Note 15. Discontinued Operations

The Company performed a strategic evaluation of its businesses in the third quarter of 2014 and decided to discontinue its commercial lending operations to focus on its specialty finance lending. The loans which constitute the commercial loan portfolio are in the process of disposition. As such, financial results of the commercial lending operations are presented as separate from continuing operations on the consolidated statements of operations and assets of the commercial lending operations to be disposed are presented as assets held for sale on the consolidated balance sheets.

The following table presents financial results of the commercial lending business included in net income (loss) from discontinued operations for the three months and nine months ended September 30, 2017 and 2016 (in thousands).



	For the three months ended September 30,		For the nine months ended September 30,
	2017	2016	2017	2016
Interest income	$ 3,098	$ 3,891	$ 9,594	$ 15,037
Interest expense	-	-	-	-
Provision for loan and lease losses	-	-	-	-
Net interest income after provision	3,098	3,891	9,594	15,037

Non interest income	549	575	1,001	678
Non interest expense	2,818	25,956	5,107	53,788

Income (loss) before taxes	829	(21,490)	5,488	(38,073)
Income tax (benefit) provision	318	2,531	2,050	(164)
Net income (loss)	$ 511	$ (24,021)	$ 3,438	$ (37,909)



	September 30,	December 31,
	2017	2016
Loans, net	$ 277,385	$ 340,396
Other real estate owned	37,609	20,315
Total assets	$ 314,994	$ 360,711

The Company utilizes lower of cost or market valuations for discontinued operations loans which are updated based on internal loan officers’ information, third party consultant information, internal loan review analysis and third party review of impairments. Based on that review, weighted average fair values were applied to the loans not specifically reviewed. The results of discontinued operations do not include any future severance payments. Of the approximately $1.1 billion in book value of loans in that portfolio as of the September 30, 2014 date of discontinuance of operations, $315.0 million of loans and other real estate owned remain in assets held for sale on the balance sheet as a result of loan sales, principal paydowns and fair value charges. The Company is attempting to sell those remaining loans. Additionally, the balance sheet reflects $107.7 million in investment in unconsolidated entity, which is comprised of notes owned by the Company as a result of the sale of certain discontinued loans to Walnut Street, see Note 8, Fair Value Measurements.