The Company’s financial instruments include assets and liabilities carried at fair value, as well as assets and liabilities carried at cost or amortized cost but disclosed at fair value in these consolidated financial statements. Fair value is defined as the price that would be received for an asset or paid to transfer a liability in the principally most advantageous market for the asset or liability in an orderly transaction between market participants. In determining fair value, the Company applies the market approach, which uses prices and other relevant data based on market transactions involving identical or comparable assets and liabilities. The inputs to valuation techniques used to measure fair value are prioritized into a three-level hierarchy. The hierarchy gives the highest priority to quoted prices from sources independent of the reporting entity (“observable inputs”) and the lowest priority to prices determined by the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (“unobservable inputs”). The fair value hierarchy is as follows:

Level 1—Valuations that are based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2—Valuations that are based on observable inputs (other than Level 1 prices) such as quoted prices for similar assets or liabilities at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. The Level 2 financial instruments also include our line of credit and our Paycheck Protection Program loan.

Level 3—Unobservable inputs that are supported by little or no market activity. The unobservable inputs represent the Company’s best assumption of how market participants would price the assets or liabilities.

Net Asset Value (NAV)—The fair values of investment company limited partnership investments are based on the capital account balances reported by the investment funds subject to their management review and adjustment. These capital account balances reflect the fair value of the investment funds.

The following tables present the Company’s assets and liabilities measured at fair value on a recurring basis, classified by the valuation hierarchy as of March 31, 2021 and December 31, 2020 (dollars in thousands):

	March 31, 2021
	Fair Value Measurements
	Total		Level 1		Level 2		Level 3
Assets:
Debt Securities:
U.S. Government	$	22,160	$	—	$	22,160	$	—
State and local government		31,879		—		31,879		—
Corporate debt		16,141		—		16,141		—
Asset-backed securities		31,823		—		31,823		—
Mortgage-backed securities		36,047		—		36,047		—
Commercial mortgage-backed securities		1,857		—		1,857		—
Collateralized mortgage obligations		7,722		—		7,722		—
Total debt securities		147,629		—		147,629		—
Equity Securities		19,086		18,803		283		—
Short-term investments		12,710		12,710		—		—
Total marketable investments measured at fair value	$	179,425	$	31,513	$	147,912	$	—

Investments measured at NAV:
Investment in limited partnership		552
Total assets measured at fair value	$	179,977

Liabilities:
Senior Unsecured Notes *	$	24,381	$	—	$	24,381	$	—
Subordinated Notes *		11,593		—		—		11,593
Line of credit *		3,000		—		3,000		—
Paycheck Protection Program loan *		2,745		—		2,745		—
Total Liabilities measured at fair value	$	41,719	$	—	$	30,126	$	11,593

*	Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheets

	December 31, 2020
	Fair Value Measurements
	Total		Level 1		Level 2		Level 3
Assets:
Debt Securities:
U.S. Government	$	30,967	$	—	$	30,967	$	—
State and local government		33,265		—		33,265		—
Corporate debt		19,303		—		19,303		—
Asset-backed securities		20,963		—		20,963		—
Mortgage-backed securities		38,854		—		38,854		—
Commercial mortgage-backed securities		2,126		—		2,126		—
Collateralized mortgage obligations		6,521		—		6,521		—
Total debt securities		151,999		—		151,999		—
Equity securities		17,336		17,053		283		—
Short-term investments		13,317		13,317		—		—
Total marketable investments measured at fair value	$	182,652	$	30,370	$	152,282	$	—

Investments measured at NAV:
Investment in limited partnership		555
Total assets measured at fair value	$	183,207

Liabilities:
Senior Unsecured Notes *	$	20,675	$	—	$	20,675	$	—
Subordinated Notes *		11,616		—		—		11,616
Line of Credit *		5,000		—		5,000		—
Paycheck Protection Program loan *		2,745		—		2,745		—
Total Liabilities measured at fair value	$	40,036	$	—	$	28,420	$	11,616

*	Carried at face value of debt net of unamortized debt issuance costs on the consolidated balance sheets

Level 1 investments consist of equity securities traded in an active exchange market. The Company uses unadjusted quoted prices for identical instruments to measure fair value. Level 1 also includes money market funds and other interest-bearing deposits at banks, which are reported as short-term investments. The fair value measurements that were based on Level 1 inputs comprise 17.5% of the fair value of the total investment portfolio as of March 31, 2021.

Level 2 investments include debt securities, which consist of U.S. government agency securities, state and local municipal bonds (including those held as restricted securities), corporate debt securities, mortgage-backed and asset-backed securities. The fair value of securities included in the Level 2 category were based on the market values obtained from a third party pricing service that were evaluated using pricing models that vary by asset class and incorporate available trade, bid and other observable market information. The third party pricing service monitors market indicators, as well as industry and economic events. The fair value measurements that were based on Level 2 inputs comprise 82.2% of the fair value of the total investment portfolio as of March 31, 2021.

The Company obtains pricing for each security from independent pricing services, investment managers or consultants to assist in determining fair value for its Level 2 investments. To validate that these quoted prices are reasonable estimates of fair value, the Company performs various quantitative and qualitative procedures, such as (i) evaluation of the underlying methodologies, (ii) analysis of recent sales activity, (iii) analytical review of our fair values against current market prices and (iv) comparison of the pricing services’ fair value to other pricing services’ fair value for the same investment. No markets for the investments were determined to be inactive at period-ends. Based on these procedures, the Company did not adjust the prices or quotes provided from independent pricing services, investment managers or consultants. The Level 2 financial instruments also include the Company's senior debt. The fair value of the borrowings under the senior revolving credit facility approximates its carrying amount because interest is based on a short-term, variable, market-based rate.

As of March 31, 2021 and December 31, 2020, Level 3 is entirely comprised of the Company's subordinated debt. In determining the fair value of the subordinated debt outstanding at March 31, 2021 and December 31, 2020, the security attributes (issue date, maturity, coupon, calls, etc.) and market rates on September 24, 2018 (the date of the restated and amended agreement which was repriced at that time) were entered into a valuation model. A lognormal trinomial interest rate lattice was created within the model to compute the option adjusted spread (“OAS”) which is the amount, in basis points, of interest rate required to be paid under the debt agreement over the risk-free U.S. Treasury rates. The OAS was then fed back into the model along with the March 31, 2021 and December 31, 2020 U.S. Treasury rates. A new lattice was generated and the fair value was computed from the OAS. There were no changes in assumptions of credit risk from the issuance date.