Fair Value Measurements

3 Months Ended

Mar. 31, 2019

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 18 – Fair Value Measurements

ASC 820, Fair Value Measurement establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The statement requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

· Level 1: Quoted market prices in active markets for identical assets or liabilities;

· Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and,

· Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

As of March 31, 2019 and December 31, 2018 material financial assets and financial liabilities were carried and measured at fair value on a recurring basis.

The following tables summarize our financial liabilities that are carried at cost and measured at fair value on a non-recurring basis as of March 31, 2019 and December 31, 2018, by level within the fair value hierarchy.

			Fair Value Measurement at March 31, 2019
(Dollars in thousands)	Carrying Value(1)		Level 1		Level 2		Level 3		Total
Notes payable	$	155,855	$	—	$	—	$	159,871	$	159,871
Subordinated debt		27,913		—		—		19,162		19,162
	$	183,768	$	—	$	—	$	179,033	$	179,033

			Fair Value Measurement at December 31, 2018
(Dollars in thousands)	Carrying Value(1)		Level 1		Level 2		Level 3		Total
Notes payable	$	139,130	$	—	$	—	$	143,564	$	143,564
Subordinated debt		27,913		—		—		18,895		18,895
	$	167,043	$	—	$	—	$	162,459	$	162,459

(1) These balances are presented before any deduction for deferred financing costs.

Following is a description of the valuation methodologies used to estimate the fair value of our financial assets and liabilities. There have been no changes in the methodologies used at March 31, 2019 and December 31, 2018.

· Level 1 investments in marketable securities primarily consist of investments associated with the ownership of marketable securities in U.S. and New Zealand. These investments are valued based on observable market quotes on the last trading date of the reporting period.

· Level 2 derivative financial instruments are valued based on discounted cash flow models that incorporate observable inputs such as interest rates and yield curves from the derivative counterparties. The credit valuation adjustments associated with our non-performance risk and counterparty credit risk are incorporated in the fair value estimates of our derivatives.  As of March 31, 2019 and December 31, 2018, we concluded that the credit valuation adjustments were not significant to the overall valuation of our derivatives.  

· Level 3 borrowings include our secured and unsecured notes payable, trust preferred securities and other debt instruments.  The borrowings are valued based on discounted cash flow models that incorporate appropriate market discount rates. We calculated the market discount rate by obtaining period-end treasury rates for fixed-rate debt, or LIBOR for variable-rate debt, for maturities that correspond to the maturities of our debt, adding appropriate credit spreads derived from information obtained from third-party financial institutions.  These credit spreads take into account factors such as our credit rate, debt maturity, types of borrowings, and the loan-to-value ratios of the debt.

The Company’s financial instruments also include cash, cash equivalents, receivables and accounts payable.  The carrying values of these financial instruments approximate the fair values due to their short maturities. Additionally, there were no transfers of assets and liabilities between levels 1, 2, or 3 during the quarter ended March 31, 2019 and March 31, 2018.