Loans Receivable

3 Months Ended

Mar. 31, 2012

Loans Receivable, Net [Abstract]

Loans Receivable

Loans Receivable

Loans receivable are as follows (dollars in thousands):

	March 31, 2012		December 31, 2011
Total loans receivable, at cost	$	357,121	$	263,187
Valuation allowance:
Specific	$	10,465	$	19,041
General	2,444		764
Total	$	10,465	$	19,805
Impaired loans:
With a specific valuation allowance, at cost	$	12,693	$	29,702
Without a valuation allowance, at cost	30,357		30,357
Unpaid principal balance	53,048		93,922
For the Three Months Ended March 31,	2012		2011
Decrease in valuation allowance	$	6,896	$	—
Loans receivable charged off	85		—

Loans receivable in non-accrual status were $13 million and $30 million at March 31, 2012 and December 31, 2011, respectively. If these loans had been current, additional interest income of $0.2 million and $0.1 million would have been recognized in accordance with their original terms for the three months ended March 31, 2012 and 2011, respectively.

The Company monitors the performance of its loans receivable and assesses the ability of the borrower to pay principal and interest based upon loan structure, underlying property values, cash flow and related financial and operating performance of the property and market conditions. Loans receivable with a potential for default are further assessed using discounted cash flow analysis and comparable cost and sales methodologies, if appropriate.

The Company's seven largest loans receivable, which have an aggregate amortized cost of $225 million and an aggregate fair value of $208 million at March 31, 2012, are secured by commercial real estate located primarily in New York City, California, Hawaii and Boston. These loans earn interest at floating LIBOR-based interest rates and have maturities (inclusive of extension options) through March 2016. As part of the evaluation process, the Company reviews certain credit quality indicators for these loans. The Company utilizes an internal risk rating system to assign a risk to each of its commercial loans. The loan rating system takes into consideration credit quality indicators including loan to value ratios, which compare the outstanding loan amount to the estimated value of the property, the borrower's financial condition and performance with respect to loan terms, the Company's position in the capital structure, and the overall leverage in the capital structure. Based on this rating system, two loans with an aggregate cost basis of $41 million were considered to be impaired at March 31, 2012. For each of these loans, a determination was made as to the amount of loss in the event of a default and whether the loss is probable. The results of the determination were considered in connection with the valuation allowance noted above. An additional credit quality indicator is the debt service coverage ratio, which compares a property's net operating income to the borrower's principal and interest payments. At March 31, 2012, each of the seven largest loans referred to above had a debt service coverage ratio greater than 3.0, except one that is lower due to a recent and temporary rate abatement.