(5) Loans Receivable

The following is a composition of the Company’s loans receivable by loan type and region:

	March 31,		December 31,
	2013		2012
	(Dollars in thousands)
Domestic:
Commercial loans:
Affiliates	$	6,522	$	6,584
Other, net of allowance for loan losses of of $-0- and $1,083	5,168		7,530

Total loans, net	$	11,690	$	14,114

Loans receivable — affiliates

Loans receivable — affiliates, which are designated by management as held for investment, are summarized as follows:

	March 31,		December 31,
	2013		2012
	(Dollars in thousands)
Outstanding balance	$	6,141	$	6,203
Discounts, net	—		—
Capitalized interest	381		381
Carrying amount of loans, net	$	6,522	$	6,584

A summary of activity in loans receivable — affiliates follows:

	Three Months Ended
	March 31,
	2013			2012
	(Dollars in thousands)
Beginning Balance	$	6,584		$	6,719
Advances	—			—
Payments received	(62		)	(128		)
Capitalized costs, net	—			64
Discount accretion, net	—			22
Ending Balance	$	6,522		$	6,677

Loans receivable — affiliates represent advances to Acquisition Partnerships and other affiliates to acquire portfolios of under-performing and non-performing commercial and consumer loans and other assets; and senior debt financing arrangements with equity-method investees to provide capital for business expansion and operations. Advances to affiliates to acquire loan portfolios are secured by the underlying collateral of the individual notes within the portfolios, which is generally real estate; whereas advances to affiliates for capital investments and working capital are generally secured by business assets (i.e. accounts receivable, inventory and equipment).

The Company did not record any provisions for impairment or sell any affiliated loans during the three-month periods ended March 31, 2013 and 2012. Information related to the credit quality and loan loss allowances related to loans receivable — affiliates is presented under the heading “Credit Quality and Allowance for Loan Losses — Loans Held for Investment” below.

Loans receivable — other

Loans receivable — other, which are designated by management as held for investment, are summarized as follows:

	March 31,			December 31,
	2013			2012
	(Dollars in thousands)
Outstanding balance	$	5,414		$	8,859
Allowance for loan losses	—			(1,083		)
Capitalized interest and costs	(246		)	(246		)
Carrying amount of loans, net	$	5,168		$	7,530

Changes in loans receivable — other are as follows:

	Three Months Ended
	March 31,
	2013			2012
	(Dollars in thousands)
Beginning Balance	$	7,530		$	12,212
Advances	—			379
Payments received	(2,410		)	(2,462		)
Change in allowance for loan losses	1,083			—
Charge-offs	(1,035		)	—
Ending Balance	$	5,168		$	10,129

Loans receivable — other include loans made to non-affiliated entities and are secured primarily by business assets such as accounts receivable, inventory, property and equipment, and real estate. The Company recorded $48,000 in recovery of provisions for impairment for the three-month period ended March 31, 2013, and did not record any provisions for impairment for the three-month period ended March 31, 2012. Information related to the credit quality and loan loss allowances related to loans receivable — other is presented under the heading “Credit Quality and Allowance for Loan Losses — Loans Held for Investment” below.

Credit Quality and Allowance for Loan Losses — Loans Held for Investment

The Company has established an allowance for loan losses to absorb probable, estimable losses inherent in its portfolio of loans receivable held for investment. This allowance for loan losses includes specific allowances, based on individual evaluations of certain loans and loan relationships, and allowances for pools of loans with similar risk characteristics. In determining the appropriate level of allowance, management uses information to stratify its portfolio of loans receivable held for investment into loan pools with common risk characteristics. Certain portions of the allowance are attributed to loan pools based on various factors and analyses. Loans deemed to be impaired, including loans with an increased probability of default as determined by management, are evaluated individually rather than on a pool basis. Management’s determination of the adequacy of the allowance is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Actual losses experienced in the future may vary from management’s estimates. Management attributes portions of the allowance to loans that it evaluates and determines to be impaired and to groups of loans that it evaluates collectively.

The following tables summarizes the activity in the allowance for loan losses by our portfolio of loans held for investment for the three-month month periods ended March 31, 2013 and 2012:

	Allowance for Loan Losses:
(Dollars in thousands)	Affiliates		Other			Total
Balance, January 1, 2013	$	—	$	1,083		$	1,083
Provisions	—		—			—
Recoveries	—		(48		)	(48		)
Charge-offs	—		(1,035		)	(1,035		)
Balance, March 31, 2013	$	—	$	—		$	—

Balance, January 1, 2012	$	—	$	1,083		$	1,083
Provisions	—		—			—
Recoveries	—		—			—
Charge-offs	—		—			—
Balance, March 31, 2012	$	—	$	1,083		$	1,083

The following table presents an analysis of the allowance for loan losses and recorded investment in loans (excluding loans held for sale):

	Commercial Loans:
(Dollars in thousands)	Affiliates		Other		Total
March 31, 2013:
Loans individually evaluated for impairment	$	6,522	$	5,168	$	11,690
Loans collectively evaluated for impairment	—		—		—
Total loans evaluated for impairment (excluding loans held for sale)	$	6,522	$	5,168	$	11,690

Allowance for loans individually evaluated for impairment	$	—	$	—	$	—
Allowance for loans collectively evaluated for impairment	—		—		—
Total allowance for loan losses	$	—	$	—	$	—

December 31, 2012:
Loans individually evaluated for impairment	$	6,584	$	8,613	$	15,197
Loans collectively evaluated for impairment	—		—		—
Total loans evaluated for impairment (excluding loans held for sale)	$	6,584	$	8,613	$	15,197

Allowance for loans individually evaluated for impairment	$	—	$	1,083	$	1,083
Allowance for loans collectively evaluated for impairment	—		—		—
Total allowance for loan losses	$	—	$	1,083	$	1,083

The following tables present our recorded investment in loans (excluding loans held for sale) by credit quality indicator as of March 31, 2013 and December 31, 2012.

Classes in the affiliated and non-affiliated portfolio asset and commercial loan portfolios are disaggregated by accrual status (which is generally based on management’s assessment on the probability of default).

(Dollars in thousands)	Accrual		Non-Accrual		Total
March 31, 2013:
Affiliates - commercial loans	$	3,260	$	3,262	$	6,522
Other - commercial loans (1)	3,299		1,869		5,168
	$	6,559	$	5,131	$	11,690

Total loans (excluding loans held for sale)					$	11,690

(Dollars in thousands)	Accrual		Non-Accrual		Total
December 31, 2012:
Affiliates - commercial loans	$	3,323	$	3,261	$	6,584
Other - commercial loans (1)	3,484		5,129		8,613
	$	6,807	$	8,390	$	15,197

Total loans (excluding loans held for sale)					$	15,197

(1) Represents loans made to U.S. non-affiliated entities that are secured primarily by business assets (as disclosed previously under the heading “Loans receivable — other” of this footnote).

The following tables include an aging analysis of our recorded investment in loans held for investment as of March 31, 2013 and December 31, 2012:

	Loans Past Due and Still Accruing
	31-60		61-90		Over				Non-Accrual		Current		Total
(Dollars in thousands)	Days		Days		90 Days		Total		Loans		Loans		Loans
March 31, 2013:
Commercial loans:
Affiliates	$	—	$	—	$	—	$	—	$	3,262	$	3,260	$	6,522
Other	—		—		—		—		1,869		3,299		5,168
Total loans (excluding loans held for sale)	$	—	$	—	$	—	$	—	$	5,131	$	6,559	$	11,690

December 31, 2012:
Commercial loans:
Affiliates	$	—	$	—	$	—	$	—	$	3,261	$	3,323	$	6,584
Other	—		—		—		—		5,129		3,484		8,613
Total loans (excluding loans held for sale)	$	—	$	—	$	—	$	—	$	8,390	$	6,807	$	15,197

The following table presents additional information regarding the Company’s impaired loans as of March 31, 2013 and December 31, 2012:

	Recorded Investment In:
	Impaired		Impaired
	Loans		Loans								Average
	Without a		With a		Total		Unpaid		Related		Impaired
	Related		Related		Impaired		Principal		Valuation		Loans for
(Dollars in thousands)	Allowance		Allowance		Loans		Balance		Allowance		the Year
March 31, 2013:
Commercial loans:
Affiliates	$	—	$	—	$	—	$	—	$	—	$	—
Other	1,869		—		1,869		3,817		—		3,474
Total loans (excluding loans held for sale)	$	1,869	$	—	$	1,869	$	3,817	$	—	$	3,474

December 31, 2012:
Commercial loans:
Affiliates	$	—	$	—	$	—	$	—	$	—	$	—
Other	2,159		2,970		5,129		7,027		1,083		6,984
Total loans (excluding loans held for sale)	$	2,159	$	2,970	$	5,129	$	7,027	$	1,083	$	6,984

The Company did not recognize any significant amounts of interest income on impaired loans during the three-month periods ended March 31, 2013 and 2012.