Previously Securitized Loans

9 Months Ended

Sep. 30, 2011

Previously Securitized Loans [Abstract]

Previously Securitized Loans

Note E –Previously Securitized Loans

Between 1997 and 1999, the Company completed six securitization transactions involving approximately $760 million in 125% of fixed rate, junior-lien underlying mortgages.  The Company retained a financial interest in each of the securitizations until 2004.  Principal amounts owed to investors were evidenced by securities ("Notes").  During 2003 and 2004, the Company exercised its early redemption options on each of those securitizations.  Once the Notes were redeemed, the Company became the beneficial owner of the mortgage loans and recorded the loans as assets of the Company within the loan portfolio.

The Company accounts for the difference between the carrying value and the total expected cash flows from these loans as an adjustment of the yield earned on the loans over their remaining lives. The discount is accreted to income over the period during which payments are probable of collection and are reasonably estimable. Additionally, the collectability of previously securitized loans is evaluated over the remaining lives of the loans. An impairment charge on previously securitized loans would be provided through the Company's provision for loan losses if the discounted present value of estimated future cash flows declines below the recorded value of previously securitized loans.  No such impairment charges were recorded for the three or nine months ended September 30, 2011 and 2010, or for the year ending December 31, 2010.

As of September 30, 2011, the Company reported a carrying value of previously securitized loans of $0.2 million whereas the actual contractual outstanding balance of previously securitized loans at September 30, 2011 was $10.4 million.

For both the three months ended September 30, 2011 and 2010, the Company recognized $0.8 million of interest income from its previously securitized loans.  During the first nine months of 2011 and 2010, the Company recognized $2.5 million and $3.3 million, respectively, of interest income from its previously securitized loans.