6 .	Fair Value Measurements

ASC 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

defined as observable inputs such as quoted prices in active markets; Level

defined as inputs, other than quoted prices in active markets, that are either directly or indirectly observable; and Level

defined as unobservable inputs for which little or

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:

		Fair Value
Financial Instrument	Hierarchy	March 31, 2018		December 31, 2017
		(Dollars in thousands)
Cash and cash equivalents
Debt securities (available-for-sale)	Level 1	$	134,505	$	99,863

Marketable securities
Equity securities	Level 1	$	40,912	$	42,004
Debt securities (available-for-sale)	Level 1		49,817		49,634
Total marketable securities		$	90,729	$	91,638

Mortgage loans held-for-sale, net	Level 2	$	113,158	$	138,114

The following methods and assumptions were used to estimate the fair value of each class of financial instruments as of

March 31, 2018

and

December 31, 2017.

Cash and cash equivalents

(excluding debt securities with an original maturity of

three

months or less)

, restricted cash, trade and other receivables, prepaid and other assets, accounts payable, accrued liabilities and borrowings on our revolving credit facility.

Fair value approximates carrying value.

quity

ecurities

. Our equity securities consist of holdings in corporate equities, preferred stock and exchange traded funds. As of

March 31, 2018,

all of our equity securities were recorded at fair value with all changes in fair value recorded to either interest and other income or other expense, dependent upon whether there was a net gain or loss, respectively, in the homebuilding section or financial services section of our consolidated statements of operations and comprehensive income. As of

December 31, 2017,

all of our equity securities were treated as available-for-sale investments and as such, were recorded at fair value with all changes in fair value initially recorded through AOCI, subject to an assessment to determine if an unrealized loss, if applicable, was other-than-temporary. See Note

for further discussion of adoption of new accounting standards.

Debt

securities

. Our debt securities consist of U.S. government securities that have an original maturity of

three

six

months. As of

March 31, 2018

and

December 31, 2017,

all of our debt securities were treated as available-for-sale investments and, as such, are recorded at fair value with all changes in fair value initially recorded through AOCI, subject to an assessment to determine if any unrealized loss, if applicable, is other-than-temporary.

Each quarter we assess all of our securities in an unrealized loss position (excluding marketable equity securities subsequent to the adoption of ASU

2016

– see Note

for further discussion of adoption of new accounting standards) for a potential other-than-temporary impairment (“OTTI”). If the unrealized loss is determined to be other-than-temporary, an OTTI is recorded in other-than-temporary impairment of marketable securities in the homebuilding or financial services sections of our consolidated statements of operations and comprehensive income. During the

three

months ended

March 31, 2017,

we recorded pretax OTTI’s of

$0.1

million.

such impairments were recorded during the

three

months ended

March 31, 2018.

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

The following tables set forth the cost and estimated fair value of our available for sale debt securities:

	March 31, 2018
	Amortized Cost Basis		OTTI		Net Amortized Cost		Fair Value
	(Dollars in thousands)
Homebuilding
Cash and cash equivalents
Debt securities	$	99,601	$	-	$	99,601	$	99,601
Marketable securities
Debt securities	$	49,817	$	-	$	49,817	$	49,817
Financial Services
Cash and cash equivalents
Debt securities	$	34,904	$	-	$	34,904	$	34,904

	December 31, 2017
	Amortized Cost Basis		OTTI		Net Amortized Cost		Fair Value
	(Dollars in thousands)
Homebuilding
Cash and cash equivalents
Debt securities	$	99,663	$	-	$	99,663	$	99,663
Marketable securities
Debt securities	$	49,634	$	-	$	49,634	$	49,634
Financial Services
Cash and cash equivalents
Debt securities	$	200	$	-	$	200	$	200

The following table reconciles the net loss recognized during the period on equity securities to the unrealized loss recognized during the period on equity securities still held at the reporting date.

	Three Months Ended
	March 31, 2018
	(Dollars in thousands)
Net losses recognized during the period on equity securities	$	(1,153	)
Less: Net losses recognized during the period on equity securities sold during the period		(96	)
Unrealized losses recognized during the reporting period on equity securities still held at the reporting date	$	(1,057	)

Mortgage loans held-for-sale, net.

Our mortgage loans held-for-sale, which are measured at fair value on a recurring basis, include (

) mortgage loans held-for-sale that are under commitments to sell and (

) mortgage loans held-for-sale that are

not

under commitments to sell. At

March 31, 2018

and

December 31, 2017,

we had

$81.2

million and

$103.5

million, respectively, of mortgage loans held-for-sale under commitments to sell. The fair value for those loans was based on quoted market prices for those mortgage loans, which are Level

fair value inputs. At

March 31, 2018

and

December 31, 2017,

we had

$32.0

million and

$34.6

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

fair value input.

M.D.C. HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements

Gains on sales of 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

months ended

March 31, 2018,

we recorded net gains on the sales of mortgage loans of

$9.0

million, compared to

$8.5

million for the same period in the prior year.

Mortgage Repurchase Facility.

The debt associated with our mortgage repurchase facility (see Note

for further discussion) is at floating rates that approximate current market rates and have relatively short-term maturities, generally within

days. The fair value approximates carrying value and is based on Level

inputs.

Senior Notes

. The estimated values of the senior notes in the following table are based on Level

inputs, which primarily reflect estimated prices for our senior notes which were provided by multiple sources.

	March 31, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in thousands)
$250 Million 5⅝% Senior Notes due February 2020, net	$	248,097	$	257,922	$	247,853	$	261,991
$250 Million 5½% Senior Notes due January 2024, net		248,634		254,913		248,585		263,617
$500 Million 6% Senior Notes due January 2043, net		490,201		464,317		490,159		493,094
Total	$	986,932	$	977,152	$	986,597	$	1,018,702