UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10 - Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________.

Commission File Number 1-13610

PMC COMMERCIAL TRUST

(Exact name of registrant as specified in its charter)

TEXAS		75-6446078
(State or other jurisdiction		(I.R.S. Employer Identification No.)
of incorporation or organization)
17950 Preston Road, Suite 600, Dallas, TX 75252		(972) 349-3200
(Address of principal executive offices)		(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2). YES o NO þ

Indicate by check mark whether the Registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act. YES o NO þ

As of May 6, 2008, the Registrant had outstanding 10,765,033 Common Shares of Beneficial Interest, par value $.01 per share.

 

 

PMC COMMERCIAL TRUST AND SUBSIDIARIES

INDEX

		PAGE NO.
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) — March 31, 2008 and December 31, 2007			2
Consolidated Statements of Income (Unaudited) — Three Months Ended March 31, 2008 and 2007			3
Consolidated Statements of Comprehensive Income (Unaudited) — Three Months Ended March 31, 2008 and 2007			4
Consolidated Statements of Beneficiaries’ Equity (Unaudited) — Three Months Ended March 31, 2008 and 2007			5
Consolidated Statements of Cash Flows (Unaudited) — Three Months Ended March 31, 2008 and 2007			6
Notes to Consolidated Financial Statements (Unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3. Quantitative and Qualitative Disclosures About Market Risk			31
Item 4. Controls and Procedures			35
PART II. Other Information
Item 1. Legal Proceedings			36
Item 1A. Risk Factors			36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			36
Item 3. Defaults upon Senior Securities			36
Item 4. Submission of Matters to a Vote of Security Holders			36
Item 5. Other Information			36
Item 6. Exhibits			37
Section 302 Officer Certification - Chief Executive Officer
Section 302 Officer Certification - Chief Financial Officer
Section 906 Officer Certification - Chief Executive Officer
Section 906 Officer Certification - Chief Financial Officer

PART I

Financial Information

ITEM 1.

Financial Statements

PMC COMMERCIAL TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

		March 31,				December 31,
		2008				2007
		(Unaudited)
ASSETS
Loans receivable, net		$	172,262			$	165,969
Retained interests in transferred assets			47,862				48,616
Cash and cash equivalents			5,631				11,485
Restricted investments			2,420				1,236
Mortgage-backed security of affiliate			511				536
Deferred tax asset, net			203				185
Other assets			3,328				3,393
Total assets		$	232,217			$	231,420
LIABILITIES AND BENEFICIARIES’ EQUITY
Liabilities:
Junior subordinated notes		$	27,070			$	27,070
Credit facilities			25,450				23,950
Debentures payable			8,166				8,165
Redeemable preferred stock of subsidiary			3,795				3,768
Borrower advances			2,920				3,066
Dividends payable			2,215				3,293
Deferred gains on property sales			1,854				2,192
Accounts payable and accrued expenses			1,484				1,933
Other liabilities			592				729
Total liabilities			73,546				74,166
Commitments and contingencies
Cumulative preferred stock of subsidiary			900				900
Beneficiaries’ equity:
Common shares of beneficial interest; authorized 100,000,000 shares of $0.01 par value; 11,051,383 shares issued at March 31, 2008 and December 31, 2007, 10,765,033 shares outstanding at March 31, 2008 and December 31, 2007			111				111
Additional paid-in capital			152,356				152,331
Net unrealized appreciation of retained interests in transferred assets			2,107				1,945
Cumulative net income			154,502				151,119
Cumulative dividends			(148,074	)			(145,921	)
			161,002				159,585
Less: Treasury stock; at cost, 286,350 shares at March 31, 2008 and December 31, 2007			(3,231	)			(3,231	)
Total beneficiaries’ equity			157,771				156,354
Total liabilities and beneficiaries’ equity		$	232,217			$	231,420

The accompanying notes are an integral part of these consolidated financial statements.

PMC COMMERCIAL TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

		Three Months Ended
		March 31,
		2008				2007
		(Unaudited)
Revenues:
Interest income		$	3,766			$	4,056
Income from retained interests in transferred assets			1,919				1,901
Other income			737				741
Total revenues			6,422				6,698
Expenses:
Salaries and related benefits			1,239				1,167
Interest			1,211				1,325
General and administrative			469				716
Permanent impairments on retained interests in transferred assets			281				24
Provision for loan losses, net			73				65
Provision for loss on rent and related receivables			—				239
Total expenses			3,273				3,536
Income before income tax provision, minority interest and discontinued operations			3,149				3,162
Income tax provision			(82	)			(142	)
Minority interest (preferred stock dividend of subsidiary)			(22	)			(22	)
Income from continuing operations			3,045				2,998
Discontinued operations:
Gains on sales of real estate			338				27
Impairment losses			—				(233	)
Net earnings			—				29
			338				(177	)
Net income		$	3,383			$	2,821
Weighted average shares outstanding:
Basic			10,765				10,754
Diluted			10,765				10,767
Basic and diluted earnings per share:
Income from continuing operations		$	0.28			$	0.28
Discontinued operations			0.03				(0.02	)
Net income		$	0.31			$	0.26

The accompanying notes are an integral part of these consolidated financial statements.

PMC COMMERCIAL TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

		Three Months Ended
		March 31,
		2008				2007
		(Unaudited)
Net income		$	3,383			$	2,821
Change in unrealized appreciation of retained interests in transferred assets:
Net unrealized appreciation arising during period			222				179
Net realized gains included in net income			(60	)			(110	)
			162				69
Comprehensive income		$	3,545			$	2,890

The accompanying notes are an integral part of these consolidated financial statements.

PMC COMMERCIAL TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF BENEFICIARIES’ EQUITY
(In thousands, except share and per share data)

		Three Months Ended March 31, 2007
		(Unaudited)
														Net
														Unrealized
		Common												Appreciation
		Shares of												of Retained
		Beneficial								Additional				Interests in				Cumulative												Total
		Interest				Par				Paid-in				Transferred				Net				Cumulative				Treasury				Beneficiaries’
		Outstanding				Value				Capital				Assets				Income				Dividends				Stock				Equity
Balances, January 1, 2007			10,753,803			$	110			$	152,178			$	3,256			$	137,984			$	(133,006	)		$	(3,231	)		$	157,291
Net unrealized appreciation			—				—				—				69				—				—				—				69
Share-based compensation expense			—				—				20				—				—				—				—				20
Dividends ($0.30 per share)			—				—				—				—				—				(3,226	)			—				(3,226	)
Net income			—				—				—				—				2,821				—				—				2,821
Balances, March 31, 2007			10,753,803			$	110			$	152,198			$	3,325			$	140,805			$	(136,232	)		$	(3,231	)		$	156,975

		Three Months Ended March 31, 2008
		(Unaudited)
														Net
														Unrealized
		Common												Appreciation
		Shares of												of Retained
		Beneficial								Additional				Interests in				Cumulative												Total
		Interest				Par				Paid-in				Transferred				Net				Cumulative				Treasury				Beneficiaries'
		Outstanding				Value				Capital				Assets				Income				Dividends				Stock				Equity
Balances, January 1, 2008			10,765,033			$	111			$	152,331			$	1,945			$	151,119			$	(145,921	)		$	(3,231	)		$	156,354
Net unrealized appreciation			—				—				—				162				—				—				—				162
Share-based compensation expense			—				—				25				—				—				—				—				25
Dividends ($0.20 per share)			—				—				—				—				—				(2,153	)			—				(2,153	)
Net income			—				—				—				—				3,383				—				—				3,383
Balances, March 31, 2008			10,765,033			$	111			$	152,356			$	2,107			$	154,502			$	(148,074	)		$	(3,231	)		$	157,771

The accompanying notes are an integral part of these consolidated financial statements.

PMC COMMERCIAL TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

		Three Months Ended
		March 31,
		2008				2007
		(Unaudited)
Cash flows from operating activities:
Net income		$	3,383			$	2,821
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			7				46
Permanent impairments on retained interests in transferred assets			281				24
Gains on sales of real estate			(338	)			(27	)
Deferred income taxes			(18	)			(9	)
Provision for loan losses, net			73				65
Provision for losses on rent and related receivables			—				239
Impairment losses			—				233
Premium income adjustment			(12	)			41
Amortization and accretion, net			(33	)			(39	)
Share-based compensation			25				20
Capitalized loan origination costs			(46	)			(37	)
Loans funded, held for sale			(1,338	)			(968	)
Proceeds from sale of guaranteed loans			1,016				2,045
Loan fees collected, net			91				103
Change in operating assets and liabilities:
Due to/from affiliates, net			(63	)			(736	)
Other assets			83				(5	)
Borrower advances			(146	)			340
Accounts payable and accrued expenses			(449	)			(505	)
Other liabilities			(41	)			216
Net cash provided by operating activities			2,475				3,867
Cash flows from investing activities:
Loans funded			(15,798	)			(9,584	)
Principal collected on loans receivable			9,684				15,284
Principal collected on retained interests in transferred assets			660				1,227
Proceeds from sale of asset acquired in liquidation, net			—				58
Principal collected on mortgage-backed security of affiliate			40				70
Investment in retained interests in transferred assets			—				(253	)
Investment in restricted investments, net			(1,184	)			(1,711	)
Purchase of furniture, fixtures and equipment			—				(4	)
Net cash provided by (used in) investing activities			(6,598	)			5,087
Cash flows from financing activities:
Proceeds from credit facilities, net			1,500				600
Payment of principal on mortgage notes			—				(35	)
Payment of dividends			(3,231	)			(4,303	)
Net cash used in financing activities			(1,731	)			(3,738	)
Net increase (decrease) in cash and cash equivalents			(5,854	)			5,216
Cash and cash equivalents, beginning of year			11,485				3,739
Cash and cash equivalents, end of period		$	5,631			$	8,955

The accompanying notes are an integral part of these consolidated financial statements.

PMC COMMERCIAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Basis of Presentation:

The accompanying consolidated balance sheet of PMC Commercial Trust (“PMC Commercial” or together with its wholly-owned subsidiaries, “we,” “us” or “our”) as of March 31, 2008 and the consolidated statements of income, comprehensive income, beneficiaries’ equity and cash flows for the three months ended March 31, 2008 and 2007 have not been audited by independent accountants. In the opinion of management, the financial statements reflect all adjustments necessary to fairly present our financial position at March 31, 2008 and results of operations for the three months ended March 31, 2008 and 2007. These adjustments are of a normal recurring nature. All material intercompany balances and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported net income or total beneficiaries’ equity.

Certain notes and other information have been omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2007.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect (1) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (2) the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

The results for the three months ended March 31, 2008 are not necessarily indicative of future financial results.

Note 2. Loans Receivable, net:

Loans receivable, net, consisted of the following:

		March 31,				December 31,
		2008				2007
		(In thousands)
SBIC commercial mortgage loans (1)		$	34,596			$	30,723
SBA 7(a) Guaranteed Loan Program loans			10,938				10,480
Conduit facility loans (2)			42,081				46,961
Other commercial mortgage loans			85,248				78,259
Total loans receivable			172,863				166,423
Less:
Deferred commitment fees, net			(486	)			(412	)
Loan loss reserves			(115	)			(42	)
Loans receivable, net		$	172,262			$	165,969

(1)		Originated by our Small Business Investment Company (“SBIC”) subsidiaries.
(2)		These loans served as collateral for our conduit facility. The conduit facility matured on May 2, 2008.

PMC COMMERCIAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The activity in our loan loss reserves was as follows:

		Three Months Ended
		March 31,
		2008				2007
		(In thousands)
Balance, beginning of year		$	42			$	63
Provision for loan losses			73				71
Reduction of loan losses			—				(6	)
Principal balances written-off, net			—				(46	)
Balance, end of period		$	115			$	82

Impaired loans are defined by generally accepted accounting principles as loans for which it is probable that the lender will be unable to collect all amounts due according to the original contractual terms of the loan. Information on those loans considered to be impaired loans was as follows:

		March 31,				December 31,
		2008				2007
		(In thousands)
Impaired loans requiring reserves		$	180			$	22
Impaired loans expected to be fully recoverable			1,922				—
Total impaired loans		$	2,102			$	22

		Three Months Ended
		March 31,
		2008				2007
		(In thousands)
Average impaired loans		$	698			$	1,548
Interest income on impaired loans		$	32			$	—

Note 3. Retained Interests:

We own subordinate financial interests in several non-consolidated special purpose entities (“QSPEs”) (i.e., retained interests in transferred assets (“Retained Interests”)). The QSPEs are PMC Capital, L.P. 1998-1 (the “1998 Partnership”), PMC Capital, L.P. 1999-1 (the “1999 Partnership”), PMC Joint Venture, L.P. 2000 (the “2000 Joint Venture”), PMC Joint Venture, L.P. 2001 (the “2001 Joint Venture”), PMC Joint Venture, L.P. 2002-1 (the “2002 Joint Venture”) and PMC Joint Venture, L.P. 2003 (the “2003 Joint Venture,” and together with the 2000 Joint Venture, the 2001 Joint Venture and the 2002 Joint Venture, the “Joint Ventures,”) created in connection with structured loan sale transactions.

In our structured loan sale transactions, we contributed loans receivable to a QSPE in exchange for cash and beneficial interests in that entity. The QSPE issued notes payable (the “Structured Notes”) to unaffiliated parties (“Structured Noteholders”). The QSPE then distributed a portion of the proceeds from the Structured Notes to us. The Structured Notes are collateralized solely by the assets of the QSPE which means that should the financial assets in the QSPE be insufficient for the trustee to make payments on the Structured Notes, the Structured Noteholders have no recourse against us. Upon the completion of our structured loan sale transactions, we recorded the transfer of loans receivable as a sale in accordance with SFAS No. 140. As a result, the loans receivable contributed to the QSPE, the Structured Notes issued by the QSPE, and the operating results of the QSPE are not included in our consolidated financial statements. Retained Interests are carried at

PMC COMMERCIAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

estimated fair value, with realized gains and permanent impairments recorded in net income and unrealized gains and losses recorded in beneficiaries’ equity.

We completed joint structured loan sale transactions with PMC Capital, Inc., our affiliate through common management. Our interests related to the loans receivable that we contributed to these structured loan sale transactions are the “Originated Structured Loan Sale Transactions.” During 2004, we acquired PMC Capital, Inc.’s Retained Interests in the Joint Ventures and 100% of the 1998 Partnership and the 1999 Partnership (collectively, the “Acquired Structured Loan Sale Transactions”).

Information pertaining to our Originated Structured Loan Sale Transactions as of March 31, 2008 was as follows:

		2000				2001				2002				2003
		Joint Venture				Joint Venture				Joint Venture				Joint Venture
		(Dollars in thousands)
Principal outstanding on sold loans		$	21,527			$	3,217			$	7,928			$	10,805
Structured Notes balance outstanding		$	16,080			$	619			$	5,224			$	7,704
Cash in the collection account		$	249			$	66			$	91			$	1,530
Cash in the reserve account		$	1,163			$	623			$	548			$	912
Weighted average interest rate of loans (1)			9.56	%			9.67	%			9.56	%			L+4.02	%
Discount rate assumptions (2)		8.0% to 14.5%				8.0% to 14.5%				8.0% to 14.5%				6.9% to 14.5%
Constant prepayment rate assumption (3)			18.00	%			—				18.00	%			18.00	%
Weighted average remaining life of Retained Interests (4)		1.64 years				0.62 years				0.75 years				1.33 years
Aggregate principal losses assumed (5)			1.10	%			—%				0.54	%			1.03	%
Aggregate principal losses to date (6)			0.33	%			0.56	%			—				—

PMC COMMERCIAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Information pertaining to our Acquired Structured Loan Sale Transactions as of March 31, 2008 was as follows:

										2000				2001				2002				2003
		1998				1999				Joint				Joint				Joint				Joint
		Partnership				Partnership				Venture				Venture				Venture				Venture
		(Dollars in thousands)
Principal outstanding on sold loans		$	9,770			$	10,102			$	7,029			$	12,442			$	9,199			$	16,059
Structured Notes balance outstanding		$	9,651			$	6,595			$	4,318			$	8,569			$	4,923			$	11,035
Cash in the collection account		$	534			$	160			$	84			$	144			$	125			$	916
Cash in the reserve account		$	1,333			$	1,213			$	562			$	987			$	867			$	1,159
Weighted average interest rate of loans (1)			P+1.05	%			9.09	%			9.03	%			9.72	%			9.53	%			L+4.02	%
Discount rate assumptions (2)		6.9% to 14.5%				8.0% to 14.5%				8.1% to 14.6%				8.0% to 14.5%				8.0% to 14.5%				6.9% to 14.5%
Constant prepayment rate assumption (3)			16.00	%			18.00	%			18.00	%			18.00	%			18.00	%			18.00	%
Weighted average remaining life of Retained Interests (4)		2.36 years				1.02 years				1.45 years				0.59 years				0.62 years				1.33 years
Aggregate principal losses assumed (5)			1.17	%			1.26	%			1.71	%			0.78	%			0.77	%			1.03	%
Aggregate principal losses to date (6)			—				—				4.28	%			1.78	%			1.31	%			—

First Western SBLC, Inc. (“First Western”) has Retained Interests related to the sale of loans originated pursuant to the Small Business Administration’s (“SBA”) 7(a) Guaranteed Loan Program. The SBA guaranteed portions of First Western’s loans receivable are sold to either dealers in government guaranteed loans receivable or institutional investors (“Secondary Market Loan Sales”) as the loans are fully funded. On Secondary Market Loan Sales, we may retain an excess spread between the interest rate paid to us from our borrowers and the rate we pay to the purchaser of the guaranteed portion of the note and servicing costs. At March 31, 2008, the aggregate principal balance of First Western’s serviced loans receivable on which we had an excess spread was approximately $31.4 million and the weighted average excess spread was approximately 0.6%. In determining the fair value of our Retained Interests related to Secondary Market Loan Sales, our assumptions at March 31, 2008 included a prepayment speed of 22% per annum and a discount rate of 14.5%.

The estimated fair value of our Retained Interests is based upon an estimate of the discounted future cash flows we will receive. In determining the present value of expected future cash flows, estimates are made in determining the amount and timing of those cash flows and the discount rates. The amount and timing of cash flows is generally determined based on estimates of loan losses and anticipated prepayment speeds relating to the loans receivable contributed to the QSPE. Actual loan losses and prepayments may vary significantly from assumptions. The discount rates that we utilize in computing the estimated fair value are based upon estimates of the inherent risks associated with each cash flow stream. Due to the limited number of entities that conduct transactions with similar assets, the relatively small size of our Retained Interests and the limited number of buyers for such assets, no readily ascertainable market exists. Therefore, our estimate of the fair value may or may not vary from what a willing buyer would pay for these assets.

PMC COMMERCIAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The components of our Retained Interests are (1) our required overcollateralization (the “OC piece”), (2) the “reserve fund” and the interest earned thereon and (3) the interest-only strip receivable (the “IO Receivable”).

Our Retained Interests consisted of the following:

		March 31, 2008
		Estimated Fair Value
		OC Piece				Reserve Fund				IO Receivable				Total				Cost
		(In thousands)
First Western		$	—			$	—			$	415			$	415			$	421
1998 Partnership			552				1,005				254				1,811				1,778
1999 Partnership			3,687				1,043				784				5,514				4,833
2000 Joint Venture			8,589				1,398				425				10,412				9,756
2001 Joint Venture			6,706				1,530				153				8,389				8,210
2002 Joint Venture			7,217				1,307				203				8,727				8,492
2003 Joint Venture			10,413				1,875				306				12,594				12,265
		$	37,164			$	8,158			$	2,540			$	47,862			$	45,755

		December 31, 2007
		Estimated Fair Value
		OC Piece				Reserve Fund				IO Receivable				Total				Cost
		(In thousands)
First Western		$	—			$	—			$	425			$	425			$	425
1998 Partnership			580				1,021				311				1,912				1,838
1999 Partnership			3,682				995				219				4,896				4,878
2000 Joint Venture			8,510				1,605				518				10,633				9,913
2001 Joint Venture			6,696				1,522				242				8,460				8,255
2002 Joint Venture			7,242				1,450				629				9,321				8,801
2003 Joint Venture			10,490				1,870				609				12,969				12,561
		$	37,200			$	8,463			$	2,953			$	48,616			$	46,671

The difference between the estimated fair value and cost of our Retained Interests is reflected in our consolidated balance sheets as unrealized appreciation of Retained Interests.

PMC COMMERCIAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following sensitivity analysis of our Retained Interests as of March 31, 2008 highlights the volatility that results when prepayments, losses and discount rates are different than our assumptions:

		Estimated
		Fair				Asset
Changed Assumption		Value				Change (1)
		(In thousands)
Losses increase by 50 basis points per annum (2)		$	47,410				($   452	)
Losses increase by 100 basis points per annum (2)		$	46,974				($   888	)
Rate of prepayment increases by 5% per annum (3)		$	47,784				($     78	)
Rate of prepayment increases by 10% per annum (3)		$	47,760				($   102	)
Discount rates increase by 100 basis points		$	47,234				($   628	)
Discount rates increase by 200 basis points		$	46,619				($1,243	)

These sensitivities are hypothetical and should be used with caution. Values based on changes in these assumptions generally cannot be extrapolated since the relationship of the change in an assumption to the change in fair value is not linear. The effect of a variation in a particular assumption on the fair value of our Retained Interests is calculated without changing any other assumption. In reality, changes in one factor are not isolated from changes in another which might magnify or counteract the sensitivities.

In accordance with SFAS No. 140, our consolidated financial statements do not include the assets, liabilities, partners’ capital, revenues or expenses of the QSPEs. As a result, at March 31, 2008 and December 31, 2007 our consolidated balance sheets do not include $121.8 million and $141.8 million of assets, respectively, and $75.0 million and $94.4 million of liabilities, respectively, related to our structured loan sale transactions recorded by the QSPEs. At March 31, 2008, the partners’ capital of the QSPEs was $46.8 million and the estimated fair value of the associated Retained Interests was approximately $47.4 million.

The annualized yield on our Retained Interests, which is comprised of the income earned less permanent impairments, was 11.4% and 11.9% during the three months ended March 31, 2008 and 2007, respectively.

Servicing fee income for the three months ended March 31, 2008 and 2007 for loans held by the QSPEs was approximately $94,000 and $142,000, respectively.

PMC COMMERCIAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 4. Debt:

Information on our debt was as follows:

																						Weighted Average
		March 31, 2008								December 31, 2007												Coupon Rate at
		Face				Carrying				Face				Carrying				Range of				March 31,				December 31,
		Amount				Value				Amount				Value				Maturities				2008				2007
		(Dollars in thousands)
Debentures		$	8,190			$	8,166			$	8,190			$	8,165			2013 to 2015				5.90%				5.90%
Junior subordinated notes			27,070				27,070				27,070				27,070			2035				8.08%				8.48%
Credit facilities:
Conduit facility (1)			23,250				23,250				23,950				23,950			2008				4.16%				6.16%
Revolving credit facility			2,200				2,200				—				—			2009				4.50%				N/A
			25,450				25,450				23,950				23,950
Redeemable preferred stock of subsidiary			4,000				3,795				4,000				3,768			2009 to 2010				4.00%				4.00%
Debt		$	64,710			$	64,481			$	63,210			$	62,953

Principal payments required on our consolidated debt at March 31, 2008 were as follows (face amount):

Twelve Months
Ending March 31,		Total
		(In thousands)
2009		$	23,250
2010			4,200
2011			2,000
2012			—
2013			—
Thereafter			35,260
		$	64,710

Note 5. Earnings Per Share:

The computations of basic earnings per common share are based on our weighted average shares outstanding. The weighted average number of common shares outstanding was approximately 10,765,000 and 10,754,000 for the three months ended March 31, 2008 and 2007, respectively. For purposes of calculating the dilutive effect of options to purchase common shares, the weighted average shares outstanding were increased by approximately 13,000 shares during the three months ended March 31, 2007.

Not included in the computation of diluted earnings per share were outstanding options to purchase approximately 99,000 and 19,000 common shares during the three months ended March 31, 2008 and 2007, respectively, because the options’ exercise prices were greater than the average market price of the stock.

PMC COMMERCIAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 6. Dividends Declared:

The Board of Trust Managers declared a $0.20 per common share quarterly dividend to common shareholders of record on March 31, 2008, which was paid on April 7, 2008.

We have certain covenants within our debt facilities which limit our ability to pay out returns of capital as part of our dividends. These restrictions have not historically limited the amount of dividends we have paid and management does not believe that they will restrict future dividend payments.

Note 7. Income Taxes:

PMC Commercial has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). To qualify as a REIT, PMC Commercial must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT taxable income to our shareholders. As a REIT, PMC Commercial generally will not be subject to corporate level Federal income tax on net income that is currently distributed to shareholders. In order to meet our 2008 taxable income distribution requirements, we will make an election under the Code to treat a portion of the distributions declared in 2008 as distributions of 2007’s REIT taxable income.

PMC Commercial has wholly-owned taxable REIT subsidiaries (“TRS’s”) which are subject to Federal income taxes. The income generated from the TRS’s is taxed at normal corporate rates.

Our income tax provision consisted of the following:

		Three Months Ended
		March 31,
		2008				2007
		(In thousands)
Federal:
Current provision		$	100			$	151
Deferred benefit			(18	)			(9	)
Income tax provision		$	82			$	142

The provision for income taxes results in effective tax rates that differ from Federal statutory rates of 35%. The reconciliation of TRS income tax attributable to net income computed at Federal statutory rates to income tax provision was as follows:

		Three Months Ended
		March 31,
		2008				2007
		(In thousands)
Income before income taxes		$	214			$	386
Expected Federal income tax provision		$	74			$	134
Preferred dividend of subsidiary recorded as minority interest			8				8
Income tax provision		$	82			$	142

PMC COMMERCIAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 8. Other Income:

Other income consisted of the following:

		Three Months Ended
		March 31,
		2008				2007
		(In thousands)
Prepayment fees		$	296			$	248
Servicing income (1)			167				214
Other loan related income			63				63
Premium income (2)			62				160
Equity in earnings			27				24
Other			122				32
		$	737			$	741

Note 9. Supplemental Disclosure of Cash Flow Information:

Information regarding our non-cash activities was as follows:

		Three Months Ended
		March 31,
		2008				2007
		(In thousands)
Reclassification from loan receivable to asset acquired in liquidation		$	—			$	1,451
Loan receivable established through due to affiliate		$	—			$	3,486
Loan receivable originated in connection with the sale of an asset acquired in liquidation		$	—			$	1,363

Note 10. Fair Value Measurements:

Effective January 1, 2008, we adopted Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability, establishes a fair value hierarchy that prioritizes the information used to develop those assumptions and expands the disclosures about fair value measurements. Although the adoption of SFAs No. 157 did not materially impact our financial condition, results of operations, or cash flow, we are now required to provide additional disclosures as part of our financial statements.

As of March 31, 2008, we have one asset, Retained Interests, that is required to be measured at fair value on a recurring basis. Fair value, per generally accepted accounting principles, is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value

PMC COMMERCIAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

measurement. In general, quoted market prices from active markets for the identical asset (“Level 1” inputs), if available, should be used to value an asset. If quoted prices are not available for the identical asset, then a determination should be made if “Level 2” inputs are available. “Level 2” inputs include quoted prices for similar assets in active markets or for identical or similar assets in markets that are not active (i.e., markets in which there are few transactions for the asset, the prices are not current, price quotations vary substantially, or in which little information is released publicly). There is little or no market information for our Retained Interests, thus these determinations are not available. “Level 3” inputs are unobservable inputs for the asset. Unobservable inputs are used to measure fair value when observable inputs are not available. These inputs include our expectations about the assumptions that market participants would use in pricing the asset in a current transaction.

We use “Level 3” inputs to determine the estimated fair value of our Retained Interests. The following is activity for our Retained Interests during the periods presented:

		Three Months Ended
		March 31,
		2008				2007
		(In thousands)
Balances as of beginning of period		$	48,616			$	55,724
Principal collections			(660	)			(1,227	)
Realized gains included in net income (1)			(60	)			(110	)
Investments			25				271
Permanent impairments			(281	)			(24	)
Unrealized appreciation			222				179
Balances as of end of period		$	47,862			$	54,813

Note 11. Commitments and Contingencies:

Loan Commitments
Commitments to extend credit are agreements to lend to a customer provided the terms established in the contract are met. Our outstanding loan commitments and approvals to fund loans were approximately $23.1 million at March 31, 2008, of which approximately $14.9 million were for prime-based loans to be originated by First Western, the government portion of which (typically 75% to 85% of each individual loan) will be sold pursuant to Secondary Market Loan Sales.

At March 31, 2008, all of our commitments and approvals were for variable-rate loans based on either the prime rate plus 0.88% to 2.75% or the 90-day LIBOR plus 3.25%. The weighted average interest rate on our loan commitments and approvals at March 31, 2008 was 6.7%. Commitments generally have fixed expiration dates and require payment of a fee to us. Since some commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements.

PMC COMMERCIAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Operating Lease
We lease office space in Dallas, Texas under a lease which expires in October 2011. Future minimum lease payments under this lease are as follows:

		Twelve Months
		Ending
		March 31,				Total
						(In thousands)
			2009			$	194
			2010				205
			2011				217
			2012				131
						$	747

Employment Agreements
We have employment agreements with our executive officers for three-year terms expiring June 30, 2010. In the event of a change in responsibilities, as defined, during the employment period, the agreements provide for severance compensation to the executive officer in a lump sum payment in an amount equal to 2.99 times the average of the last three years annual compensation paid to the executive officer.

Structured Loan Sale Transactions
The transaction documents of the QSPEs contain provisions (the “Credit Enhancement Provisions”) that govern the assets and the inflow and outflow of funds of the QSPEs formed as part of the structured loan sale transactions. The Credit Enhancement Provisions include specified limits on the delinquency, default and loss rates on the loans receivable included in each QSPE. If, at any measurement date, the delinquency, default or loss rate with respect to any QSPE were to exceed the specified limits, the Credit Enhancement Provisions would automatically increase the level of credit enhancement requirements for that QSPE. During the period in which the specified delinquency, default or loss rate was exceeded, excess cash flow from the QSPE, if any, which would otherwise be distributable to us, would be used to fund the increased credit enhancement levels up to the principal amount of such loans and would delay or reduce our distribution. In general, there can be no assurance that amounts deferred under Credit Enhancement Provisions would be received in future periods or that future deferrals or losses will not occur.

Litigation
We had significant outstanding claims against Arlington Hospitality, Inc.’s and its subsidiary, Arlington Inns, Inc.’s (together “Arlington”) bankruptcy estates. Arlington objected to our claims and initiated a complaint in the bankruptcy seeking, among other things, the return of payments Arlington made pursuant to the property leases and the master lease agreement.

While confident that a substantial portion of our claims would have been allowed and the claims against us would have been disallowed, due to the exorbitant cost of defense coupled with the likelihood of reduced available assets in the debtors’ estates to pay claims, we executed an agreement with Arlington to settle our claims against Arlington and Arlington’s claims against us. The settlement provides that Arlington will dismiss its claims seeking the return of certain payments made pursuant to the property leases and master lease agreement and substantially reduces our claims against the Arlington estates. The settlement further provides for mutual releases among the parties. The Bankruptcy Court approved the settlement. Accordingly, there are no remaining assets or liabilities recorded in the accompanying consolidated financial statements related to this matter. However, the settlement will only become final upon the Bankruptcy Court’s approval of Arlington’s liquidation plan which was filed during the third quarter of 2007. Due to the complexity of the bankruptcy, we cannot estimate when the liquidation plan will be approved.

In the normal course of business we are periodically party to certain legal actions and proceedings involving matters that are generally incidental to our business (i.e., collection of loans receivable). In management’s opinion, the resolution of these legal actions and proceedings will not have a material adverse effect on our consolidated financial statements.

PMC COMMERCIAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Other
If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by First Western, the SBA may seek recovery of funds from us. With respect to the guaranteed portion of SBA loans that have been sold, the SBA will first honor its guarantee and then seek compensation from us in the event that a loss is deemed to be attributable to technical deficiencies.

Note 12. Business Segments:

Operating results are presented for our reportable business segments. These segments are categorized by line of business which also corresponds to how they are operated. The segments historically included (1) the Lending Division, which originates loans to small businesses primarily in the hospitality industry and (2) the Property Division, which operated certain of our hotel properties. With respect to the operations of our Lending Division, we do not differentiate between subsidiaries or loan programs.

Business segment data for the three months ended March 31, 2008 and 2007 was as follows:

		For the Three Months Ended March 31,
		2008												2007
						Lending				Property								Lending				Property
		Total				Division				Division				Total				Division				Division
		(In thousands)
Total revenues		$	6,422			$	6,412			$	10			$	6,698			$	6,691			$	7
Total expenses			3,273				3,273				—				3,536				3,228				308
Income (loss) before income tax provision, minority interest and discontinued operations			3,149				3,139				10				3,162				3,463				(301	)
Income tax benefit (provision)			(82	)			(83	)			1				(142	)			(154	)			12
Minority interest (preferred stock dividend of subsidiary)			(22	)			(22	)			—				(22	)			(22	)			—
Income (loss) from continuing operations			3,045				3,034				11				2,998				3,287				(289	)
Discontinued operations			338				335				3				(177	)			(177	)			—
Net income (loss)		$	3,383			$	3,369			$	14			$	2,821			$	3,110			$	(289	)

ITEM 2.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

     This Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created thereby. Such forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “believe,” “anticipate,” “estimate,” or “continue,” or the negative thereof or other variations or similar words or phrases. These statements include the plans and objectives of management for future operations, including, but not limited to, plans and objectives relating to future growth of the loan portfolio and availability of funds. The forward-looking statements included herein are based on current expectations and there can be no assurance that these expectations will be attained. For a description of certain factors that could cause our future results to differ materially from those expressed in any such forward-looking statement, see “Recent Developments and Trends That May Affect our Business.” Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made. We do not undertake to update them to reflect changes that occur after the date they are made.

     The following discussion of our financial condition at March 31, 2008 and results of operations for the three months ended March 31, 2008 and 2007 should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2007. For a more detailed description of the risks affecting our financial condition and results of operations, see “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2007.

BUSINESS

     We are primarily a commercial lender that originates loans to small businesses that are principally collateralized by first liens on the real estate of the related business. Our loans are predominantly to borrowers in the limited service hospitality industry. We then sell certain of our loans receivable through privately-placed structured loan transactions. Historically, we have retained residual interests in all loans receivable sold through a subordinate financial interest in the related QSPEs. We seek to maximize shareholder value through long-term growth in dividends paid to our shareholders. As a REIT, we must annually distribute at least 90% of our REIT taxable income to our shareholders.

     Our ability to generate interest income, as well as other revenue sources, is dependent upon economic, competitive and regulatory factors that influence interest rates and loan originations, and our ability to secure financing for our investment activities. The amount of income earned will vary based on the volume of loans funded, the timing and amount of financings, the volume of loans receivable which prepay and the resultant applicable prepayment fees, if any, the mix of loans (construction vs. non-construction), the rate on loans originated as well as the general level of interest rates.

RECENT DEVELOPMENTS AND TRENDS THAT MAY AFFECT OUR BUSINESS

     The following provides an update of our recent developments and trends that may affect our business included in our Annual Report on Form 10-K for the year ended December 31, 2007 that may have an impact on our financial condition and results of operations. The factors described below could impact the volume of loan originations, the income we earn on our assets, our ability to complete a securitization, the performance of our loans and/or the performance of the QSPEs.

     Our net income during the first three months of 2008 was $3,383,000 ($0.31 per share), including prepayment fees and recognition of previously deferred gains, which compares favorably to net income of $2,648,000 ($0.24 per share) and $2,821,000 ($0.26 per share) during the three months ended December 31, 2007 and March 31, 2007, respectively. Our loan portfolio continues to perform well with continued low loan losses. However, we are facing several economic challenges that are impacting our ability to fully utilize our lending platform and causing reduced yield on our assets as interest rates decline.

The economic challenges include: (i) reduced availability of capital, (ii) continued prepayments on our serviced portfolio, (iii) lowering of short-term market interest rates and (iv) economic recession. As a result of these challenges, we proactively reduced our quarterly dividend from $0.30 per share to $0.20 per share in March 2008. The Board of Trust Managers (“Board”) established the dividend in an amount it believes can reasonably be paid each of the four quarters of this year. In setting the dividend, the Board considered the likely adverse impact on our earnings from declining interest rates affecting our existing portfolio, which is composed primarily of variable-rate loans, and new loan originations in the current market of diminished liquidity available to us.

Liquidity

     The availability of capital for providers of real estate financing started to deteriorate during 2007 with the initial cause of the deterioration being credit concerns in the sub-prime residential mortgage market. We are neither an originator of sub-prime mortgages nor an originator of single-family residential mortgages. However, as a result of these concerns, there has been a spillover effect and during 2008, banks, insurance companies and other capital providers have substantially reduced the availability and increased the cost of debt capital for many companies originating commercial mortgages. At the current time, the market for commercial loan asset-backed securitizations is severely limited. We cannot anticipate when, or if, we will be able to access this market in the future.

     Our conduit facility matured on May 2, 2008. The balance outstanding on the conduit facility (approximately $22 million) was repaid on April 30, 2008 using proceeds from our revolving credit facility. We are working with the provider of our revolving credit facility and other financial institutions to increase the availability of short-term borrowings from $45 million to a minimum of $70 million. The credit markets remain extremely illiquid making it difficult to increase availability under our revolving credit facility at this time. Therefore, there can be no assurance that we will be able to increase the amount available under our revolving credit facility or identify other sources of funds with acceptable terms. We have availability through 2009 under our current revolving credit facility; however, the limited amount of capital available to originate new loans will cause us to limit non-SBA 7(a) loan origination activity.

Loan Activity

     During the first quarter of 2008 we originated approximately $17.1 million of loans. The market segment for limited service hospitality loans continues to be competitive and our ability to originate loans is constrained by our availability of funds. We anticipate that our fundings during the remaining three quarters of 2008 will be approximately $25 million to $35 million. During April 2008 we originated approximately $8.9 million of loans.

     The competitive nature of this market has resulted in a significant increase in the amount of prepayments of our serviced loans. We had greater than $84 million of prepayments in 2007 and over $28 million during the first three months of 2008. As shown in the table below, the result has been a reduction in our total serviced portfolio outstanding from its peak of approximately $498 million during 2004 to approximately $312 million at March 31, 2008. While we believe that we will continue to see high levels of prepayment activity during the remainder of 2008, the credit market disruptions may have a moderating effect. During April 2008, prepayments on our retained portfolio and securitized loans were $1.4 million and $5.2 million, respectively.

     Information on our serviced portfolio is provided since we retain a residual interest in the cash flows from our sold loans. Therefore, the performance of these loans impacts our profitability and our cash available for dividend distributions.

     Information on our serviced portfolio, including prepayment trends, was as follows:

		March 31,				December 31,
		2008				2007				2006				2005				2004
		(Dollars in thousands)
Serviced portfolio (1)		$	312,535			$	326,368			$	397,567			$	447,220			$	468,158
Loan originations		$	17,136			$	44,419			$	71,530			$	58,852			$	53,659
Prepayments		$	28,467			$	84,137			$	91,710			$	41,049			$	15,931
% Prepayments (2) (3)			8.7	%			21.2	%			20.5	%			8.8	%			3.2	%

     We are in the process of further expanding our marketing initiatives for the SBA 7(a) program. The typical size of a SBA 7(a) program loan is smaller than our other lending programs. We anticipate that as a result of First Western’s preferred lender status and these expanded marketing initiatives, our originations under the SBA 7(a) program will increase; however, to date we have not realized a significant increase in fundings. We are beginning to see an increase in commitments.

Additional Opportunities

     We continue to explore additional investment and business opportunities. However, as a result of current market disruptions, investment in these opportunities may be limited. We are evaluating investment opportunities in the banking industry which may provide alternative and/or lower costs of funds as well as alternative lending products. To the extent we were to invest in certain opportunities in the banking industry, we may no longer be able to operate as a REIT. These changes may require shareholder approval. While we are using resources to evaluate these opportunities, there can be no assurance that we will ultimately invest in any of these alternatives. In addition, some of these alternatives may initially generate negative cash flow and could impact our ability to maintain our dividend payments at their current or anticipated levels. In order to finance these investments, we anticipate utilizing alternative sources of funds and/or our revolving credit facility.

Short-term Market Interest Rates

     As a result of actions by the Federal Reserve Bank and other economic events during the first quarter of 2008, LIBOR is down significantly. Most of our retained loans (approximately $149.7 million) and our consolidated debt (approximately $52.5 million) are based on LIBOR or the prime rate. On the net difference of $97.2 million between our variable-rate loans and debt, interest rate reductions will have a negative impact on our future earnings. During the first quarter of 2008, the base interest rate (LIBOR) charged to our borrowers was 4.73% which declined to 2.70% during the second quarter of 2008 (set on April 1, 2008). In general, a 2% reduction in variable interest rates will cause a reduction in our net interest income of approximately $1.9 million assuming no other portfolio changes.

Real Estate Market Risk

     Most of the limited service hospitality properties collateralizing our loans are located on interstate highways. There have been significant increases in gasoline prices. When gas prices sharply increase, occupancy rates for properties located on interstate highways may decrease. These factors may cause a reduction in revenue per available room. In addition, the operations of the limited service hospitality properties collateralizing our loans may be negatively impacted by an economic recession. Our loan portfolio has continued to experience a limited amount of delinquencies and charge-offs; however, as a result of these economic factors, there can be no assurance that this positive performance will continue.

LOAN PORTFOLIO INFORMATION AND STATISTICS

General

     Loans originated during the first three months of 2008 were approximately $17.1 million, which is greater than the $15.4 million of loans we originated during the same period in 2007 (including approximately $3.5 million repurchased from one of our securitizations and $1.4 million from the sale of an asset acquired in liquidation). We currently anticipate loan originations to be between $25 million and $35 million during the remaining three quarters of 2008. At March 31, 2008, December 31, 2007 and March 31, 2007, our outstanding commitments to fund loans were approximately $23.1 million, $32.1 million and $30.4 million, respectively. All of our current commitments are for variable-rate loans which provide an interest rate match with our present sources of funds. We believe that our LIBOR-based loan program (1) allows us to compete more effectively with the diminishing market share of variable-rate products, (2) provides us with a more attractive securitization product and (3) provides us with a net interest spread that is less susceptible to interest rate risk than fixed-rate loan programs.

     In addition to our retained portfolio, at March 31, 2008, we service approximately $139.7 million of aggregate principal balance remaining on loans that were sold in structured loan sale transactions and secondary market loan sales. Since we retain a residual interest in the cash flows from these sold loans, the performance of these loans impacts our profitability and our cash available for dividend distributions. Therefore, we provide information on both our loans retained (the “Retained Portfolio”) and combined with sold loans that we service (the “Aggregate Portfolio”).

Loan Portfolio Rollforward

     Loans originated and principal repayments on our retained loans receivable were as follows:

		Three Months Ended
		March 31,
		2008				2007
		(In millions)
Loan Originations:
Commercial mortgage loans		$	13.4			$	11.0
SBA 7(a) program loans			1.8				1.4
Loan originated in connection with sale of asset acquired in liquidation			—				1.4
SBA 504 program loans (1)			1.9				1.6
Total loans originated		$	17.1			$	15.4
Principal Repayments:
Prepayments		$	9.0			$	10.4
Proceeds from the sale of SBA 7(a) guaranteed loans			1.0				2.0
Scheduled principal payments			0.7				1.0
Balloon maturities of SBA 504 program loans			—				3.9
Total principal repayments		$	10.7			$	17.3