a material impact on the Company's condensed consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02, "Consolidation - Amendments to the Consolidation Analysis," to eliminate the deferral of the application of the revised consolidation rules and make changes to both the variable interest model and the voting model. Under this ASU, a general partner will not consolidate a partnership or similar entity under the voting model. The ASU became effective for the interim and annual reporting periods in the fiscal year that began after December 15, 2015. The adoption of the ASU impacted the disclosure of VIEs but did not have a material impact on the Company's condensed consolidated financial statements. See Note 8, Variable interest entities, below.
In April 2015, the FASB issued ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs," which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability. The ASU became effective for the interim and annual reporting periods in the fiscal year that began after December 15, 2015. The adoption of the ASU did not have a material impact on the Company's condensed consolidated financial statements.
In May 2015, the FASB issued ASU No. 2015-07, "Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)," which removes the requirement to categorize within the fair value hierarchy all investments measured using the net asset value per share practical expedient and related disclosures. The ASU became effective for the interim and annual reporting periods in the fiscal year that began after December 15, 2015. The adoption of the ASU impacted the fair value disclosures but did not have a material impact on the Company's condensed consolidated financial statements. See Note 6, Fair value measurements, below.
Recently Issued
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers." The ASU outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Additionally, the ASU expands the disclosure requirements for revenue recognition. The ASU was originally effective for the annual reporting period in the fiscal year that begins after December 15, 2016. In August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers: Deferral of the Effective Date." which provides amendments that defer the effective date of ASU 2014-09 by one year. In 2016, the FASB additionally issued ASU No. 2016-08-Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net); ASU No. 2016-10, "Identifying Performance Obligations and Licensing,"; and ASU 2016-12 Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients. The amendments in these updates are effective either retrospectively to each prior reporting period presented, or as a cumulative-effect adjustment as of the date of adoption, during interim and annual periods beginning after December 15, 2017, with early adoption permitted beginning after December 15, 2016. The Company is currently assessing the impact of the adoption of this update on its financial condition, results of operations and cash flows, or disclosures thereto.
In August 2014, the FASB issued ASU No. 2014-15, "Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern," which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The ASU requires management of an entity to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements and also provide disclosures if there is "substantial doubt about the entity's ability to continue as a going concern." The ASU is effective for the annual reporting period in the fiscal year that begins after December 15, 2016 and early adoption is permitted. The Company will not early adopt this ASU. The Company is currently evaluating the impact on its disclosure.
In January 2016, the FASB issued ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities," which revises an entity's accounting related to the classification and measurement of investments in equity securities, changes the presentation of certain fair value changes relating to instrument specific credit risk for financial liabilities and amends certain disclosure requirements associated with the fair value of financial instruments. The ASU is effective for fiscal years beginning after December 15, 2017. The adoption of the ASU will not have a material impact on the Company's condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, "Leases." The ASU requires most leases to be reflected on the balance sheet. The ASU is effective for fiscal years beginning after December 15, 2018. The adoption of the new lessee model is expected to have material impact on the Company's condensed consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and minimum statutory tax withholding requirements, as well as classification in the statement of cash flows. The ASU is effective for fiscal year beginning after December 15, 2016 and early adoption is permitted. The Company will not early adopt this ASU. The Company is currently evaluating the impact of the ASU and the adoption of the ASU will not have a material impact on its condensed consolidated financial statements.
In June 16, 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments", which amends the FASB's guidance on the impairment of financial Instruments. The ASU adds to U.S. GAAP an impairment model ("current expected credit loss model"). Under this new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The ASU is effective for the fiscal year beginning after December 15, 2019. The Company is currently evaluating the impact, if any, that the ASU will have on its condensed consolidated financial statements.
3. Discontinued operations
OMHHF historically has been 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, to Walker & Dunlop, LLC. 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 included in discontinued operations on the condensed consolidated statement of operations. During the second quarter of 2016, the Company also sold its business pipeline of mortgage loans for approximately
$1.5 million
.
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 statements of operations. Prior-period amounts have been recast for discontinued operations.
The following is a summary of the assets and liabilities of OMHHF as of June 30, 2016 and December 31, 2015:
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
June 30, 2016
|
|
December 31, 2015
|
ASSETS
|
|
|
|
|
Securities owned
|
|
$
|
562
|
|
|
$
|
562
|
|
Loans held for sale
|
|
1,743
|
|
|
60,234
|
|
Mortgage servicing rights
|
|
1,993
|
|
|
28,168
|
|
Other assets
|
|
17,466
|
|
|
10,917
|
|
Total assets
|
|
$
|
21,764
|
|
|
$
|
99,881
|
|
LIABILITIES
|
|
|
|
|
Accounts payable and other liabilities
|
|
$
|
35,689
|
|
|
$
|
64,124
|
|
Deferred tax liability
|
|
801
|
|
|
10,556
|
|
Total liabilities
|
|
$
|
36,490
|
|
|
$
|
74,680
|
|
The following is a summary of revenue and expenses of OMHHF for the three and six months ended June 30, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
REVENUE
|
|
|
|
|
|
|
|
Interest
|
$
|
472
|
|
|
$
|
717
|
|
|
$
|
809
|
|
|
$
|
1,049
|
|
Principal transactions, net
|
(1,541
|
)
|
|
(1,831
|
)
|
|
(6,628
|
)
|
|
8,226
|
|
Gain on sale of assets
|
14,916
|
|
|
—
|
|
|
14,916
|
|
|
—
|
|
Other
|
4,070
|
|
|
12,082
|
|
|
12,558
|
|
|
10,079
|
|
Total revenue
|
17,917
|
|
|
10,968
|
|
|
21,655
|
|
|
19,354
|
|
EXPENSES
|
|
|
|
|
|
|
|
Compensation and related expenses
|
735
|
|
|
4,409
|
|
|
3,652
|
|
|
6,676
|
|
Communications and technology
|
59
|
|
|
100
|
|
|
161
|
|
|
196
|
|
Occupancy and equipment costs
|
286
|
|
|
74
|
|
|
362
|
|
|
150
|
|
Interest
|
159
|
|
|
399
|
|
|
380
|
|
|
540
|
|
Other
|
1,312
|
|
|
2,255
|
|
|
2,391
|
|
|
4,024
|
|
Total expenses
|
2,551
|
|
|
7,237
|
|
|
6,946
|
|
|
11,586
|
|
Income before income taxes
|
$
|
15,366
|
|
|
$
|
3,731
|
|
|
$
|
14,709
|
|
|
$
|
7,768
|
|
Income attributable to noncontrolling interest before income taxes
|
$
|
2,508
|
|
|
$
|
609
|
|
|
$
|
2,401
|
|
|
$
|
1,268
|
|
The following is a summary of cash flows of OMHHF for the three and six months ended June 30, 2016 and 2015:
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
For the Six Months Ended June 30,
|
|
2016
|
|
2015
|
Cash provided by operating activities
|
$
|
5,624
|
|
|
$
|
1,960
|
|
Cash provided by investing activities
|
43,252
|
|
|
—
|
|
Cash used in financing activities
|
(124
|
)
|
|
(124
|
)
|
Net increase in cash and cash equivalents
|
$
|
48,752
|
|
|
$
|
1,836
|
|
Intraperiod tax allocation rules require the Company to allocate the provision for income taxes between continuing operations and other categories of earnings, such as discontinued operations. In periods in which the Company has a year-to-date loss before income taxes from continuing operations and income before income taxes in other categories of earnings, such as discontinued operations, the Company must allocate the tax provision to the other categories of earnings, and then record a related tax benefit in continuing operations. During the three and six months ended June 30, 2016, the Company recognized net income from discontinued operations, and, as a result, recorded income tax expense of
$6.0 million
and
$5.8 million
, respectively, which is included in net income from discontinued operations in the consolidated statement of operations and statement of comprehensive income. Accordingly, the Company recognized a related income tax benefit of
$2.6 million
and
$6.4 million
from continuing operations in the consolidated statement of operations and statement of comprehensive income for the three and six months ended June 30, 2016, respectively.
4. Earnings per share
Basic earnings per share is computed by dividing net income attributable to Oppenheimer Holdings Inc. by the weighted average number of shares of Class A Stock and Class B Stock outstanding. Diluted earnings per share includes the weighted average number of shares of Class A Stock and Class B Stock outstanding and options to purchase Class A Stock and unvested restricted stock awards of Class A Stock using the treasury stock method.
Earnings per share have been calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands, except number of shares and per share amounts)
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net income (loss) from continuing operations
|
$
|
(2,619
|
)
|
|
$
|
(1,501
|
)
|
|
$
|
(6,147
|
)
|
|
$
|
2,158
|
|
Net income from discontinued operations
|
9,330
|
|
|
2,146
|
|
|
8,949
|
|
|
4,608
|
|
Net income
|
6,711
|
|
|
645
|
|
|
2,802
|
|
|
6,766
|
|
Less net income attributable to noncontrolling interest, net of tax
|
1,523
|
|
|
350
|
|
|
1,461
|
|
|
752
|
|
Net income attributable to Oppenheimer Holdings Inc.
|
$
|
5,188
|
|
|
$
|
295
|
|
|
$
|
1,341
|
|
|
$
|
6,014
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of shares outstanding
|
13,367,248
|
|
|
13,745,957
|
|
|
13,373,537
|
|
|
13,725,208
|
|
Net dilutive effect of share-based awards, treasury method
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
617,266
|
|
Diluted weighted average number of shares outstanding
|
13,367,248
|
|
|
13,745,957
|
|
|
13,373,537
|
|
|
14,342,474
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share attributable to Oppenheimer Holdings Inc.
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
(0.20
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.46
|
)
|
|
$
|
0.16
|
|
Discontinued operations
|
0.59
|
|
|
0.13
|
|
|
0.56
|
|
|
0.28
|
|
Net earnings per share attributable to Oppenheimer Holdings Inc.
|
$
|
0.39
|
|
|
$
|
0.02
|
|
|
$
|
0.10
|
|
|
$
|
0.44
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share attributable to Oppenheimer Holdings Inc.
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
(0.20
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.46
|
)
|
|
$
|
0.15
|
|
Discontinued operations
|
0.59
|
|
|
0.13
|
|
|
0.56
|
|
|
0.27
|
|
Net earnings per share attributable to Oppenheimer Holdings Inc.
|
$
|
0.39
|
|
|
$
|
0.02
|
|
|
$
|
0.10
|
|
|
$
|
0.42
|
|
|
|
(1)
|
For both the
three and six
months ended
June 30, 2016
, the diluted earnings per share computation does not include the anti-dilutive effect of
1,271,124
shares of Class A Stock granted under share-based compensation arrangements (
1,312,760
and
40,309
, respectively, for the
three and six
months ended
June 30, 2015
).
|
5. Receivable from and payable to brokers, dealers and clearing organizations
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
As of
|
|
June 30, 2016
|
|
December 31, 2015
|
Receivable from brokers, dealers and clearing organizations consist of:
|
|
|
|
Securities borrowed
|
$
|
216,419
|
|
|
$
|
224,672
|
|
Receivable from brokers
|
42,763
|
|
|
49,458
|
|
Securities failed to deliver
|
17,541
|
|
|
7,799
|
|
Clearing organizations
|
24,669
|
|
|
25,030
|
|
Other
|
13,916
|
|
|
58,832
|
|
Total
|
$
|
315,308
|
|
|
$
|
365,791
|
|
Payable to brokers, dealers and clearing organizations consist of:
|
|
|
|
Securities loaned
|
$
|
125,548
|
|
|
$
|
130,658
|
|
Payable to brokers
|
1,068
|
|
|
3,316
|
|
Securities failed to receive
|
23,491
|
|
|
21,513
|
|
Other
|
22,255
|
|
|
9,059
|
|
Total
|
$
|
172,362
|
|
|
$
|
164,546
|
|
6. Fair value measurements
Securities owned and securities sold but not yet purchased, investments and derivative contracts are carried at fair value with changes in fair value recognized in earnings each period.
Securities Owned and Securities Sold, But Not Yet Purchased at Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
As of June 30, 2016
|
|
As of December 31, 2015
|
|
Owned
(1)
|
|
Sold
|
|
Owned
(1)
|
|
Sold
|
U.S. treasury, agency and sovereign obligations
|
$
|
616,831
|
|
|
$
|
179,562
|
|
|
$
|
509,614
|
|
|
$
|
77,485
|
|
Corporate debt and other obligations
|
40,311
|
|
|
23,811
|
|
|
16,138
|
|
|
1,652
|
|
Mortgage and other asset-backed securities
|
3,875
|
|
|
27
|
|
|
3,504
|
|
|
27
|
|
Municipal obligations
|
106,661
|
|
|
—
|
|
|
30,132
|
|
|
—
|
|
Convertible bonds
|
56,582
|
|
|
12,505
|
|
|
54,693
|
|
|
5,951
|
|
Corporate equities
|
38,612
|
|
|
43,127
|
|
|
34,475
|
|
|
41,378
|
|
Money markets
|
495
|
|
|
—
|
|
|
35
|
|
|
—
|
|
Auction rate securities
|
89,101
|
|
|
—
|
|
|
86,802
|
|
|
—
|
|
Total
|
$
|
952,468
|
|
|
$
|
259,032
|
|
|
$
|
735,393
|
|
|
$
|
126,493
|
|
(1)
$562,000
is included in assets held for sale on the condensed consolidated balance sheet. See Note 3 for details.
Securities owned and securities sold, but not yet purchased, consist of trading and investment securities at fair values. Included in securities owned at
June 30, 2016
are corporate equities with estimated fair values of approximately
$13.7 million
(
$14.0 million
at
December 31, 2015
), which are related to deferred compensation liabilities to certain employees included in accrued compensation on the condensed consolidated balance sheet.
Valuation Techniques
A description of the valuation techniques applied and inputs used in measuring the fair value of the Company's financial instruments is as follows:
U.S. Government Obligations
U.S. Treasury securities are valued using quoted market prices obtained from active market makers and inter-dealer brokers.
U.S. Agency Obligations
U.S. agency securities consist of agency issued debt securities and mortgage pass-through securities. Non-callable agency issued debt securities are generally valued using quoted market prices. Callable agency issued debt securities are valued by benchmarking model-derived prices to quoted market prices and trade data for identical or comparable securities. The fair value of mortgage pass-through securities are model driven with respect to spreads of the comparable to-be-announced security.
Sovereign Obligations
The fair value of sovereign obligations is determined based on quoted market prices when available or a valuation model that generally utilizes interest rate yield curves and credit spreads as inputs.
Corporate Debt and Other Obligations
The fair value of corporate bonds is estimated using recent transactions, broker quotations and bond spread information.
Mortgage and Other Asset-Backed Securities
The Company holds non-agency securities collateralized by home equity and various other types of collateral which are valued based on external pricing and spread data provided by independent pricing services. When specific external pricing is not observable, the valuation is based on yields and spreads for comparable bonds.
Municipal Obligations
The fair value of municipal obligations is estimated using recently executed transactions, broker quotations, and bond spread information.
Convertible Bonds
The fair value of convertible bonds is estimated using recently executed transactions and dollar-neutral price quotations, where observable. When observable price quotations are not available, fair value is determined based on cash flow models using yield curves and bond spreads as key inputs.
Corporate Equities
Equity securities and options are generally valued based on quoted prices from the exchange or market where traded. To the extent quoted prices are not available, fair values are generally derived using bid/ask spreads.
Loans Held for Sale
The Company elected the fair value option for loans held for sale and determines the fair value using both a discounted cash flow model (see key assumptions used in determining mortgage servicing rights below) and quoted observable prices from market participants.
Interest Rate Lock Commitments
OMHHF records an interest rate lock commitment upon the commitment to originate a loan with a borrower. This commitment, which can be an asset or liability, is recognized at fair value, which reflects the fair value of the contractual loan origination related fees and sale premiums, net of co-broker fees, and the estimated fair value of the expected net future cash flows associated with the servicing of the loan. The interest rate lock commitments are valued using a discounted cash flow model developed based on U.S. Treasury rate changes and other observable market data. The fair value is determined after considering the potential impact of collateralization.
To-Be-Announced ("TBA") sale contracts
TBA sale contracts of permanent loans originated or purchased at OMHHF are based on observable market prices of recently executed purchases of similar loans which are then used to derive a market implied spread, which in turn is used as the primary input in estimating the fair value of loans at the measurement date. TBA sale contracts of construction loans originated or purchased at OMHHF are based on observable market prices of recently executed purchases.
Mortgage Servicing Rights ("MSRs")
The Company's MSRs are measured at fair value on a nonrecurring basis. The MSRs are initially measured at fair value on the loan securitization date and subsequently measured on the amortized cost basis subject to quarterly impairment testing. MSRs do not trade in active open markets with readily observable pricing. Therefore the Company uses a discounted cash flow model to estimate the fair value of MSRs. The discounted cash flow model calculates the present value of estimated future net servicing income using inputs such as contractually specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. The Company reassesses and periodically adjusts the underlying inputs and assumptions used in the model to reflect observable and unobservable market conditions and assumptions that a market participant would consider in valuing a MSR asset. MSRs are carried at the lower of amortized cost or estimated fair value.
The following key assumptions were used in determining the initial fair value of MSRs:
Discount Rate – The discount rate used for originated permanent and construction loans averaged approximately
12%
.
Estimated Life – The estimated life of the MSRs is derived using a continuous prepayment rate ("CPR") assumption which estimates projected prepayments of the loan portfolio by considering factors such as note rates, lockouts, and prepayment penalties at the loan level. The CPR rates used are
0%
until such time that a loan's prepayment penalty rate hits
4%
of the unpaid principal balance of the loan with the vast majority of CPR speeds ranging from
10%
to
15%
thereafter, with an average of
12%
.
Servicing Costs – The estimated future cost to service the loans on an annual basis per loan averages approximately
$1,250
for a permanent loan, with a considerably higher cost to service during the construction phase.
The Company does not anticipate any credit losses on the commercial mortgages it services since all of the mortgages are insured for and guaranteed against credit losses by the Federal Housing Administration ("FHA") and the Government National Mortgage Association ("GNMA") and are thus guaranteed by the U.S. government.
Auction Rate Securities ("ARS")
In February 2010, Oppenheimer finalized settlements with each of the New York Attorney General's office ("NYAG") and the Massachusetts Securities Division ("MSD" and, together with the NYAG, the "Regulators") concluding investigations and administrative proceedings by the Regulators concerning Oppenheimer's marketing and sale of ARS. Pursuant to the settlements with the Regulators, Oppenheimer agreed to extend offers to repurchase ARS from certain of its clients subject to certain terms and conditions more fully described below. As of
June 30, 2016
, the Company did not have any outstanding ARS purchase commitments related to the settlements with the Regulators. In addition to the settlements with the Regulators, Oppenheimer has also reached settlements of and received adverse awards in legal proceedings with various clients where the Company is obligated to purchase ARS. Pursuant to completed Purchase Offers (as defined) under the settlements with the Regulators and client related legal settlements and awards to purchase ARS, as of
June 30, 2016
, the Company purchased and holds (net of redemptions) approximately
$90.7 million
in ARS from its clients. In addition, the Company is committed to purchase another
$26.9 million
in ARS from clients through
2020
under legal settlements and awards.
The ARS positions that the Company owns and is committed to purchase primarily represent auction rate preferred securities issued by closed-end funds and, to a lesser extent, municipal auction rate securities which are municipal bonds wrapped by municipal bond insurance and student loan auction rate securities which are asset-backed securities backed by student loans.
Interest rates on ARS typically reset through periodic auctions. Due to the auction mechanism and generally liquid markets, ARS have historically been categorized as Level 1 of the fair value hierarchy. Beginning in February 2008, uncertainties in the credit markets resulted in substantially all of the ARS market experiencing failed auctions. Once the auctions failed, the ARS could no longer be valued using observable prices set in the auctions. The Company has used less observable determinants of the fair value of ARS, including the strength in the underlying credits, announced issuer redemptions, completed issuer redemptions, and announcements from issuers regarding their intentions with respect to their outstanding ARS. The Company has also developed an internal methodology to discount for the lack of liquidity and non-performance risk of the failed auctions. Due to liquidity problems associated with the ARS market, ARS that lack liquidity are setting their interest rates according to a maximum rate formula. For example, an auction rate preferred security maximum rate may be set at
200%
of a short-term index such as LIBOR or U.S. Treasury yield. For fair value purposes, the Company has determined that the maximum spread would be an adequate risk premium to account for illiquidity in the market. Accordingly, the Company applies a spread to the short-term index for each asset class to derive the discount rate. The Company uses short-term U.S. Treasury yields as its benchmark short-term index. The risk of non-performance is typically reflected in the prices of ARS positions where the fair value is derived from recent trades in the secondary market.
The ARS purchase commitment, or derivative asset or liability, arises from both the settlements with the Regulators and legal settlements and awards. The ARS purchase commitment represents the difference between the principal value and the fair value of the ARS the Company is committed to purchase. The Company utilizes the same valuation methodology for the ARS purchase commitment as it does for the ARS it owns. Additionally, the present value of the future principal value of ARS purchase commitments under legal settlements and awards is used in the discounted valuation model to reflect the time value of money over the period of time that the commitments are outstanding. The amount of the ARS purchase commitment only becomes determinable once the Company has met with its primary regulator and the NYAG and agreed upon a buyback amount, commenced the ARS buyback offer to clients, and received notice from its clients which ARS they are tendering. As a result, it is not possible to observe the current yields actually paid on the ARS until all of these events have happened which is typically very close to the time that the Company actually purchases the ARS. For ARS purchase commitments pursuant to legal settlements and awards, the criteria for purchasing ARS from clients is based on the nature of the settlement or award which will stipulate a time period and amount for each repurchase. The Company will not know which ARS will be tendered by the client until the stipulated time for repurchase is reached. Therefore, the Company uses the current yields of ARS owned in its discounted valuation model to determine a fair value of ARS purchase commitments. The Company also uses these current yields by asset class (i.e., auction rate preferred securities, municipal auction rate securities, and student loan auction rate securities) in its discounted valuation model to determine the fair value of ARS purchase commitments. In addition, the Company uses the discount rate and duration of ARS owned, by asset class, as a proxy for the duration of ARS purchase commitments.
Additional information regarding the valuation technique and inputs for ARS used is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantitative Information about Level 3 Fair Value Measurements at June 30, 2016
|
Product
|
|
Principal
|
|
Valuation
Adjustment
|
|
Fair Value
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Range
|
|
Weighted
Average
|
Auction Rate Securities ("ARS") Owned
(1)
|
|
|
|
|
|
|
|
|
Auction Rate Preferred Securities
|
|
$
|
86,750
|
|
|
$
|
1,156
|
|
|
$
|
85,594
|
|
|
Discounted Cash Flow
|
|
Discount Rate
(2)
|
|
0.94% to 1.29%
|
|
1.11%
|
|
|
|
|
|
|
|
|
|
|
Duration
|
|
4.0 years
|
|
4.0 years
|
|
|
|
|
|
|
|
|
|
|
Current Yield
(3)
|
|
0.77%
|
|
0.77%
|
Municipal Auction Rate Securities
|
|
25
|
|
|
—
|
|
|
25
|
|
|
Discounted Cash Flow
|
|
Discount Rate
(4)
|
|
1.64%
|
|
1.64%
|
|
|
|
|
|
|
|
|
|
|
Duration
|
|
4.5 years
|
|
4.5 years
|
|
|
|
|
|
|
|
|
|
|
Current Yield
(3)
|
|
1.19%
|
|
1.19%
|
Student Loan Auction Rate Securities
|
|
300
|
|
|
21
|
|
|
279
|
|
|
Discounted Cash Flow
|
|
Discount Rate
(5)
|
|
2.49%
|
|
2.49%
|
|
|
|
|
|
|
|
|
|
|
Duration
|
|
7.0 years
|
|
7.0 years
|
|
|
|
|
|
|
|
|
|
|
Current Yield
(3)
|
|
1.43%
|
|
1.43%
|
Other
(7)
|
|
3,625
|
|
|
422
|
|
|
3,203
|
|
|
Secondary Market Trading Activity
|
|
Observable trades in inactive market for in portfolio securities
|
|
88.36% of par
|
|
88.36% of par
|
|
|
$
|
90,700
|
|
|
$
|
1,599
|
|
|
$
|
89,101
|
|
|
|
|
|
|
|
|
|
Auction Rate Securities Commitments to Purchase
(6)
|
|
|
|
|
|
|
|
|
Auction Rate Preferred Securities
|
|
$
|
6,372
|
|
|
$
|
(911
|
)
|
|
$
|
7,283
|
|
|
Discounted Cash Flow
|
|
Discount Rate
(2)
|
|
0.94% to 1.29%
|
|
1.11%
|
|
|
|
|
|
|
|
|
|
|
Duration
|
|
4.0 years
|
|
4.0 years
|
|
|
|
|
|
|
|
|
|
|
Current Yield
(3)
|
|
0.77%
|
|
0.77%
|
Auction Rate Preferred Securities
|
|
20,495
|
|
|
142
|
|
|
20,353
|
|
|
Discounted Cash Flow
|
|
Discount Rate
(2)
|
|
0.94% to 1.29%
|
|
1.11%
|
|
|
|
|
|
|
|
|
|
|
Duration
|
|
4.0 years
|
|
4.0 years
|
|
|
|
|
|
|
|
|
|
|
Current Yield
(3)
|
|
0.77%
|
|
0.77%
|
|
|
$
|
26,867
|
|
|
$
|
(769
|
)
|
|
$
|
27,636
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
117,567
|
|
|
$
|
830
|
|
|
$
|
116,737
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Principal amount represents the par value of the ARS and is included in securities owned in the condensed consolidated balance sheet at
June 30, 2016
. The valuation adjustment amount is included as a reduction to securities owned in the condensed consolidated balance sheet at
June 30, 2016
.
|
|
|
(2)
|
Derived by applying a multiple to the spread between
110%
to
150%
to the U.S. Treasury rate of
0.86%
.
|
|
|
(3)
|
Based on current yields for ARS positions owned.
|
|
|
(4)
|
Derived by applying a multiple to the spread of
175%
to the U.S. Treasury rate of
0.94%
.
|
|
|
(5)
|
Derived by applying the sum of the spread of
1.20%
to the U.S. Treasury rate of
1.29%
.
|
|
|
(6)
|
Principal amount represents the present value of the ARS par value that the Company is committed to purchase at a future date. This principal amount is presented as an off-balance sheet item. The valuation adjustment amounts, unrealized gains and losses, are included in other assets and accounts payable and other liabilities, respectively, on the condensed consolidated balance sheet at
June 30, 2016
.
|
|
|
(7)
|
Represents ARS issued by a credit default obligation structure that the Company has purchased and is committed to purchase as a result of a legal settlement.
|
The fair value of ARS and ARS purchase commitments is particularly sensitive to movements in interest rates. Increases in short-term interest rates would increase the discount rate input used in the ARS valuation and thus reduce the fair value of the ARS (increase the valuation adjustment). Conversely, decreases in short-term interest rates would decrease the discount rate and thus increase the fair value of ARS (decrease the valuation adjustment). However, an increase (decrease) in the discount rate input would be partially mitigated by an increase (decrease) in the current yield earned on the underlying ARS asset increasing the cash flows and thus the fair value. Furthermore, movements in short term interest rates would likely impact the ARS duration (i.e., sensitivity of the price to a change in interest rates), which would also have a mitigating effect on interest rate movements. For example, as interest rates increase, issuers of ARS have an incentive to redeem outstanding securities as servicing the interest payments gets prohibitively expensive which would lower the duration assumption thereby increasing the ARS fair value. Alternatively, ARS issuers are less likely to redeem ARS in a lower interest rate environment as it is a relatively inexpensive source of financing which would increase the duration assumption thereby decreasing the ARS fair value. For example, see the following sensitivities:
|
|
•
|
The impact of a
25
basis point increase in the discount rate at
June 30, 2016
would result in a decrease in the fair value of
$1.1 million
(does not consider a corresponding reduction in duration as discussed above).
|
|
|
•
|
The impact of a
50
basis point increase in the discount rate at
June 30, 2016
would result in a decrease in the fair value of
$2.2 million
(does not consider a corresponding reduction in duration as discussed above).
|
These sensitivities are hypothetical and are based on scenarios where they are "stressed" and should be used with caution. These estimates do not include all of the interplay among assumptions and are estimated as a portfolio rather than as individual assets.
Due to the less observable nature of these inputs, the Company categorizes ARS in Level 3 of the fair value hierarchy. As of
June 30, 2016
, the Company had a valuation adjustment (unrealized loss) of
$1.6 million
for ARS owned which is included as a reduction to securities owned on the condensed consolidated balance sheet. As of
June 30, 2016
, the Company also had a net valuation adjustment (unrealized gain) of
$769,000
on ARS purchase commitments from settlements with the Regulators and legal settlements and awards, comprised of unrealized gains of
$911,000
and unrealized losses of
$142,000
, which are included in other assets and accounts payable and other liabilities, respectively, on the condensed consolidated balance sheet. The total valuation adjustment was
$830,000
as of
June 30, 2016
. The valuation adjustment represents the difference between the principal value and the fair value of the ARS owned and ARS purchase commitments.
Investments
In its role as general partner in certain hedge funds and private equity funds, the Company, through its subsidiaries, holds direct investments in such funds. The Company uses the net asset value of the underlying fund as a basis for estimating the fair value of its investment.
The following table provides information about the Company's investments in Company-sponsored funds at
June 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Unfunded
Commitments
|
|
Redemption Frequency
|
|
Redemption
Notice Period
|
Hedge funds
(1)
|
$
|
2,614
|
|
|
$
|
—
|
|
|
Quarterly - Annually
|
|
30 - 120 Days
|
Private equity funds
(2)
|
4,629
|
|
|
1,251
|
|
|
N/A
|
|
N/A
|
|
$
|
7,243
|
|
|
$
|
1,251
|
|
|
|
|
|
|
|
(1)
|
Includes investments in hedge funds and hedge fund of funds that pursue long/short, event-driven, and activist strategies. Each hedge fund has various restrictions regarding redemption; no investment is locked-up for a period greater than
one
year.
|
|
|
(2)
|
Includes private equity funds and private equity fund of funds with a focus on diversified portfolios, real estate and global natural resources. Due to the illiquid nature of these funds, investors are not permitted to make withdrawals without the consent of the general partner. The lock-up period of the private equity funds can extend to
10
years.
|
Valuation Process
The Finance & Accounting ("F&A") group is responsible for the Company's fair value policies, processes and procedures. F&A is independent from the business units and trading desks and is headed by the Company's Chief Financial Officer ("CFO"), who has final authority over the valuation of the Company's financial instruments. The Finance Control Group ("FCG") within F&A is responsible for daily profit and loss reporting, front-end trading system position reconciliations, monthly profit and loss reporting, and independent price verification procedures.
For financial instruments categorized in Levels 1 and 2 of the fair value hierarchy, the FCG performs a monthly independent price verification to determine the reasonableness of the prices provided by the Company's independent pricing vendor. The FCG uses its third-party pricing vendor, executed transactions, and broker-dealer quotes for validating the fair values of financial instruments.
For financial instruments categorized in Level 3 of the fair value hierarchy measured on a recurring basis, primarily for ARS, a group comprised of the CFO, the Controller, and an Operations Director are responsible for the ARS valuation model and resulting fair valuations. Procedures performed include aggregating all ARS owned by type from firm inventory accounts and ARS purchase commitments from regulatory and legal settlements and awards provided by the Legal Department. Observable and unobservable inputs are aggregated from various sources and entered into the ARS valuation model. For unobservable inputs, the group reviews the appropriateness of the inputs to ensure consistency with how a market participant would arrive at the unobservable input. For example, for the duration assumption, the group would consider recent policy statements regarding short-term interest rates by the Federal Reserve and recent ARS issuer redemptions and announcements for future redemptions. The model output is reviewed for reasonableness and consistency. Where available, comparisons are performed between ARS owned or committed to purchase to ARS that are trading in the secondary market.
For financial instruments categorized in Level 3 of the fair value hierarchy measured on a non-recurring basis, primarily for MSRs, the OMHHF Valuation Committee, which is comprised of the OMHHF President & Chief Executive Officer, and OMHHF Chief Operating Officer, is responsible for the MSR model and resulting fair valuations. The OMHHF Valuation Committee performs its review of the model and assumptions and its impairment analysis on a quarterly basis. On an annual basis, the Company utilizes an external valuation consultant to validate that the internal MSR model is functioning appropriately. The OMHHF Valuation Committee compares assumptions used for unobservable inputs, such as for discount rates, estimated life, and costs of servicing, to that used by the external valuation consultant for reasonableness. The model output and resulting valuation multiples are reviewed for reasonableness and consistency. Where available, comparisons are performed to recent MSR sales in the secondary market. The Company's management reviews the results of both the quarterly reviews and annual impairment analysis.
Assets and Liabilities Measured at Fair Value
The Company's assets and liabilities, recorded at fair value on a recurring basis as of
June 30, 2016
and
December 31, 2015
, have been categorized based upon the above fair value hierarchy as follows:
Assets and liabilities measured at fair value on a recurring basis as of
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
Fair Value Measurements at June 30, 2016
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
22,156
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
22,156
|
|
Deposits with clearing organizations
|
22,975
|
|
|
—
|
|
|
—
|
|
|
22,975
|
|
Securities owned:
|
|
|
|
|
|
|
|
U.S. Treasury securities
(1)
|
593,897
|
|
|
—
|
|
|
—
|
|
|
593,897
|
|
U.S. Agency securities
|
4,515
|
|
|
18,387
|
|
|
—
|
|
|
22,902
|
|
Sovereign obligations
|
—
|
|
|
32
|
|
|
—
|
|
|
32
|
|
Corporate debt and other obligations
|
—
|
|
|
40,311
|
|
|
—
|
|
|
40,311
|
|
Mortgage and other asset-backed securities
|
—
|
|
|
3,875
|
|
|
—
|
|
|
3,875
|
|
Municipal obligations
|
—
|
|
|
106,636
|
|
|
25
|
|
|
106,661
|
|
Convertible bonds
|
—
|
|
|
56,582
|
|
|
—
|
|
|
56,582
|
|
Corporate equities
|
38,612
|
|
|
—
|
|
|
—
|
|
|
38,612
|
|
Money markets
|
495
|
|
|
—
|
|
|
—
|
|
|
495
|
|
Auction rate securities
|
—
|
|
|
—
|
|
|
89,101
|
|
|
89,101
|
|
Securities owned, at fair value
|
637,519
|
|
|
225,823
|
|
|
89,126
|
|
|
952,468
|
|
Investments
(2)
|
—
|
|
|
—
|
|
|
158
|
|
|
158
|
|
Loans held for sale
(3)
|
—
|
|
|
1,743
|
|
|
—
|
|
|
1,743
|
|
Derivative contracts:
|
|
|
|
|
|
|
|
TBAs
|
—
|
|
|
1,296
|
|
|
—
|
|
|
1,296
|
|
Interest rate lock commitments
|
—
|
|
|
—
|
|
|
13,453
|
|
|
13,453
|
|
ARS purchase commitments
|
—
|
|
|
—
|
|
|
911
|
|
|
911
|
|
Derivative contracts, total
|
—
|
|
|
1,296
|
|
|
14,364
|
|
|
15,660
|
|
Total
|
$
|
682,650
|
|
|
$
|
228,862
|
|
|
$
|
103,648
|
|
|
$
|
1,015,160
|
|
Liabilities
|
|
|
|
|
|
|
|
Securities sold, but not yet purchased:
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
179,554
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
179,554
|
|
U.S. Agency securities
|
—
|
|
|
8
|
|
|
—
|
|
|
8
|
|
Corporate debt and other obligations
|
—
|
|
|
23,811
|
|
|
—
|
|
|
23,811
|
|
Mortgage and other asset-backed securities
|
—
|
|
|
27
|
|
|
—
|
|
|
27
|
|
Convertible bonds
|
—
|
|
|
12,505
|
|
|
—
|
|
|
12,505
|
|
Corporate equities
|
43,127
|
|
|
—
|
|
|
—
|
|
|
43,127
|
|
Securities sold, but not yet purchased, at fair value
|
222,681
|
|
|
36,351
|
|
|
—
|
|
|
259,032
|
|
Derivative contracts:
|
|
|
|
|
|
|
|
Futures
|
950
|
|
|
—
|
|
|
—
|
|
|
950
|
|
Foreign currency forward contracts
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
TBAs
|
—
|
|
|
12,507
|
|
|
—
|
|
|
12,507
|
|
ARS purchase commitments
|
—
|
|
|
—
|
|
|
142
|
|
|
142
|
|
Derivative contracts, total
|
956
|
|
|
12,507
|
|
|
142
|
|
|
13,605
|
|
Total
|
$
|
223,637
|
|
|
$
|
48,858
|
|
|
$
|
142
|
|
|
$
|
272,637
|
|
|
|
(1)
|
$562,000
is included in assets held for sale on the condensed consolidated balance sheet. See Note 3 for details.
|
|
|
(2)
|
Included in other assets on the condensed consolidated balance sheet.
|
|
|
(3)
|
Included in assets held for sale on the condensed consolidated balance sheet. See Note 3 for details.
|
Assets and liabilities measured at fair value on a recurring basis as of
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2015
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
13,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13,000
|
|
Deposits with clearing organizations
|
31,456
|
|
|
—
|
|
|
—
|
|
|
31,456
|
|
Securities owned:
|
|
|
|
|
|
|
|
U.S. Treasury securities
(1)
|
436,533
|
|
|
—
|
|
|
—
|
|
|
436,533
|
|
U.S. Agency securities
|
25,240
|
|
|
46,176
|
|
|
—
|
|
|
71,416
|
|
Sovereign obligations
|
—
|
|
|
1,665
|
|
|
—
|
|
|
1,665
|
|
Corporate debt and other obligations
|
—
|
|
|
16,138
|
|
|
—
|
|
|
16,138
|
|
Mortgage and other asset-backed securities
|
—
|
|
|
3,504
|
|
|
—
|
|
|
3,504
|
|
Municipal obligations
|
—
|
|
|
30,051
|
|
|
81
|
|
|
30,132
|
|
Convertible bonds
|
—
|
|
|
54,693
|
|
|
—
|
|
|
54,693
|
|
Corporate equities
|
34,475
|
|
|
—
|
|
|
—
|
|
|
34,475
|
|
Money markets
|
35
|
|
|
—
|
|
|
—
|
|
|
35
|
|
Auction rate securities
|
—
|
|
|
—
|
|
|
86,802
|
|
|
86,802
|
|
Securities owned, at fair value
|
496,283
|
|
|
152,227
|
|
|
86,883
|
|
|
735,393
|
|
Investments
(2)
|
—
|
|
|
—
|
|
|
157
|
|
|
157
|
|
Loans held for sale
(3)
|
—
|
|
|
60,234
|
|
|
—
|
|
|
60,234
|
|
Securities purchased under agreements to resell
(4)
|
—
|
|
|
206,499
|
|
|
—
|
|
|
206,499
|
|
Derivative contracts:
|
|
|
|
|
|
|
|
TBAs
|
—
|
|
|
6,448
|
|
|
—
|
|
|
6,448
|
|
Interest rate lock commitments
|
—
|
|
|
—
|
|
|
9,161
|
|
|
9,161
|
|
Derivative contracts, total
|
—
|
|
|
6,448
|
|
|
9,161
|
|
|
15,609
|
|
Total
|
$
|
540,739
|
|
|
$
|
425,408
|
|
|
$
|
96,201
|
|
|
$
|
1,062,348
|
|
Liabilities
|
|
|
|
|
|
|
|
Securities sold, but not yet purchased:
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
$
|
75,653
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
75,653
|
|
U.S. Agency securities
|
—
|
|
|
15
|
|
|
—
|
|
|
15
|
|
Sovereign obligations
|
—
|
|
|
1,817
|
|
|
—
|
|
|
1,817
|
|
Corporate debt and other obligations
|
—
|
|
|
1,652
|
|
|
—
|
|
|
1,652
|
|
Mortgage and other asset-backed securities
|
—
|
|
|
27
|
|
|
—
|
|
|
27
|
|
Convertible bonds
|
—
|
|
|
5,951
|
|
|
—
|
|
|
5,951
|
|
Corporate equities
|
41,378
|
|
|
—
|
|
|
—
|
|
|
41,378
|
|
Securities sold, but not yet purchased, at fair value
|
117,031
|
|
|
9,462
|
|
|
—
|
|
|
126,493
|
|
Derivative contracts:
|
|
|
|
|
|
|
|
Futures
|
249
|
|
|
—
|
|
|
—
|
|
|
249
|
|
Foreign currency forward contracts
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
TBAs
|
—
|
|
|
11,619
|
|
|
—
|
|
|
11,619
|
|
Interest rate lock commitments
|
—
|
|
|
—
|
|
|
923
|
|
|
923
|
|
ARS purchase commitments
|
—
|
|
|
—
|
|
|
1,369
|
|
|
1,369
|
|
Derivative contracts, total
|
251
|
|
|
11,619
|
|
|
2,292
|
|
|
14,162
|
|
Total
|
$
|
117,282
|
|
|
$
|
21,081
|
|
|
$
|
2,292
|
|
|
$
|
140,655
|
|
|
|
(1)
|
$562,000
is included in assets held for sale on the condensed consolidated balance sheet. See Note 3 for details.
|
|
|
(2)
|
Included in other assets on the condensed consolidated balance sheet.
|
|
|
(3)
|
Included in assets held for sale on the condensed consolidated balance sheet. See Note 3 for details.
|
|
|
(4)
|
Included in securities purchased under agreements to resell where the Company has elected fair value option treatment.
|
There were no transfers between any of the levels in the three and six months ended
June 30, 2016
.
The following tables present changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended
June 30, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Assets and Liabilities
|
|
For the Three Months Ended June 30, 2016
|
|
|
|
Total Realized
|
|
|
|
|
|
|
|
|
|
|
|
and Unrealized
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
Gains
|
|
Purchases
|
|
Sales and
|
|
Transfers
|
|
Ending
|
|
Balance
|
|
(Losses)
(4)(5)
|
|
and Issuances
|
|
Settlements
|
|
In (Out)
|
|
Balance
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Municipals
|
$
|
85
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
(62
|
)
|
|
$
|
—
|
|
|
$
|
25
|
|
Auction rate securities
(1)(6)(7)
|
84,185
|
|
|
1,341
|
|
|
5,000
|
|
|
(1,425
|
)
|
|
—
|
|
|
89,101
|
|
Interest rate lock commitments
(2)
|
14,024
|
|
|
(571
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,453
|
|
Investments
|
161
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
158
|
|
ARS purchase commitments
(3)
|
1,540
|
|
|
(629
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
911
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
ARS purchase commitments
(3)
|
559
|
|
|
417
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
142
|
|
|
|
(1)
|
Represents auction rate preferred securities, municipal auction rate securities and student loan auction rate securities that failed in the auction rate market.
|
|
|
(2)
|
Interest rate lock commitment assets and liabilities are recorded upon the commitment to originate a loan with a borrower and sell the loan to an investor. The commitment assets and liabilities are recognized at fair value, which reflects the fair value of the contractual loan origination related fees and sale premiums, net of co-broker fees, and the estimated fair value of the expected net future cash flows associated with the servicing of the loan.
|
|
|
(3)
|
Represents the difference in principal and fair value for auction rate securities purchase commitments outstanding at the end of the period.
|
|
|
(4)
|
Included in principal transactions on the condensed consolidated statement of operations, except for investments which are included in other income on the condensed consolidated statement of operations.
|
|
|
(5)
|
Unrealized gains (losses) are attributable to assets or liabilities that are still held at the reporting date.
|
|
|
(6)
|
Purchases and issuances in connection with ARS purchase commitments represent instances in which the Company purchased ARS securities from clients during the period pursuant to regulatory and legal settlements and awards that satisfy the outstanding commitment to purchase obligation. This also includes instances where the ARS issuer has redeemed ARS where the Company had an outstanding purchase commitment prior to the Company purchasing those ARS.
|
|
|
(7)
|
Sales and settlements for the ARS purchase commitments represent additional purchase commitments made during the period for regulatory and legal ARS settlements and awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Assets and Liabilities
|
|
For the Three Months Ended June 30, 2015
|
|
|
|
Total Realized
|
|
|
|
|
|
|
|
|
|
|
|
and Unrealized
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
Gains
|
|
Purchases
|
|
Sales and
|
|
Transfers
|
|
Ending
|
|
Balance
|
|
(Losses)
(4)(5)
|
|
and Issuances
|
|
Settlements
|
|
In (Out)
|
|
Balance
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Municipals
|
$
|
104
|
|
|
$
|
(22
|
)
|
|
$
|
—
|
|
|
$
|
(20
|
)
|
|
$
|
—
|
|
|
$
|
62
|
|
Auction rate securities
(1)(6)(7)
|
99,057
|
|
|
(998
|
)
|
|
2,500
|
|
|
(175
|
)
|
|
—
|
|
|
100,384
|
|
Interest rate lock commitments
(2)
|
11,424
|
|
|
(6,364
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,060
|
|
Investments
|
184
|
|
|
31
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
215
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments
(2)
|
544
|
|
|
(139
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
683
|
|
ARS purchase commitments
(3)
|
797
|
|
|
(237
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,034
|
|
|
|
(1)
|
Represents auction rate preferred securities, municipal auction rate securities and student loan auction rate securities that failed in the auction rate market.
|
|
|
(2)
|
Interest rate lock commitment assets and liabilities are recorded upon the commitment to originate a loan with a borrower and sell the loan to an investor. The commitment assets and liabilities are recognized at fair value, which reflects the fair value of the contractual loan origination related fees and sale premiums, net of co-broker fees, and the estimated fair value of the expected net future cash flows associated with the servicing of the loan.
|
|
|
(3)
|
Represents the difference in principal and fair value for auction rate securities purchase commitments outstanding at the end of the period.
|
|
|
(4)
|
Included in principal transactions on the condensed consolidated statement of operations, except for investments which are included in other income on the condensed consolidated statement of operations.
|
|
|
(5)
|
Unrealized gains (losses) are attributable to assets or liabilities that are still held at the reporting date.
|
|
|
(6)
|
Purchases and issuances in connection with ARS purchase commitments represent instances in which the Company purchased ARS securities from clients during the period pursuant to regulatory and legal settlements and awards that satisfy the outstanding commitment to purchase obligation. This also includes instances where the ARS issuer has redeemed ARS where the Company had an outstanding purchase commitment prior to the Company purchasing those ARS.
|
|
|
(7)
|
Sales and settlements for the ARS purchase commitments represent additional purchase commitments made during the period for regulatory and legal ARS settlements and awards.
|
The following tables present changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the
six
months ended
June 30, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Assets and Liabilities
|
|
For the Six Months Ended June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Realized
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
and Unrealized
|
|
Purchases
|
|
Sales and
|
|
Transfers
|
|
Ending
|
|
Balance
|
|
Gains
(4)(5)
|
|
and Issuances
|
|
Settlements
|
|
In (Out)
|
|
Balance
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Municipals
|
$
|
81
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
(62
|
)
|
|
$
|
—
|
|
|
$
|
25
|
|
Auction rate securities
(1)(6)(7)
|
86,802
|
|
|
3,574
|
|
|
11,775
|
|
|
(13,050
|
)
|
|
—
|
|
|
89,101
|
|
Interest rate lock commitments
(2)
|
9,161
|
|
|
4,292
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,453
|
|
Investments
|
157
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
158
|
|
ARS purchase commitments
(3)
|
—
|
|
|
911
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
911
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments
(2)
|
923
|
|
|
923
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
ARS purchase commitments
(3)
|
1,369
|
|
|
1,227
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
142
|
|
|
|
(1)
|
Represents auction rate preferred securities, municipal auction rate securities and student loan auction rate securities that failed in the auction rate market.
|
|
|
(2)
|
Interest rate lock commitment assets and liabilities are recorded upon the commitment to originate a loan with a borrower and sell the loan to an investor. The commitment assets and liabilities are recognized at fair value, which reflects the fair value of the contractual loan origination related fees and sale premiums, net of co-broker fees, and the estimated fair value of the expected net future cash flows associated with the servicing of the loan.
|
|
|
(3)
|
Represents the difference in principal and fair value for auction rate securities purchase commitments outstanding at the end of the period.
|
|
|
(4)
|
Included in principal transactions on the condensed consolidated statement of operations, except for investments which are included in other income on the condensed consolidated statement of operations.
|
|
|
(5)
|
Unrealized gains are attributable to assets or liabilities that are still held at the reporting date.
|
|
|
(6)
|
Purchases and issuances in connection with ARS purchase commitments represent instances in which the Company purchased ARS securities from clients during the period pursuant to regulatory and legal settlements and awards that satisfy the outstanding commitment to purchase obligation. This also includes instances where the ARS issuer has redeemed ARS where the Company had an outstanding purchase commitment prior to the Company purchasing those ARS.
|
|
|
(7)
|
Sales and settlements for the ARS purchase commitments represent additional purchase commitments made during the period for regulatory and legal ARS settlements and awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Assets and Liabilities
|
|
For the Six Months Ended June 30, 2015
|
|
|
|
Total Realized
|
|
|
|
|
|
|
|
|
|
|
|
and Unrealized
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
Gains
|
|
Purchases
|
|
Sales and
|
|
Transfers
|
|
Ending
|
|
Balance
|
|
(Losses)
(4)(5)
|
|
and Issuances
|
|
Settlements
|
|
In (Out)
|
|
Balance
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Municipals
|
$
|
164
|
|
|
$
|
(82
|
)
|
|
$
|
—
|
|
|
$
|
(20
|
)
|
|
$
|
—
|
|
|
$
|
62
|
|
Auction rate securities
(1)(6)(7)
|
91,422
|
|
|
(63
|
)
|
|
10,725
|
|
|
(1,700
|
)
|
|
—
|
|
|
100,384
|
|
Interest rate lock commitments
(2)
|
7,576
|
|
|
(2,516
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,060
|
|
Investments
|
193
|
|
|
22
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
215
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock commitments
(2)
|
1,222
|
|
|
539
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
683
|
|
ARS purchase commitments
(3)
|
902
|
|
|
(132
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,034
|
|
|
|
(1)
|
Represents auction rate preferred securities, municipal auction rate securities and student loan auction rate securities that failed in the auction rate market.
|
|
|
(2)
|
Interest rate lock commitment assets and liabilities are recorded upon the commitment to originate a loan with a borrower and sell the loan to an investor. The commitment assets and liabilities are recognized at fair value, which reflects the fair value of the contractual loan origination related fees and sale premiums, net of co-broker fees, and the estimated fair value of the expected net future cash flows associated with the servicing of the loan.
|
|
|
(3)
|
Represents the difference in principal and fair value for auction rate securities purchase commitments outstanding at the end of the period.
|
|
|
(4)
|
Included in principal transactions on the condensed consolidated statement of operations, except for investments which are included in other income on the condensed consolidated statement of operations.
|
|
|
(5)
|
Unrealized gains (losses) are attributable to assets or liabilities that are still held at the reporting date.
|
|
|
(6)
|
Purchases and issuances in connection with ARS purchase commitments represent instances in which the Company purchased ARS securities from clients during the period pursuant to regulatory and legal settlements and awards that satisfy the outstanding commitment to purchase obligation. This also includes instances where the ARS issuer has redeemed ARS where the Company had an outstanding purchase commitment prior to the Company purchasing those ARS.
|
|
|
(7)
|
Sales and settlements for the ARS purchase commitments represent additional purchase commitments made during the period for regulatory and legal ARS settlements and awards.
|
Financial Instruments Not Measured at Fair Value
The tables below present the carrying value, fair value and fair value hierarchy category of certain financial instruments that are not measured at fair value in the condensed consolidated balance sheets. The tables below exclude non-financial assets and liabilities (e.g., office facilities and accrued compensation).
The carrying value of financial instruments not measured at fair value categorized in the fair value hierarchy as Level 1 or Level 2 (e.g., cash and receivables from customers) approximates fair value because of the relatively short period of time between their origination and expected maturity or settlement. The fair value of the Company's
8.75%
Senior Secured Notes, categorized in Level 2 of the fair value hierarchy, is based on quoted prices from the market in which the Notes trade.
The fair value of MSRs is based on observable and unobservable inputs and thus categorized as Level 3 in the fair value hierarchy. See valuation techniques above for key assumptions used.
Assets and liabilities not measured at fair value as of
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement: Assets
|
|
As of June 30, 2016
|
|
As of June 30, 2016
|
|
Carrying Value
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Cash
|
$
|
85,381
|
|
|
$
|
85,381
|
|
|
$
|
85,381
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
85,381
|
|
Deposits with clearing organization
|
19,935
|
|
|
19,935
|
|
|
19,935
|
|
|
—
|
|
|
—
|
|
|
19,935
|
|
Receivable from brokers, dealers and clearing organizations:
|
|
|
|
|
|
|
|
|
|
|
|
Securities borrowed
|
216,419
|
|
|
216,419
|
|
|
—
|
|
|
216,419
|
|
|
—
|
|
|
216,419
|
|
Receivables from brokers
|
42,763
|
|
|
42,763
|
|
|
—
|
|
|
42,763
|
|
|
—
|
|
|
42,763
|
|
Securities failed to deliver
|
17,541
|
|
|
17,541
|
|
|
—
|
|
|
17,541
|
|
|
—
|
|
|
17,541
|
|
Clearing organizations
|
24,669
|
|
|
24,669
|
|
|
—
|
|
|
24,669
|
|
|
—
|
|
|
24,669
|
|
Other
|
13,916
|
|
|
13,916
|
|
|
—
|
|
|
13,916
|
|
|
—
|
|
|
13,916
|
|
|
315,308
|
|
|
315,308
|
|
|
—
|
|
|
315,308
|
|
|
—
|
|
|
315,308
|
|
Receivable from customers
|
780,670
|
|
|
780,670
|
|
|
—
|
|
|
780,670
|
|
|
—
|
|
|
780,670
|
|
Mortgage servicing rights
(1)
|
1,993
|
|
|
6,170
|
|
|
—
|
|
|
—
|
|
|
6,170
|
|
|
6,170
|
|
Investments
(2)
|
53,941
|
|
|
53,941
|
|
|
—
|
|
|
53,941
|
|
|
—
|
|
|
53,941
|
|
|
|
(1)
|
Included in assets held for sale on the condensed consolidated balance sheet. See Note 3 for details.
|
|
|
(2)
|
Included in other assets on the condensed consolidated balance sheet.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement: Liabilities
|
|
As of June 30, 2016
|
|
As of June 30, 2016
|
|
Carrying Value
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Drafts payable
|
$
|
26,759
|
|
|
$
|
26,759
|
|
|
$
|
26,759
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,759
|
|
Bank call loans
|
151,900
|
|
|
151,900
|
|
|
—
|
|
|
151,900
|
|
|
—
|
|
|
151,900
|
|
Payables to brokers, dealers and clearing organizations:
|
|
|
|
|
|
|
|
|
|
|
|
Securities loaned
|
125,548
|
|
|
125,548
|
|
|
—
|
|
|
125,548
|
|
|
—
|
|
|
125,548
|
|
Payable to brokers
|
1,068
|
|
|
1,068
|
|
|
—
|
|
|
1,068
|
|
|
—
|
|
|
1,068
|
|
Securities failed to receive
|
23,491
|
|
|
23,491
|
|
|
—
|
|
|
23,491
|
|
|
—
|
|
|
23,491
|
|
Other
|
22,255
|
|
|
22,255
|
|
|
—
|
|
|
22,255
|
|
|
—
|
|
|
22,255
|
|
|
172,362
|
|
|
172,362
|
|
|
—
|
|
|
172,362
|
|
|
—
|
|
|
172,362
|
|
Payables to customers
|
596,441
|
|
|
596,441
|
|
|
—
|
|
|
596,441
|
|
|
—
|
|
|
596,441
|
|
Securities sold under agreements to repurchase
|
432,912
|
|
|
432,912
|
|
|
—
|
|
|
432,912
|
|
|
—
|
|
|
432,912
|
|
Warehouse payable
(1)
|
1,486
|
|
|
1,486
|
|
|
—
|
|
|
1,486
|
|
|
—
|
|
|
1,486
|
|
Senior secured notes
|
150,000
|
|
|
152,345
|
|
|
—
|
|
|
152,345
|
|
|
—
|
|
|
152,345
|
|
|
|
(1)
|
Included in liabilities held for sale on the condensed consolidated balance sheet. See Note 3 for details.
|
Assets and liabilities not measured at fair value as of
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement: Assets
|
|
As of December 31, 2015
|
|
As of December 31, 2015
|
|
Carrying Value
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Cash
|
$
|
50,364
|
|
|
$
|
50,364
|
|
|
$
|
50,364
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
50,364
|
|
Deposits with clearing organization
|
18,034
|
|
|
18,034
|
|
|
18,034
|
|
|
—
|
|
|
—
|
|
|
18,034
|
|
Receivable from brokers, dealers and clearing organizations:
|
|
|
|
|
|
|
|
|
|
|
|
Securities borrowed
|
224,672
|
|
|
224,672
|
|
|
—
|
|
|
224,672
|
|
|
—
|
|
|
224,672
|
|
Receivables from brokers
|
49,458
|
|
|
49,458
|
|
|
—
|
|
|
49,458
|
|
|
—
|
|
|
49,458
|
|
Securities failed to deliver
|
7,799
|
|
|
7,799
|
|
|
—
|
|
|
7,799
|
|
|
—
|
|
|
7,799
|
|
Clearing organizations
|
25,030
|
|
|
25,030
|
|
|
—
|
|
|
25,030
|
|
|
—
|
|
|
25,030
|
|
Other
|
58,832
|
|
|
58,832
|
|
|
—
|
|
|
58,832
|
|
|
—
|
|
|
58,832
|
|
|
365,791
|
|
|
365,791
|
|
|
—
|
|
|
365,791
|
|
|
—
|
|
|
365,791
|
|
Receivable from customers
|
840,355
|
|
|
840,355
|
|
|
—
|
|
|
840,355
|
|
|
—
|
|
|
840,355
|
|
Mortgage servicing rights
(1)
|
28,168
|
|
|
41,838
|
|
|
—
|
|
|
—
|
|
|
41,838
|
|
|
41,838
|
|
Investments
(2)
|
53,286
|
|
|
53,286
|
|
|
—
|
|
|
53,286
|
|
|
—
|
|
|
53,286
|
|
|
|
(1)
|
Included in assets held for sale on the condensed consolidated balance sheet. See Note 3 for details.
|
|
|
(2)
|
Included in other assets on the condensed consolidated balance sheet.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement: Liabilities
|
|
As of December 31, 2015
|
|
As of December 31, 2015
|
|
Carrying Value
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Drafts payable
|
$
|
48,011
|
|
|
$
|
48,011
|
|
|
$
|
48,011
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
48,011
|
|
Bank call loans
|
100,200
|
|
|
100,200
|
|
|
—
|
|
|
100,200
|
|
|
—
|
|
|
100,200
|
|
Payables to brokers, dealers and clearing organizations:
|
|
|
|
|
|
|
|
|
|
|
|
Securities loaned
|
130,658
|
|
|
130,658
|
|
|
—
|
|
|
130,658
|
|
|
—
|
|
|
130,658
|
|
Payable to brokers
|
3,316
|
|
|
3,316
|
|
|
—
|
|
|
3,316
|
|
|
—
|
|
|
3,316
|
|
Securities failed to receive
|
21,513
|
|
|
21,513
|
|
|
—
|
|
|
21,513
|
|
|
—
|
|
|
21,513
|
|
Other
|
9,059
|
|
|
9,059
|
|
|
—
|
|
|
9,059
|
|
|
—
|
|
|
9,059
|
|
|
164,546
|
|
|
164,546
|
|
|
—
|
|
|
164,546
|
|
|
—
|
|
|
164,546
|
|
Payables to customers
|
594,833
|
|
|
594,833
|
|
|
—
|
|
|
594,833
|
|
|
—
|
|
|
594,833
|
|
Securities sold under agreements to repurchase
|
651,445
|
|
|
651,445
|
|
|
—
|
|
|
651,445
|
|
|
—
|
|
|
651,445
|
|
Warehouse payable
(1)
|
54,341
|
|
|
54,341
|
|
|
—
|
|
|
54,341
|
|
|
—
|
|
|
54,341
|
|
Senior secured notes
|
150,000
|
|
|
154,568
|
|
|
—
|
|
|
154,568
|
|
|
—
|
|
|
154,568
|
|
|
|
(1)
|
Included in liabilities held for sale on the condensed consolidated balance sheet. See Note 3 for details.
|
Fair Value Option
The Company has elected to apply the fair value option to its loan trading portfolio which resides in OPY Credit Corp. and is included in other assets on the condensed consolidated balance sheet. Management has elected this treatment as it is consistent with the manner in which the loan trading portfolio is managed as well as the way that financial instruments in other parts of the business are recorded. There were no loan positions held in the secondary loan trading portfolio at
June 30, 2016
or
December 31, 2015
.
The Company elected the fair value option for repurchase agreements and reverse repurchase agreements that do not settle overnight or have an open settlement date. The Company has elected the fair value option for these instruments to more accurately reflect market and economic events in its earnings and to mitigate a potential mismatch in earnings caused by using different measurement attributes (i.e. fair value versus carrying value) for certain assets and liabilities. At
June 30, 2016
, the Company did not have any reverse repurchase agreements and repurchase agreements that elected the fair value option.
On October 1, 2013, the Company also elected the fair value option for loans held for sale which reside in OMHHF and are included in assets held for sale on the condensed consolidated balance sheet. Loans held for sale represent originated loans that are generally transferred or sold within
60
days from the date that a mortgage loan is funded. Electing to use fair value allows a better offset of the change in fair value of the loan and the change in fair value of the derivative instruments used as economic hedges. During the period prior to its sale, interest income on a loan held for sale is calculated in accordance with the terms of the individual loan. At
June 30, 2016
, the Company did not carry any loans held for sale for a period longer than
90
days. At
June 30, 2016
, the book value and fair value of loans held for sale was
$1.6 million
and
$1.7 million
, respectively.
Derivative Instruments and Hedging Activities
The Company transacts, on a limited basis, in exchange traded and over-the-counter derivatives for both asset and liability management as well as for trading and investment purposes. Risks managed using derivative instruments include interest rate risk and, to a lesser extent, foreign exchange risk. All derivative instruments are measured at fair value and are recognized as either assets or liabilities on the condensed consolidated balance sheet.
Cash flow hedges used for asset and liability management
For derivative instruments that were designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative was reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains or losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. For the three months ended
June 30, 2016
and
2015
, there were no derivative instruments that were designated and qualified as a cash flow hedge.
Foreign exchange hedges
From time to time, the Company also utilizes forward and options contracts to hedge the foreign currency risk associated with compensation obligations to Oppenheimer Israel (OPCO) Ltd. employees denominated in New Israeli Shekel. Such hedges have not been designated as accounting hedges. Unrealized gains and losses on foreign exchange forward contracts are recorded in other assets in the condensed consolidated balance sheet and other income in the condensed consolidated statement of operations.
Derivatives used for trading and investment purposes
Futures contracts represent commitments to purchase or sell securities or other commodities at a future date and at a specified price. Market risk exists with respect to these instruments. Notional or contractual amounts are used to express the volume of these transactions and do not represent the amounts potentially subject to market risk. The futures contracts the Company used include U.S. Treasury notes, Federal Funds, General collateral futures and Eurodollar contracts which are used primarily as an economic hedge of interest rate risk associated with government trading activities. Unrealized gains and losses on futures contracts are recorded in the condensed consolidated balance sheet in payable to brokers, dealers and clearing organizations and in the condensed consolidated statement of operations as principal transactions revenue, net.
Derivatives used for commercial mortgage banking
In the normal course of business, OMHHF enters into contractual commitments to originate (purchase) and sell multifamily mortgage loans at fixed prices with fixed expiration dates. The commitments become effective when the borrowers "lock-in" a specified interest rate within time frames established by OMHHF. All mortgagors are evaluated for credit worthiness prior to the extension of the commitment. Market risk arises if interest rates move adversely between the time of the "lock-in" of rates by the borrower and the sale date of the loan to an investor. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, OMHHF's policy is to enter into a TBA sale contract with the investor simultaneously with the rate lock commitment with the borrower. The TBA sale contract with the investor locks in an interest rate and price for the sale of the loan. The terms of the contract with the investor and the rate lock with the borrower are matched in substantially all respects, with the objective of eliminating interest rate risk to the extent practical. TBA sale contracts with the investors have an expiration date that is longer than our related commitments to the borrower to allow, among other things, for the closing of the loan and processing of paperwork to deliver the loan into the sale commitment.
Both the rate lock commitments to borrowers and the TBA sale contracts to buyers are undesignated derivatives and, accordingly, are marked to fair value through earnings. Unrealized gains and losses on rate lock commitments are recorded in other assets in the condensed consolidated balance sheet and other income in the condensed consolidated statement of operations. The fair value of the Company's rate lock commitments to borrowers and loans held for sale and the related input includes, as applicable:
|
|
•
|
the assumed gain/loss of the expected resultant loan sale to the buyer;
|
|
|
•
|
the expected net future cash flows associated with servicing the loan;
|
|
|
•
|
the effects of interest rate movements between the date of the rate lock and the balance sheet date; and
|
|
|
•
|
the nonperformance risk of both the counterparty and the Company.
|
The fair value of the Company's TBA sale contracts to investors considers effects of interest rate movements between the trade date and the balance sheet date. The market price changes are multiplied by the notional amount of the TBA sale contracts to measure the fair value.
The assumed gain/loss considers the amount that the Company has discounted the price to the borrower from par for competitive reasons, if at all, and the expected net cash flows from servicing to be received upon securitization of the loan. The fair value of the expected net future cash flows associated with servicing the loan is calculated pursuant to the valuation techniques described previously for MSRs.
To calculate the effects of interest rate movements, the Company uses applicable published U.S. Treasury prices, and multiplies the price movement between the rate lock date and the balance sheet date by the notional loan commitment amount.
The fair value of the Company's TBA sale contracts to investors considers the market price movement of the same type of security between the trade date and the balance sheet date. The market price changes are multiplied by the notional amount of the TBA sale contracts to measure the fair value.
The fair value of the Company's interest rate lock commitments and TBA sale contracts is adjusted to reflect the risk that the agreement will not be fulfilled. The Company's exposure to nonperformance in rate lock and TBA sale contracts is represented by the contractual amount of those instruments. Given the credit quality of our counterparties, the short duration of interest rate lock commitments and TBA sale contracts, and the Company's historical experience with the agreements, the risk of nonperformance by the Company's counterparties is not significant.
TBA Securities
The Company also transacts in pass-through mortgage-backed securities eligible to be sold in the TBA market as economic hedges against mortgage-backed securities that it owns or has sold but not yet purchased. TBAs provide for the forward or delayed delivery of the underlying instrument with settlement up to
180
days. The contractual or notional amounts related to these financial instruments reflect the volume of activity and do not reflect the amounts at risk. Unrealized gains and losses on TBAs are recorded in the condensed consolidated balance sheet in receivable from brokers, dealers and clearing organizations and payable to brokers, dealers and clearing organizations, respectively, and in the condensed consolidated statement of operations as principal transactions revenue, net.
The notional amounts and fair values of the Company's derivatives at
June 30, 2016
and
December 31, 2015
by product were as follows:
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
Fair Value of Derivative Instruments at June 30, 2016
|
|
Description
|
|
Notional
|
|
Fair Value
|
Assets
|
|
|
|
|
|
Derivatives not designated as hedging instruments
(1)
|
|
|
|
|
|
Other contracts
|
TBAs
|
|
$
|
134,400
|
|
|
$
|
1,296
|
|
|
Interest rate lock commitments
|
|
186,205
|
|
|
13,453
|
|
|
ARS purchase commitments
|
|
6,372
|
|
|
911
|
|
|
|
|
$
|
326,977
|
|
|
$
|
15,660
|
|
Liabilities
|
|
|
|
|
|
Derivatives not designated as hedging instruments
(1)
|
|
|
|
|
|
Commodity contracts
|
Futures
|
|
$
|
4,503,000
|
|
|
$
|
950
|
|
Other contracts
|
Foreign exchange forward contracts
|
|
400
|
|
|
6
|
|
|
TBAs
|
|
134,400
|
|
|
1,309
|
|
|
TBA sale contracts
|
|
187,809
|
|
|
11,198
|
|
|
ARS purchase commitments
|
|
20,495
|
|
|
142
|
|
|
|
|
$
|
4,846,104
|
|
|
$
|
13,605
|
|
|
|
(1)
|
See "Derivative Instruments and Hedging Activities" above for description of derivative financial instruments. Such derivative instruments are not subject to master netting agreements, thus the related amounts are not offset.
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
Fair Value of Derivative Instruments at December 31, 2015
|
|
Description
|
|
Notional
|
|
Fair Value
|
Assets
|
|
|
|
|
|
Derivatives not designated as hedging instruments
(1)
|
|
|
|
|
|
Other contracts
|
TBAs
|
|
$
|
35,650
|
|
|
$
|
4
|
|
|
TBA sale contracts
|
|
83,810
|
|
|
6,444
|
|
|
Interest rate lock commitments
|
|
203,648
|
|
|
9,161
|
|
|
|
|
$
|
323,108
|
|
|
$
|
15,609
|
|
Liabilities
|
|
|
|
|
|
Derivatives not designated as hedging instruments
(1)
|
|
|
|
|
|
Commodity contracts
|
Futures
|
|
$
|
2,943,000
|
|
|
$
|
249
|
|
Other contracts
|
Foreign exchange forward contracts
|
|
400
|
|
|
2
|
|
|
TBAs
|
|
24,350
|
|
|
5
|
|
|
TBA sale contracts
|
|
223,846
|
|
|
11,614
|
|
|
Interest rate lock commitments
|
|
48,638
|
|
|
923
|
|
|
ARS purchase commitments
|
|
27,813
|
|
|
1,369
|
|
|
|
|
$
|
3,268,047
|
|
|
$
|
14,162
|
|
|
|
(1)
|
See "Derivative Instruments and Hedging Activities" above for description of derivative financial instruments. Such derivative instruments are not subject to master netting agreements, thus the related amounts are not offset.
|
The following table presents the location and fair value amounts of the Company's derivative instruments and their effect on the condensed consolidated statements of operations for the three months ended
June 30, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
The Effect of Derivative Instruments on the Statement of Operations
|
|
|
For the Three Months Ended June 30, 2016
|
|
|
|
|
Recognized in Income on Derivatives
(pre-tax)
|
Types
|
|
Description
|
|
Location
|
|
Gain (Loss)
|
Commodity contracts
|
|
Futures
|
|
Principal transactions revenue
|
|
$
|
(1,306
|
)
|
Other contracts
|
|
Foreign exchange forward contracts
|
|
Other revenue
|
|
(6
|
)
|
|
|
TBAs
|
|
Principal transactions revenue
|
|
(4
|
)
|
|
|
TBA sale contracts
|
|
Other revenue
|
|
(228
|
)
|
|
|
Interest rate lock commitments
|
|
Other revenue
|
|
(571
|
)
|
|
|
ARS purchase commitments
|
|
Principal transactions revenue
|
|
(212
|
)
|
|
|
|
|
|
|
$
|
(2,327
|
)
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
The Effect of Derivative Instruments on the Statement of Operations
|
|
|
For the Three Months Ended June 30, 2015
|
|
|
|
|
Recognized in Income on Derivatives
(pre-tax)
|
Types
|
|
Description
|
|
Location
|
|
Gain (Loss)
|
Commodity contracts
|
|
Futures
|
|
Principal transactions revenue
|
|
$
|
(641
|
)
|
Other contracts
|
|
Foreign exchange forward contracts
|
|
Other revenue
|
|
28
|
|
|
|
TBAs
|
|
Principal transactions revenue
|
|
1
|
|
|
|
TBA sale contracts
|
|
Other revenue
|
|
7,531
|
|
|
|
Interest rate lock commitments
|
|
Other revenue
|
|
(6,503
|
)
|
|
|
ARS purchase commitments
|
|
Principal transactions revenue
|
|
(237
|
)
|
|
|
|
|
|
|
$
|
179
|
|
The following table presents the location and fair value amounts of the Company's derivative instruments and their effect on the condensed consolidated statements of operations for the
six
months ended
June 30, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
The Effect of Derivative Instruments on the Statement of Operations
|
|
|
For the Six Months Ended June 30, 2016
|
|
|
|
|
Recognized in Income on Derivatives
(pre-tax)
|
Types
|
|
Description
|
|
Location
|
|
Gain (Loss)
|
Commodity contracts
|
|
Futures
|
|
Principal transactions revenue
|
|
$
|
(3,061
|
)
|
Other contracts
|
|
Foreign exchange forward contracts
|
|
Other revenue
|
|
11
|
|
|
|
TBAs
|
|
Principal transactions revenue
|
|
(13
|
)
|
|
|
Interest rate lock commitments
|
|
Other revenue
|
|
5,215
|
|
|
|
ARS purchase commitments
|
|
Principal transactions revenue
|
|
2,138
|
|
|
|
Forward sale commitments
|
|
Other revenue
|
|
(8,129
|
)
|
|
|
|
|
|
|
$
|
(3,839
|
)
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
The Effect of Derivative Instruments on the Statement of Operations
|
|
|
For the Six Months Ended June 30, 2015
|
|
|
|
|
Recognized in Income on Derivatives
(pre-tax)
|
Types
|
|
Description
|
|
Location
|
|
Gain (Loss)
|
Commodity contracts
|
|
Futures
|
|
Principal transactions revenue
|
|
$
|
(2,121
|
)
|
Other contracts
|
|
Foreign exchange forward contracts
|
|
Other revenue
|
|
31
|
|
|
|
TBAs
|
|
Principal transactions revenue
|
|
(13
|
)
|
|
|
TBA sale contracts
|
|
Other revenue
|
|
5,912
|
|
|
|
Interest rate lock commitments
|
|
Other revenue
|
|
(1,977
|
)
|
|
|
ARS purchase commitments
|
|
Principal transactions revenue
|
|
(132
|
)
|
|
|
|
|
|
|
$
|
1,700
|
|
7. Collateralized transactions
The Company enters into collateralized borrowing and lending transactions in order to meet customers' needs and earn residual interest rate spreads, obtain securities for settlement and finance trading inventory positions. Under these transactions, the Company either receives or provides collateral, including U.S. government and agency, asset-backed, corporate debt, equity, and non-U.S. government and agency securities.
The Company obtains short-term borrowings primarily through bank call loans. Bank call loans are generally payable on demand and bear interest at various rates but not exceeding the broker call rate. At
June 30, 2016
, bank call loans were
$151.9 million
(
$100.2 million
at
December 31, 2015
). At
June 30, 2016
, such loans were collateralized by firm and customer securities with market values of approximately
$173.0 million
and
$171.6 million
, respectively, with commercial banks.
At
June 30, 2016
, the Company had approximately
$1.1 billion
of customer securities under customer margin loans that are available to be pledged, of which the Company has re-pledged approximately
$96.3 million
under securities loan agreements.
At
June 30, 2016
, the Company had pledged
$343.1 million
of customer securities directly with the Options Clearing Corporation to secure obligations and margin requirements under option contracts written by customers.
The Company enters into reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions to, among other things, acquire securities to cover short positions and settle other securities obligations, to accommodate customers' needs and to finance the Company's inventory positions. Except as described below, repurchase and reverse repurchase agreements, principally involving government and agency securities, are carried at amounts at which the securities subsequently will be resold or reacquired as specified in the respective agreements and include accrued interest. Repurchase and reverse repurchase agreements are presented on a net-by-counterparty basis, when the repurchase and reverse repurchase agreements are executed with the same counterparty, have the same explicit settlement date, are executed in accordance with a master netting arrangement, the securities underlying the repurchase and reverse repurchase agreements exist in "book entry" form and certain other requirements are met.
The following table presents a disaggregation of the gross obligation by the class of collateral pledged and the remaining contractual maturity of the repurchase agreements and securities loaned transactions as of
June 30, 2016
:
|
|
|
|
|
(Expressed in thousands)
|
|
|
Overnight and Open
|
Repurchase agreements:
|
|
U.S. Treasury and Agency securities
|
$
|
665,135
|
|
Securities loaned:
|
|
Equity securities
|
125,548
|
|
Gross amount of recognized liabilities for repurchase agreements and securities loaned
|
$
|
790,683
|
|
The following tables present the gross amounts and the offsetting amounts of reverse repurchase agreements, repurchase agreements, securities borrowed and securities loaned transactions as of
June 30, 2016
and
December 31, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2016
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset on
the Balance Sheet
|
|
|
|
Gross
Amounts of
Recognized
Assets
|
|
Gross
Amounts
Offset on the
Balance Sheet
|
|
Net Amounts
of Assets
Presented on
the Balance
Sheet
|
|
Financial
Instruments
|
|
Cash
Collateral
Received
|
|
Net Amount
|
Reverse repurchase agreements
|
$
|
232,223
|
|
|
$
|
(232,223
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Securities borrowed
(1)
|
216,419
|
|
|
—
|
|
|
216,419
|
|
|
(210,012
|
)
|
|
—
|
|
|
6,407
|
|
Total
|
$
|
448,642
|
|
|
$
|
(232,223
|
)
|
|
$
|
216,419
|
|
|
$
|
(210,012
|
)
|
|
$
|
—
|
|
|
$
|
6,407
|
|
|
|
(1)
|
Included in receivable from brokers, dealers and clearing organizations on the condensed consolidated balance sheet.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset on
the Balance Sheet
|
|
|
|
Gross
Amounts of
Recognized
Liabilities
|
|
Gross
Amounts
Offset in the
Balance Sheet
|
|
Net Amounts
of Liabilities
Presented on
the Balance
Sheet
|
|
Financial
Instruments
|
|
Cash
Collateral
Pledged
|
|
Net Amount
|
Repurchase agreements
|
$
|
665,135
|
|
|
$
|
(232,223
|
)
|
|
$
|
432,912
|
|
|
$
|
(425,411
|
)
|
|
$
|
—
|
|
|
$
|
7,501
|
|
Securities loaned
(2)
|
125,548
|
|
|
—
|
|
|
125,548
|
|
|
(123,587
|
)
|
|
—
|
|
|
1,961
|
|
Total
|
$
|
790,683
|
|
|
$
|
(232,223
|
)
|
|
$
|
558,460
|
|
|
$
|
(548,998
|
)
|
|
$
|
—
|
|
|
$
|
9,462
|
|
|
|
(2)
|
Included in payable to brokers, dealers and clearing organizations on the condensed consolidated balance sheet.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset on
the Balance Sheet
|
|
|
|
Gross
Amounts of
Recognized
Assets
|
|
Gross
Amounts
Offset in the
Balance Sheet
|
|
Net Amounts
of Assets
Presented on
the Balance
Sheet
|
|
Financial
Instruments
|
|
Cash
Collateral
Received
|
|
Net Amount
|
Reverse repurchase agreements
|
$
|
282,042
|
|
|
$
|
(75,543
|
)
|
|
$
|
206,499
|
|
|
$
|
(203,266
|
)
|
|
$
|
—
|
|
|
$
|
3,233
|
|
Securities borrowed
(1)
|
224,672
|
|
|
—
|
|
|
224,672
|
|
|
(219,099
|
)
|
|
—
|
|
|
5,573
|
|
Total
|
$
|
506,714
|
|
|
$
|
(75,543
|
)
|
|
$
|
431,171
|
|
|
$
|
(422,365
|
)
|
|
$
|
—
|
|
|
$
|
8,806
|
|
|
|
(1)
|
Included in receivable from brokers, dealers and clearing organizations on the condensed consolidated balance sheet.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset on
the Balance Sheet
|
|
|
|
Gross
Amounts of
Recognized
Liabilities
|
|
Gross
Amounts
Offset in the
Balance Sheet
|
|
Net Amounts
of Liabilities
Presented on
the Balance
Sheet
|
|
Financial
Instruments
|
|
Cash
Collateral
Pledged
|
|
Net Amount
|
Repurchase agreements
|
$
|
726,988
|
|
|
$
|
(75,543
|
)
|
|
$
|
651,445
|
|
|
$
|
(645,498
|
)
|
|
$
|
—
|
|
|
$
|
5,947
|
|
Securities loaned
(2)
|
130,658
|
|
|
—
|
|
|
130,658
|
|
|
(122,650
|
)
|
|
—
|
|
|
8,008
|
|
Total
|
$
|
857,646
|
|
|
$
|
(75,543
|
)
|
|
$
|
782,103
|
|
|
$
|
(768,148
|
)
|
|
$
|
—
|
|
|
$
|
13,955
|
|
|
|
(2)
|
Included in payable to brokers, dealers and clearing organizations on the condensed consolidated balance sheet.
|
Certain of the Company's repurchase agreements and reverse repurchase agreements are carried at fair value as a result of the Company's fair value option election. The Company elected the fair value option for those repurchase agreements and reverse repurchase agreements that do not settle overnight or have an open settlement date. The Company has elected the fair value option for these instruments to more accurately reflect market and economic events in its earnings and to mitigate a potential imbalance in earnings caused by using different measurement attributes (i.e. fair value versus carrying value) for certain assets and liabilities. At
June 30, 2016
, the Company did not have any reverse repurchase agreements and repurchase agreements that elected the fair value option.
The Company receives collateral in connection with securities borrowed and reverse repurchase agreement transactions and customer margin loans. Under many agreements, the Company is permitted to sell or re-pledge the securities received (e.g., use the securities to enter into securities lending transactions, or deliver to counterparties to cover short positions). At
June 30, 2016
, the fair value of securities received as collateral under securities borrowed transactions and reverse repurchase agreements was
$211.1 million
(
$217.0 million
at
December 31, 2015
) and
$232.4 million
(
$278.8 million
at
December 31, 2015
), respectively, of which the Company has sold and re-pledged approximately
$26.2 million
(
$36.0 million
at
December 31, 2015
) under securities loaned transactions and
$232.4 million
under repurchase agreements (
$278.8 million
at
December 31, 2015
).
The Company pledges certain of its securities owned for securities lending and repurchase agreements and to collateralize bank call loan transactions. The carrying value of pledged securities owned that can be sold or re-pledged by the counterparty was
$657.5 million
, as presented on the face of the condensed consolidated balance sheet at
June 30, 2016
(
$546.3 million
at
December 31, 2015
). The carrying value of securities owned by the Company that have been loaned or pledged to counterparties where those counterparties do not have the right to sell or re-pledge the collateral was
$173.0 million
at
June 30, 2016
(
$142.7 million
at
December 31, 2015
).
The Company manages credit exposure arising from repurchase and reverse repurchase agreements by, in appropriate circumstances, entering into master netting agreements and collateral arrangements with counterparties that provide the Company, in the event of a customer default, the right to liquidate and the right to offset a counterparty's rights and obligations. The Company manages market risk of repurchase agreements and securities loaned by monitoring the market value of collateral held and the market value of securities receivable from others. It is the Company's policy to request and obtain additional collateral when exposure to loss exists. In the event the counterparty is unable to meet its contractual obligation to return the securities, the Company may be exposed to off-balance sheet risk of acquiring securities at prevailing market prices.
Credit Concentrations
Credit concentrations may arise from trading, investing, underwriting and financing activities and may be impacted by changes in economic, industry or political factors. In the normal course of business, the Company may be exposed to risk in the event customers, counterparties including other brokers and dealers, issuers, banks, depositories or clearing organizations are unable to fulfill their contractual obligations. The Company seeks to mitigate these risks by actively monitoring exposures and obtaining collateral as deemed appropriate. Included in receivable from brokers, dealers and clearing organizations as of
June 30, 2016
are receivables from
two
major U.S. broker-dealers totaling approximately
$107.9 million
.
Warehouse Facilities
The Company reached an agreement with RBS Citizens, NA ("Citizens") that was announced in July 2012, whereby the Company, through OPY Credit Corp., will introduce lending opportunities to Citizens, which Citizens can elect to accept and in which the Company will participate in the fees earned from any related commitment by Citizens. The Company can also in certain circumstances assume a portion of Citizen's syndication and lending risk under such loans, and if it does so it shall be obligated to secure such obligations via a cash deposit determined through risk-based formulas. Neither the Company nor Citizens is obligated to make any specific loan or to commit any minimum amount of lending capacity to the relationship. The agreement also calls for Citizens and the Company at their option to jointly participate in the arrangement of various loan syndications. At
June 30, 2016
, there were
no
loans in place.
The Company is obligated to settle transactions with brokers and other financial institutions even if its clients fail to meet their obligations to the Company. Clients are required to complete their transactions on the settlement date, generally
one
to
three
business days after the trade date. If clients do not fulfill their contractual obligations, the Company may incur losses. The Company has clearing/participating arrangements with the National Securities Clearing Corporation ("NSCC"), the Fixed Income Clearing Corporation ("FICC"), R.J. O'Brien & Associates (commodities transactions), Mortgage-Backed Securities and Clearing Corporation and others. With respect to its business in reverse repurchase and repurchase agreements, substantially all open contracts at
June 30, 2016
are with the FICC. In addition, the Company began clearing its non-U.S. international equities business carried on by Oppenheimer Europe Ltd. through BNP Paribas Securities Services and Oppenheimer through BNP Securities Corp. The clearing organizations have the right to charge the Company for losses that result from a client's failure to fulfill its contractual obligations. Accordingly, the Company has credit exposures with these clearing brokers. The clearing brokers can re-hypothecate the securities held on behalf of the Company. As the right to charge the Company has no maximum amount and applies to all trades executed through the clearing brokers, the Company believes there is no maximum amount assignable to this right. At
June 30, 2016
, the Company had recorded no liabilities with regard to this right. The Company's policy is to monitor the credit standing of the clearing brokers and banks with which it conducts business.
OMHHF, which historically engaged in commercial mortgage origination and servicing, has obtained an uncommitted warehouse facility line through PNC Bank ("PNC") under which OMHHF pledges FHA-guaranteed mortgages for a period averaging
15
business days and PNC provides a facility that allows OMHHF to fund the loan at the closing table. Warehouse payable represents the warehouse line amount outstanding with PNC and is included in liabilities held for sale on the condensed consolidated balance sheet and cash flows from operating activities on the condensed consolidated statement of cash flows. OMHHF repays PNC upon the securitization of the mortgage by GNMA and the delivery of the security to the counter-party for payment pursuant to a contemporaneous sale on the date the mortgage is securitized. At
June 30, 2016
, OMHHF had
$1.5 million
(
$54.3 million
at
December 31, 2015
) outstanding under the warehouse facility line at a variable interest rate of
one month LIBOR
plus a spread. The Company earns a spread between the interest earned on the loans originated by the Company and the interest incurred on amounts drawn from the warehouse facility. Interest expense for the three and
six
months ended
June 30, 2016
and was
$159,000
and
$359,000
, respectively (
$385,000
and
$510,000
, respectively, for the three and six months ended June 30, 2015).
As discussed in Note 6, Fair value measurements, the Company enters into TBA sale contracts to offset exposures related to commitments to provide funding for FHA loans at OMHHF. In the normal course of business, the Company may be exposed to the risk that counterparties to these TBA sale contracts are unable to fulfill their contractual obligations.
8. Variable interest entities ("VIEs")
The Company's policy is to consolidate all subsidiaries in which it has a controlling financial interest, as well as any VIEs where the Company is deemed to be the primary beneficiary, when it has the power to make the decisions that most significantly affect the economic performance of the VIE and has the obligation to absorb significant losses or the right to receive benefits that could potentially be significant to the VIE.
For funds that the Company has concluded are not VIEs, the Company then evaluates whether the fund is a partnership or similar entity. If the fund is a partnership or similar entity, the Company evaluates the fund under the partnership consolidation guidance. Pursuant to that guidance, the Company consolidates funds in which it is the general partner, unless presumption of control by the Company can be overcome. This presumption is overcome only when unrelated investors in the fund have the substantive ability to liquidate the fund or otherwise remove the Company as the general partner without cause, based on a simple majority vote of unaffiliated investors, or have other substantive participating rights. If the presumption of control can be overcome, the Company accounts for its interest in the fund pursuant to the equity method of accounting.
The Company serves as general partner of hedge funds and private equity funds that were established for the purpose of providing investment alternatives to both its institutional and qualified retail clients. The Company holds variable interests in these funds as a result of its right to receive management and incentive fees. The Company's investment in and additional capital commitments to these hedge funds and private equity funds are also considered variable interests. The Company's additional capital commitments are subject to call at a later date and are limited in amount.
The Company assesses whether it is the primary beneficiary of the hedge funds and private equity funds in which it holds a variable interest in the form of general and limited partner interests. In each instance, the Company has determined that it is not the primary beneficiary and therefore need not consolidate the hedge funds or private equity funds. The subsidiaries' general and limited partnership interests, additional capital commitments, and management fees receivable represent its maximum exposure to loss. The subsidiaries' general partnership and limited partnership interests and management fees receivable are included in other assets on the condensed consolidated balance sheet.
The following tables set forth the total VIE assets, the carrying value of the subsidiaries' variable interests, and the Company's maximum exposure to loss in Company-sponsored non-consolidated VIEs in which the Company holds variable interests and other non-consolidated VIEs in which the Company holds variable interests at
June 30, 2016
and
December 31, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2016
|
|
|
|
|
|
|
|
Maximum
Exposure
to Loss in
Non-consolidated
VIEs
|
|
|
|
Carrying Value of the
|
|
|
|
|
Total
|
|
Company's Variable Interest
|
|
Capital
|
|
|
VIE Assets
(1)
|
|
Assets
(2)
|
|
Liabilities
|
|
Commitments
|
|
Hedge funds
|
$
|
320,101
|
|
|
$
|
656
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
656
|
|
Private equity funds
|
37,100
|
|
|
15
|
|
|
—
|
|
|
2
|
|
|
17
|
|
Total
|
$
|
357,201
|
|
|
$
|
671
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
673
|
|
|
|
(1)
|
Represents the total assets of the VIEs and does not represent the Company's interests in the VIEs.
|
|
|
(2)
|
Represents the Company's interests in the VIEs and is included in other assets on the condensed consolidated balance sheet.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2015
|
|
|
|
|
|
|
|
|
|
Maximum
Exposure
to Loss in
Non-consolidated
VIEs
|
|
|
|
Carrying Value of the
|
|
|
|
|
Total
|
|
Company's Variable Interest
|
|
Capital
|
|
|
VIE Assets
(1)
|
|
Assets
(2)
|
|
Liabilities
|
|
Commitments
|
|
Hedge funds
|
$
|
1,775,503
|
|
|
$
|
1,354
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,354
|
|
Private equity funds
|
54,800
|
|
|
27
|
|
|
—
|
|
|
2
|
|
|
29
|
|
Total
|
$
|
1,830,303
|
|
|
$
|
1,381
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
1,383
|
|
|
|
(1)
|
Represents the total assets of the VIEs and does not represent the Company's interests in the VIEs.
|
|
|
(2)
|
Represents the Company's interests in the VIEs and is included in other assets on the condensed consolidated balance sheet.
|
9. Commercial mortgage banking
The Commercial Mortgage Banking segment, which operates out of OMHHF, became a discontinued operation during second quarter of 2016. See Note 3 for further details.
Loan Origination Fees
OMHHF recognizes origination fees and other direct origination costs when it enters into a rate lock commitment with the borrower. The origination fees and other direct origination costs are recognized when OMHHF enters into a commitment to sell loans to third parties. In accordance with Housing and Urban Development ("HUD") guidelines, OMHHF will, with HUD's approval and for certain loan programs, apply the premium income towards the payment of prepayment costs that customers will incur on their prior mortgage. These costs are netted with revenues from premium income that are otherwise earned from these loan refinancings or modifications. Prepayment costs recorded as contra-revenue against premium income were
$5.3 million
and
$6.5 million
for the
three and six
months ended
June 30, 2016
, respectively (
$7.8 million
and
$16.0 million
for the
three and six
months ended
June 30, 2015
, respectively).
Funding Commitments
OMHHF provides its clients with commitments to fund FHA-insured permanent or constructions loans. Upon providing these commitments to fund, OMHHF enters into TBA sale contracts directly or indirectly with counterparties to offset its exposures related to these funding commitments. See Note 6, Fair value measurements, for more information.
Loans Held For Sale
OMHHF advances funds from its own cash reserves in addition to obtaining financing through warehouse facilities in order to fund initial loan closing and subsequent construction loan draws. Prior to the GNMA securitization of a loan, a loan held for sale is recorded on the condensed consolidated balance sheet. Loans held for sale are recorded at fair value through earnings.
Escrows Held in Trust
Custodial escrow accounts relating to loans serviced by OMHHF totaled
$27.6 million
at
June 30, 2016
(
$421.5 million
at
December 31, 2015
). These amounts are not included on the condensed consolidated balance sheet as such amounts are not OMHHF’s assets. Certain cash deposits at financial institutions exceeded the FDIC-insured limits or other institutionally provided insurance. The combined uninsured balance with relation to escrow accounts at
June 30, 2016
was approximately
$15.7 million
. OMHHF places these deposits with major financial institutions where it believes the risk is minimal and that meet or exceed GNMA required credit ratings.
The total unpaid principal balance of loans the Company was servicing for various institutional investors as of
June 30, 2016
and
December 31, 2015
was as follows:
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
As of June 30, 2016
|
|
As of December 31, 2015
|
Unpaid principal balance of loans
|
$
|
196,726
|
|
|
$
|
3,974,292
|
|
Mortgage Servicing Rights (“MSRs”)
OMHHF purchases commitments or originates mortgage loans that are sold and securitized into GNMA mortgage backed securities. OMHHF retains the servicing responsibilities for the loans securitized and recognizes either a MSR asset or a MSR liability for that servicing contract. OMHHF receives monthly servicing fees equal to a percentage of the outstanding principal balance of the loans being serviced.
OMHHF estimates the initial fair value of the servicing rights based on the present value of future net servicing income, adjusted for factors such as discount rate and prepayment. OMHHF uses the amortization method for subsequent measurement, subject to annual impairment. See Note 6, Fair value measurements, for more information.
The fair value of the servicing rights on the loan portfolio was
$6.2 million
and
$41.8 million
at
June 30, 2016
and
December 31, 2015
, respectively (carrying value of
$2.0 million
and
$28.2 million
at
June 30, 2016
and
December 31, 2015
, respectively). The following tables summarize the changes in carrying value of MSRs for the
six
months ended
June 30, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
For the Six Months Ended June 30,
|
|
2016
|
|
2015
|
Balance at beginning of period
|
$
|
28,168
|
|
|
$
|
30,140
|
|
Originations
|
2,311
|
|
|
3,491
|
|
Purchases
|
478
|
|
|
653
|
|
Disposals
|
(1,753
|
)
|
|
—
|
|
Sale of MSRs
|
(25,987
|
)
|
|
(4,569
|
)
|
Amortization expense
|
(1,224
|
)
|
|
(495
|
)
|
Balance at end of period
|
$
|
1,993
|
|
|
$
|
29,220
|
|
Servicing rights are amortized using the straight-line method over
10
years. Estimated amortization expense for the next five years and thereafter is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
Originated MSRs
|
|
Purchased MSRs
|
|
Total MSRs
|
2016
|
$
|
97
|
|
|
$
|
19
|
|
|
$
|
116
|
|
2017
|
195
|
|
|
37
|
|
|
232
|
|
2018
|
195
|
|
|
37
|
|
|
232
|
|
2019
|
195
|
|
|
37
|
|
|
232
|
|
2020
|
195
|
|
|
37
|
|
|
232
|
|
Thereafter
|
791
|
|
|
158
|
|
|
949
|
|
|
$
|
1,668
|
|
|
$
|
325
|
|
|
$
|
1,993
|
|
The Company receives fees during the course of servicing the mortgage loans. The fees for the
three and six
months ended
June 30, 2016
and
2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Servicing fees
|
$
|
1,409
|
|
|
$
|
1,454
|
|
|
$
|
2,864
|
|
|
$
|
2,921
|
|
Ancillary fees
|
49
|
|
|
93
|
|
|
154
|
|
|
194
|
|
Total MSR fees
|
$
|
1,458
|
|
|
$
|
1,547
|
|
|
$
|
3,018
|
|
|
$
|
3,115
|
|
10. Long-term debt
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
Issued
|
Maturity Date
|
|
At June 30, 2016
|
|
At December 31, 2015
|
Senior Secured Notes
|
4/15/2018
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Unamortized Debt Issuance Costs
|
|
|
890
|
|
|
1,132
|
|
|
|
|
$
|
149,110
|
|
|
$
|
148,868
|
|
On
April 12, 2011
, the Company completed the private placement of
$200 million
in aggregate principal amount of
8.75%
Senior Secured Notes due April 15, 2018 (the "Notes") at par. The interest on the Notes is payable
semi-annually
on April 15
th
and October 15
th
. On April 15, 2014, the Company retired early a total of
$50.0 million
(
25%
) of the Notes.
The indenture for the Notes contains covenants which place restrictions on the incurrence of indebtedness, the payment of dividends, sale of assets, mergers and acquisitions and the granting of liens. The Notes provide for events of default including nonpayment, misrepresentation, breach of covenants and bankruptcy. The Company’s obligations under the Notes are guaranteed, subject to certain limitations. These guarantees may be shared, on a senior basis, under certain circumstances, with newly incurred debt outstanding in the future. At
June 30, 2016
, the Company was in compliance with all of its covenants.
As discussed in Note 3, "Discontinued operations", the Company has sold most of the assets of its Commercial Mortgage Banking business which operates out of its OMHHF subsidiary. Under the indenture for the Notes, OMHHF is a restricted subsidiary and the Company has pledged its equity interests in OMHHF as collateral for the Notes. Net proceeds received by the Company and restricted subsidiaries from asset sales must either be used within twelve months from the date to make an offer to repurchase the Notes or to make an investment in Replacement Assets, as defined in the indenture, or if any such proceeds are not so applied, and the total thereof is at least
$15.0 million
, the Company must offer to purchase Notes at par with an aggregate principal amount equal to the amount of such proceeds.
Interest expense for both the
three and six
months ended
June 30, 2016
and
2015
on the Notes was
$3.3 million
and
$6.6 million
, respectively.
11. Share capital
The Company's authorized share capital consists of (a)
50,000,000
shares of Preferred Stock, par value
$0.001
per share; (b)
50,000,000
shares of Class A non-voting common stock ("Class A Stock"), par value
$0.001
per share; and (c)
99,665
shares of Class B voting common stock ("Class B Stock"), par value
$0.001
per share.
No
Preferred Stock has been issued.
99,665
shares of Class B Stock have been issued and are outstanding.
The Class A Stock and the Class B Stock are equal in all respects except that the Class A Stock is non-voting.
The following table reflects changes in the number of shares of Class A Stock outstanding for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Class A Stock outstanding, beginning of period
|
13,263,532
|
|
|
13,634,831
|
|
|
13,238,486
|
|
|
13,530,688
|
|
Issued pursuant to shared-based compensation plans
|
7,163
|
|
|
15,318
|
|
|
272,483
|
|
|
119,461
|
|
Repurchased and canceled pursuant to the stock buy-back
|
(10,980
|
)
|
|
—
|
|
|
(251,254
|
)
|
|
—
|
|
Class A Stock outstanding, end of period
|
13,259,715
|
|
|
13,650,149
|
|
|
13,259,715
|
|
|
13,650,149
|
|
Stock buy-back
On September 15, 2015, the Company announced that its board of directors approved a share repurchase program that authorizes the Company to purchase up to
665,000
shares of the Company's Class A Stock, representing approximately
5%
of its
13,348,369
then issued and outstanding shares of Class A Stock ("New Program"). This authorization replaces the share repurchase program covering up to
675,000
shares of the Company's Class A Stock, which was announced on October 7, 2011 ("Previous Program"), pursuant to which
322,177
shares of the Company's Class A Stock were repurchased and canceled prior to December 31, 2014. During the year ended December 31, 2015, the Company purchased and canceled an additional
328,844
shares of Class A Stock for a total consideration of
$6.6 million
(
$20.12
per share) under the Previous Program. The
23,979
remaining shares available under the Previous Program have been replaced by the shares available under the New Program.
During the three and
six
months ended
June 30, 2016
, the Company purchased and canceled an aggregate of
10,980
and
251,254
shares of Class A Stock, respectively, for a total consideration of
$163,900
(
$14.93
per share) and
$3.8 million
(
$15.12
per share), respectively, under the New Program. As of
June 30, 2016
,
318,864
shares were available to be purchased under the New Program.
Any such share purchases will be made by the Company from time to time in the open market at the prevailing open market price using cash on hand, in compliance with the applicable rules and regulations of the New York Stock Exchange and federal and state securities laws and the terms of the Company's senior secured debt. All shares purchased will be canceled. The share repurchase program is expected to continue indefinitely. The timing and amounts of any purchases will be based on market conditions and other factors including price, regulatory requirements and capital availability. The share repurchase program does not obligate the Company to repurchase any dollar amount or number of Class A Stock. Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice.
12. Contingencies
Many aspects of the Company's business involve substantial risks of liability. In the normal course of business, the Company has been named as defendant or co-defendant in various legal actions, including arbitrations, class actions, and other litigation, creating substantial exposure. Certain of the actual or threatened legal matters include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. These proceedings arise primarily from securities brokerage, asset management and investment banking activities. The Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding the Company's business which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. The investigations include, among other things, inquiries from the Securities and Exchange Commission (the "SEC"), the Financial Industry Regulatory Authority ("FINRA") and various state regulators.
The Company accrues for estimated loss contingencies related to legal and regulatory matters when available information indicates that it is probable a liability had been incurred at the date of the condensed consolidated financial statements and the Company can reasonably estimate the amount of that loss. In many proceedings, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is often not possible to reasonably estimate the size of the possible loss or range of loss or possible additional losses or range of additional losses.
For certain legal and regulatory proceedings, the Company cannot reasonably estimate such losses, particularly for proceedings that are in their early stages of development or where plaintiffs seek substantial, indeterminate or special damages. Numerous issues may need to be reviewed, analyzed or resolved, including through potentially lengthy discovery and determination of important factual matters, and by addressing novel or unsettled legal questions relevant to the proceedings in question, before a loss or range of loss or additional loss can be reasonably estimated for any proceeding. Even after lengthy review and analysis, the Company, in many legal and regulatory proceedings, may not be able to reasonably estimate possible losses or range of loss.
For certain other legal and regulatory proceedings, the Company can estimate possible losses, or range of loss in excess of amounts accrued, but does not believe, based on current knowledge and after consultation with counsel, that such losses individually, or in the aggregate, will have a material adverse effect on the Company's condensed consolidated financial statements as a whole.
For legal and regulatory proceedings where there is at least a reasonable possibility that a loss or an additional loss may be incurred, the Company estimates a range of aggregate loss in excess of amounts accrued of
$0
to
$54.0 million
. This estimated aggregate range is based upon currently available information for those legal proceedings in which the Company is involved, where an estimate for such losses can be made. For certain cases, the Company does not believe that an estimate can currently be made. The foregoing estimate is based on various factors, including the varying stages of the proceedings (including the fact that many are currently in preliminary stages), the numerous yet-unresolved issues in many of the proceedings and the attendant uncertainty of the various potential outcomes of such proceedings. Accordingly, the Company's estimate will change from time to time, and actual losses may be more than the current estimate.
In February 2010, Oppenheimer finalized settlements with the Regulators concluding investigations and administrative proceedings by the Regulators concerning Oppenheimer's marketing and sale of ARS. Pursuant to the settlements with the Regulators, Oppenheimer agreed to extend offers to repurchase ARS from certain of its clients subject to certain terms and conditions more fully described below. As of
June 30, 2016
, the Company did not have any outstanding ARS purchase commitments related to the settlements with the Regulators. In addition to the settlements with the Regulators, Oppenheimer has also reached settlements of and received adverse awards in legal proceedings with various clients where the Company is obligated to purchase ARS. Pursuant to completed Purchase Offers (as defined) under the settlements with the Regulators and client related legal settlements and awards to purchase ARS, as of
June 30, 2016
, the Company purchased and holds (net of redemptions) approximately
$90.7 million
in ARS from its clients. In addition, the Company is committed to purchase another
$26.9 million
in ARS from clients through 2020 under legal settlements and awards.
The Company's purchases of ARS from its clients holding ARS eligible for repurchase will, subject to the terms and conditions of the settlements with the Regulators, continue on a periodic basis. Pursuant to these terms and conditions, the Company is required to conduct a financial review every six months, until the Company has extended Purchase Offers to all Eligible Investors (as defined), to determine whether it has funds available, after giving effect to the financial and regulatory capital constraints applicable to the Company, to extend additional Purchase Offers. The financial review is based on the Company's operating results, regulatory net capital, liquidity, and other ARS purchase commitments outstanding under legal settlements and awards (described below). There are no predetermined quantitative thresholds or formulas used for determining the final agreed upon amount for the Purchase Offers. Upon completion of the financial review, the Company first meets with its primary regulator, FINRA, and then with representatives of the NYAG and other regulators to present the results of the review and to finalize the amount of the next Purchase Offer. Various offer scenarios are discussed in terms of which Eligible Investors should receive a Purchase Offer. The primary criteria to date in terms of determining which Eligible Investors should receive a Purchase Offer has been the amount of household account equity each Eligible Investor had with the Company in February 2008. Once various Purchase Offer scenarios have been discussed, the regulators, not the Company, make the final determination of which Purchase Offer scenario to implement. The terms of settlements provide that the amount of ARS to be purchased during any period shall not risk placing the Company in violation of regulatory requirements.
Eligible Investors for future buybacks continued to hold approximately
$34.3 million
of ARS principal value as of
June 30, 2016
. It is reasonably possible that some ARS Purchase Offers will need to be extended to Eligible Investors holding ARS prior to redemptions (or tender offers) by issuers of the full amount that remains outstanding. The potential additional losses that may result from entering into ARS purchase commitments with Eligible Investors for future buybacks represents the estimated difference between the principal value and the fair value. It is possible that the Company could sustain a loss of all or substantially all of the principal value of ARS still held by Eligible Investors but such an outcome is highly unlikely. The amount of potential additional losses resulting from entering into these commitments cannot be reasonably estimated due to the uncertainties surrounding the amounts and timing of future buybacks that result from the six-month financial review and the amounts, scope, and timing of future issuer redemptions and tender offers of ARS held by Eligible Investors. The range of potential additional losses related to valuation adjustments is between
$0
and the amount of the estimated differential between the principal value and the fair value of ARS held by Eligible Investors for future buybacks that were not yet purchased or committed to be purchased by the Company at any point in time. The range of potential additional losses described here is not included in the estimated range of aggregate loss in excess of amounts accrued for legal and regulatory proceedings described above.
Outside of the settlements with the Regulators, the Company has also reached various legal settlements with clients and received unfavorable legal awards requiring it to purchase ARS. The terms and conditions including the ARS amounts committed to be purchased under legal settlements and awards are based on the specific facts and circumstances of each legal proceeding. In most instances, the purchase commitments are in increments and extend over a period of time. At
June 30, 2016
, no ARS purchase commitments related to legal settlements extended past 2020.
The Company has sought, with limited success, financing from a number of sources to try to find a means for all its clients to find liquidity from their ARS holdings and will continue to do so. There can be no assurance that the Company will be successful in finding a liquidity solution for all its clients' ARS.
On January 27, 2015, the SEC approved an Offer of Settlement from Oppenheimer and issued an Order Instituting Administrative and Cease and Desist Proceedings (the "Order"). Pursuant to the Order, Oppenheimer was ordered to (i) cease and desist from committing or causing any violations of the relevant provisions of the federal securities laws; (ii) be censured; (iii) pay to the SEC
$10.0 million
comprised of
$4.2 million
in disgorgement,
$753,500
in prejudgment interest and
$5.1 million
in civil penalties; and (iv) retain an independent consultant to review Oppenheimer's policies and procedures relating to anti-money laundering and Section 5 of the Securities Act.
Oppenheimer made a payment of
$5.0 million
to the SEC on February 17, 2015 and agreed to make a second payment of
$5.0 million
to the SEC before January 27, 2017. On the same date the Order was issued, a division of the United States Department of the Treasury ("FinCEN") issued a Civil Monetary Assessment (the "Assessment") against Oppenheimer relating to potential violations of the Bank Secrecy Act and the regulations promulgated thereunder related primarily to, in the Company's view, the SEC matter discussed immediately above. Pursuant to the terms of the Assessment, Oppenheimer admitted that it violated the Bank Secrecy Act and consented to the payment of a civil money penalty, which, as a result of the payments to the SEC described above, obligates Oppenheimer to make an aggregate payment of
$10.0 million
to FinCEN. On February 9, 2015, Oppenheimer made a payment of
$5.0 million
to FinCEN and has agreed to make a second payment of
$5.0 million
before January 27, 2017. As of
June 30, 2016
, the Company was fully reserved for the remaining
$10.0 million
related to the aforementioned matters.
Since early 2014, Oppenheimer has been responding to information requests from FINRA regarding the supervision of one of its former financial advisers who was indicted by the United States Attorney's Office for the District of New Jersey in March 2014 on allegations of insider trading. In August 2014, Oppenheimer received information requests from the SEC regarding supervision of the same financial adviser. A number of Oppenheimer employees have provided on-the-record testimony in connection with the SEC inquiry. Oppenheimer is continuing to cooperate with both the FINRA and SEC inquiries.
For several quarters, Oppenheimer has been responding to information requests from FINRA regarding the sale of leveraged and inverse exchange traded funds ("ETFs"). On June 7, 2016, Oppenheimer entered into a settlement with FINRA of its inquiry pursuant to which Oppenheimer consented to a censure and to pay a fine of
$2.3 million
and to pay restitution to eligible clients of approximately
$717,000
. All amounts due under the settlement had been previously accrued.
13. Regulatory requirements
The Company's U.S. broker dealer subsidiaries, Oppenheimer and Freedom, are subject to the uniform net capital requirements of the SEC under Rule 15c3-1 (the "Rule") promulgated under the Exchange Act. Oppenheimer computes its net capital requirements under the alternative method provided for in the Rule which requires that Oppenheimer maintain net capital equal to
two
percent of aggregate customer-related debit items, as defined in SEC Rule 15c3-3. At
June 30, 2016
, the net capital of Oppenheimer as calculated under the Rule was
$120.5 million
or
11.05%
of Oppenheimer's aggregate debit items. This was
$98.7 million
in excess of the minimum required net capital at that date. Freedom computes its net capital requirement under the basic method provided for in the Rule, which requires that Freedom maintain net capital equal to the greater of
$100,000
or 6-2/3% of aggregate indebtedness, as defined. At
June 30, 2016
, Freedom had net capital of
$5.7 million
, which was
$5.6 million
in excess of the
$100,000
required to be maintained at that date.
New Basel III requirements being implemented in the European Union have changed how capital adequacy is reported under the Capital Requirements Directive (CRD IV), effective January 1, 2014, for Oppenheimer Europe Ltd. At
June 30, 2016
, the capital required and held under CRD IV was as follows:
|
|
•
|
Common Equity Tier 1 ratio
10.72%
(required
4.5%
);
|
|
|
•
|
Tier 1 Capital ratio
10.72%
(required
6.0%
); and
|
|
|
•
|
Total Capital ratio
12.14%
(required
8.0%
).
|
At
June 30, 2016
, the regulatory capital of Oppenheimer Investments Asia Limited was
$1.9 million
, which was
$1.5 million
in excess of the
$387,000
required to be maintained on that date. Oppenheimer Investments Asia Limited computes its regulatory capital pursuant to the requirements of the Securities and Futures Commission in Hong Kong.
14. Segment information
The Company has determined its reportable segments based on the Company's method of internal reporting, which disaggregates its retail business by branch and its proprietary and investment banking businesses by product. The Company evaluates the performance of its segments and allocates resources to them based upon profitability.
The Company's reportable segments are:
Private Client
—
includes commissions and a proportionate amount of fee income earned on assets under management ("AUM"), net interest earnings on client margin loans and cash balances, fees from money market funds, net contributions from stock loan activities and financing activities, and direct expenses associated with this segment;
Asset Management
—includes a proportionate amount of fee income earned on AUM from investment management services of Oppenheimer Asset Management Inc. Oppenheimer's asset management divisions employ various programs to professionally manage client assets either in individual accounts or in funds, and includes direct expenses associated with this segment;
Capital Markets
—includes investment banking, institutional equities sales, trading, and research, taxable fixed income sales, trading, and research, public finance and municipal trading, as well as the Company's operations in the United Kingdom, Hong Kong and Israel, and direct expenses associated with this segment; and
Corporate/Other
—the Company does not allocate costs associated with certain infrastructure support groups that are centrally managed for its reportable segments. These areas include, but are not limited to, legal, compliance, operations, accounting, and internal audit. Costs associated with these groups are separately reported in a Corporate/Other category and primarily include compensation and benefits.
The Commercial Mortgage Banking segment became a discontinued segment during second quarter of 2016. See Note 3 for further details.
The table below presents information about the reported revenue and net income before taxes from continuing operations of the Company for the
three and six
months ended
June 30, 2016
and
2015
. Asset information by reportable segment is not reported, since the Company does not produce such information for internal use by the chief operating decision maker.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenue
|
|
|
|
|
|
|
|
Private client
(1)
|
$
|
121,358
|
|
|
$
|
133,783
|
|
|
$
|
248,902
|
|
|
$
|
273,715
|
|
Asset management
(1)
|
22,770
|
|
|
25,344
|
|
|
45,744
|
|
|
49,805
|
|
Capital markets
|
65,524
|
|
|
69,531
|
|
|
126,589
|
|
|
141,697
|
|
Corporate/Other
|
2,422
|
|
|
(699
|
)
|
|
5,795
|
|
|
(83
|
)
|
Total
|
$
|
212,074
|
|
|
$
|
227,959
|
|
|
$
|
427,030
|
|
|
$
|
465,134
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes from c
ontinuing operations
|
|
|
|
|
|
|
Private client
(1)
|
$
|
14,345
|
|
|
$
|
13,402
|
|
|
$
|
30,662
|
|
|
$
|
30,159
|
|
Asset management
(1)
|
5,703
|
|
|
7,801
|
|
|
12,471
|
|
|
15,687
|
|
Capital markets
|
4,045
|
|
|
3,623
|
|
|
(2,753
|
)
|
|
10,358
|
|
Corporate/Other
|
(29,339
|
)
|
|
(25,927
|
)
|
|
(52,966
|
)
|
|
(51,491
|
)
|
Total
|
$
|
(5,246
|
)
|
|
$
|
(1,101
|
)
|
|
$
|
(12,586
|
)
|
|
$
|
4,713
|
|
(1) Asset management fees are allocated
22.5%
to the Asset Management and
77.5%
to the Private Client segments.
Revenue, from continuing operations, classified by the major geographic areas in which it was earned for the
three and six
months ended
June 30, 2016
and
2015
, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Americas
|
$
|
202,821
|
|
|
$
|
218,748
|
|
|
$
|
406,290
|
|
|
$
|
443,393
|
|
Europe/Middle East
|
8,440
|
|
|
8,332
|
|
|
19,032
|
|
|
19,304
|
|
Asia
|
813
|
|
|
879
|
|
|
1,708
|
|
|
2,437
|
|
Total
|
$
|
212,074
|
|
|
$
|
227,959
|
|
|
$
|
427,030
|
|
|
$
|
465,134
|
|
15. Subsequent events
On July 21, 2016, the Company, through its OMHHF subsidiary, entered into an agreement with Berkeley Point Capital LLC to sell its entire portfolio of construction loans including the associated servicing rights for cash consideration of
$3.7 million
.
On
July 29, 2016
, the Company announced a quarterly dividend in the amount of
$0.11
per share, payable on
August 26, 2016
to holders of Class A Stock and Class B Stock of record on
August 12, 2016
.
16. Condensed consolidating financial information
The Company's Notes are jointly and severally and fully and unconditionally guaranteed on a senior basis by E.A. Viner International Co. and Viner Finance Inc. (together, the "Guarantors"), unless released as described below. Each of the Guarantors is
100%
owned by the Company. The indenture for the Notes contains covenants with restrictions which are discussed in Note 10. The following condensed consolidating financial information presents the financial position, results of operations and cash flows of the Company (referred to as "Parent" for purposes of this Note only), the Guarantor subsidiaries, the Non-Guarantor subsidiaries and elimination entries necessary to consolidate the Company.
Each Guarantor will be automatically and unconditionally released and discharged upon: the sale, exchange or transfer of the capital stock of a Guarantor and the Guarantor ceasing to be a direct or indirect subsidiary of the Company if such sale does not constitute an asset sale under the indenture for the Notes or does not constitute an asset sale effected in compliance with the asset sale and merger covenants of the indenture for the Notes; a Guarantor being dissolved or liquidated; a Guarantor being designated unrestricted in compliance with the applicable provisions of the Notes; or the exercise by the Company of its legal defeasance option or covenant defeasance option or the discharge of the Company's obligations under the indenture for the Notes in accordance with the terms of such indenture.
OPPENHEIMER HOLDINGS INC.
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
Parent
|
|
Guarantor
subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
606
|
|
|
$
|
525
|
|
|
$
|
106,406
|
|
|
$
|
—
|
|
|
$
|
107,537
|
|
Deposits with clearing organizations
|
—
|
|
|
—
|
|
|
42,910
|
|
|
—
|
|
|
42,910
|
|
Receivable from brokers, dealers and clearing organizations
|
—
|
|
|
—
|
|
|
315,308
|
|
|
—
|
|
|
315,308
|
|
Receivable from customers, net of allowance for credit losses of $2,543
|
—
|
|
|
—
|
|
|
780,670
|
|
|
—
|
|
|
780,670
|
|
Income tax receivable
|
39,056
|
|
|
27,984
|
|
|
—
|
|
|
(49,506
|
)
|
|
17,534
|
|
Securities owned, including amounts pledged of $657,527, at fair value
|
—
|
|
|
1,261
|
|
|
950,645
|
|
|
—
|
|
|
951,906
|
|
Notes receivable, net of accumulated amortization and
allowance for uncollectibles of $61,671 and $8,062,
respectively
|
—
|
|
|
—
|
|
|
33,012
|
|
|
—
|
|
|
33,012
|
|
Office facilities, net of accumulated depreciation of $107,810
|
—
|
|
|
21,274
|
|
|
6,606
|
|
|
—
|
|
|
27,880
|
|
Assets held for sale
|
—
|
|
|
—
|
|
|
21,764
|
|
|
—
|
|
|
21,764
|
|
Subordinated loan receivable
|
—
|
|
|
112,558
|
|
|
—
|
|
|
(112,558
|
)
|
|
—
|
|
Intangible assets
|
—
|
|
|
—
|
|
|
31,700
|
|
|
—
|
|
|
31,700
|
|
Goodwill
|
—
|
|
|
—
|
|
|
137,889
|
|
|
—
|
|
|
137,889
|
|
Other assets
|
100
|
|
|
2,502
|
|
|
105,017
|
|
|
—
|
|
|
107,619
|
|
Deferred tax assets
|
48
|
|
|
309
|
|
|
39,147
|
|
|
(39,504
|
)
|
|
—
|
|
Investment in subsidiaries
|
582,743
|
|
|
522,841
|
|
|
—
|
|
|
(1,105,584
|
)
|
|
—
|
|
Intercompany receivables
|
45,929
|
|
|
29,362
|
|
|
—
|
|
|
(75,291
|
)
|
|
—
|
|
Total assets
|
$
|
668,482
|
|
|
$
|
718,616
|
|
|
$
|
2,571,074
|
|
|
$
|
(1,382,443
|
)
|
|
$
|
2,575,729
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Drafts payable
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,759
|
|
|
$
|
—
|
|
|
$
|
26,759
|
|
Bank call loans
|
—
|
|
|
—
|
|
|
151,900
|
|
|
—
|
|
|
151,900
|
|
Payable to brokers, dealers and clearing organizations
|
—
|
|
|
—
|
|
|
172,362
|
|
|
—
|
|
|
172,362
|
|
Payable to customers
|
—
|
|
|
—
|
|
|
596,441
|
|
|
—
|
|
|
596,441
|
|
Securities sold under agreements to repurchase
|
—
|
|
|
—
|
|
|
432,912
|
|
|
—
|
|
|
432,912
|
|
Securities sold, but not yet purchased, at fair value
|
—
|
|
|
—
|
|
|
259,032
|
|
|
—
|
|
|
259,032
|
|
Liabilities held for sale
|
—
|
|
|
—
|
|
|
36,490
|
|
|
—
|
|
|
36,490
|
|
Accrued compensation
|
—
|
|
|
—
|
|
|
108,097
|
|
|
—
|
|
|
108,097
|
|
Accounts payable and other liabilities
|
3,020
|
|
|
35,089
|
|
|
72,258
|
|
|
—
|
|
|
110,367
|
|
Income tax payable
|
2,440
|
|
|
22,189
|
|
|
24,877
|
|
|
(49,506
|
)
|
|
—
|
|
Senior secured notes, net of debt issuance costs of $890
|
149,110
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
149,110
|
|
Subordinated indebtedness
|
—
|
|
|
—
|
|
|
112,558
|
|
|
(112,558
|
)
|
|
—
|
|
Deferred tax liabilities, net of deferred tax assets of $61,198
|
—
|
|
|
10
|
|
|
49,641
|
|
|
(39,504
|
)
|
|
10,147
|
|
Intercompany payables
|
—
|
|
|
62,204
|
|
|
13,087
|
|
|
(75,291
|
)
|
|
—
|
|
Total liabilities
|
154,570
|
|
|
119,492
|
|
|
2,056,414
|
|
|
(276,859
|
)
|
|
2,053,617
|
|
Stockholders' equity
|
|
|
|
|
|
|
|
|
|
Stockholders' equity attributable to Oppenheimer Holdings Inc.
|
513,912
|
|
|
599,124
|
|
|
506,460
|
|
|
(1,105,584
|
)
|
|
513,912
|
|
Noncontrolling interest
|
—
|
|
|
—
|
|
|
8,200
|
|
|
—
|
|
|
8,200
|
|
Total stockholders' equity
|
513,912
|
|
|
599,124
|
|
|
514,660
|
|
|
(1,105,584
|
)
|
|
522,112
|
|
Total liabilities and stockholders' equity
|
$
|
668,482
|
|
|
$
|
718,616
|
|
|
$
|
2,571,074
|
|
|
$
|
(1,382,443
|
)
|
|
$
|
2,575,729
|
|
OPPENHEIMER HOLDINGS INC.
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
Parent
|
|
Guarantor
subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
907
|
|
|
$
|
2,586
|
|
|
$
|
59,871
|
|
|
$
|
—
|
|
|
$
|
63,364
|
|
Deposits with clearing organizations
|
—
|
|
|
—
|
|
|
49,490
|
|
|
—
|
|
|
49,490
|
|
Receivable from brokers, dealers and clearing organizations
|
—
|
|
|
—
|
|
|
365,791
|
|
|
—
|
|
|
365,791
|
|
Receivable from customers, net of allowance for credit losses of $2,545
|
—
|
|
|
—
|
|
|
840,355
|
|
|
—
|
|
|
840,355
|
|
Income tax receivable
|
33,801
|
|
|
27,536
|
|
|
—
|
|
|
(49,106
|
)
|
|
12,231
|
|
Securities purchased under agreements to resell
|
—
|
|
|
—
|
|
|
206,499
|
|
|
—
|
|
|
206,499
|
|
Securities owned, including amounts pledged of $546,334, at fair value
|
—
|
|
|
1,183
|
|
|
733,648
|
|
|
—
|
|
|
734,831
|
|
Notes receivable, net of accumulated amortization and
allowance for uncollectibles of $54,919 and $8,444,
respectively
|
—
|
|
|
—
|
|
|
32,849
|
|
|
—
|
|
|
32,849
|
|
Office facilities, net of accumulated depreciation of $104,812
|
—
|
|
|
20,793
|
|
|
7,492
|
|
|
—
|
|
|
28,285
|
|
Assets held for sale
|
—
|
|
|
—
|
|
|
99,881
|
|
|
—
|
|
|
99,881
|
|
Subordinated loan receivable
|
—
|
|
|
112,558
|
|
|
—
|
|
|
(112,558
|
)
|
|
—
|
|
Intangible assets
|
—
|
|
|
—
|
|
|
31,700
|
|
|
—
|
|
|
31,700
|
|
Goodwill
|
—
|
|
|
—
|
|
|
137,889
|
|
|
—
|
|
|
137,889
|
|
Other assets
|
69
|
|
|
3,224
|
|
|
91,546
|
|
|
—
|
|
|
94,839
|
|
Deferred tax assets
|
317
|
|
|
330
|
|
|
40,456
|
|
|
(41,103
|
)
|
|
—
|
|
Investment in subsidiaries
|
577,320
|
|
|
532,651
|
|
|
—
|
|
|
(1,109,971
|
)
|
|
—
|
|
Intercompany receivables
|
60,187
|
|
|
13,185
|
|
|
—
|
|
|
(73,372
|
)
|
|
—
|
|
Total assets
|
$
|
672,601
|
|
|
$
|
714,046
|
|
|
$
|
2,697,467
|
|
|
$
|
(1,386,110
|
)
|
|
$
|
2,698,004
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Drafts payable
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
48,011
|
|
|
$
|
—
|
|
|
$
|
48,011
|
|
Bank call loans
|
—
|
|
|
—
|
|
|
100,200
|
|
|
—
|
|
|
100,200
|
|
Payable to brokers, dealers and clearing organizations
|
—
|
|
|
—
|
|
|
164,546
|
|
|
—
|
|
|
164,546
|
|
Payable to customers
|
—
|
|
|
—
|
|
|
594,833
|
|
|
—
|
|
|
594,833
|
|
Securities sold under agreements to repurchase
|
—
|
|
|
—
|
|
|
651,445
|
|
|
—
|
|
|
651,445
|
|
Securities sold, but not yet purchased, at fair value
|
—
|
|
|
—
|
|
|
126,493
|
|
|
—
|
|
|
126,493
|
|
Liabilities held for sale
|
—
|
|
|
—
|
|
|
74,680
|
|
|
—
|
|
|
74,680
|
|
Accrued compensation
|
—
|
|
|
—
|
|
|
149,092
|
|
|
—
|
|
|
149,092
|
|
Accounts payable and other liabilities
|
3,235
|
|
|
35,812
|
|
|
69,590
|
|
|
—
|
|
|
108,637
|
|
Income tax payable
|
2,440
|
|
|
22,189
|
|
|
24,477
|
|
|
(49,106
|
)
|
|
—
|
|
Senior secured notes, net of debt issuance costs of $1,132
|
148,868
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
148,868
|
|
Subordinated indebtedness
|
—
|
|
|
—
|
|
|
112,558
|
|
|
(112,558
|
)
|
|
—
|
|
Deferred tax liabilities, net of deferred tax assets of $63,481
|
—
|
|
|
—
|
|
|
47,220
|
|
|
(41,103
|
)
|
|
6,117
|
|
Intercompany payables
|
—
|
|
|
62,204
|
|
|
11,168
|
|
|
(73,372
|
)
|
|
—
|
|
Total liabilities
|
154,543
|
|
|
120,205
|
|
|
2,174,313
|
|
|
(276,139
|
)
|
|
2,172,922
|
|
Stockholders' equity
|
|
|
|
|
|
|
|
|
|
Stockholders' equity attributable to Oppenheimer Holdings Inc.
|
518,058
|
|
|
593,841
|
|
|
516,130
|
|
|
(1,109,971
|
)
|
|
518,058
|
|
Noncontrolling interest
|
—
|
|
|
—
|
|
|
7,024
|
|
|
—
|
|
|
7,024
|
|
Total stockholders' equity
|
518,058
|
|
|
593,841
|
|
|
523,154
|
|
|
(1,109,971
|
)
|
|
525,082
|
|
Total liabilities and stockholders' equity
|
$
|
672,601
|
|
|
$
|
714,046
|
|
|
$
|
2,697,467
|
|
|
$
|
(1,386,110
|
)
|
|
$
|
2,698,004
|
|
OPPENHEIMER HOLDINGS INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
Parent
|
|
Guarantor
subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
REVENUES
|
|
|
|
|
|
|
|
|
|
Commissions
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
92,591
|
|
|
$
|
—
|
|
|
$
|
92,591
|
|
Advisory fees
|
—
|
|
|
—
|
|
|
66,511
|
|
|
(407
|
)
|
|
66,104
|
|
Investment banking
|
—
|
|
|
—
|
|
|
18,881
|
|
|
—
|
|
|
18,881
|
|
Interest
|
—
|
|
|
2,556
|
|
|
12,016
|
|
|
(2,565
|
)
|
|
12,007
|
|
Principal transactions, net
|
—
|
|
|
22
|
|
|
7,555
|
|
|
—
|
|
|
7,577
|
|
Other
|
—
|
|
|
81
|
|
|
14,913
|
|
|
(80
|
)
|
|
14,914
|
|
Total revenue
|
—
|
|
|
2,659
|
|
|
212,467
|
|
|
(3,052
|
)
|
|
212,074
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
Compensation and related expenses
|
356
|
|
|
—
|
|
|
141,365
|
|
|
—
|
|
|
141,721
|
|
Communications and technology
|
34
|
|
|
—
|
|
|
17,604
|
|
|
—
|
|
|
17,638
|
|
Occupancy and equipment costs
|
—
|
|
|
—
|
|
|
15,064
|
|
|
(80
|
)
|
|
14,984
|
|
Clearing and exchange fees
|
—
|
|
|
—
|
|
|
6,199
|
|
|
—
|
|
|
6,199
|
|
Interest
|
3,282
|
|
|
—
|
|
|
4,255
|
|
|
(2,565
|
)
|
|
4,972
|
|
Other
|
523
|
|
|
2
|
|
|
31,688
|
|
|
(407
|
)
|
|
31,806
|
|
Total expenses
|
4,195
|
|
|
2
|
|
|
216,175
|
|
|
(3,052
|
)
|
|
217,320
|
|
Income (loss) before income taxes
|
(4,195
|
)
|
|
2,657
|
|
|
(3,708
|
)
|
|
—
|
|
|
(5,246
|
)
|
Income taxes
|
(3,272
|
)
|
|
999
|
|
|
(354
|
)
|
|
—
|
|
|
(2,627
|
)
|
Net income (loss) from continuing operations
|
(923
|
)
|
|
1,658
|
|
|
(3,354
|
)
|
|
—
|
|
|
(2,619
|
)
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
—
|
|
|
—
|
|
|
15,366
|
|
|
—
|
|
|
15,366
|
|
Income taxes
|
—
|
|
|
—
|
|
|
6,036
|
|
|
—
|
|
|
6,036
|
|
Net income from discontinued operations
|
—
|
|
|
—
|
|
|
9,330
|
|
|
—
|
|
|
9,330
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries
|
6,111
|
|
|
4,453
|
|
|
—
|
|
|
(10,564
|
)
|
|
—
|
|
Net income
|
5,188
|
|
|
6,111
|
|
|
5,976
|
|
|
(10,564
|
)
|
|
6,711
|
|
Less net income attributable to noncontrolling interest, net of tax
|
—
|
|
|
—
|
|
|
1,523
|
|
|
—
|
|
|
1,523
|
|
Net income attributable to Oppenheimer Holdings Inc.
|
5,188
|
|
|
6,111
|
|
|
4,453
|
|
|
(10,564
|
)
|
|
5,188
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
(654
|
)
|
|
—
|
|
|
(654
|
)
|
Total comprehensive income
|
$
|
5,188
|
|
|
$
|
6,111
|
|
|
$
|
3,799
|
|
|
$
|
(10,564
|
)
|
|
$
|
4,534
|
|
OPPENHEIMER HOLDINGS INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
Parent
|
|
Guarantor
subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
REVENUES
|
|
|
|
|
|
|
|
|
|
Commissions
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
196,424
|
|
|
$
|
—
|
|
|
$
|
196,424
|
|
Advisory fees
|
—
|
|
|
—
|
|
|
132,890
|
|
|
(760
|
)
|
|
132,130
|
|
Investment banking
|
—
|
|
|
—
|
|
|
31,264
|
|
|
—
|
|
|
31,264
|
|
Interest
|
—
|
|
|
5,113
|
|
|
25,068
|
|
|
(5,132
|
)
|
|
25,049
|
|
Principal transactions, net
|
—
|
|
|
52
|
|
|
14,143
|
|
|
—
|
|
|
14,195
|
|
Other
|
—
|
|
|
159
|
|
|
27,967
|
|
|
(158
|
)
|
|
27,968
|
|
Total revenue
|
—
|
|
|
5,324
|
|
|
427,756
|
|
|
(6,050
|
)
|
|
427,030
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
Compensation and related expenses
|
743
|
|
|
—
|
|
|
289,473
|
|
|
—
|
|
|
290,216
|
|
Communications and technology
|
62
|
|
|
—
|
|
|
35,256
|
|
|
—
|
|
|
35,318
|
|
Occupancy and equipment costs
|
—
|
|
|
—
|
|
|
30,045
|
|
|
(158
|
)
|
|
29,887
|
|
Clearing and exchange fees
|
—
|
|
|
—
|
|
|
13,120
|
|
|
—
|
|
|
13,120
|
|
Interest
|
6,563
|
|
|
—
|
|
|
8,408
|
|
|
(5,132
|
)
|
|
9,839
|
|
Other
|
1,196
|
|
|
5
|
|
|
60,795
|
|
|
(760
|
)
|
|
61,236
|
|
Total expenses
|
8,564
|
|
|
5
|
|
|
437,097
|
|
|
(6,050
|
)
|
|
439,616
|
|
Income (loss) before income taxes
|
(8,564
|
)
|
|
5,319
|
|
|
(9,341
|
)
|
|
—
|
|
|
(12,586
|
)
|
Income taxes
|
(4,986
|
)
|
|
2,003
|
|
|
(3,456
|
)
|
|
—
|
|
|
(6,439
|
)
|
Net income (loss) from continuing operations
|
(3,578
|
)
|
|
3,316
|
|
|
(5,885
|
)
|
|
—
|
|
|
(6,147
|
)
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
—
|
|
|
—
|
|
|
14,709
|
|
|
—
|
|
|
14,709
|
|
Income taxes
|
—
|
|
|
—
|
|
|
5,760
|
|
|
—
|
|
|
5,760
|
|
Net income from discontinued operations
|
—
|
|
|
—
|
|
|
8,949
|
|
|
—
|
|
|
8,949
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries
|
4,919
|
|
|
1,603
|
|
|
—
|
|
|
(6,522
|
)
|
|
—
|
|
Net income
|
1,341
|
|
|
4,919
|
|
|
3,064
|
|
|
(6,522
|
)
|
|
2,802
|
|
Less net income attributable to noncontrolling interest, net of tax
|
—
|
|
|
—
|
|
|
1,461
|
|
|
—
|
|
|
1,461
|
|
Net income attributable to Oppenheimer Holdings Inc.
|
1,341
|
|
|
4,919
|
|
|
1,603
|
|
|
(6,522
|
)
|
|
1,341
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
219
|
|
|
—
|
|
|
219
|
|
Total comprehensive income
|
$
|
1,341
|
|
|
$
|
4,919
|
|
|
$
|
1,822
|
|
|
$
|
(6,522
|
)
|
|
$
|
1,560
|
|
OPPENHEIMER HOLDINGS INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
Parent
|
|
Guarantor
subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
REVENUES
|
|
|
|
|
|
|
|
|
|
Commissions
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
103,556
|
|
|
$
|
—
|
|
|
$
|
103,556
|
|
Advisory fees
|
—
|
|
|
—
|
|
|
72,654
|
|
|
(411
|
)
|
|
72,243
|
|
Investment banking
|
—
|
|
|
—
|
|
|
29,020
|
|
|
—
|
|
|
29,020
|
|
Interest
|
—
|
|
|
2,557
|
|
|
11,321
|
|
|
(2,565
|
)
|
|
11,313
|
|
Principal transactions, net
|
—
|
|
|
—
|
|
|
3,571
|
|
|
(30
|
)
|
|
3,541
|
|
Other
|
—
|
|
|
96
|
|
|
8,266
|
|
|
(76
|
)
|
|
8,286
|
|
Total revenue
|
—
|
|
|
2,653
|
|
|
228,388
|
|
|
(3,082
|
)
|
|
227,959
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
Compensation and related expenses
|
263
|
|
|
—
|
|
|
153,542
|
|
|
—
|
|
|
153,805
|
|
Communications and technology
|
42
|
|
|
—
|
|
|
16,265
|
|
|
—
|
|
|
16,307
|
|
Occupancy and equipment costs
|
—
|
|
|
—
|
|
|
15,987
|
|
|
(76
|
)
|
|
15,911
|
|
Clearing and exchange fees
|
—
|
|
|
—
|
|
|
6,231
|
|
|
—
|
|
|
6,231
|
|
Interest
|
3,281
|
|
|
|
|
|
3,389
|
|
|
(2,565
|
)
|
|
4,105
|
|
Other
|
258
|
|
|
45
|
|
|
32,839
|
|
|
(441
|
)
|
|
32,701
|
|
Total expenses
|
3,844
|
|
|
45
|
|
|
228,253
|
|
|
(3,082
|
)
|
|
229,060
|
|
Income (loss) before income taxes
|
(3,844
|
)
|
|
2,608
|
|
|
135
|
|
|
—
|
|
|
(1,101
|
)
|
Income taxes
|
(1,521
|
)
|
|
923
|
|
|
998
|
|
|
—
|
|
|
400
|
|
Net income (loss) from continuing operations
|
(2,323
|
)
|
|
1,685
|
|
|
(863
|
)
|
|
—
|
|
|
(1,501
|
)
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
—
|
|
|
—
|
|
|
3,731
|
|
|
—
|
|
|
3,731
|
|
Income taxes
|
—
|
|
|
—
|
|
|
1,585
|
|
|
—
|
|
|
1,585
|
|
Net income from discontinued operations
|
—
|
|
|
—
|
|
|
2,146
|
|
|
—
|
|
|
2,146
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries
|
2,618
|
|
|
933
|
|
|
—
|
|
|
(3,551
|
)
|
|
—
|
|
Net income
|
295
|
|
|
2,618
|
|
|
1,283
|
|
|
(3,551
|
)
|
|
645
|
|
Less net income attributable to noncontrolling interest, net of tax
|
—
|
|
|
—
|
|
|
350
|
|
|
—
|
|
|
350
|
|
Net income attributable to Oppenheimer Holdings Inc.
|
295
|
|
|
2,618
|
|
|
933
|
|
|
(3,551
|
)
|
|
295
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
1,317
|
|
|
—
|
|
|
1,317
|
|
Total comprehensive income
|
$
|
295
|
|
|
$
|
2,618
|
|
|
$
|
2,250
|
|
|
$
|
(3,551
|
)
|
|
$
|
1,612
|
|
OPPENHEIMER HOLDINGS INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
Parent
|
|
Guarantor
subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
REVENUES
|
|
|
|
|
|
|
|
|
|
Commissions
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
213,251
|
|
|
$
|
—
|
|
|
$
|
213,251
|
|
Advisory fees
|
—
|
|
|
—
|
|
|
144,074
|
|
|
(865
|
)
|
|
143,209
|
|
Investment banking
|
—
|
|
|
—
|
|
|
56,325
|
|
|
—
|
|
|
56,325
|
|
Interest
|
—
|
|
|
5,123
|
|
|
22,022
|
|
|
(5,129
|
)
|
|
22,016
|
|
Principal transactions, net
|
—
|
|
|
—
|
|
|
12,122
|
|
|
(84
|
)
|
|
12,038
|
|
Other
|
—
|
|
|
191
|
|
|
18,255
|
|
|
(151
|
)
|
|
18,295
|
|
Total revenue
|
—
|
|
|
5,314
|
|
|
466,049
|
|
|
(6,229
|
)
|
|
465,134
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
Compensation and related expenses
|
575
|
|
|
—
|
|
|
314,054
|
|
|
—
|
|
|
314,629
|
|
Communications and technology
|
67
|
|
|
—
|
|
|
33,312
|
|
|
—
|
|
|
33,379
|
|
Occupancy and equipment costs
|
—
|
|
|
—
|
|
|
31,763
|
|
|
(151
|
)
|
|
31,612
|
|
Clearing and exchange fees
|
—
|
|
|
—
|
|
|
12,633
|
|
|
—
|
|
|
12,633
|
|
Interest
|
6,562
|
|
|
—
|
|
|
6,442
|
|
|
(5,129
|
)
|
|
7,875
|
|
Other
|
546
|
|
|
113
|
|
|
60,583
|
|
|
(949
|
)
|
|
60,293
|
|
Total expenses
|
7,750
|
|
|
113
|
|
|
458,787
|
|
|
(6,229
|
)
|
|
460,421
|
|
Income (loss) before income taxes
|
(7,750
|
)
|
|
5,201
|
|
|
7,262
|
|
|
—
|
|
|
4,713
|
|
Income taxes
|
(3,001
|
)
|
|
1,770
|
|
|
3,786
|
|
|
—
|
|
|
2,555
|
|
Net income (loss) from continuing operations
|
(4,749
|
)
|
|
3,431
|
|
|
3,476
|
|
|
—
|
|
|
2,158
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
—
|
|
|
—
|
|
|
7,768
|
|
|
—
|
|
|
7,768
|
|
Income taxes
|
—
|
|
|
—
|
|
|
3,160
|
|
|
—
|
|
|
3,160
|
|
Net income from discontinued operations
|
—
|
|
|
—
|
|
|
4,608
|
|
|
—
|
|
|
4,608
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries
|
10,763
|
|
|
7,332
|
|
|
—
|
|
|
(18,095
|
)
|
|
—
|
|
Net income
|
6,014
|
|
|
10,763
|
|
|
8,084
|
|
|
(18,095
|
)
|
|
6,766
|
|
Less net income attributable to noncontrolling interest, net of tax
|
—
|
|
|
—
|
|
|
752
|
|
|
—
|
|
|
752
|
|
Net income attributable to Oppenheimer Holdings Inc.
|
6,014
|
|
|
10,763
|
|
|
7,332
|
|
|
(18,095
|
)
|
|
6,014
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
750
|
|
|
—
|
|
|
750
|
|
Total comprehensive income
|
$
|
6,014
|
|
|
$
|
10,763
|
|
|
$
|
8,082
|
|
|
$
|
(18,095
|
)
|
|
$
|
6,764
|
|
OPPENHEIMER HOLDINGS INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
Parent
|
|
Guarantor
subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) operating activities
|
$
|
7,191
|
|
|
$
|
(2,061
|
)
|
|
$
|
(45,845
|
)
|
|
$
|
—
|
|
|
$
|
(40,715
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of office facilities
|
—
|
|
|
—
|
|
|
(2,572
|
)
|
|
—
|
|
|
(2,572
|
)
|
Proceeds from sale of assets
|
—
|
|
|
—
|
|
|
43,252
|
|
|
—
|
|
|
43,252
|
|
Cash provided by investing activities
|
—
|
|
|
—
|
|
|
40,680
|
|
|
—
|
|
|
40,680
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Cash dividends paid on Class A non-voting and Class B voting common stock
|
(2,947
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,947
|
)
|
Repurchase of Class A non-voting common stock for cancellation
|
(3,798
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,798
|
)
|
Tax deficiency from share-based awards
|
(747
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(747
|
)
|
Increase in bank call loans, net
|
—
|
|
|
—
|
|
|
51,700
|
|
|
—
|
|
|
51,700
|
|
Cash flow provided by (used in) financing activities
|
(7,492
|
)
|
|
—
|
|
|
51,700
|
|
|
—
|
|
|
44,208
|
|
Net increase (decrease) in cash and cash equivalents
|
(301
|
)
|
|
(2,061
|
)
|
|
46,535
|
|
|
—
|
|
|
44,173
|
|
Cash and cash equivalents, beginning of the period
|
907
|
|
|
2,586
|
|
|
59,871
|
|
|
—
|
|
|
63,364
|
|
Cash and cash equivalents, end of the period
|
$
|
606
|
|
|
$
|
525
|
|
|
$
|
106,406
|
|
|
$
|
—
|
|
|
$
|
107,537
|
|
OPPENHEIMER HOLDINGS INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expressed in thousands)
|
Parent
|
|
Guarantor
subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) operating activities
|
$
|
2,883
|
|
|
$
|
1,128
|
|
|
$
|
(130,399
|
)
|
|
$
|
—
|
|
|
$
|
(126,388
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of office facilities
|
—
|
|
|
—
|
|
|
(1,913
|
)
|
|
—
|
|
|
(1,913
|
)
|
Cash used in investing activities
|
—
|
|
|
—
|
|
|
(1,913
|
)
|
|
—
|
|
|
(1,913
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Cash dividends paid on Class A non-voting and Class B voting common stock
|
(3,023
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,023
|
)
|
Tax deficiency from share-based awards
|
(270
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(270
|
)
|
Increase in bank call loans, net
|
—
|
|
|
—
|
|
|
118,100
|
|
|
—
|
|
|
118,100
|
|
Cash flow provided by (used in) financing activities
|
(3,293
|
)
|
|
—
|
|
|
118,100
|
|
|
—
|
|
|
114,807
|
|
Net increase (decrease) in cash and cash equivalents
|
(410
|
)
|
|
1,128
|
|
|
(14,212
|
)
|
|
—
|
|
|
(13,494
|
)
|
Cash and cash equivalents, beginning of the period
|
439
|
|
|
1,557
|
|
|
61,811
|
|
|
—
|
|
|
63,807
|
|
Cash and cash equivalents, end of the period
|
$
|
29
|
|
|
$
|
2,685
|
|
|
$
|
47,599
|
|
|
$
|
—
|
|
|
$
|
50,313
|
|