LOANS RECEIVABLE

9 Months Ended

Sep. 30, 2021

4. LOANS RECEIVABLE

Loans receivable consist of the following (in thousands):


	September 30, 2021		December 31, 2020
SBA 7(a) loans receivable, subject to credit risk	$	42,498	$	32,226
SBA 7(a) loans receivable, subject to loan-backed notes	20,129		23,631
SBA 7(a) loans receivable, Paycheck Protection Program	7,622		14,484
SBA 7(a) loans receivable, subject to secured borrowings	8,064		8,786
SBA 7(a) loans receivable, held for sale	15,995		4,009
Loans receivable	94,308		83,136
Deferred capitalized costs, net	1,467		884
Loan loss reserves	(959)		(885)
Loans receivable, net	$	94,816	$	83,135

SBA 7(a) Loans Receivable, Subject to Credit Risk—Represents the unguaranteed portions of loans originated under the SBA 7(a) Small Business Loan Program which were retained by the Company.

SBA 7(a) Loans Receivable, Subject to Loan-Backed Notes—Represents the unguaranteed portions of loans originated under the SBA 7(a) Small Business Loan Program which were transferred to a trust and are held as collateral in connection with a securitization transaction. The proceeds received from the transfer are reflected as loan-backed notes payable (Note 6). These loans are subject to credit risk.

SBA 7(a) Loans Receivable, Paycheck Protection Program—As a SBA 7(a) licensee, the Company originated $26.4 million in loans under the PPP with $7.6 million outstanding as of September 30, 2021. As of September 30, 2021, a significant portion of these loans have been either forgiven or repaid, and the Company expects a significant portion of the outstanding balance at September 30, 2021 will be forgiven or repaid, either in part or in full, by the SBA, including both principal and accrued interest.

SBA 7(a) Loans Receivable, Subject to Secured Borrowings—Represents the government guaranteed portions of loans originated under the SBA 7(a) Small Business Loan Program which were sold with the proceeds received from the sale reflected as secured borrowings—government guaranteed loans. There is no credit risk associated with these loans since the SBA has guaranteed payment of the principal.

SBA 7(a) Loans Receivable, Held for Sale— Represents the government guaranteed portion of loans held for sale at the end of the period or that had been sold but in respect of which proceeds had not been received as of the end of the period.

Other

As of September 30, 2021 and December 31, 2020, the Company’s loans subject to credit risk were 99.8% and 99.1%, respectively, concentrated in the hospitality industry. As of September 30, 2021 and December 31, 2020, 99.9% and 98.8%, respectively, of the Company’s loans subject to credit risk were current. The Company classifies loans with negative characteristics in substandard categories ranging from special mention to doubtful. As of both September 30, 2021 and December 31, 2020, $1.4 million of loans subject to credit risk were classified in substandard categories.