Fair Value Measurements

6 Months Ended

Jun. 30, 2023

Fair Value MeasurementsASC Topic 820, Fair Value Measurements (“ASC 820”), defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs, other than quoted prices in active markets, that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The following table sets forth the fair values and methods used for measuring the fair values of financial instruments on a recurring basis, except those for which the carrying values approximate fair values:


		Fair Value
Financial Instrument	Hierarchy	June 30, 2023		December 31, 2022

		(Dollars in thousands)
Marketable securities
Debt securities (available-for-sale)	Level 1	$	676,565	$	561,100

Mortgage loans held-for-sale, net	Level 2	$	158,746	$	229,513

Derivative and financial instruments, net (Note 17)
Interest rate lock commitments	Level 2	$	2,617	$	(1,678)
Forward sales of mortgage-backed securities	Level 2	$	2,712	$	(5,269)
Mandatory delivery forward loan sale commitments	Level 2	$	33	$	791
Best-effort delivery forward loan sale commitments	Level 2	$	—	$	1,976

The following methods and assumptions were used to estimate the fair value of each class of financial instruments as of June 30, 2023 and December 31, 2022.

Debt securities. Our debt securities consist of U.S. government treasury securities with original maturities upon acquisition of less than six months and are treated as available-for-sale investments and, as such, are recorded at fair value with all changes in fair value initially recorded through other comprehensive income. Debt securities are reviewed on a regular basis for impairment. There were no impairments recorded during the three and six months ended June 30, 2023.

The estimated fair value, gross unrealized holding gains, gross unrealized holding losses and amortized cost for debt securities by major classification are as follows:


	June 30, 2023								December 31, 2022
	(Dollars in thousands)
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. Government	$	676,446	$	120	$	1	$	676,565	$	561,100	$	—	$	—	$	561,100
Total Debt Securities	$	676,446	$	120	$	1	$	676,565	$	561,100	$	—	$	—	$	561,100

Mortgage loans held-for-sale, net. Our mortgage loans held-for-sale, which are measured at fair value on a recurring basis, include (1) mortgage loans held-for-sale that are under commitments to sell and (2) mortgage loans held-for-sale that are not under commitments to sell. At June 30, 2023 and December 31, 2022, we had $48.0 million and $142.9 million, respectively, of mortgage loans held-for-sale at fair value under commitments to sell. The fair value for those loans was based on quoted market prices for those mortgage loans, which are Level 2 fair value inputs. At June 30, 2023 and December 31, 2022, we had $110.7 million and $86.6 million, respectively, of mortgage loans held-for-sale that were not under commitments to sell. The fair value for those loans was primarily based upon the estimated market price received from an outside party, which is a Level 2 fair value input.

Gains (losses) on mortgage loans, net, are included as a component of revenues in the financial services section of our consolidated statements of operations and comprehensive income. For the three and six months ended June 30, 2023, we recorded a gain (loss) on mortgage loans held-for-sale, net of $(3.4) million and $(5.6) million, respectively, compared to $(4.3) million and $(9.3) million for the same period in the prior year.

Derivative and financial instruments, net. Our derivatives and financial instruments, which include (1) interest rate lock commitments, (2) forward sales of mortgage-backed securities, (3) mandatory delivery forward loan sale commitments and (4) best-effort delivery forward loan sale commitments, are measured at fair value on a recurring basis based on market prices for similar instruments.

For the financial assets and liabilities that the Company does not reflect at fair value, the following methods and assumptions were used to estimate the fair value of each class of financial instruments.

Cash and cash equivalents (excluding debt securities with an original maturity of three months or less), restricted cash, trade and other receivables, prepaids and other assets, accounts payable, accrued and other liabilities and borrowings on our revolving credit facility. Fair value approximates carrying value.

Mortgage Repurchase Facility. The debt associated with our mortgage repurchase facility (see Note 18 for further discussion) is at floating rates that approximate current market rates and have relatively short-term maturities, generally within 30 days. The fair value approximates carrying value and is based on Level 2 inputs.

Senior Notes. The estimated values of the senior notes in the following table are based on Level 2 inputs, which primarily reflect estimated prices for our senior notes that were provided by multiple sources.


	June 30, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

	(Dollars in thousands)
$300 million 3.850% Senior Notes due January 2030, net	$	298,076	$	261,448	$	297,949	$	246,236
$350 million 2.500% Senior Notes due January 2031, net	347,559		275,270		347,413		255,374
$500 million 6.000% Senior Notes due January 2043, net	491,234		448,648		491,120		414,017
$350 million 3.966% Senior Notes due August 2061, net	346,116		208,283		346,094		204,014
Total	$	1,482,985	$	1,193,649	$	1,482,576	$	1,119,641

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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