Fair Values of Financial Instruments

9 Months Ended

Sep. 30, 2012

Fair Values of Financial Instruments [Abstract]

Fair Values of Financial Instruments

3. Fair Values of Financial Instruments

U.S. GAAP establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1:	Quoted prices for identical assets or liabilities in active markets at the measurement date
Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data at the measurement date
Level 3:	Unobservable inputs reflecting management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following tables summarize fair value measurements by level at September 30, 2012 and December 31, 2011 for assets and liabilities measured at fair value on a recurring basis (dollars in thousands):

	Level 1				Level 2				Level 3				Total
Description	2012		2011		2012		2011		2012		2011		2012		2011
Investments	$	2,804	$	—	$	—	$	25,311	$	923	$	902	$	3,727	$	26,213
Total assets at fair value	$	2,804	$	—	$	—	$	25,311	$	923	$	902	$	3,727	$	26,213

The fair values of some investment securities included within our investment portfolio were based on quoted market prices from various stock and bond exchanges. Certificates of deposit have original maturities greater than 90 days and less than one year. Certain of our debt securities were classified at fair value utilizing Level 2 inputs in the prior year. For these securities, fair value was measured using observable market data that includes dealer quotes, live trading levels, trade execution data, credit information and the bond’s terms and conditions.

The fair values of our auction rate instruments are classified in Level 3 because they are valued using a trinomial discount model due to insufficient observable auction rate market information available to determine the fair value of these investments. The determination of the fair value of the auction rate instruments employs assumptions including financial standing of the issuer of the instruments, final stated maturities, estimates of the probability of the issue being called prior to final maturity (ranging from 84.0% to 87.6%), estimates of the probability of defaults (ranging from 11.9% to 14.1%) and recoveries (ranging from 40% to 60%), expected changes in interest rates paid on the securities, interest rates paid on similar instruments, and an estimated illiquidity discount (ranging from 3.5% to 4.5%) due to extended redemption periods. Significant changes in any of those inputs in isolation would result in a significantly different fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the probability of principal returned prior to maturity and the liquidity risk premium.

There were no transfers between Level 1 and Level 2 measurements in the three and nine months ended September 30, 2012 and 2011. The following table sets forth the reconciliation of beginning and ending balances for each major category of assets measured at fair value using significant unobservable inputs (Level 3) for the three and nine months ended September 31, 2012 and 2011 (dollars in thousands):

	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2012		2011			2012			2011
Balance at beginning of period	$	923	$	954		$	902		$	951
Losses included in earnings		—		(21	)		(11	)		(21	)
Gains included in other comprehensive income		—		—			32			3
Balance as of September 30	$	923	$	933		$	923		$	933