Loans Receivable

9 Months Ended

Sep. 30, 2012

Loans Receivable, Net [Abstract]

Loans Receivable

Loans Receivable

Loans receivable are as follows:

(Dollars in thousands)	September 30, 2012			December 31, 2011
Total loans receivable	$	371,408		$	263,187
Valuation allowance:
Specific	$	3,080		$	19,041
General	2,674			764
Total	$	5,754		$	19,805
Impaired loans:
With a specific valuation allowance	$	2,362		$	29,702
Without a valuation allowance	30,299			30,357
Unpaid principal balance	35,660			93,922
For the Nine Months Ended September 30,	2012			2011
Increase (decrease) in valuation allowance	$	(14,053	)	$	541
Loans receivable charged off	139			9
For the Three Months Ended September 30,
Decrease in valuation allowance	(7,280		)	(9		)
Loans receivable charged off	54			9

Loans receivable in non-accrual status were $31 million and $30 million at September 30, 2012 and December 31, 2011, respectively. If these loans had been current, additional interest income of $0.6 million and none would have been recognized in accordance with their original terms for the nine months ended September 30, 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 five largest loans receivable, which have an aggregate amortized cost of $217 million and an aggregate fair value of $212 million at September 30, 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 August 2025. 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, one loan with an aggregate cost basis of $30 million was considered to be impaired at September 30, 2012. For each of this loan, 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 September 30, 2012, each of the five 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.