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Fair Value of Assets and liabilities (Tables)
 6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Summary of Assets and Liabilities Measured at Fair Value on a Recurring Basis

Equity investments were recorded at cost less impairment plus or minus observable price changes. Commencing with the quarter ended March 31, 2020, the Company elected to measure equity investments at fair value on a non-recurring basis, which have been adjusted for all periods presented.

The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019.

 

June 30, 2020

(Dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

$

—

 

 

$

2,567

 

 

$

—

 

 

$

2,567

 

Available for sale investment securities(1)

 

 

—

 

 

 

47,495

 

 

 

—

 

 

 

47,495

 

Total

 

$

—

 

 

$

50,062

 

 

$

—

 

 

$

50,062

 

 

(1)

Total unrealized gain of $1,128, net of tax, was included in accumulated other comprehensive income (loss) for the six months ended June 30, 2020 related to these assets.

 

December 31, 2019

(Dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale investment securities(1)

 

$

—

 

 

$

48,998

 

 

$

—

 

 

$

48,998

 

Total

 

$

—

 

 

$

48,998

 

 

$

—

 

 

$

48,998

 

 

(1)

Total unrealized gains of $1,081, net of tax, was included in accumulated other comprehensive income (loss) for the year ended December 31, 2019 related to these assets.

Summary of Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The following tables present the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2020 and December 31, 2019.

 

June 30, 2020

(Dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

—

 

 

$

—

 

 

$

10,389

 

 

$

10,389

 

Impaired loans

 

 

—

 

 

 

—

 

 

 

81,925

 

 

 

81,925

 

Loan collateral in process of foreclosure

 

 

—

 

 

 

—

 

 

 

47,375

 

 

 

47,375

 

Total

 

$

—

 

 

$

—

 

 

$

139,689

 

 

$

139,689

 

 

December 31, 2019

(Dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity investments

 

$

—

 

 

$

—

 

 

$

10,079

 

 

$

10,079

 

Impaired loans

 

 

—

 

 

 

—

 

 

 

34,915

 

 

 

34,915

 

Loan collateral in process of foreclosure

 

 

—

 

 

 

—

 

 

 

52,711

 

 

 

52,711

 

Total

 

$

—

 

 

$

—

 

 

$

97,705

 

 

$

97,705

 

 
Summary of Valuation Techniques and Significant Unobservable Inputs Used in Recurring and Non-Recurring Level 3 Fair Value Measurements of Assets and Liabilities The valuation techniques and significant unobservable inputs used in recurring and non-recurring level 3 fair value measurements of assets and liabilities as of June 30, 2020 and December 31, 2019

(Dollars in thousands)

 

Fair Value at 6/30/20

 

 

Valuation Techniques

 

Unobservable Inputs

 

Range

(Weighted Average)

 

Equity investments

 

$

8,934

 

 

Investee financial analysis

 

Financial condition and operating performance of the borrower (1)

 

N/A

 

 

 

 

 

 

 

 

 

Collateral support

 

N/A

 

 

 

 

1,455

 

 

Precedent market transaction

 

Offering price

 

$8.73 / share

 

Impaired loans

 

 

44,557

 

 

Market approach

 

Historical and actual loss experience

 

1.50% - 6.00%

 

 

 

 

 

 

 

 

 

 

 

60% of balance

 

 

 

 

 

 

 

 

 

Median transfer price (2)

 

$4.0 - 149.5

 

 

 

 

 

 

 

 

 

Collateral value

 

N/A

 

 

 

 

37,368

 

 

Discounted cash flow

 

Discount rate

 

 

12.78

%

 

 

 

 

 

 

 

 

Terminal value

 

$

119.5

 

 

 

 

 

 

 

 

 

Terms

 

0-41 months

 

 

 

 

 

 

 

 

 

Monthly payments

 

$0.6- 5.0

 

Loan collateral in process of foreclosure

 

 

47,375

 

 

Market approach

 

Collateral value (3)

 

N/A

 

 

 

 

 

 

 

 

 

Median transfer price (2)

 

$4.0 - 149.5

 

 

 

(1)

Includes projections based on revenue, EBITDA, leverage and liquidation amounts. These assumptions are based on a variety of factors, including economic conditions, industry and market developments, market valuations of comparable companies, and company-specific developments, including exit strategies and realization opportunities.

 

(2)

Represents amount net of liquidation costs.

 

(3)

Relates to the recreation portfolio.

(Dollars in thousands)

 

Fair Value at 12/31/19

 

 

Valuation Techniques

 

Unobservable Inputs

 

Range

(Weighted Average)

 

Equity investments

 

$

7,435

 

 

Investee financial analysis

 

Financial condition and operating performance of the borrower

 

N/A

 

 

 

 

 

 

 

 

 

Collateral support

 

N/A

 

 

 

 

1,189

 

 

Investee book value adjusted for market appreciation

 

Financial condition and operating performance of the borrower

 

N/A

 

 

 

 

 

 

 

 

Public company comparables

 

Business enterprise value

 

$4,855 - 6,120

 

 

 

 

 

 

 

 

 

Business enterprise value/revenue multiples

 

1.59 - 5.98x

 

 

 

 

 

 

 

 

 

Discount for lack of marketability

 

 

25

%

 

 

 

1,455

 

 

Precedent market transaction

 

Offering price

 

$8.73 / share