Fair Values of Financial Instruments:

12 Months Ended

Dec. 31, 2011

Fair Values of Financial Instruments: [Abstract]

Fair Values of Financial Instruments:

Note 14. Fair Values of Financial Instruments:

For impaired loans measured at fair value on a nonrecurring basis during 2011 and 2010 the following table provides the carrying value of the related individual assets at year end. We used Level 3 inputs to determine the estimated fair value of our impaired loans.

		September 30,		September 30,		September 30,		September 30,
	Carrying Value at				Provision for
	December 31,				Loan Losses (2)
	2011		2010		2011		2010
	(In thousands)
Impaired loans (1)	$	7,694	$	696	$	438	$	160

(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 REO, our carrying value approximates the estimated fair value at the time of foreclosure and the lower of cost or market thereafter. We used Level 3 inputs to determine the estimated fair value of our REO. The carrying value of our REO 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 of the collateral, tax assessed value and market environment.

The following is activity for our REO:

		September 30,			September 30,
	Years Ended
	December 31,
	2011			2010
	(In thousands)
Balance as of beginning of year	$	3,477		$	5,479
Foreclosures		409			4,040
Additions		17			—
Proceeds from sales		(1,604	)		(5,793	)
Gain (loss)		(153	)		76
Impairment losses		(887	)		(325	)
Balance as of end of year	$	1,259		$	3,477

The estimated fair value of our financial instruments was as follows:

		September 30,		September 30,		September 30,		September 30,
	December 31,
	2011				2010
			Estimated				Estimated
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(In thousands)
Assets:
Loans receivable, net	$	234,427	$	224,395	$	233,218	$	228,821
Cash and cash equivalents		6,502		6,502		2,642		2,642
Restricted cash and cash equivalents		2,233		2,233		5,786		5,786
Liabilities:
Structured notes and SBIC debentures payable		18,445		19,027		30,334		30,781
Secured borrowings—government guaranteed loans		32,546		32,546		21,765		21,765
Revolving credit facility		17,800		17,800		13,800		13,800
Junior Subordinated Notes		27,070		22,595		27,070		22,310

We used Level 3 inputs to determine the estimated fair value of our financial instruments. 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 discount rate based on current market interest rates, prepayment tendencies and potential loan losses. Loan loss 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 a reasonable estimation of fair value due to the short maturity of these instruments.

Restricted cash and cash equivalents: Restricted cash and cash equivalents represent 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 accounts, (2) the reserve accounts can be used at any time in conjunction with the exercise of our “clean-up call” options.

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 exercise of “clean-up call” options.

Secured borrowings – government guaranteed loans: The estimated fair value approximates cost as the interest rate on these secured borrowings approximates current market interest rates.

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.