NOTE 19 – FAIR VALUE

Assets and liabilities are categorized into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are defined as follows:

Level 1 − Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 − Observable inputs other than quoted prices included within Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

Level 3 − Unobservable inputs that reflect the entity's own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and that are, consequently, not based on market activity, but upon particular valuation techniques.

As of June 30, 2011, the fair values of the Company's assets recorded at fair value on a recurring basis were as follows (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Investment securities	$	16,286	$	−	$	2,349	$	18,635
Retained financial interest-commercial finance		−		−		156		156
Total	$	16,286	$	−	$	2,505	$	18,791
Liabilities:
Interest rate swap	$	−	$	168	$	−	$	168
Total	$	−	$	168	$	−	$	168

As of September 30, 2010, the fair values of the Company's assets recorded at fair value on a recurring basis were as follows (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Investment securities	$	16,135	$	−	$	6,223	$	22,358
Retained financial interest – commercial finance		−		−		273		273
Total	$	16,135	$	−	$	6,496	$	22,631

The following is a discussion of assets and liabilities that are recorded at fair value on a recurring and non-recurring basis as well as the valuation techniques applied to each fair value measurement:

Receivables from managed entities. The Company recorded a discount on certain of its receivable balances due from its real estate and commercial finance managed entities due to the extended term of the repayment to the Company. The discount was computed based on estimated inputs, including the repayment term (Level 3).

Retained interest - commercial finance. During fiscal 2010, the Company sold leases and loans to third-parties in which portions of the proceeds were retained by the purchasers. The purchasers have the right to return leases and loans that default within periods ranging from approximately six to forty-eight months after the date of sale and to deduct the applicable percentage from the retained proceeds. The Company determines the fair value of these retained interests by calculating the present value of future expected cash flows using key assumptions for credit losses and discount rates based on historical experience and repayment terms (Level 3).

Investment securities. The Company uses quoted market prices (Level 1) to value its investments in RCC and TBBK common stock. The fair value of CDO investments is based primarily on internally generated expected cash flow models that require significant management judgments and estimates due to the lack of market activity and unobservable pricing inputs. Unobservable inputs into these models include default, recovery, discount and deferral rates, prepayment speeds and reinvestment interest spreads (Level 3).

Guggenheim Securities- secured revolving facility. The proceeds from this loan were allocated to the revolving facility and the warrants issued to the lender based on their relative fair values, as determined by an independent third-party appraiser. The appraiser determined the fair value of the debt based primarily on the interest rates of similarly rated notes with similar terms. The appraiser assessed the fair value of the equity of LEAF in making its determination of the fair value of the warrants.

Interest rate swaps. These instruments are valued by a third-party pricing agent using an income approach and utilizing models that use as their primary basis readily observable market parameters. This valuation process considers factors including interest rate yield curves, time value, credit factors and volatility factors. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Impaired loans and leases - commercial finance. Leases and loans are considered impaired when they are 90 or more days past due and are placed on non-accrual status. The Company records an allowance for the impaired loans and leases based upon historical experience (Level 3).

Senior Notes. The proceeds from the Senior Notes were allocated to the notes and the warrants based on their relative fair values. The Company used a Black-Scholes pricing model to calculate the fair value of the warrants at $4.9 million for the first issuance and $1.0 million for the subsequent issuance (Level 3).

Servicing liability. In May 2010, the Company sold a portfolio of leases and loans to RCC. Although it remained as the servicer for the portfolio, the Company agreed not to charge servicing fees. Accordingly, the Company recorded a servicing liability based on the present value of 1% of the portfolio sold (Level 3). This liability was eliminated as a result of the January 2011 formation of LEAF.

The following table presents additional information about assets which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value for the nine months ended June 30, 2011 and fiscal year ended September 30, 2010 (in thousands):

				Retained
	Investment			Financial
	Securities			Interest
For the Nine Months Ended June 30, 2011:
Balance, beginning of period	$	6,223		$	273
Purchases, sales, issuances and settlements, net		(2,809	)		−
Loss on sale of investment securities, net		(1,470	)		−
Payments received		−			(117	)
Change in unrealized losses included in accumulated other comprehensive loss		405			−
Balance, end of period	$	2,349		$	156

For the Fiscal Year Ended September 30, 2010:
Balance, beginning of period	$	8,245		$	−
Purchases, sales, issuances and settlements, net		(2,985	)		299
Change in unrealized losses included in accumulated other comprehensive loss		1,894			−
Other-than-temporary impairment loss		(480	)		−
Loss on sale of investment securities, net		(451	)		−
Payments received and leases returned		−			(26	)
Balance, end of period	$	6,223		$	273

The Company recognized the following changes in carrying value of the assets and liabilities measured at fair value on a non-recurring basis, as follows (in thousands):

	Level 1		Level 2		Level 3		Total
For the Nine Months Ended June 30, 2011:
Assets:
Investments in commercial finance – impaired loans and leases	$	−	$	−	$	186	$	186
Receivables from managed entities – commercial finance and real estate		−		−		18,344		18,344
Total	$	−	$	−	$	18,530	$	18,530
Liabilities:
Guggenheim –secured revolving credit facility	$	−	$	−	$	49,266	$	49,266
Total	$	−	$	−	$	49,266	$	49,266

For the Fiscal Year Ended September 30, 2010:
Assets:
Investments in commercial finance – impaired loans and leases	$	−	$	−	$	190	$	190
Receivables from managed entities		−		−		9,922		9,922
Total	$	−	$	−	$	10,112	$	10,112
Liabilities:
Servicing liability	$	−	$	−	$	2,478	$	2,478
Senior Notes		−		−		2,239		2,239
Total	$	−	$	−	$	4,717	$	4,717

For cash, receivables and payables, the carrying amounts approximate fair value because of the short-term maturity of these instruments.

The fair value of financial instruments was as follows (in thousands):

	June 30, 2011				September 30, 2010
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Receivables from managed entities (1)	$	56,946	$	43,240	$	66,416	$	60,204
Investments in commercial finance - loans		18,881		18,801		1,661		1,011
	$	75,827	$	62,041	$	68,077	$	61,215
Borrowings: (2)
Commercial finance debt	$	149,963	$	149,963	$	20,750	$	20,750
Corporate secured revolving credit facilities		7,493		7,493		14,127		14,127
Corporate term note		1,400		1,400		−		−
Real estate debt		11,909		9,267		12,005		11,265
Senior Notes		15,726		18,259		14,317		16,884
Other debt		3,342		2,326		4,911		3,916
	$	189,833	$	188,708	$	66,110	$	66,942

(1)	Certain of the receivables from managed entities at June 30, 2011 and September 30, 2010 have been valued using a present value discounted cash flow where market prices were not available. The discount rate used in these calculations is the estimated current market rate adjusted for liquidity risk.

(2)

The carrying value of the Company's corporate secured revolving credit facilities and term note approximates their fair values because of their variable interest rates. The carrying value of the Company's commercial finance debt approximates its fair value due to its recent issuance at June 30, 2011. The Company's real estate debt and other debt fair values are estimated using current interest rates for similar loans. The Company estimated the fair value of the Senior Notes by applying the percentage appreciation in a high-yield fund with approximately similar quality and risk attributes as the Senior Notes. This disclosure excludes instruments valued on a recurring basis.

- 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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 159
-Paragraph 17-22, 27, 28
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15C, 15D
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 28
-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 16
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13504-108611

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15A
-Subparagraph a-d
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 21
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13537-108611

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 44A, 44B
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 30
-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 3, 10, 14, 15
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15B
-Subparagraph a, b
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 157
-Paragraph 32, 33, 34
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details