Notes Receivable And Allowance For Losses
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Mar. 31, 2012
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Notes Receivable And Allowance For Losses | Notes Receivable and Allowance for Losses The Company segregates its notes receivable for the purposes of evaluating allowances for credit losses between two categories: Mezzanine and Other Notes Receivable and Forgivable Notes Receivable. The Company utilizes the level of security it has in the various notes receivable as its primary credit quality indicator (i.e. senior, subordinated or unsecured) when determining the appropriate allowances for uncollectible loans within these categories. The following table shows the composition of our notes receivable balances:
The Company classifies notes receivable due within one year as other current assets and notes receivable with a maturity greater than one year as other assets in the Company’s consolidated balance sheets. The following table summarizes the activity related to the Company’s Forgivable Notes Receivable and Mezzanine and & Other Notes Receivable allowance for losses from December 31, 2011 through March 31, 2012:
(1) Consists of default rate assumption changes Forgivable Notes Receivable As of March 31, 2012 and December 31, 2011, the unamortized balance of the Company's forgivable notes receivable totaled $7.7 million and $7.9 million, respectively. The Company recorded an allowance for credit losses on these forgivable notes receivable of $0.8 million at both March 31, 2012 and December 31, 2011, respectively. At March 31, 2012 and December 31, 2011, the Company did not have any forgivable unsecured notes that were past due. Amortization expense included in the accompanying consolidated statements of income related to the notes was $0.6 million and $0.5 million for the three months ended March 31, 2012 and 2011, respectively. Mezzanine and Other Notes Receivable The Company has determined that approximately $12.6 million and $11.2 million of its mezzanine and other notes receivable were impaired at March 31, 2012 and December 31, 2011, respectively. The Company has recorded allowance for credit losses on these impaired loans at March 31, 2012 and December 31, 2011 totaling $8.4 million and $8.2 million resulting in a carrying value of impaired loans of $4.3 million and $3.0 million, respectively for which we had no related allowance for credit losses. The Company recognized approximately $31 thousand of interest income on impaired loans during the three months ended March 31, 2012 on the cash basis. The Company did not recognize any interest on an accrual or cash basis on its impaired loans during the three months ended March 31, 2011. The Company had provided loan reserves on non-impaired loans totaling $0.1 million and $0.2 million at March 31, 2012 and December 31, 2011, respectively. Past due balances of mezzanine and other notes receivable by credit quality indicators are as follows:
Loans Acquired with Deteriorated Credit Quality On December 2, 2011, the Company acquired an $11.5 million mortgage, held on a franchisee hotel asset, from a financial institution for $7.9 million. At both March 31, 2012 and December 31, 2011, the carrying amount of this loan, which is reported under senior mezzanine and other notes receivables, was $7.9 million and there was no allowance for uncollectable amounts. The Company's accretable yield at acquisition was $1.8 million or 7.36% and a reconciliation of the accretable yield for the three months ended March 31, 2012 is as follows:
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