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Loans Receivable, net
 12 Months Ended
Dec. 31, 2012
Loans Receivable, net [Abstract]  
Loans Receivable, net

Note 2. Loans Receivable, net:

Loans receivable, net, consisted of the following:

 

                 
    December 31,  
    2012     2011  
    (In thousands)  

Commercial mortgage loans

     $ 128,401       $   134,835    

SBIC commercial mortgage loans

     47,621         32,416    

SBA 7(a) loans, subject to secured borrowings

     37,909         30,151    

SBA 7(a) loans

     28,196         23,238    

Commercial mortgage loans, subject to structured notes payable (1)

     -         15,474    
   

 

 

    

 

 

  

Total loans receivable

     242,127         236,114    

Add/(deduct):

                

 Deferred capitalized costs, net

     277         125    

 Loan loss reserves

     (3,413)        (1,812)   
   

 

 

    

 

 

  

Loans receivable, net

     $             238,991         $             234,427    
   

 

 

    

 

 

  

 

(1)

We repaid the remaining 2003 Joint Venture structured notes on February 15, 2012.

Commercial mortgage loans

Represents the loans held by the 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; therefore, no loan loss reserves are recorded on the $37.9 million and $30.2 million, respectively, of government guaranteed portions of these SBA 7(a) loans included in loans receivable at December 31, 2012 and 2011.

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 Loans Discounts of $2.1 million and $1.6 million at December 31, 2012 and 2011, respectively.

 

Commercial mortgage loans, subject to structured notes payable

Represented loans contributed to a special purpose entity in exchange for a subordinated financial interest in that entity. The collateral of the structured notes payable included these loans. The structured notes were repaid on February 15, 2012.

Concentration Risks

We have certain concentrations of investments. Substantially all of our revenue is generated from loans collateralized by hospitality properties. At December 31, 2012, 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, bankruptcies or other political or geopolitical events, could have a material adverse effect on our financial condition and results of operations.

At December 31, 2012 and 2011, 15% and 18%, respectively, of our loans were collateralized by properties in Texas. No other state had a concentration of 10% or greater of our loans receivable at December 31, 2012 or 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 approximately 5% of our loans receivable at December 31, 2012. Any significant 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 principal on these loans). Balances are prior to loan loss reserves and deferred capitalized costs, net.

 

                                                 

December 31, 2012

  

Category

   Totals     Commercial
Mortgage
Loans		     SBA 7(a)
Loans		  
    (Dollars in thousands)  

Current (1)

     $ 198,282         97.1%       $ 170,429         96.8%       $ 27,853         98.8%  

Between 30 and 59 days delinquent (2)

     2,824         1.4%       2,482         1.4%       342         1.2%  

Between 60 and 89 days delinquent

     1         -       -         -       1         -  

Over 89 days delinquent (3)

     3,111         1.5%       3,111         1.8%       -         -  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
      $         204,218           100.0%       $         176,022           100.0%       $         28,196           100.0%  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1)

Includes $7.6 million of commercial mortgage loans classified as troubled debt restructurings which are current at December 31, 2012 based on revised note terms.

(2)

Includes $2.3 million of loans classified as troubled debt restructurings. We are currently in the process of foreclosing on the collateral underlying an SBA 7(a) Program loan – a limited service hospitality property - with a principal balance of $211,000 (excluding the government guaranteed portion as it was sold as a hybrid).

(3)

Loans are classified as troubled debt restructurings. We are currently in the process of foreclosing on the collateral underlying these loans – two limited service hospitality properties.

                                                 

 

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 were current based on revised note terms. Of these loans, $5.6 million were paying interest only.

(2)

Includes a $1.4 million loan on which the borrowers filed for Chapter 11 Bankruptcy. We were classified as a secured creditor in the bankruptcy proceedings.

Loan Loss Reserves

Management closely monitors our loans which require evaluation for loan loss reserves based on specific identification metrics 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 on which the fair value of the collateral is less than the remaining unamortized principal balance. 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 the borrowers are current on their payments; however, they may be delinquent on their property taxes, insurance, or franchise fees or may be under agreements which provide for interest only payments during a short period of time.

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 commitment fees):

 

                                                 
    December 31, 2012  
    Totals     %     Commercial
Mortgage
Loans		     %     SBA 7(a)
Loans		     %  
    (Dollars in thousands)  

Satisfactory

     $ 187,749         92.0%         $ 159,994         90.9%         $ 27,755         98.5%    

OAEM

     81         -           -           -           81         0.3%    

Substandard

     13,043         6.4%         12,917         7.3%         126         0.4%    

Doubtful

     3,345         1.6%         3,111         1.8%         234         0.8%    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
      $         204,218           100.0%         $         176,022           100.0%         $         28,196           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         96.6%    

OAEM

     3,354         1.6%         3,317         1.8%         37         0.1%    

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 and recoveries of loan losses) as a percentage of our weighted average Loans Receivable Subject To Credit Risk was 1.25% and 0.40% during 2012 and 2011, respectively. Whenever our borrowers experience significant operating difficulties and we are forced to liquidate the collateral underlying the loan, future losses may be substantial.

During the five-year period ended December 31, 2012, our aggregate provision for loan losses, net, was approximately $4.5 million or 46 basis points per year based on the five-year average of our Loans Receivable Subject To Credit Risk. Our total loan loss reserves as a percentage of our weighted average Loans Receivable Subject To Credit Risk were 1.70% at December 31, 2012.

The activity in our loan loss reserves was as follows:

 

                         
    Year Ended December 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

     2,505         2,219         286    

Reduction of loan losses

     (104)        (70)        (34)   

Recoveries

     (467)        (467)        -    

Principal balances written-off, net

     (333)        (161)        (172)   
   

 

 

    

 

 

    

 

 

  

Balance, end of year

     $         3,413         $         2,850         $         563    
   

 

 

    

 

 

    

 

 

  

Recoveries represent cash proceeds from collections on personal loan guarantees to the extent there is a deficiency after foreclosure of the real property collateral and to the extent cash received does not exceed realized losses taken on the property.

 

                         
    Year Ended December 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

     826         429         397    

Reduction of loan losses

     (366)        (342)        (24)   

Principal balances written-off

     (257)        (61)        (196)   
   

 

 

    

 

 

    

 

 

  

Balance, end of year

     $         1,812         $         1,329         $         483    
   

 

 

    

 

 

    

 

 

  

 

                         
    Year Ended December 31, 2010  
    Total     Commercial
Mortgage
Loans		     SBA 7(a)
Loans		  
    (In thousands)  

Balance, beginning of year

     $ 1,257         $ 1,055         $ 202    

Provision for loan losses

     1,019         607         412    

Reduction of loan losses

     (378)        (309)        (69)   

Consolidation of the 2000 Joint Venture and the 1998 Partnership reserves

     184        184         -    

Principal balances written-off

     (473)        (234)        (239)   
   

 

 

    

 

 

    

 

 

  

Balance, end of year

     $         1,609       $         1,303         $         306    
   

 

 

    

 

 

    

 

 

  

 

Impaired Loan Data

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

 

                         
    At December 31, 2012  
    Total     Commercial
Mortgage
Loans 		    SBA 7(a)
Loans		  
    (In thousands)  

Impaired loans requiring reserves (1)

     $             10,927         $             10,049         $             878    

Impaired loans expected to be fully
recoverable (1)

     2,244         2,123         121    
   

 

 

    

 

 

    

 

 

  

Total impaired loans (2)

     $ 13,171         $ 12,172         $ 999    
   

 

 

    

 

 

    

 

 

  
       

Loan loss reserves

     $ 1,535         $ 1,382         $ 153    
   

 

 

    

 

 

    

 

 

  
   
    At December 31, 2011  
    Total     Commercial
Mortgage
Loans 		    SBA 7(a)
Loans		  
    (In thousands)  

Impaired loans requiring reserves (1)

     $             7,411         $             7,027         $             384    

Impaired loans expected to be fully
recoverable (1)

     846         689         157    
   

 

 

    

 

 

    

 

 

  

Total impaired loans (3)

     $             8,257         $             7,716           $             541    
   

 

 

    

 

 

    

 

 

  
       

Loan loss reserves

     $             563         $             372         $             191    
   

 

 

    

 

 

    

 

 

  
   
    At December 31, 2010  
    Total     Commercial
Mortgage
Loans 		    SBA 7(a)
Loans		  
    (In thousands)  

Impaired loans requiring reserves (1)

     $             687         $             419         $             268    

Impaired loans expected to be fully
recoverable (1)

     228         228         -    
   

 

 

    

 

 

    

 

 

  

Total impaired loans (4)

     $             915         $             647         $ 268    
   

 

 

    

 

 

    

 

 

  
       

Loan loss reserves

     $ 219         $ 25         $ 194    
   

 

 

    

 

 

    

 

 

  

 

 

(1)

Balances represent our recorded investment. For 2012 and 2011, includes loans classified as troubled debt restructurings.

(2)

The unpaid principal balance of our impaired commercial mortgage loans was $12,704,000 at December 31, 2012. The unpaid principal balance of our impaired SBA 7(a) loans (excluding the government guaranteed portion) was $362,000 at December 31, 2012.

(3)

The unpaid principal balance of our impaired commercial mortgage loans was $7,940,000 at December 31, 2011. The unpaid principal balance of our impaired SBA 7(a) loans (excluding the government guaranteed portion) was $593,000 at December 31, 2011.

(4)

The unpaid principal balance of our impaired commercial mortgage loans was $678,000 at December 31, 2010. The unpaid principal balance of our impaired SBA 7(a) loans (excluding the government guaranteed portion) was $288,000 at December 31, 2010.

 

                         
    Year Ended December 31, 2012  
    Total     Commercial
Mortgage
Loans		     SBA 7(a)
Loans		  
    (In thousands)  

Average impaired loans

     $             9,895         $             9,116         $             779    
   

 

 

    

 

 

    

 

 

  
       

Interest income on impaired loans

     $             372         $             359         $ 13    
   

 

 

    

 

 

    

 

 

  
   
    Year Ended December 31, 2011  
    Total     Commercial
Mortgage
Loans		     SBA 7(a)
Loans		  
    (In thousands)  

Average impaired loans

     $             8,176         $             7,610         $             566    
   

 

 

    

 

 

    

 

 

  
       

Interest income on impaired loans

     $             290         $             271         $             19    
   

 

 

    

 

 

    

 

 

  
   
    Year Ended December 31, 2010  
    Total     Commercial
Mortgage
Loans 		    SBA 7(a)
Loans		  
    (In thousands)  

Average impaired loans

     $ 4,317         $ 3,558         $ 759    
   

 

 

    

 

 

    

 

 

  
       

Interest income on impaired loans

     $ 114         $ 89         $ 25    
   

 

 

    

 

 

    

 

 

  

Our recorded investment in Non-Accrual Loans at December 31, 2012 of $5,768,000 was comprised of an $855,000 SBA 7(a) Program loan and $4,913,000 of commercial mortgage loans. Included within the non-accrual SBA 7(a) loan is the government guaranteed portion of $634,000 (i.e., the loan has a related secured borrowing as it was sold as a hybrid) on which we have no credit loss exposure. The collateral securing the majority of our Non-Accrual Loans at December 31, 2012 is currently in the process of foreclosure. Our recorded investment in Non-Accrual Loans at December 31, 2011 of $1,820,000 was comprised of $384,000 of SBA 7(a) Program 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 December 31, 2012 or 2011.

 

Information on our troubled debt restructurings was as follows at December 31, 2012 and 2011:

 

                                 
    December 31, 2012  
    Commercial Mortgage Loans     SBA 7(a) Loan  
    Recorded
Investment		     Unpaid
Principal
Balance		     Recorded
Investment		     Unpaid
Principal
Balance		  
    (In thousands)  

Troubled debt restructurings requiring
reserves (1)

     $ 10,049         $             10,531         $             854         $             846    

Troubled debt restructurings without reserves

     2,123         2,172         -         -    
   

 

 

    

 

 

    

 

 

    

 

 

  

Total troubled debt restructurings

     $ 12,172         $ 12,703         $ 854         $ 846    
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Number of loans

     8                 1            
   

 

 

            

 

 

          
         

Loan loss reserves

     $             1,382                 $ 130            
   

 

 

            

 

 

          

 

(1)

The SBA 7(a) loan recorded investment and unpaid principal balance includes the government guaranteed portion of $634,000 on which we have no credit loss exposure. This loan is no longer complying with its modified terms, including lack of required payments. We are currently in the process of foreclosing on the collateral underlying this loan.

Loans with a recorded investment at December 31, 2012 of $4.8 million were modified voluntarily under agreements to allow extended interest only periods instead of the principal and interest payments required by the notes. In addition, loans with a recorded investment at December 31, 2012 of $6.0 million were modified involuntarily through Chapter 11 bankruptcy proceedings. The bankruptcy plans were confirmed with modified terms including interest only and amortization periods or modification of timing of payments combined with interest rate adjustments. Of these, $3.1 million of loans are no longer complying with their modified terms, including lack of required payments. We are currently in the process of foreclosing on the collateral underlying these loans.

 

                 
    December 31, 2011  
    Commercial Mortgage Loans  
    Recorded
Investment		     Unpaid
Principal
Balance		  
    (In thousands)  

Troubled debt restructurings requiring reserves

     $             5,591         $             5,730    

Troubled debt restructurings without reserves

     689         749    
   

 

 

    

 

 

  

Total troubled debt restructurings

     $ 6,280         $ 6,479    
   

 

 

    

 

 

  
     

Number of loans

     4            
   

 

 

          
     

Loan loss reserves

     $ 236            
   

 

 

          

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 included an extended only interest period and re-amortization. In addition, the interest rate was reduced on one of the commercial mortgage loans with an extended interest only period.