Variable Interest Entities

9 Months Ended

Sep. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interest Entities

(18) VARIABLE INTEREST ENTITIES

During the quarter, the Company determined that Trust III is a VIE. Trust III had been consolidated as a subsidiary of MFC historically, although it should have been consolidated under the variable interest model, since MFC is its primary beneficiary. Trust III is a VIE since the key decision-making authority rests in the servicing agreement (where MFC is the servicer for Trust III) rather than in the voting rights of the equity interests and as a result the decision-making rights are considered a variable interest. In addition, this conclusion is supported by a qualitative assessment that Trust III does not have sufficient equity at risk. Since the inception of Trust III, MFC has also been subject to a limited guaranty which was considered a variable interest because MFC absorbed variability as a result of the on-going performance of the loans in Trust III.

The following table shows the assets and liabilities of Trust III as of September 30, 2018 and December 31, 2017.

	Bank Holding Company Accounting		Investment Company Accounting
(Dollars in thousands)	UNAUDITED September 30, 2018		December 31, 2017
Assets
Cash	$	166	$	393
Net loans receivable		45,384		—
Net investments		—		96,688
Accrued interest receivable		97		170
Loan collateral in process of foreclosure		17,865		—
Total assets	$	63,512	$	97,251
Liabilities
Accounts payable and accrued expenses	$	69	$	—
Accrued interest payable		2,364		1,849
DZ loan		96,058		99,984
Total liabilities		98,491		101,833

Assets held by Trust III are restricted and can only be used to settle obligations owed to DZ Bank. The liabilities of Trust III are non-recourse to the Company and are subject to a limited guaranty by MFC of $5,987 at September 30, 2018. The Company and MFC are not required to provide financial support to Trust III in excess of the limited guaranty.