þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TEXAS | 75-6446078 | |
(State or other jurisdiction | (I.R.S. Employer Identification No.) | |
of incorporation or organization) |
17950 Preston Road, Suite 600, Dallas, TX 75252 | (972) 349-3200 | |
(Address of principal executive offices) | (Registrants telephone number) |
Large accelerated filer o
|
Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
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Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Loans receivable, net: |
||||||||
Commercial mortgage loans receivable |
$ | 121,131 | $ | 122,581 | ||||
Commercial mortage loans receivable, subject to structured notes payable |
36,457 | 40,421 | ||||||
SBIC commercial mortgage loans receivable |
29,653 | 31,113 | ||||||
SBA 7(a) loans receivable, subject to secured borrowings |
26,012 | 20,533 | ||||||
SBA 7(a) loans receivable |
19,039 | 18,570 | ||||||
Loans receivable, net |
232,292 | 233,218 | ||||||
Restricted cash and cash equivalents |
7,211 | 5,786 | ||||||
Cash and cash equivalents |
4,709 | 2,642 | ||||||
Real estate owned |
1,914 | 3,477 | ||||||
Other assets |
6,675 | 7,004 | ||||||
Total assets |
$ | 252,801 | $ | 252,127 | ||||
LIABILITIES AND EQUITY |
||||||||
Liabilities: |
||||||||
Debt: |
||||||||
Secured borrowings government guaranteed loans |
$ | 28,009 | $ | 21,765 | ||||
Junior subordinated notes |
27,070 | 27,070 | ||||||
Structured notes payable |
19,452 | 22,157 | ||||||
Revolving credit facility |
12,800 | 13,800 | ||||||
SBIC debentures payable |
8,179 | 8,177 | ||||||
Debt |
95,510 | 92,969 | ||||||
Borrower advances |
3,640 | 3,462 | ||||||
Accounts payable and accrued expenses |
2,285 | 2,739 | ||||||
Dividends payable |
1,714 | 1,712 | ||||||
Deferred gains on property sales |
| 685 | ||||||
Total liabilities |
103,149 | 101,567 | ||||||
Commitments and contingencies |
||||||||
Beneficiaries equity: |
||||||||
Common shares of beneficial interest; authorized 100,000,000 shares of $0.01 par value;
11,110,883 and 11,095,883 shares issued at June 30, 2011 and December 31, 2010,
respectively; 10,574,554 and 10,559,554 shares outstanding at June 30, 2011 and
December 31, 2010, respectively |
111 | 111 | ||||||
Additional paid-in capital |
152,903 | 152,756 | ||||||
Net unrealized appreciation of retained interests in transferred assets |
349 | 276 | ||||||
Cumulative net income |
174,704 | 172,449 | ||||||
Cumulative dividends |
(174,414 | ) | (171,031 | ) | ||||
153,653 | 154,561 | |||||||
Less: Treasury stock; at cost, 536,329 shares at June 30, 2011 and December 31, 2010 |
(4,901 | ) | (4,901 | ) | ||||
Total beneficiaries equity |
148,752 | 149,660 | ||||||
Noncontrolling interests cumulative preferred stock of subsidiary |
900 | 900 | ||||||
Total equity |
149,652 | 150,560 | ||||||
Total liabilities and equity |
$ | 252,801 | $ | 252,127 | ||||
2
Six Months Ended | Three Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(Unaudited) | ||||||||||||||||
Revenues: |
||||||||||||||||
Interest income |
$ | 6,756 | $ | 6,715 | $ | 3,389 | $ | 3,498 | ||||||||
Other income |
1,147 | 675 | 458 | 437 | ||||||||||||
Total revenues |
7,903 | 7,390 | 3,847 | 3,935 | ||||||||||||
Expenses: |
||||||||||||||||
Salaries and related benefits |
2,216 | 1,911 | 1,099 | 970 | ||||||||||||
Interest |
1,930 | 2,000 | 957 | 1,011 | ||||||||||||
General and administrative |
1,048 | 1,212 | 544 | 644 | ||||||||||||
Provision for (reduction of) loan losses, net |
379 | (98 | ) | 66 | 104 | |||||||||||
Total expenses |
5,573 | 5,025 | 2,666 | 2,729 | ||||||||||||
Income before income tax benefit and
discontinued operations |
2,330 | 2,365 | 1,181 | 1,206 | ||||||||||||
Income tax benefit |
29 | 128 | 54 | 20 | ||||||||||||
Income from continuing operations |
2,359 | 2,493 | 1,235 | 1,226 | ||||||||||||
Discontinued operations |
(104 | ) | 8 | 104 | (3 | ) | ||||||||||
Net income |
$ | 2,255 | $ | 2,501 | $ | 1,339 | $ | 1,223 | ||||||||
Weighted average shares outstanding: |
||||||||||||||||
Basic |
10,566 | 10,549 | 10,570 | 10,550 | ||||||||||||
Diluted |
10,621 | 10,565 | 10,626 | 10,566 | ||||||||||||
Basic and diluted earnings per share: |
||||||||||||||||
Income from continuing operations |
$ | 0.22 | $ | 0.24 | $ | 0.12 | $ | 0.12 | ||||||||
Discontinued operations |
(0.01 | ) | | 0.01 | | |||||||||||
Net income |
$ | 0.21 | $ | 0.24 | $ | 0.13 | $ | 0.12 | ||||||||
3
Six Months Ended | Three Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(Unaudited) | ||||||||||||||||
Net income |
$ | 2,255 | $ | 2,501 | $ | 1,339 | $ | 1,223 | ||||||||
Change in unrealized appreciation of retained interests in
transferred assets: |
||||||||||||||||
Net unrealized appreciation arising during period |
118 | 20 | 51 | 49 | ||||||||||||
Net realized gains included in net income |
(45 | ) | (4 | ) | (25 | ) | (1 | ) | ||||||||
73 | 16 | 26 | 48 | |||||||||||||
Comprehensive income |
$ | 2,328 | $ | 2,517 | $ | 1,365 | $ | 1,271 | ||||||||
4
Six Months Ended June 30, 2010 | ||||||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||||||
Net | ||||||||||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||||||||||
Common | Appreciation | |||||||||||||||||||||||||||||||||||
Shares of | of Retained | Cumulative | ||||||||||||||||||||||||||||||||||
Beneficial | Additional | Interests in | Cumulative | Preferred | ||||||||||||||||||||||||||||||||
Interest | Par | Paid-in | Transferred | Net | Cumulative | Treasury | Stock of | Total | ||||||||||||||||||||||||||||
Outstanding | Value | Capital | Assets | Income | Dividends | Stock | Subsidiary | Equity | ||||||||||||||||||||||||||||
Balances, January 1, 2010 |
10,548,354 | $ | 111 | $ | 152,611 | $ | 325 | $ | 167,686 | $ | (164,274 | ) | $ | (4,901 | ) | $ | 900 | $ | 152,458 | |||||||||||||||||
Cumulative effect adjustment |
| | | $ | (265 | ) | 466 | | | | 201 | |||||||||||||||||||||||||
Net unrealized appreciation |
| | | 16 | | | | | 16 | |||||||||||||||||||||||||||
Share-based compensation
expense |
9,700 | | 99 | | | | | | 99 | |||||||||||||||||||||||||||
Dividends ($0.32 per share) |
| | | | | (3,378 | ) | | | (3,378 | ) | |||||||||||||||||||||||||
Net income |
| | | | 2,501 | | | | 2,501 | |||||||||||||||||||||||||||
Balances, June 30, 2010 |
10,558,054 | $ | 111 | $ | 152,710 | $ | 76 | $ | 170,653 | $ | (167,652 | ) | $ | (4,901 | ) | $ | 900 | $ | 151,897 | |||||||||||||||||
Six Months Ended June 30, 2011 | ||||||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||||||
Net | ||||||||||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||||||||||
Common | Appreciation | |||||||||||||||||||||||||||||||||||
Shares of | of Retained | Cumulative | ||||||||||||||||||||||||||||||||||
Beneficial | Additional | Interests in | Cumulative | Preferred | ||||||||||||||||||||||||||||||||
Interest | Par | Paid-in | Transferred | Net | Cumulative | Treasury | Stock of | Total | ||||||||||||||||||||||||||||
Outstanding | Value | Capital | Assets | Income | Dividends | Stock | Subsidiary | Equity | ||||||||||||||||||||||||||||
Balances, January 1, 2011 |
10,559,554 | $ | 111 | $ | 152,756 | $ | 276 | $ | 172,449 | $ | (171,031 | ) | $ | (4,901 | ) | $ | 900 | $ | 150,560 | |||||||||||||||||
Net unrealized appreciation |
| | | 73 | | | | | 73 | |||||||||||||||||||||||||||
Share-based compensation
expense |
15,000 | | 147 | | | | | | 147 | |||||||||||||||||||||||||||
Dividends ($0.32 per share) |
| | | | | (3,383 | ) | | | (3,383 | ) | |||||||||||||||||||||||||
Net income |
| | | | 2,255 | | | | 2,255 | |||||||||||||||||||||||||||
Balances, June 30, 2011 |
10,574,554 | $ | 111 | $ | 152,903 | $ | 349 | $ | 174,704 | $ | (174,414 | ) | $ | (4,901 | ) | $ | 900 | $ | 149,652 | |||||||||||||||||
5
Six Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 2,255 | $ | 2,501 | ||||
Adjustments to reconcile net income to net cash used in
operating activities: |
||||||||
Depreciation |
4 | 9 | ||||||
Impairment losses |
232 | | ||||||
Net gains on sales of real estate |
(570 | ) | (78 | ) | ||||
Deferred income taxes |
(231 | ) | (502 | ) | ||||
Provision for (reduction of) loan losses, net |
379 | (98 | ) | |||||
Unrealized premium adjustment |
642 | 1,082 | ||||||
Amortization and accretion, net |
(23 | ) | 30 | |||||
Share-based compensation |
147 | 99 | ||||||
Capitalized loan origination costs |
(96 | ) | (183 | ) | ||||
Loans funded, held for sale |
(10,743 | ) | (19,826 | ) | ||||
Proceeds from sale of guaranteed loans |
6,015 | | ||||||
Principal collected on loans |
294 | 64 | ||||||
Loan fees remitted, net |
(78 | ) | (37 | ) | ||||
Change in operating assets and liabilities: |
||||||||
Other assets |
(533 | ) | (81 | ) | ||||
Borrower advances |
178 | 1,026 | ||||||
Accounts payable and accrued expenses |
(485 | ) | 249 | |||||
Other liabilities |
(32 | ) | (28 | ) | ||||
Net cash used in operating activities |
(2,645 | ) | (15,773 | ) | ||||
Cash flows from investing activities: |
||||||||
Loans funded |
(3,233 | ) | (3,118 | ) | ||||
Principal collected on loans |
9,429 | 8,677 | ||||||
Principal collected on retained interests in transferred assets |
70 | 109 | ||||||
Purchase of furniture, fixtures, and equipment |
(31 | ) | | |||||
Proceeds from sales of real estate owned, net |
111 | 2,291 | ||||||
Proceeds from unconsolidated subsidiary |
1,373 | | ||||||
Investment in restricted cash and cash equivalents, net |
(1,425 | ) | (404 | ) | ||||
Net cash provided by investing activities |
6,294 | 7,555 | ||||||
Cash flows from financing activities: |
||||||||
Repayment of revolving credit facility, net |
(1,000 | ) | (4,100 | ) | ||||
Payment of principal on structured notes payable |
(2,705 | ) | (2,289 | ) | ||||
Proceeds from secured borrowings government guaranteed loans |
5,980 | 18,639 | ||||||
Payment of principal on secured borrowings government guaranteed loans |
(294 | ) | (64 | ) | ||||
Redemption of redeemable preferred stock of subsidiary |
| (2,000 | ) | |||||
Payment of borrowing costs |
(182 | ) | | |||||
Payment of dividends |
(3,381 | ) | (3,397 | ) | ||||
Net cash provided by (used in) financing activities |
(1,582 | ) | 6,789 | |||||
Net increase (decrease) in cash and cash equivalents |
2,067 | (1,429 | ) | |||||
Cash and cash equivalents, beginning of year |
2,642 | 7,838 | ||||||
Cash and cash equivalents, end of period |
$ | 4,709 | $ | 6,409 | ||||
6
7
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Commercial mortgage loans (1) |
$ | 122,751 | $ | 124,065 | ||||
Commercial mortgage loans, subject to structured notes payable |
36,537 | 40,514 | ||||||
SBIC commercial mortgage loans |
29,897 | 31,289 | ||||||
SBA 7(a) loans, subject to secured borrowings |
26,012 | 20,326 | ||||||
SBA 7(a) loans |
18,908 | 18,673 | ||||||
Total loans receivable |
234,105 | 234,867 | ||||||
Adjusted by: |
||||||||
Deferred capitalized costs (commitment fees), net |
47 | (40 | ) | |||||
Loan loss reserves |
(1,860 | ) | (1,609 | ) | ||||
Loans receivable, net |
$ | 232,292 | $ | 233,218 | ||||
(1) | At December 31, 2010, these loans were pledged to our revolving credit facility. |
8
June 30, 2011 | ||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||
Mortgage | SBA 7(a) | |||||||||||||||||||||||
Category | Totals | Loans | Loans | |||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Current |
$ | 204,955 | 98.5 | % | $ | 186,340 | 98.5 | % | $ | 18,615 | 98.5 | % | ||||||||||||
Between 30 and 59 days delinquent |
18 | | | | 18 | | ||||||||||||||||||
Between 60 and 89 days delinquent |
774 | 0.4 | % | 774 | 0.4 | % | | | ||||||||||||||||
Over 89 days delinquent (1) |
2,346 | 1.1 | % | 2,071 | 1.1 | % | 275 | 1.5 | % | |||||||||||||||
$ | 208,093 | 100.0 | % | $ | 189,185 | 100.0 | % | $ | 18,908 | 100.0 | % | |||||||||||||
(1) | Includes $1.5 million of loans on which the borrowers have filed for Chapter 11 Bankruptcy.
We are classified as a secured creditor in the bankruptcy proceedings. In addition, the
collateral underlying $0.7 million of loans included in the over 89 days delinquent category
was in the foreclosure process. |
December 31, 2010 | ||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||
Mortgage | SBA 7(a) | |||||||||||||||||||||||
Category | Totals | Loans | Loans | |||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Current (1) |
$ | 196,539 | 91.6 | % | $ | 178,592 | 91.2 | % | $ | 17,947 | 96.1 | % | ||||||||||||
Between 30 and 59 days delinquent |
4,877 | 2.3 | % | 4,664 | 2.4 | % | 213 | 1.1 | % | |||||||||||||||
Between 60 and 89 days delinquent |
5,576 | 2.6 | % | 5,253 | 2.7 | % | 323 | 1.7 | % | |||||||||||||||
Over 89 days delinquent (2) |
7,549 | 3.5 | % | 7,359 | 3.8 | % | 190 | 1.0 | % | |||||||||||||||
$ | 214,541 | 100.0 | % | $ | 195,868 | 100.0 | % | $ | 18,673 | 100.0 | % | |||||||||||||
(1) | Includes $9.0 million of loans which are current under agreements which provide for interest
only payments during a short period of time in exchange for additional collateral. Of this,
$7.2 million relates to an affiliated group of obligors described above. |
|
(2) | Includes $6.3 million of loans on which the borrowers have filed for Chapter 11 Bankruptcy.
We are classified as a secured creditor in the bankruptcy proceedings. In addition, the
collateral underlying $1.1 million of loans included in the over 89 days delinquent category
was in the foreclosure process. |
9
June 30, 2011 | ||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||
Mortgage | SBA 7(a) | |||||||||||||||||||||||
Totals | % | Loans | % | Loans | % | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Satisfactory |
$ | 178,190 | 85.6 | % | $ | 160,110 | 84.6 | % | $ | 18,080 | 95.6 | % | ||||||||||||
OAEM |
21,992 | 10.6 | % | 21,981 | 11.6 | % | 11 | 0.1 | % | |||||||||||||||
Substandard |
5,384 | 2.6 | % | 5,023 | 2.7 | % | 361 | 1.9 | % | |||||||||||||||
Doubtful |
2,527 | 1.2 | % | 2,071 | 1.1 | % | 456 | 2.4 | % | |||||||||||||||
$ | 208,093 | 100.0 | % | $ | 189,185 | 100.0 | % | $ | 18,908 | 100.0 | % | |||||||||||||
December 31, 2010 | ||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||
Mortgage | SBA 7(a) | |||||||||||||||||||||||
Totals | % | Loans | % | Loans | % | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Satisfactory |
$ | 187,630 | 87.5 | % | $ | 169,880 | 86.7 | % | $ | 17,750 | 95.1 | % | ||||||||||||
OAEM |
16,886 | 7.9 | % | 16,872 | 8.6 | % | 14 | 0.1 | % | |||||||||||||||
Substandard |
9,113 | 4.2 | % | 8,469 | 4.3 | % | 644 | 3.4 | % | |||||||||||||||
Doubtful |
912 | 0.4 | % | 647 | 0.3 | % | 265 | 1.4 | % | |||||||||||||||
$ | 214,541 | 100.0 | % | $ | 195,868 | 100.0 | % | $ | 18,673 | 100.0 | % | |||||||||||||
10
Six Months Ended June 30, | ||||||||||||||||
2011 | ||||||||||||||||
Commercial | ||||||||||||||||
Mortgage | SBA 7(a) | |||||||||||||||
Total | Loans | Loans | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Balance, beginning of year |
$ | 1,609 | $ | 1,303 | $ | 306 | $ | 1,257 | ||||||||
Provision for loan losses |
520 | 332 | 188 | 306 | ||||||||||||
Reduction of loan losses |
(141 | ) | (118 | ) | (23 | ) | (404 | ) | ||||||||
Consolidation of the 2000 Joint Venture and the 1998 Partnership reserves |
| | | 184 | ||||||||||||
Principal balances written-off |
(128 | ) | | (128 | ) | (143 | ) | |||||||||
Balance, end of period |
$ | 1,860 | $ | 1,517 | $ | 343 | $ | 1,200 | ||||||||
June 30, 2011 | December 31, 2010 | |||||||||||||||||||||||
Commercial | Commercial | |||||||||||||||||||||||
Mortgage | SBA 7(a) | Mortgage | SBA 7(a) | |||||||||||||||||||||
Total | Loans | Loans | Total | Loans | Loans | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Impaired loans requiring reserves |
$ | 1,704 | $ | 1,411 | $ | 293 | $ | 687 | $ | 419 | $ | 268 | ||||||||||||
Impaired loans expected to be fully recoverable |
817 | 654 | 163 | 228 | 228 | | ||||||||||||||||||
Total impaired loans |
$ | 2,521 | $ | 2,065 | $ | 456 | $ | 915 | $ | 647 | $ | 268 | ||||||||||||
Three Months Ended June 30, | ||||||||||||||||
2011 | ||||||||||||||||
Commercial | ||||||||||||||||
Mortgage | SBA 7(a) | |||||||||||||||
Total | Loans | Loans | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Average impaired loans |
$ | 2,646 | $ | 2,061 | $ | 585 | $ | 3,915 | ||||||||
Interest income on impaired loans |
$ | 2 | $ | | $ | 2 | $ | 57 | ||||||||
11
Six Months Ended June 30, | ||||||||||||||||
2011 | ||||||||||||||||
Commercial | ||||||||||||||||
Mortgage | SBA 7(a) | |||||||||||||||
Total | Loans | Loans | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Average impaired loans |
$ | 2,548 | $ | 2,059 | $ | 489 | $ | 4,190 | ||||||||
Interest income on impaired loans |
$ | 4 | $ | | $ | 4 | $ | 71 | ||||||||
June 30, 2011 | ||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||
Mortgage | SBA 7(a) | |||||||||||||||||||||||
Year of Origination | Totals | Loans | Loans | |||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
1991 to 1999 |
$ | 33,120 | 15.9 | % | $ | 31,833 | 16.8 | % | $ | 1,287 | 6.8 | % | ||||||||||||
2000 to 2004 |
54,114 | 26.0 | % | 51,544 | 27.2 | % | 2,570 | 13.6 | % | |||||||||||||||
2005 to 2007 |
77,029 | 37.0 | % | 75,734 | 40.0 | % | 1,295 | 6.8 | % | |||||||||||||||
2008 to 2011 |
43,830 | 21.1 | % | 30,074 | 15.9 | % | 13,756 | 72.8 | % | |||||||||||||||
$ | 208,093 | 100.0 | % | $ | 189,185 | 100.0 | % | $ | 18,908 | 100.0 | % | |||||||||||||
12
December 31, 2010 | ||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||
Mortgage | SBA 7(a) | |||||||||||||||||||||||
Year of Origination | Totals | Loans | Loans | |||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
1991 to 1999 |
$ | 36,405 | 17.0 | % | $ | 35,057 | 17.9 | % | $ | 1,348 | 7.2 | % | ||||||||||||
2000 to 2004 |
56,497 | 26.3 | % | 53,739 | 27.4 | % | 2,758 | 14.8 | % | |||||||||||||||
2005 to 2007 |
79,118 | 36.9 | % | 77,773 | 39.7 | % | 1,345 | 7.2 | % | |||||||||||||||
2008 to 2010 |
42,521 | 19.8 | % | 29,299 | 15.0 | % | 13,222 | 70.8 | % | |||||||||||||||
$ | 214,541 | 100.0 | % | $ | 195,868 | 100.0 | % | $ | 18,673 | 100.0 | % | |||||||||||||
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Deferred tax asset, net |
$ | 1,270 | $ | 1,039 | ||||
Retained interests in transferred assets |
1,014 | 1,010 | ||||||
Deferred borrowing costs, net |
1,007 | 836 | ||||||
Servicing asset, net |
830 | 758 | ||||||
Investment in variable interest entities (1) |
820 | 2,183 | ||||||
Interest receivable |
689 | 691 | ||||||
Prepaid expenses and deposits |
550 | 286 | ||||||
Other |
495 | 201 | ||||||
$ | 6,675 | $ | 7,004 | |||||
(1) | During January 2011, our lessee exercised the fixed purchase option related to
one of our unconsolidated variable interest entities. No gain or loss was recorded on
the transaction. |
13
Weighted | ||||||||||||||||||||
Average | ||||||||||||||||||||
Interest Rate | ||||||||||||||||||||
Weighted Average | on Underlying | |||||||||||||||||||
Carrying Value (1) | Coupon Rate at | Loans at | ||||||||||||||||||
June 30, | December 31, | June 30, | December 31, | June 30, | ||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | ||||||||||||||||
(Dollars in thousands, except footnotes) | ||||||||||||||||||||
Structured notes payable: |
||||||||||||||||||||
2003 Joint Venture |
$ | 5,989 | $ | 7,094 | 2.75 | % | 2.80 | % | 4.30 | % | ||||||||||
2000 Joint Venture |
10,330 | 11,724 | 7.28 | % | 7.28 | % | 9.56 | % | ||||||||||||
1998 Partnership |
3,133 | 3,339 | 2.25 | % | 2.25 | % | 4.99 | % | ||||||||||||
19,452 | 22,157 | |||||||||||||||||||
Junior subordinated notes |
27,070 | 27,070 | 3.56 | % | 3.54 | % | NA | |||||||||||||
Revolving credit facility (2) |
12,800 | 13,800 | 2.42 | % | 3.25 | % | NA | |||||||||||||
Debentures payable |
8,179 | 8,177 | 5.90 | % | 5.90 | % | NA | |||||||||||||
Secured borrowings government
guaranteed loans: |
||||||||||||||||||||
Loans sold for a premium and excess spread |
21,970 | 15,664 | 3.82 | % | 3.87 | % | 5.95 | % | ||||||||||||
Loans sold for excess spread |
6,039 | 6,101 | 1.58 | % | 1.58 | % | 5.96 | % | ||||||||||||
28,009 | 21,765 | |||||||||||||||||||
Debt |
$ | 95,510 | $ | 92,969 | ||||||||||||||||
(1) | The face amount of debt as of June 30, 2011 and December 31, 2010 was $95,521,000 and
$92,982,000, respectively. |
|
(2) | We amended our revolving credit facility in June 2011. The maturity date was extended to
June 30, 2014 and our interest rate was reduced to prime less 50 basis points or the 30 day
LIBOR plus 2%, at our option. |
14
Structured | ||||||||||||
Notes and | ||||||||||||
Secured | All Other | |||||||||||
Years Ending June 30, | Total | Borrowings (1) | Debt (2) | |||||||||
(In thousands) | ||||||||||||
2012 |
$ | 3,984 | $ | 3,984 | $ | | ||||||
2013 |
4,266 | 4,266 | | |||||||||
2014 |
21,255 | 4,265 | 16,990 | |||||||||
2015 |
8,494 | 4,494 | 4,000 | |||||||||
2016 |
3,754 | 3,754 | | |||||||||
Thereafter |
53,768 | 26,698 | 27,070 | |||||||||
$ | 95,521 | $ | 47,461 | $ | 48,060 | |||||||
(1) | Principal payments are generally dependent upon cash flows received from
the underlying loans. Our estimate of their repayment is based on scheduled
principal payments on the underlying loans. Our estimate will differ from actual
amounts to the extent we experience prepayments and/or loan losses. No payment is
due on the structured notes or secured borrowings unless payments are received from
the borrowers on the loans underlying them. |
|
(2) | Represents the revolving credit facility, junior subordinated notes and
debentures payable. |
Assumption | ||||
Expected Term (years) |
3.0 | |||
Risk-Free Interest Rate |
0.71 | % | ||
Expected Dividend Yield |
7.31 | % | ||
Expected Volatility |
33.58 | % | ||
Expected Forfeiture Rate |
2.0 | % |
15
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Premium income |
$ | 128 | $ | 167 | $ | 559 | $ | 167 | ||||||||
Prepayment fees |
110 | 93 | 110 | 135 | ||||||||||||
Servicing income |
103 | 86 | 200 | 164 | ||||||||||||
Retained interests in
transferred assets |
53 | 34 | 106 | 75 | ||||||||||||
Loan related income other |
46 | 38 | 92 | 96 | ||||||||||||
Other |
18 | 19 | 80 | 38 | ||||||||||||
$ | 458 | $ | 437 | $ | 1,147 | $ | 675 | |||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Net gains on sales of real estate |
$ | 568 | $ | 2 | $ | 570 | $ | 78 | ||||||||
Net operating losses |
(232 | ) | (5 | ) | (442 | ) | (70 | ) | ||||||||
Impairment losses |
(232 | ) | | (232 | ) | | ||||||||||
Discontinued operations |
$ | 104 | $ | (3 | ) | $ | (104 | ) | $ | 8 | ||||||
16
Provision for | ||||||||||||||||
Loan Losses | ||||||||||||||||
Carrying Value at | Six Months Ended | |||||||||||||||
June 30, | June 30, (2) | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Impaired loans (1) |
$ | 2,269 | $ | 2,053 | $ | 124 | $ | 101 | ||||||||
(1) | Carrying value represents our impaired loans net of loan loss reserves. Our carrying value
is determined based on managements assessment of the fair value of the collateral based on
numerous factors including operating statistics to the extent available, appraised value of
the collateral, tax assessed value and market environment. |
|
(2) | Represents the net change in the provision for loan losses included in our consolidated
statements of income related specifically to these loans during the periods presented. |
17
June 30, | December 31, | |||||||||||||||
2011 | 2010 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
(In thousands) | ||||||||||||||||
Assets: |
||||||||||||||||
Loans receivable, net |
$ | 232,292 | $ | 230,584 | $ | 233,218 | $ | 228,821 | ||||||||
Cash and cash equivalents |
4,709 | 4,709 | 2,642 | 2,642 | ||||||||||||
Restricted cash and cash equivalents |
7,211 | 7,211 | 5,786 | 5,786 | ||||||||||||
Liabilities: |
||||||||||||||||
Structured notes and SBIC debentures payable |
27,631 | 28,040 | 30,334 | 30,781 | ||||||||||||
Secured borrowings government guaranteed
loans |
28,009 | 28,009 | 21,765 | 21,765 | ||||||||||||
Revolving credit facility |
12,800 | 12,800 | 13,800 | 13,800 | ||||||||||||
Junior subordinated notes |
27,070 | 22,334 | 27,070 | 22,310 |
18
Six Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Loans receivable reclassified to real estate owned |
$ | | $ | 2,380 | ||||
Reclassification from secured borrowings government
guaranteed loans to loans receivable, net |
$ | | $ | 2,007 | ||||
Loans receivable originated to facilitate sales of
real estate owned |
$ | 1,172 | $ | 3,325 | ||||
Consolidation of off-balance sheet securitizations: |
||||||||
Loans receivable, net |
$ | | $ | 27,752 | ||||
Restricted cash and cash equivalents |
$ | | $ | 3,396 | ||||
Structured notes payable |
$ | | $ | 19,524 | ||||
Twelve Months Ending June 30, | Total | |||
(In thousands) | ||||
2012 |
$ | 85 | ||
2013 |
208 | |||
2014 |
214 | |||
2015 |
146 | |||
$ | 653 | |||
19
20
21
22
Principal | Premium | Gain Recognized Upon Sale | ||||||||||||||
Type of Sale | Sold | Received | Book | Tax | ||||||||||||
Cash premium |
$ | 6,015,000 | $ | 603,000 | $ | 559,000 | $ | 627,000 | ||||||||
Hybrid |
5,980,000 | 598,000 | | 730,000 | ||||||||||||
$ | 11,995,000 | $ | 1,201,000 | $ | 559,000 | $ | 1,357,000 | |||||||||
June 30, | December 31, | |||||||||||||||||||||||
2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Aggregate Portfolio (1) |
$ | 287,524 | $ | 284,451 | $ | 273,687 | $ | 275,530 | $ | 326,368 | $ | 397,567 | ||||||||||||
Loans funded (2) |
$ | 13,976 | $ | 38,440 | $ | 30,435 | $ | 34,587 | $ | 33,756 | $ | 51,686 | ||||||||||||
Prepayments (2) |
$ | 4,615 | $ | 10,830 | $ | 12,795 | $ | 68,556 | $ | 84,137 | $ | 91,710 | ||||||||||||
% Prepayments (3) |
3.2 | % | 4.0 | % | 4.6 | % | 21.0 | % | 21.2 | % | 20.5 | % |
(1) | Serviced Portfolio outstanding at the period ended before loan loss reserves and
deferred commitment fees. |
|
(2) | During the years ended December 31 and the six months ended June 30, 2011. |
|
(3) | Represents prepayments as a percentage of the Aggregate Portfolio outstanding as of
the beginning of the applicable year. For the six months ended June 30, 2011, represents
annualized prepayments as a percentage of our Aggregate Portfolio outstanding. |
23
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Loans Originated: |
||||||||||||||||
Loans Funded: |
||||||||||||||||
SBA 7(a) loans |
$ | 5,074 | $ | 11,933 | $ | 12,940 | $ | 22,715 | ||||||||
Commercial mortgage loans |
830 | 189 | 1,036 | 229 | ||||||||||||
Total loans funded |
5,904 | 12,122 | 13,976 | 22,944 | ||||||||||||
Other Loan Transactions: |
||||||||||||||||
2000 Joint Venture (1) |
| | | 22,912 | ||||||||||||
1998 Partnership (1) |
| | | 5,024 | ||||||||||||
Loans originated to facilitate sales of real
estate owned |
1,172 | 1,050 | 1,172 | 3,325 | ||||||||||||
Total loans originated |
$ | 7,076 | $ | 13,172 | $ | 15,148 | $ | 54,205 | ||||||||
Principal Reductions: |
||||||||||||||||
Scheduled principal payments |
$ | 2,894 | $ | 2,877 | $ | 5,593 | $ | 5,683 | ||||||||
Prepayments |
3,968 | 841 | 4,130 | 3,058 | ||||||||||||
Proceeds from sale of SBA 7(a) guaranteed loans (2) |
1,335 | 2,007 | 6,015 | 2,007 | ||||||||||||
Total principal reductions |
$ | 8,197 | $ | 5,725 | $ | 15,738 | $ | 10,748 | ||||||||
(1) | The 2000 Joint Venture and the 1998 Partnership were consolidated effective January
1, 2010 due to a change in accounting rules. |
|
(2) | For the three and six months ended June 30, 2010, represents reclassifications from
secured borrowings government guaranteed loans to loans receivable. |
June 30, 2011 | December 31, 2010 | |||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Retained Portfolio | Interest | Retained Portfolio | Interest | |||||||||||||||||||||
Amount | % | Rate | Amount | % | Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Variable-rate LIBOR |
$ | 134,821 | 58.0 | % | 4.2 | % | $ | 125,606 | 53.9 | % | 4.2 | % | ||||||||||||
Fixed-rate |
47,569 | 20.5 | % | 9.3 | % | 63,263 | 27.1 | % | 9.1 | % | ||||||||||||||
Variable-rate prime |
49,902 | 21.5 | % | 5.7 | % | 44,349 | 19.0 | % | 5.7 | % | ||||||||||||||
$ | 232,292 | 100.0 | % | 5.6 | % | $ | 233,218 | 100.0 | % | 5.8 | % | |||||||||||||
24
June 30, 2011 | ||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||
Mortgage | SBA 7(a) | |||||||||||||||||||||||
Totals | % | Loans | % | Loans | % | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Satisfactory |
$ | 178,190 | 85.6 | % | $ | 160,110 | 84.6 | % | $ | 18,080 | 95.6 | % | ||||||||||||
OAEM |
21,992 | 10.6 | % | 21,981 | 11.6 | % | 11 | 0.1 | % | |||||||||||||||
Substandard |
5,384 | 2.6 | % | 5,023 | 2.7 | % | 361 | 1.9 | % | |||||||||||||||
Doubtful |
2,527 | 1.2 | % | 2,071 | 1.1 | % | 456 | 2.4 | % | |||||||||||||||
$ | 208,093 | 100.0 | % | $ | 189,185 | 100.0 | % | $ | 18,908 | 100.0 | % | |||||||||||||
December 31, 2010 | ||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||
Mortgage | SBA 7(a) | |||||||||||||||||||||||
Totals | % | Loans | % | Loans | % | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Satisfactory |
$ | 187,630 | 87.5 | % | $ | 169,880 | 86.7 | % | $ | 17,750 | 95.1 | % | ||||||||||||
OAEM |
16,886 | 7.9 | % | 16,872 | 8.6 | % | 14 | 0.1 | % | |||||||||||||||
Substandard |
9,113 | 4.2 | % | 8,469 | 4.3 | % | 644 | 3.4 | % | |||||||||||||||
Doubtful |
912 | 0.4 | % | 647 | 0.3 | % | 265 | 1.4 | % | |||||||||||||||
$ | 214,541 | 100.0 | % | $ | 195,868 | 100.0 | % | $ | 18,673 | 100.0 | % | |||||||||||||
25
Three Months Ended | ||||||||||||||||
June 30, | Change | |||||||||||||||
2011 | 2010 | $ | % | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Total revenues |
$ | 3,847 | $ | 3,935 | $ | (88 | ) | (2.2 | )% | |||||||
Total expenses |
$ | 2,666 | $ | 2,729 | $ | (63 | ) | (2.3 | )% | |||||||
Income from continuing operations |
$ | 1,235 | $ | 1,226 | $ | 9 | 0.7 | % | ||||||||
Net income |
$ | 1,339 | $ | 1,223 | $ | 116 | 9.5 | % |
26
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Premium income |
$ | 128 | $ | 167 | ||||
Prepayment fees |
110 | 93 | ||||||
Servicing income |
103 | 86 | ||||||
Retained interests in transferred assets |
53 | 34 | ||||||
Loan related income other |
46 | 38 | ||||||
Other |
18 | 19 | ||||||
$ | 458 | $ | 437 | |||||
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Structured notes payable |
$ | 253 | $ | 335 | ||||
Junior subordinated notes |
246 | 245 | ||||||
Secured borrowings |
200 | 86 | ||||||
Revolver |
111 | 198 | ||||||
Debentures payable |
124 | 124 | ||||||
Other |
23 | 23 | ||||||
$ | 957 | $ | 1,011 | |||||
27
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Net gains on sales of real estate |
$ | 568 | $ | 2 | ||||
Net operating losses |
(232 | ) | (5 | ) | ||||
Impairment losses |
(232 | ) | | |||||
Discontinued operations |
$ | 104 | $ | (3 | ) | |||
28
Six Months Ended | ||||||||||||||||
June 30, | Change | |||||||||||||||
2011 | 2010 | $ | % | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Total revenues |
$ | 7,903 | $ | 7,390 | $ | 513 | 6.9 | % | ||||||||
Total expenses |
$ | 5,573 | $ | 5,025 | $ | 548 | 10.9 | % | ||||||||
Income from continuing operations |
$ | 2,359 | $ | 2,493 | $ | (134 | ) | (5.4 | )% | |||||||
Net income |
$ | 2,255 | $ | 2,501 | $ | (246 | ) | (9.8 | )% |
Six Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Premium income |
$ | 559 | $ | 167 | ||||
Servicing income |
200 | 164 | ||||||
Prepayment fees |
110 | 135 | ||||||
Retained interests in transferred assets |
106 | 75 | ||||||
Loan related income other |
92 | 96 | ||||||
Other |
80 | 38 | ||||||
$ | 1,147 | $ | 675 | |||||
29
Six Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Structured notes payable |
$ | 526 | $ | 681 | ||||
Junior subordinated notes |
489 | 484 | ||||||
Secured borrowings |
386 | 105 | ||||||
Revolver |
238 | 398 | ||||||
Debentures payable |
246 | 247 | ||||||
Other |
45 | 85 | ||||||
$ | 1,930 | $ | 2,000 | |||||
30
Six Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Net gains on sales of real estate |
$ | 570 | $ | 78 | ||||
Net operating losses |
(442 | ) | (70 | ) | ||||
Impairment losses |
(232 | ) | | |||||
Discontinued operations |
$ | (104 | ) | $ | 8 | |||
Six Months Ended | ||||||||||||
June 30, | ||||||||||||
2011 | 2010 | Change | ||||||||||
(In thousands) | ||||||||||||
Cash used in operating activities |
$ | (2,645 | ) | $ | (15,773 | ) | $ | 13,128 | ||||
Cash provided by investing activities |
6,294 | 7,555 | (1,261 | ) | ||||||||
Cash provided by (used in) financing activities |
(1,582 | ) | 6,789 | (8,371 | ) | |||||||
Net cash flow |
$ | 2,067 | $ | (1,429 | ) | $ | 3,496 | |||||
31
Six Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Net cash used in operating activities |
$ | (2,645 | ) | $ | (15,773 | ) | ||
Change in operating assets and liabilities |
872 | (1,166 | ) | |||||
Operating Loan Activity |
4,728 | 19,826 | ||||||
Modified Cash |
$ | 2,955 | $ | 2,887 | ||||
32
| Issuance of SBIC debentures; |
||
| Issuance of junior subordinated notes; or |
||
| Structured loan financings or sales. |
33
34
Amount | ||||||||
Date Paid | Record Date | Per Share | ||||||
April 11, 2011 |
March 31, 2011 | $ | 0.16 | |||||
July 11, 2011 |
June 30, 2011 | 0.16 | ||||||
$ | 0.32 | |||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||||||
(In thousands) | |||||||||||||||||||||
Net income |
$ | 1,339 | $ | 1,223 | $ | 2,255 | $ | 2,501 | |||||||||||||
Gains related to real estate |
(683 | ) | (2 | ) | (235 | ) | 387 | ||||||||||||||
Amortization and accretion |
(17 | ) | (25 | ) | (33 | ) | (51 | ) | |||||||||||||
Loan valuation |
(41 | ) | (361 | ) | 147 | (558 | ) | ||||||||||||||
Impairment losses |
209 | | 209 | | |||||||||||||||||
Other, net |
4 | (100 | ) | 34 | (154 | ) | |||||||||||||||
Subtotal |
811 | 735 | 2,377 | 2,125 | |||||||||||||||||
Adjustment for TRS net loss, net of tax |
128 | 60 | 100 | 293 | |||||||||||||||||
REIT taxable income |
$ | 939 | $ | 795 | $ | 2,477 | $ | 2,418 | |||||||||||||
Distributions declared |
$ | 1,692 | $ | 1,690 | $ | 3,383 | $ | 3,378 | |||||||||||||
Weighted average common shares outstanding |
10,571 | 10,550 | 10,566 | 10,549 | |||||||||||||||||
35
Six Months Ended June 30, 2011 | ||||||||||||
Combined | REIT | TRSs | ||||||||||
(In thousands, except footnotes) | ||||||||||||
Net income (loss) |
$ | 2,255 | $ | 2,355 | $ | (100 | ) | |||||
Book vs. tax timing differences |
815 | 122 | 693 | (1) | ||||||||
Taxable income |
3,070 | 2,477 | 593 | |||||||||
Special item (2) |
(448 | ) | (448 | ) | | |||||||
Taxable Income, adjusted for special item |
2,622 | 2,029 | 593 | |||||||||
Current income tax expense |
(202 | ) | | (202 | ) | |||||||
Adjusted Taxable Income, Net of Current Tax Expense |
$ | 2,420 | $ | 2,029 | $ | 391 | ||||||
Six Months Ended June 30, 2010 | ||||||||||||
Combined | REIT | TRSs | ||||||||||
(In thousands, except footnotes) | ||||||||||||
Net income (loss) |
$ | 2,501 | $ | 2,794 | $ | (293 | ) | |||||
Book vs. tax timing differences |
1,011 | (376 | ) | 1,387 | (1) | |||||||
Taxable income |
3,512 | 2,418 | 1,094 | |||||||||
Current income tax expense |
(374 | ) | | (374 | ) | |||||||
Adjusted Taxable Income, Net of Current Tax Expense |
$ | 3,138 | $ | 2,418 | $ | 720 | ||||||
(1) | Includes $690,000 and $1,858,000 of timing differences during 2011 and 2010, respectively,
related to Secondary Market Loan Sales. |
|
(2) | Recognition of deferred gain for tax purposes on a property previously owned by our off-balance
sheet variable interest entity. |
36
| national, regional and local economic conditions; |
||
| rises in gasoline prices if there is a concurrent decrease in business and leisure
travel; |
||
| local real estate conditions (including an oversupply of commercial real estate); |
||
| natural disasters including hurricanes and earthquakes, acts of war and/or
terrorism and other events that may cause performance declines and/or losses to the
owners and operators of the real estate securing our loans; |
||
| changes or continued weakness in the underlying value of limited service
hospitality properties; |
||
| construction quality, construction cost, age and design; |
||
| demographic factors; |
||
| uninsured losses; |
||
| environmental, zoning and other governmental laws and regulations; |
||
| increases in operating expenses (such as energy costs) for the owners of the
properties; and |
||
| limitations in the availability and cost of leverage. |
37
Six Months | Year Ended | Six Months | ||||||||||
Ended | December 31, | Ended | ||||||||||
Provision for loan losses | June 30, 2011 | 2010 | June 30, 2010 | |||||||||
(In thousands) | ||||||||||||
As reported (1) |
$ | 520 | $ | 1,019 | $ | 306 | ||||||
Annual loan losses increase by 50 basis points (2) |
1,042 | 2,117 | 884 | |||||||||
Annual loan losses increase by 100 basis points (2) |
1,564 | 3,214 | 1,462 |
(1) | Excludes reductions of loan losses |
|
(2) | Represents provision for loan losses based on increases in losses as a percentage
of our weighted average loans receivable for the periods indicated |
38
Twelve Month Periods Ending June 30, | Carrying | Fair | ||||||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | Thereafter | Value | Value (1) | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Fixed-rate debt (2) |
$ | 1,507 | $ | 1,727 | $ | 5,824 | $ | 5,807 | $ | 1,985 | $ | 1,658 | $ | 18,508 | $ | 19,065 | ||||||||||||||||
Variable-rate debt (LIBOR
and prime based) (3) (4) |
2,477 | 2,539 | 15,420 | 2,687 | 1,769 | 52,110 | 77,002 | 72,118 | ||||||||||||||||||||||||
Totals |
$ | 3,984 | $ | 4,266 | $ | 21,244 | $ | 8,494 | $ | 3,754 | $ | 53,768 | $ | 95,510 | $ | 91,183 | ||||||||||||||||
(1) | The estimated fair value is based on a present value calculation based on prices of the same
or similar instruments after considering risk, current interest rates and remaining
maturities. |
|
(2) | The weighted average interest rate of our fixed-rate debt at June 30, 2011 was 6.7%. |
|
(3) | Principal payments on the structured notes and secured borrowings are dependent upon cash
flows received from the underlying loans. Our estimate of their repayment is based upon
scheduled principal payments on the underlying loans. Our estimate will differ from actual
amounts to the extent we experience prepayments and/or loan losses. |
|
(4) | The weighted average interest rate of our variable-rate debt at June 30, 2011 was 3.2%. |
39
Years Ending December 31, | Carrying | Fair | ||||||||||||||||||||||||||||||
2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | Value | Value (1) | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Fixed-rate debt (2) |
$ | 1,652 | $ | 1,815 | $ | 6,155 | $ | 2,008 | $ | 6,205 | $ | 2,066 | $ | 19,901 | $ | 20,514 | ||||||||||||||||
Variable-rate debt (LIBOR
and prime rate based) (3) (4) |
16,123 | 2,414 | 2,463 | 2,570 | 2,534 | 46,964 | 73,068 | 68,142 | ||||||||||||||||||||||||
Totals |
$ | 17,775 | $ | 4,229 | $ | 8,618 | $ | 4,578 | $ | 8,739 | $ | 49,030 | $ | 92,969 | $ | 88,656 | ||||||||||||||||
(1) | The estimated fair value is based on a present value calculation based on prices of the same
or similar instruments after considering risk, current interest rates and remaining
maturities. |
|
(2) | The weighted average interest rate of our fixed-rate debt at December 31, 2010 was 6.7%. |
|
(3) | Principal payments on the structured notes and secured borrowings are dependent upon cash
flows received from the underlying loans. Our estimate of their repayment is based upon
scheduled principal payments on the underlying loans. Our estimate will differ from actual
amounts to the extent we experience prepayments and/or loan losses. |
|
(4) | The weighted average interest rate of our variable-rate debt at December 31, 2010 was 3.3%. |
40
41
42
3.1
|
Declaration of Trust (incorporated by reference to the exhibits to the Registrants Registration Statement on Form S-11 filed with the Securities and Exchange Commission (SEC) on June 25, 1993, as amended (Registration No. 33-65910)). | |
3.1(a)
|
Amendment No. 1 to Declaration of Trust (incorporated by reference to the Registrants Registration Statement on Form S-11 filed with the SEC on June 25, 1993, as amended (Registration No. 33-65910)). | |
3.1(b)
|
Amendment No. 2 to Declaration of Trust (incorporated by reference to the Registrants Annual Report on Form 10-K for the year ended December 31, 1993). | |
3.1(c)
|
Amendment No. 3 to Declaration of Trust (incorporated by reference to the Registrants Annual Report on Form 10-K for the year ended December 31, 2003). | |
3.2
|
Bylaws (incorporated by reference to the exhibits to the Registrants Registration Statement on Form S-11 filed with the SEC on June 25, 1993, as amended (Registration No. 33-65910)). | |
3.3
|
Amendment No. 1 to Bylaws (incorporated by reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K filed with the SEC on April 16, 2009). | |
10.1
|
Form of Executive Employment Contract (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on June 29, 2011). | |
10.2
|
First Amendment to Amended and Restated Credit Agreement among PMC Commercial Trust, First Western SBLC, Inc., and JPMorgan Chase Bank, National Association, as Administrative Agent, and the lenders named therein, dated June 8, 2011 (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on June 10, 2011). | |
10.3
|
Second Amended and Restated Revolving Note executed by PMC Commercial Trust (incorporated by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed with the SEC on June 10, 2011). | |
10.4
|
First Amended and Restated Revolving Note executive by First Western SBLC, Inc. (incorporated by reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K filed with the SEC on June 10, 2011). | |
*31.1
|
Section 302 Officer Certification Chief Executive Officer | |
*31.2
|
Section 302 Officer Certification Chief Financial Officer | |
**32.1
|
Section 906 Officer Certification Chief Executive Officer | |
**32.2
|
Section 906 Officer Certification Chief Financial Officer | |
***101.INS
|
XBRL Instance Document | |
***101.SCH
|
XBRL Taxonomy Extension Schema Document | |
***101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document | |
***101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document | |
***101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document | |
***101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document |
* | Filed herewith. |
|
** | Furnished herewith |
|
*** | In accordance with Regulation S-T, the XBRL-related
information in Exhibit No. 101 shall be deemed furnished and not filed
under sections 11 or 12 of the Securities Act of 1933 and/or under section 18
of the Securities and Exchange Act of 1934, and otherwise is not subject to
liability under these sections. |
43
PMC Commercial Trust | ||||
Date: 08/09/11
|
/s/ Lance B. Rosemore
|
|||
President and Chief Executive Officer | ||||
Date: 08/09/11
|
/s/ Barry N. Berlin | |||
Barry N. Berlin | ||||
Executive Vice President and | ||||
Chief Financial Officer | ||||
(Principal Accounting Officer) |
44
1. | I have reviewed this quarterly report on Form 10-Q of PMC Commercial Trust; |
||
2. | Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report; |
||
3. | Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
||
4. | The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared; |
||
b) | designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles; |
||
c) | evaluated the effectiveness of the registrants disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and |
||
d) | disclosed in this report any change in the registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over
financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of the registrants board of directors (or persons
performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrants ability to record,
process, summarize and report financial information; and |
||
b) | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants internal
control over financial reporting. |
Date: 08/09/11
|
/s/ Lance B. Rosemore
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of PMC Commercial Trust; |
||
2. | Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report; |
||
3. | Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report; |
||
4. | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have: |
a) | designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared; |
||
b) | designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles; |
||
c) | evaluated the effectiveness of the registrants disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and |
||
d) | disclosed in this report any change in the registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth quarter in
the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrants internal control over financial
reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrants auditors and the audit committee of the registrants board of directors
(or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrants ability to record,
process, summarize and report financial information; and |
||
b) | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants internal
control over financial reporting. |
Date: 08/09/11
|
/s/ Barry N. Berlin
Chief Financial Officer |
/s/ Lance B. Rosemore
Chief Executive Officer August 9, 2011 |
/s/ Barry N. Berlin
Chief Financial Officer August 9, 2011 |
Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
|
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Beneficiaries' equity: | Â | Â |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 11,110,883 | 11,095,883 |
Common stock, shares outstanding | 10,574,554 | 10,559,554 |
Treasury stock, shares | 536,329 | 536,329 |
Consolidated Statements of Income (Unaudited) (USD $)
In Thousands, except Per Share data |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Revenues: | Â | Â | Â | Â |
Interest income | $ 3,389 | $ 3,498 | $ 6,756 | $ 6,715 |
Other income | 458 | 437 | 1,147 | 675 |
Total revenues | 3,847 | 3,935 | 7,903 | 7,390 |
Expenses: | Â | Â | Â | Â |
Salaries and related benefits | 1,099 | 970 | 2,216 | 1,911 |
Interest | 957 | 1,011 | 1,930 | 2,000 |
General and administrative | 544 | 644 | 1,048 | 1,212 |
Provision for (reduction of) loan losses, net | 66 | 104 | 379 | (98) |
Total expenses | 2,666 | 2,729 | 5,573 | 5,025 |
Income before income tax benefit and discontinued operations | 1,181 | 1,206 | 2,330 | 2,365 |
Income tax benefit | 54 | 20 | 29 | 128 |
Income from continuing operations | 1,235 | 1,226 | 2,359 | 2,493 |
Discontinued operations | 104 | (3) | (104) | 8 |
Net income | $ 1,339 | $ 1,223 | $ 2,255 | $ 2,501 |
Weighted average shares outstanding: | Â | Â | Â | Â |
Basic | 10,570 | 10,550 | 10,566 | 10,549 |
Diluted | 10,626 | 10,566 | 10,621 | 10,565 |
Basic and diluted earnings per share: | Â | Â | Â | Â |
Income from continuing operations | $ 0.12 | $ 0.12 | $ 0.22 | $ 0.24 |
Discontinued operations | $ 0.01 | Â | $ (0.01) | Â |
Net income | $ 0.13 | $ 0.12 | $ 0.21 | $ 0.24 |
Document and Entity Information (USD $)
In Millions, except Share data |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2011
|
Aug. 03, 2011
|
Jun. 30, 2010
|
|
Document and Entity Information [Abstract] | Â | Â | Â |
Entity Registrant Name | PMC COMMERCIAL TRUST /TX | Â | Â |
Entity Central Index Key | 0000908311 | Â | Â |
Document Type | 10-Q | Â | Â |
Document Period End Date | Jun. 30, 2011 | ||
Amendment Flag | false | Â | Â |
Document Fiscal Year Focus | 2011 | Â | Â |
Document Fiscal Period Focus | Q2 | Â | Â |
Current Fiscal Year End Date | --12-31 | Â | Â |
Entity Well-known Seasoned Issuer | No | Â | Â |
Entity Voluntary Filers | No | Â | Â |
Entity Current Reporting Status | Yes | Â | Â |
Entity Filer Category | Accelerated Filer | Â | Â |
Entity Public Float | Â | Â | $ 81 |
Entity Common Stock, Shares Outstanding | Â | 10,574,554 | Â |
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Loans Receivable, net
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
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Loans Receivable, net [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans Receivable, net |
Note 4. Loans Receivable, net:
Loans receivable, net, consisted of the following:
Commercial mortgage loans
Represents all of the loans of PMC Commercial Trust.
Commercial mortgage loans, subject to structured notes payable
Represents loans contributed to special purpose entities in exchange for a subordinated financial
interest in that entity. The collateral of the structured notes payable includes these loans.
SBIC commercial mortgage loans
Loans originated by our Small Business Investment Company (“SBIC”) subsidiaries.
SBA 7(a) loans, subject to secured borrowings
Represents the government guaranteed portion of loans which were sold with the proceeds received
from the sale reflected as secured borrowings — government guaranteed loans (a liability on our
consolidated balance sheet). There is no credit risk associated with these loans since the SBA has
guaranteed payment of the principal.
SBA 7(a) loans
Represents (1) the non-government guaranteed retained portion of loans originated under the SBA
7(a) program and (2) the government guaranteed portion of loans that have not yet been fully funded
or legally sold. The balance is net of retained loan discounts of $1.3 million at both June 30,
2011 and December 31, 2010.
Concentration Risks
We have certain concentrations of investments. Substantially all of our revenue is generated from
loans collateralized by hospitality properties. At both June 30, 2011 and December 31, 2010, our
loans were 94% concentrated in the hospitality industry. Any economic factors that negatively
impact the hospitality industry, including recessions, depressed commercial real estate markets,
travel restrictions, gasoline prices, bankruptcies or other political or geopolitical events, could
have a material adverse effect on our financial condition and results of operations.
At both June 30, 2011 and December 31, 2010, 19% of our loans were collateralized by properties in
Texas. No other state had a concentration of 10% or greater of our loans receivable at June 30,
2011. A decline in economic conditions in any state in which we have a concentration of
investments could have a material adverse effect on our financial condition and results of
operations.
We have not loaned more than 10% of our assets to any single borrower; however, we have an
affiliated group of obligors representing greater than 5% of our loans receivable (approximately
6%) at both June 30, 2011 and December 31, 2010. Any
decline in the financial status of this group could have a material adverse effect on our financial
condition and results of operations.
Aging
The following tables represent an aging of our loans receivable. These tables do not include our
SBA 7(a) loans receivable, subject to secured borrowings since the SBA has guaranteed payment of
the principal.
Loan Loss Reserves
We have a quarterly review process to identify and evaluate potential exposure to loan losses.
Loans that require specific identification review are identified based on one or more negative
characteristics including, but not limited to, non-payment or lack of timely payment of interest
and/or principal, non-payment or lack of timely payment of property taxes for an extended period of
time, insurance defaults and/or franchise defaults. The specific identification evaluation begins
with an estimation of underlying collateral values using appraisals, broker price opinions, tax
assessed value and/or revenue analysis. Management uses appraisals as tools in conjunction with
other determinants of collateral value to estimate collateral values, not as the sole determinant
of value due to the current economic environment. The property valuation takes into consideration
current information on property values in general and value changes in commercial real estate
and/or hospitality properties. The probability of liquidation is then determined. These
probability determinations include macroeconomic factors, the location of the property and economic
environment where the property is located, industry
specific factors relating primarily to the hospitality industry, our historical experience with
similar borrowers and/or individual borrower or collateral characteristics, and in certain
circumstances, the strength of the guarantors. The liquidation probability is then applied to the
specifically identified loss exposure to establish the specifically identified reserve for that
loan.
Management closely monitors our loans which require evaluation for loan loss reserves based on
specific identification which are classified into three categories: Doubtful, Substandard and
Other Assets Especially Mentioned (“OAEM”) (together “Specific Identification Loans”). Loans
classified as Doubtful are generally loans which are not complying with their contractual terms,
the collection of the balance of the principal is considered impaired and liquidation of the
collateral securing the loan is probable. These loans are typically placed on non-accrual status
and are generally in the foreclosure process. Loans classified as Substandard are generally those
loans that are either not complying or had previously not complied with their contractual terms and
have other credit weaknesses which may make payment default or principal exposure likely but not
yet certain. Loans classified as OAEM are generally loans for which the credit quality of the
borrowers has temporarily deteriorated. Typically these borrowers, whose loans are classified as
OAEM, are current on their payments; however, they may be delinquent on their property taxes,
insurance, or franchise fees or may be under agreements which provided for interest only payments
during a short period of time. In addition, included in OAEM are loans for which the borrowers
have filed for Chapter 11 Bankruptcy and we are classified as a secured creditor in the bankruptcy
proceedings. Until bankruptcy plans are confirmed, the loans are typically delinquent.
Management has classified our loans receivable (excluding our SBA 7(a) loans receivable, subject to
secured borrowings since the SBA has guaranteed payment of the principal) as follows (balances
represent our investment in the loans prior to loan loss reserves and deferred commitment fees):
At June 30, 2011 and December 31, 2010, we had loan loss reserves of $1,860,000 and $1,609,000,
respectively, including general loan loss reserves of $1,270,000 and $1,100,000, respectively. Our
total loan loss reserves and general loan loss reserves as a percentage of our outstanding
portfolio (excluding SBA 7(a) loans receivable, subject to secured borrowings) were 89 basis points
and 61 basis points, respectively, at June 30, 2011 and 54 basis points and 38 basis points,
respectively, at June 30, 2010. Our provision for loan losses (excluding reductions of loan
losses) as a percentage of our weighted average outstanding loans receivable (excluding SBA 7(a)
loans receivable, subject to secured borrowings) was 0.25% and 0.14%
during the six months ended June 30, 2011 and 2010, respectively. To the extent one or several of
our loans experience significant operating difficulties and we are forced to liquidate the loans,
future losses may be substantial.
The activity in our loan loss reserves was as follows:
Information on those loans considered to be impaired loans (loans for which it is probable
that the lender will be unable to collect all amounts due according to the original contractual
terms of the loan) was as follows:
Our recorded investment in Non-Accrual Loans at June 30, 2011 of $4,585,000 was comprised of
$293,000 of SBA 7(a) loans and $4,292,000 of commercial mortgage loans. Our recorded investment in
Non-Accrual Loans at December 31, 2010 of $12,275,000 was comprised of $519,000 of SBA 7(a) loans
and $11,756,000 of commercial mortgage loans. Our Non-Accrual Loans were primarily in bankruptcy
proceedings or the collateral securing our Non-Accrual Loans was in the process of foreclosure at
June 30, 2011 and December 31, 2010. We did not have any loans receivable past due 90 days or more
which were accruing interest at June 30, 2011 or December 31, 2010.
Additional Credit Quality Indicator
We consider loan origination dates to be a credit quality indicator of our portfolio. Loans
originated from 1991 to 1999 are heavily seasoned; thus typically representing a smaller risk in
terms of loss upon liquidation due to paydowns of principal. For loans originated during 2005 to
2007, the businesses collateralizing these loans (within a short period of time following closing
of the loans) were subject to extreme conditions including a recession and resulting decrease in
property values and performance. While we believe that industry performance is improving, it has
not yet reached pre-recession levels. The majority of our loans receivable which were over 89 days
delinquent at June 30, 2011 and December 31, 2010 were originated from 2005 to 2007.
The years of origination for our loans receivable outstanding (excluding our SBA 7(a) loans
receivable, subject to secured borrowings since the SBA has guaranteed payment of the principal)
were as follows:
|
Income Taxes
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Income Taxes [Abstract] | Â |
Income Taxes |
Note 9. Income Taxes:
PMC Commercial has elected to be taxed as a real estate investment trust (“REIT”) under the
Internal Revenue Code of 1986, as amended (the “Code”). To qualify as a REIT, PMC Commercial must
meet a number of organizational and operational requirements, including a requirement that we
distribute at least 90% of our REIT taxable income to our shareholders. As a REIT, PMC Commercial
generally will not be subject to corporate level Federal income tax on net income that is currently
distributed to shareholders.
PMC Commercial has wholly-owned taxable REIT subsidiaries (“TRS’s”) which are subject to Federal
income taxes. The income generated from the TRS’s is taxed at normal corporate rates.
|
Debt
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Debt [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt |
Note 6. Debt:
Information on our debt was as follows:
Principal payments on our debt at June 30, 2011 were as follows:
|
Earnings Per Share
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Earnings Per Share [Abstract] | Â |
Earnings Per Share |
Note 11. Earnings Per Share:
The computations of basic earnings per common share are based on our weighted average shares
outstanding. For purposes of calculating diluted earnings per share, the weighted average shares
outstanding were increased by 55,000 shares to reflect the dilutive effect of stock options during
the three and six months ended June 30, 2011. During both the three and six months ended June 30,
2010, the weighted average shares outstanding were increased by 16,000 shares to reflect the
dilutive effect of stock options.
Not included in the computation of diluted earnings per share were outstanding options to purchase
39,000 and 77,000 common shares during the three and six months ended June 30, 2011 and 2010,
respectively, because the options’ exercise prices were greater than the average market price of
the shares.
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Share-Based Compensation Plans
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6 Months Ended | |||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Share-Based Compensation Plans [Abstract] | Â | |||||||||||||||||||||||||||||||||||
Share-Based Compensation Plans |
Note 7. Share-Based Compensation Plans:
We granted 27,000 option awards on June 10, 2011 at an exercise price of $8.75 (the then current
market price). The fair value of this option award was estimated at the date of grant using the
Black-Scholes option-pricing model with the following assumptions:
The expected term of the options granted represents the period of time that the options are
expected to be outstanding and was based on historical data. The risk-free rate was based on the
three-year U.S. Treasury rate corresponding to the expected term of the options. We used
historical information to determine our expected volatility and forfeiture rates. We recorded
compensation expense of $30,000 during the three and six months ended June 30, 2011 related to this
option grant. We granted 26,500 option awards on June 12, 2010 at an exercise price of $8.35 (the
closing price on June 11, 2010) and recorded compensation expense of approximately $33,000 during
the three and six months ended June 30, 2010.
We issued an aggregate of 5,000 shares to the Board of Trust Managers on June 10, 2011 at the then
current market price of the shares of $8.75. These shares vested immediately upon issuance. We
recorded compensation expense of $44,000 during the three and six months ended June 30, 2011
related to these shares.
We issued an aggregate of 10,000 restricted shares to executive officers on March 13, 2011 at the
then current market price of the shares of $8.72. We issued an aggregate of 13,100 restricted
shares to executive officers and our Board of Trust Managers on June 12, 2010 at the then current
market price of the shares of $8.35. There were forfeitures of 3,400 restricted shares during June
2010. The restricted shares vest based on two years of continuous service with one-third of the
shares vesting immediately upon issuance of the shares and one-third vesting at the end of each of
the next two years. Restricted share awards provide for accelerated vesting if there is a change
in control (as defined in the plan). Compensation expense related to the restricted shares is
being recognized over the vesting periods. We recorded compensation expense of $24,000 and $42,000
during the three months ended June 30, 2011 and 2010, respectively, and $73,000 and $66,000 during
the six months ended June 30, 2011 and 2010, respectively, related to these restricted shares. As
of June 30, 2011, there was $60,000 of total unrecognized compensation expense related to
restricted shares which will be recognized over the next two years.
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Other Assets
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Other Assets [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Assets |
Note 5. Other Assets:
Other assets consisted of the following:
|
Consolidated Statements of Equity (Unaudited) (USD $)
In Thousands, except Share data |
Total
|
Common Shares of Beneficial Interest Outstanding
|
Additional Paid-in Capital
|
Net Unrealized Appreciation of Retained Interests in transferred Assets
|
Cumulative Net Income
|
Cumulative Dividends
|
Treasury Stock
|
Cumulative Preferred Stock of Subsidiary
|
---|---|---|---|---|---|---|---|---|
Beginning Balance at Dec. 31, 2009 | $ 152,458 | $ 111 | $ 152,611 | $ 325 | $ 167,686 | $ (164,274) | $ (4,901) | $ 900 |
Beginning Balance, shares at Dec. 31, 2009 | Â | 10,548,354 | Â | Â | Â | Â | Â | Â |
Cumulative effect adjustment | 201 | Â | Â | (265) | 466 | Â | Â | Â |
Net unrealized appreciation | 16 | Â | Â | 16 | Â | Â | Â | Â |
Share-based compensation expense | 99 | Â | 99 | Â | Â | Â | Â | Â |
Share-based compensation expense, shares | Â | 9,700 | Â | Â | Â | Â | Â | Â |
Dividends ($0.32 per share) | (3,378) | Â | Â | Â | Â | (3,378) | Â | Â |
Net income | 2,501 | Â | Â | Â | 2,501 | Â | Â | Â |
Ending Balance at Jun. 30, 2010 | 151,897 | 111 | 152,710 | 76 | 170,653 | (167,652) | (4,901) | 900 |
Ending Balance, shares at Jun. 30, 2010 | Â | 10,558,054 | Â | Â | Â | Â | Â | Â |
Beginning Balance at Dec. 31, 2010 | 150,560 | 111 | 152,756 | 276 | 172,449 | (171,031) | (4,901) | 900 |
Beginning Balance, shares at Dec. 31, 2010 | 10,559,554 | 10,559,554 | Â | Â | Â | Â | Â | Â |
Net unrealized appreciation | 73 | Â | Â | 73 | Â | Â | Â | Â |
Share-based compensation expense | 147 | Â | 147 | Â | Â | Â | Â | Â |
Share-based compensation expense, shares | Â | 15,000 | Â | Â | Â | Â | Â | Â |
Dividends ($0.32 per share) | (3,383) | Â | Â | Â | Â | (3,383) | Â | Â |
Net income | 2,255 | Â | Â | Â | 2,255 | Â | Â | Â |
Ending Balance at Jun. 30, 2011 | $ 149,652 | $ 111 | $ 152,903 | $ 349 | $ 174,704 | $ (174,414) | $ (4,901) | $ 900 |
Ending Balance, shares at Jun. 30, 2011 | 10,574,554 | 10,574,554 | Â | Â | Â | Â | Â | Â |
Basis of Presentation
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Basis of Presentation [Abstract] | Â |
Basis of Presentation |
Note 1. Basis of Presentation:
The accompanying interim financial statements of PMC Commercial Trust (“PMC Commercial” or together
with its wholly-owned subsidiaries, “we,” “us” or “our”) have not been audited by independent
accountants. These consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States for interim financial information and
with the instructions to Form 10-Q. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United States for complete
financial statement presentation. In the opinion of management, the financial statements include
all normal recurring adjustments necessary for a fair statement of the results for the interim
period. All material intercompany balances and transactions have been eliminated. The results for
the three and six months ended June 30, 2011 are not necessarily indicative of future financial
results. Therefore, these financial statements should be read in conjunction with the financial
statements and notes thereto included in our Annual Report on Form 10-K for the year ended December
31, 2010.
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect (1) the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and (2) the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates. Our most sensitive estimates involve the
valuation of our real estate owned and determination of loan loss reserves.
|
Recently Issued Accounting Pronouncements
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Recently Issued Accounting Pronouncements [Abstract] | Â |
Recently Issued Accounting Pronouncements |
Note 2. Recently Issued Accounting Pronouncements:
ASC topic 310 Update 2011-02 (“2011-02”) was issued in April 2011. 2011-02 clarified guidance on a
creditor’s evaluation of whether (1) it has granted a concession and (2) a debtor is experiencing
financial difficulties. 2011-02 is effective for the first interim or annual period beginning on
or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period
of adoption. Early adoption is permitted. We are currently evaluating the impact of this update
on our financial statements; however, we anticipate that our loans identified as troubled debt
restructurings, and as a result deemed impaired, will increase.
ASU 2011-04, Fair Value Measurement (Topic 820); Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP was issued in May 2011. This ASU provides
additional guidance on fair value measurements and requires additional fair value disclosures
including quantitative and qualitative information for recurring Level 3 fair value measurements.
In addition, entities must report the level in the fair value hierarchy of assets and liabilities
not recorded at fair value but where fair value is disclosed. This ASU is effective for interim
and annual periods beginning on or after December 15, 2011, with early adoption prohibited. We are
currently evaluating the impact of this ASU on our financial statements.
|
Discontinued Operations
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Discontinued Operations [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations |
Note 10. Discontinued Operations:
Discontinued operations consisted of the following:
During the second quarter of 2011, previously deferred gains of $683,000 from property sales we
financed were recognized as gains due to principal reductions on the underlying loans. During June
2011, we sold an asset acquired through foreclosure for $1.3 million, received cash proceeds of
$128,000 and financed the remainder. A loss of $115,000 was recorded on the transaction.
During the second quarter of 2011, we recorded impairment losses due to declines in the estimated
fair value of our real estate owned, primarily a full service hospitality property owned by the
2003 Joint Venture.
|
Reclassifications
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Reclassifications [Abstract] | Â |
Reclassifications |
Note 3. Reclassifications:
Certain prior period amounts have been reclassified to conform with the current period
presentation. These reclassifications had no effect on previously reported net income, cash flows
or beneficiaries’ equity.
|
Supplemental Disclosure of Cash Flow Information
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Supplemental Disclosure of Cash Flow Information [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Disclosure of Cash Flow Information |
Note 13. Supplemental Disclosure of Cash Flow Information:
Information regarding our non-cash activities was as follows:
|
Consolidated Statements of Comprehensive Income (Unaudited) (USD $)
In Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Consolidated Statements of Comprehensive Income [Abstract] | Â | Â | Â | Â |
Net income | $ 1,339 | $ 1,223 | $ 2,255 | $ 2,501 |
Change in unrealized appreciation of retained interests in transferred assets: | Â | Â | Â | Â |
Net unrealized appreciation arising during period | 51 | 49 | 118 | 20 |
Net realized gains included in net income | (25) | (1) | (45) | (4) |
Total change in unrealized appreciation of retained interests in transferred assets | 26 | 48 | 73 | 16 |
Comprehensive income | $ 1,365 | $ 1,271 | $ 2,328 | $ 2,517 |
Commitments and Contingencies
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Jun. 30, 2011
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Commitments and Contingencies [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies |
Note 14. Commitments and Contingencies:
Loan Commitments
Commitments to extend credit are agreements to lend to a customer provided the terms established in
the contract are met. Our outstanding loan commitments and approvals to fund loans were
approximately $18.7 million at June 30, 2011, the majority of which were for prime-based loans to
be originated by First Western, the government guaranteed portion of which
is intended to be sold. Commitments generally have fixed expiration dates. Since some commitments
are expected to expire without being drawn upon, total commitment amounts do not necessarily
represent future cash requirements.
Operating Lease
We lease office space in Dallas, Texas under a lease which expires in October 2011. During April
2011, we signed an amendment extending this lease to February 2015. Future minimum lease payments
are as follows:
Employment Agreements
We have employment agreements with our executive officers for terms expiring June 30, 2014. Under
certain circumstances, as defined within the agreements, the agreements provide for (1) severance
compensation or change in control payments to the executive officer in an amount equal to 2.99
times the average of the last three years annual compensation paid to the executive officer and (2)
death and disability payments in an amount equal to two times and one time, respectively, the
annual compensation paid to the executive officer.
Structured Loan Sale Transactions
The documents of the structured loan sale transactions contain provisions (the “Credit Enhancement
Provisions”) that govern the assets and the inflow and outflow of funds of the entities originally
formed as part of the structured loan sale transactions. The Credit Enhancement Provisions include
specified increased reserve requirements. If, at any measurement date, the loans in structured
loan transactions were delinquent in excess of specified limits or were considered “charged-off”
loans in accordance with the transaction documents, the Credit Enhancement Provisions would require
an increase in the level of credit enhancement (reserve fund). During the period in which the
Credit Enhancement Provisions were in effect, excess cash flow from the entity, if any, which would
otherwise be distributable to us, would be used to fund the increased credit enhancement levels
until the specified reserve requirement was met and would delay or reduce our distribution. In
general, there can be no assurance that amounts deferred under Credit Enhancement Provisions would
be received in future periods or that future deferrals or losses would not occur.
Litigation
We had significant outstanding claims against Arlington Hospitality, Inc.’s and its subsidiary,
Arlington Inns, Inc.’s (together “Arlington”) bankruptcy estates. Arlington objected to our claims
and initiated a complaint in the bankruptcy seeking, among other things, the return of payments
Arlington made pursuant to the property leases and the master lease agreement. While confident
that a substantial portion of our claims would have been allowed and the claims against us would
have been disallowed, due to the exorbitant cost of defense coupled with the likelihood of reduced
available assets in the debtors’ estates to pay claims, we executed an agreement with Arlington to
settle our claims against Arlington and Arlington’s claims against us. The settlement provides
that Arlington will dismiss its claims seeking the return of certain payments made pursuant to the
property leases and master lease agreement and substantially reduces our claims against the
Arlington estates. The settlement further provides for mutual releases among the parties. The
Bankruptcy Court approved the settlement. Accordingly, there are no remaining assets or
liabilities recorded in the accompanying consolidated financial statements related to this matter.
However, the settlement will only become final upon the Bankruptcy Court’s approval of Arlington’s
liquidation plan which was filed during the third quarter of 2007. We currently anticipate that
the bankruptcy will be dismissed during the third quarter of 2011 based on a dismissal motion filed
with the Bankruptcy Court.
In the normal course of business we are periodically party to certain legal actions and proceedings
involving matters that are generally incidental to our business (i.e., collection of loans
receivable). In management’s opinion, the resolution of these legal actions and proceedings will
not have a material adverse effect on our consolidated financial statements.
Other
If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant
technical deficiencies in the manner in which the loan was originated, funded or serviced by us,
the SBA may seek recovery of the principal loss related to the deficiency from us. With respect to
the guaranteed portion of SBA loans that have been sold, the SBA will first honor its guarantee and
then seek compensation from us in the event that a loss is deemed to be attributable to technical
deficiencies. Based on historical experience, we do not expect that this contingency would be
material to the financial statements if asserted.
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Consolidated Statements of Equity (Unaudited) (Parenthetical) (USD $)
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6 Months Ended | |
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Jun. 30, 2011
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Jun. 30, 2010
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Dividends per share | $ 0.32 | $ 0.32 |
Cumulative Dividends
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Dividends per share | $ 0.32 | $ 0.32 |
Other Income
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Jun. 30, 2011
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Other Income [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income |
Note 8. Other Income:
Other income consisted of the following:
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Fair Value Measurements
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Fair Value Measurements [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements |
Note 12. Fair Value Measurements:
For impaired loans measured at fair value on a nonrecurring basis during the six months ended June
30, 2011 and 2010, the following table provides the carrying value of the related individual assets
at quarter end. We used Level 3 inputs to determine the estimated fair value of our impaired
loans.
For real estate owned, our carrying value approximates the estimated fair value at the time of
foreclosure and the lower of cost or fair value thereafter. We use Level 3 inputs to determine the
estimated fair value of our real estate owned. The carrying value of our real estate owned is
established at the time of foreclosure based upon management’s assessment of its fair value based
on numerous factors including operating statistics to the extent available, the appraised value,
tax assessed value and market environment. At June 30, 2011 and December 31, 2010, both the
carrying value and estimated fair value of our real estate owned was $1,914,000 and $3,477,000,
respectively.
The estimated fair values of our financial and non-financial instruments were as follows:
In general, estimates of fair value may differ from the carrying amounts of the financial
assets and liabilities primarily as a result of the effects of discounting future cash flows.
Considerable judgment is required to interpret market data and develop estimates of fair value.
Accordingly, the estimates presented may not be indicative of the amounts we could realize in a
current market exchange.
Loans receivable, net: Our loans receivable are recorded at cost and adjusted by net loan
origination fees and discounts. In order to determine the estimated fair value of our loans
receivable, we use a present value technique for the anticipated future
cash flows using certain assumptions including a current discount rate, prepayment tendencies and
potential loan losses. Reserves are established based on numerous factors including, but not
limited to, the creditor’s payment history, collateral value, guarantor support and other factors.
In the absence of a readily ascertainable market value, the estimated value of our loans receivable
may differ from the values that would be placed on the portfolio if a ready market for the loans
receivable existed.
Cash and cash equivalents: The carrying amount is considered to be reasonable estimates of fair
value due to the short maturity of these funds.
Restricted cash and cash equivalents: Restricted cash and cash equivalents are comprised of our
collection and reserve accounts of the securitizations. The carrying amount is considered to be a
reasonable estimate of their fair value due to (1) the short maturity of the collection account,
(2) the majority of our reserve accounts can be used at any time in conjunction with the exercise
of our “clean-up call” options and (3) the reserve accounts providing collateral value at their
current carrying amounts to the structured noteholders.
Structured notes and SBIC debentures payable and junior subordinated notes: The estimated fair
value is based on a present value calculation based on prices of the same or similar instruments
after considering market risks, current interest rates and remaining maturities.
Secured borrowings — government guaranteed loans: The estimated fair value approximates cost as
the value of the loans that were sold approximates the value we would be able to attain in similar
current third-party transactions.
Revolving credit facility: The carrying amount is a reasonable estimation of fair value as the
interest rate on this instrument is variable and was set in a current third-party transaction.
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