Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 12. Fair Value Measurements:

For impaired loans measured at fair value on a nonrecurring basis during the nine months ended September 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.

					Provision for
					Loan Losses
	Carrying Value at				Nine Months Ended
	September 30,				September 30, (2)
	2011		2010		2011		2010
	(In thousands)
Impaired loans (1)	$	8,832	$	6,205	$	335	$	436

(1)	Carrying value represents our impaired loans net of loan loss reserves.
(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.

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 September 30, 2011 and December 31, 2010, both the carrying value and estimated fair value of our real estate owned was $1,905,000 and $3,477,000, respectively.

The estimated fair values of our financial instruments were as follows:

	September 30,				December 31,
	2011				2010
			Estimated				Estimated
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(In thousands)
Assets:
Loans receivable, net	$	235,426	$	230,776	$	233,218	$	228,821
Cash and cash equivalents		7,789		7,789		2,642		2,642
Restricted cash and cash equivalents		8,879		8,879		5,786		5,786
Liabilities:
Structured notes and SBIC debentures payable		30,181		30,759		30,334		30,781
Secured borrowings — government guaranteed loans		31,977		31,977		21,765		21,765
Revolving credit facility		14,800		14,800		13,800		13,800
Junior subordinated notes		27,070		22,407		27,070		22,310

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, expected future cash flows 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) 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, remaining maturities and actual and anticipated exercises of “clean-up call” options.

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.