Loans Receivable, net:

3 Months Ended

Mar. 31, 2012

Loans Receivable, net: [Abstract]

Loans Receivable, net:

Note 3. Loans Receivable, net:

Loans receivable, net, consisted of the following:

	March 31,			December 31,
	2012			2011
	(In thousands)
Commercial mortgage loans	$	144,098		$	134,835
SBIC commercial mortgage loans		35,501			32,416
SBA 7(a) loans, subject to secured borrowings		34,986			30,151
SBA 7(a) loans		23,235			23,238
Commercial mortgage loans, subject to structured notes payable (1)		—			15,474
Total loans receivable		237,820			236,114
Adjusted by:
Deferred capitalized costs, net		196			125
Loan loss reserves		(2,272	)		(1,812	)
Loans receivable, net	$	235,744		$	234,427

(1) We repaid the 2003 Joint Venture structured notes on February 15, 2012.

Commercial mortgage loans

Represents the loans held by our parent company, PMC Commercial Trust.

SBIC commercial mortgage loans

Represents loans of our licensed 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 the non-government guaranteed retained portion of loans originated under the SBA 7(a) program and the government guaranteed portion of loans that have not yet been fully funded or sold. The balance is net of retained loan discounts of $1.6 million at both March 31, 2012 and December 31, 2011.

Commercial mortgage loans, subject to structured notes payable

Represented loans contributed to special purpose entities in exchange for a subordinated financial interest in that entity. The collateral of the structured notes payable included these loans.

Concentration Risks

We have certain concentrations of investments. Substantially all of our revenue is generated from loans collateralized by hospitality properties. At both March 31, 2012 and December 31, 2011, our loans were 93% 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 March 31, 2012 and December 31, 2011, 18% of our loans were collateralized by properties in Texas. No other state had a concentration of 10% or greater of our loans receivable at March 31, 2012. 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 5% of our loans receivable at both March 31, 2012 and December 31, 2011. 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 Subject to Credit Risk (loans receivable less SBA 7(a) loans, subject to secured borrowings as the SBA has guaranteed payment of the principal). Balances are prior to loan loss reserves and deferred capitalized costs, net.

March 31, 2012
Category	Totals				Commercial Mortgage Loans				SBA 7(a) Loans
	(Dollars in thousands)
Current (1)	$	195,567	96.4	%	$	172,992	96.3	%	$	22,575	97.2	%
Between 30 and 59 days delinquent		5,450	2.7	%		5,163	2.9	%		287	1.2	%
Between 60 and 89 days delinquent		—	—			—	—			—	—
Over 89 days delinquent (2)		1,817	0.9	%		1,444	0.8	%		373	1.6	%
	$	202,834	100.0	%	$	179,599	100.0	%	$	23,235	100.0	%

(1) Includes $6.3 million of loans classified as troubled debt restructurings which are current based on revised note terms. Of these loans, $5.6 million are paying interest only.

(2) Includes a $1.4 million loan on which the borrower has filed for Chapter 11 Bankruptcy. We are classified as a secured creditor in the bankruptcy proceeding.

December 31, 2011
Category	Totals				Commercial Mortgage Loans				SBA 7(a) Loans
	(Dollars in thousands)
Current (1)	$	202,217	98.2	%	$	179,497	98.2	%	$	22,720	97.7	%
Between 30 and 59 days delinquent		1,224	0.6	%		1,090	0.6	%		134	0.6	%
Between 60 and 89 days delinquent		696	0.3	%		696	0.4	%		—	—
Over 89 days delinquent (2)		1,826	0.9	%		1,442	0.8	%		384	1.7	%
	$	205,963	100.0	%	$	182,725	100.0	%	$	23,238	100.0	%

(1) Includes $6.3 million of loans classified as troubled debt restructurings which are current based on revised note terms. Of these loans, $5.6 million are paying interest only.

(2) Includes a $1.4 million loan on which the borrower has filed for Chapter 11 Bankruptcy. We are classified as a secured creditor in the bankruptcy proceeding.

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 evaluation of the estimated fair value of the loan. In determining estimated fair value, management utilizes the present value of the expected future cash flows discounted at the loan’s effective interest rate and/or 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. 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, our historical experience with similar borrowers and/or individual borrower or collateral characteristics, and in certain circumstances, the financial strength of the guarantors. The liquidation probability is then applied to the identified loss exposure to determine the general or specific reserve for that loan and the ultimate determination as to whether it is considered impaired.

Management closely monitors our loans which require evaluation for loan loss reserves based on specific criteria which classify the loans 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 Subject to Credit Risk as follows (balances represent our investment in the loans prior to loan loss reserves and deferred capitalized costs):

	March 31, 2012
	Totals		%			Commercial Mortgage Loans		%			SBA 7(a) Loans		%
	(Dollars in thousands)
Satisfactory	$	186,801		92.1	%	$	164,466		91.6	%	$	22,335		96.1	%
OAEM		2,082		1.0	%		1,950		1.1	%		132		0.6	%
Substandard		11,958		5.9	%		11,739		6.5	%		219		0.9	%
Doubtful		1,993		1.0	%		1,444		0.8	%		549		2.4	%
	$	202,834		100.0	%	$	179,599		100.0	%	$	23,235		100.0	%

	December 31, 2011
	Totals		%			Commercial Mortgage Loans		%			SBA 7(a) Loans		%
	(Dollars in thousands)
Satisfactory	$	189,836		92.2	%	$	167,397		91.6	%	$	22,439		96.5	%
OAEM		3,354		1.6	%		3,317		1.8	%		37		0.2	%
Substandard		10,790		5.2	%		10,569		5.8	%		221		1.0	%
Doubtful		1,983		1.0	%		1,442		0.8	%		541		2.3	%
	$	205,963		100.0	%	$	182,725		100.0	%	$	23,238		100.0	%

Our provision for loan losses (excluding reductions of loan losses) as a percentage of our weighted average outstanding Loans Receivable Subject To Credit Risk was 0.24% and 0.18% during the three months ended March 31, 2012 and 2011, respectively. To the extent one or several of our borrowers experience significant operating difficulties and we are forced to liquidate the collateral underlying the loan, future losses may be substantial.

The activity in our loan loss reserves was as follows:

	Three Months Ended March 31, 2012
	Total			Commercial Mortgage Loans			SBA 7(a) Loans
	(In thousands)
Balance, beginning of year	$	1,812		$	1,329		$	483
Provision for loan losses		482			410			72
Reduction of loan losses		(7	)		(7	)		—
Principal balances written-off		(15	)		—			(15	)
Balance, end of period	$	2,272		$	1,732		$	540

	Three Months Ended March 31, 2011
	Total			Commercial Mortgage Loans			SBA 7(a) Loans
	(In thousands)
Balance, beginning of year	$	1,609		$	1,303		$	306
Provision for loan losses		378			310			68
Reduction of loan losses		(65	)		(47	)		(18	)
Principal balances written-off		(35	)		—			(35	)
Balance, end of period	$	1,887		$	1,566		$	321

Information on those loans considered to be impaired loans was as follows:

	March 31, 2012						December 31, 2011
	Total		Commercial Mortgage Loans		SBA 7(a) Loans		Total		Commercial Mortgage Loans		SBA 7(a) Loans
	(In thousands)
Impaired loans requiring reserves (1)	$	7,456	$	7,055	$	401	$	7,411	$	7,027	$	384
Impaired loans expected to be fully recoverable (1)		834		681		153		846		689		157
Total impaired loans (2)	$	8,290	$	7,736	$	554	$	8,257	$	7,716	$	541
Loan loss reserves	$	646	$	421	$	225	$	563	$	372	$	191

(1) Includes loans classified as troubled debt restructurings.

(2) The unpaid principal balance of our impaired commercial loans was $7,933,000 and $7,940,000 at March 31, 2012 and December 31, 2011, respectively. The unpaid principal balance of our impaired SBA 7(a) loans (excluding the government guaranteed portion) was $615,000 and $593,000 at March 31, 2012 and December 31, 2011, respectively.

	Three Months Ended March 31, 2012						Three Months Ended March 31, 2011
	Total		Commercial Mortgage Loans		SBA 7(a) Loans		Total		Commercial Mortgage Loans		SBA 7(a) Loans
	(In thousands)
Average impaired loans	$	8,261	$	7,726	$	535	$	2,444	$	2,053	$	391
Interest income on impaired loans	$	89	$	87	$	2	$	2	$	—	$	2

Our recorded investment in Non-Accrual Loans at March 31, 2012 of $3,685,000 was comprised of $402,000 of SBA 7(a) loans and $3,283,000 of commercial mortgage loans. Our recorded investment in Non-Accrual Loans at December 31, 2011 of $1,820,000 was comprised of $384,000 of SBA 7(a) loans and $1,436,000 of commercial mortgage loans. We did not have any loans receivable past due 90 days or more which were accruing interest at March 31, 2012 or December 31, 2011.

Information on our troubled debt restructurings which consisted of four commercial mortgage loans was as follows at March 31, 2012:

	Recorded Investment		Unpaid Principal Balance
	(In thousands)
Troubled debt restructurings requiring reserves	$	5,594	$	5,730
Troubled debt restructurings without reserves		681		740
Total troubled debt restructurings	$	6,275	$	6,470
Loan loss reserves	$	232

The modifications were primarily extended interest only periods; however, for one loan the borrower filed Chapter 11 Bankruptcy and the plan was confirmed with modified terms including extended interest only and amortization periods. In addition, the interest rate was reduced on one of the commercial mortgage loans with an extended interest only period.