10. Fair Value Measurements

Recurring Fair Value Measurements

In accordance with ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), certain of the Company’s assets and liabilities, which are carried at fair value, are classified in one of the following three categories:

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

Level 2: Observable market-based inputs, other than Level 1, or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2015 and 2014 and December 31, 2014 are as follows (dollars in thousands):



	June 30,		Fair Value Measurements Using
	2015		Level 1		Level 2		Level 3
Financial assets:
Nonqualified Savings Plan-related assets and Deferred Director Shares	$	11,576	$	11,090	$	486	$	—
Investment in equity securities	109,140		—		109,140		—
Total	$	120,716	$	11,090	$	109,626	$	—
	June 30,		Fair Value Measurements Using
	2014		Level 1		Level 2		Level 3
Financial assets:
Nonqualified Savings Plan-related assets and Deferred Director Shares	$	14,826	$	14,826	$	—	$	—
Total	$	14,826	$	14,826	$	—	$	—
	December 31,		Fair Value Measurements Using
	2014		Level 1		Level 2		Level 3
Financial assets:
Nonqualified Savings Plan-related assets and Deferred Director Shares	$	12,838	$	12,259	$	579	$	—
Investment in equity securities	131,584		—		131,584		—
Total	$	144,422	$	12,259	$	132,163	$	—

Nonqualified Savings Plan-related assets and Deferred Director Shares have an offsetting liability of equal amount, which is included in “Accounts payable and accrued expenses” in the consolidated balance sheets. The Nonqualified Savings Plan-related assets include marketable equity securities, which are classified as Level 1 and based on net asset values. As of June 30, 2015, as a result of the Enova Spin-off, the portion of the Deferred Director Shares measured at fair value represented shares of Enova common stock. As of June 30, 2015, the Company’s investment in equity securities represents the Company’s available-for-sale shares of Enova common stock that it retained in connection with the Enova Spin-off. See Note 5. The equity securities representing Enova stock, both those included in Deferred Director Shares and investment in equity securities in the table above, are classified as Level 2, as they were not yet registered securities with the SEC as of that date, and accordingly, were not carried at the fair value of the quoted Enova stock prices. The Company valued these shares using the market determined stock price of Enova, less an adjustment factor due to the unregistered nature of the shares.

During the six months ended June 30, 2015 and 2014, there were no transfers of assets in or out of Level 1 or Level 2 fair value measurements.

Fair Value Measurements on a Non-Recurring Basis

The Company measures non-financial assets and liabilities such as property and equipment and intangible assets at fair value on a nonrecurring basis or when events or circumstances indicate that the carrying amount of the assets may be impaired.

Financial Assets and Liabilities Not Measured at Fair Value

The Company’s financial assets and liabilities as of June 30, 2015 and 2014 and December 31, 2014 that are not measured at fair value in the consolidated balance sheets are as follows (dollars in thousands):



	Carrying Value		Estimated Fair Value
	June 30,		June 30,		Fair Value Measurement Using
	2015		2015		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	43,986	$	43,986	$	43,986	$	—	$	—
Restricted cash	27		27		27		—		—
Pawn loans	247,381		247,381		—		—		247,381
Short-term loans, net	26,986		26,986		—		—		26,986
Installment loans, net	3,407		3,407		—		—		3,407
Pawn loan fees and service charges receivable	50,317		50,317		—		—		50,317
Total	$	372,104	$	372,104	$	44,013	$	—	$	328,091
Financial liabilities:
Liability for estimated losses on consumer loans guaranteed by the Company	$	1,922	$	1,922	$	—	$	—	$	1,922
Senior unsecured notes	184,450		186,756		—		186,756		—
Total	$	186,372	$	188,678	$	—	$	186,756	$	1,922



	Carrying Value		Estimated Fair Value
	June 30,		June 30,		Fair Value Measurement Using
	2014		2014		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	113,130	$	113,130	$	113,130	$	—	$	—
Restricted cash	60		60		60		—		—
Pawn loans	263,668		263,668		—		—		263,668
Short-term loans, net	39,313		39,313		—		—		39,313
Installment loans, net	6,681		6,681		—		—		6,681
Pawn loan fees and service charges receivable	51,986		51,986		—		—		51,986
Total	$	474,838	$	474,838	$	113,190	$	—	$	361,648
Financial liabilities:
Liability for estimated losses on consumer loans guaranteed by the Company	$	1,595	$	1,595	$	—	$	—	$	1,595
Senior unsecured notes	300,000		307,500		—		307,500		—
Total	$	301,595	$	309,095	$	—	$	307,500	$	1,595



	Carrying Value		Estimated Fair Value
	December 31,		December 31,		Fair Value Measurement Using
	2014		2014		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	53,042	$	53,042	$	53,042	$	—	$	—
Restricted cash	60		60		60		—		—
Pawn loans	252,168		252,168		—		—		252,168
Short-term loans, net	40,218		40,218		—		—		40,218
Installment loans, net	4,635		4,635		—		—		4,635
Pawn loan fees and service charges receivable	53,648		53,648		—		—		53,648
Total	$	403,771	$	403,771	$	53,102	$	—	$	350,669
Financial liabilities:
Liability for estimated losses on consumer loans guaranteed by the Company	$	1,060	$	1,060	$	—	$	—	$	1,060
Senior unsecured notes	196,470		203,346		—		203,346		—
Total	$	197,530	$	204,406	$	—	$	203,346	$	1,060

Pawn loans generally have maturity periods of less than 90 days. Because of this short maturity period, the carrying value of pawn loans approximates the fair value of these loans.

Short-term loans and installment loans, collectively, represent “Consumer loans, net” on the consolidated balance sheet and are carried net of the allowance for estimated loan losses, which is calculated by applying historical loss rates combined with recent default trends to the gross consumer loan balance. The unobservable inputs used to calculate the fair value of these loans include historical loss rates, recent default trends and estimated remaining loan terms; therefore, the carrying value approximates the fair value.

Pawn loan fees and service charges revenue and the related pawn loan fees and service charges receivable is accrued ratably over the term of the loan for the portion of those pawn loans estimated to be collectible. The Company uses historical performance data to determine the collectability of pawn loan fees and service charges receivable. Additionally, pawn loan fee and service charge rates are determined by regulations and bear no valuation relationship to the capital markets’ interest rate movements. Therefore, the carrying value approximates the fair value.

In connection with its CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders for short-term loans, unsecured installment loans and installment loans secured by the customer’s vehicle and is required to purchase any defaulted loans it has guaranteed. The Company measures the fair value of its liability for third-party lender-owned consumer loans under Level 3 inputs. The fair value of these liabilities is calculated by applying historical loss rates combined with recent default trends to the gross consumer loan balance. The unobservable inputs used to calculate the fair value of these loans include historical loss rates, recent default trends and estimated remaining loan terms; therefore, the carrying value of these liabilities approximate the fair value.

The Company measures the fair value of long-term debt instruments using Level 2 inputs. The fair values of the Company’s long-term debt instruments are estimated based on market values for debt issues with similar characteristics or rates currently available for debt with similar terms. As of June 30, 2015, the 2018 Senior Notes had a higher fair market value than the carrying value due to the difference in yield when compared to recent issuances of similar senior unsecured notes.