Note 16 - Disclosures About Fair Value

6 Months Ended

Jun. 30, 2017

16.	Disclosures about Fair Value

ASC Topic

820,

Fair Value Measurements and Disclosures

("ASC

820"

), establishes a framework for measuring fair value, expands disclosures regarding fair value measurements and defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Further, ASC

820

requires us to maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements. ASC

820

specifies a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. The

three

levels of the hierarchy are as follows:

• Level

– quoted prices for

identical

assets or liabilities in active markets;

• Level

– quoted prices for

similar

assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are

not

active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level

– valuations derived from valuation techniques in which

one

or more significant inputs or significant value drivers are

unobservable

Financial instruments measured at fair value on a recurring basis:

		Fair Value at
Description	Fair Value Hierarchy	June 30, 2017		December 31, 2016
		(Dollars in thousands)

Marketable securities, available-for-sale
Municipal debt securities	Level 2	$	9,387	$	9,387
Metropolitan district bond securities	Level 3	$	15,142	$	8,711
Mortgage loans held for sale	Level 2	$	158,804	$	265,542

Marketable Securities, Available-for-sale

Marketable securities that are available-for-sale are comprised mainly of municipal debt securities and metropolitan district bond securities. The Company’s municipal debt securities are valued based on quoted market prices of similar instruments, which uses Level

inputs, and the metropolitan district bond securities are based on a discounted future cash flow model, which uses Level

inputs. The primary unobservable inputs used in our discounted cash flow model are (

) the forecasted number of homes to be closed, as homes drive increases to the taxpaying base for the metropolitan district, (

) the forecasted assessed value of those closed homes and (

) the discount rate.

Mortgage loans held for sale

consist of FHA, VA, USDA and agency

first

mortgages on single-family residences which are eligible for sale to FNMA/FHLMC, GNMA or other investors, as applicable. Fair values of these loans are based on quoted prices from

third

party investors when preselling loans.

Financial instruments for which we have

not

elected the fair value option in accordance with ASC

825:

		June 30, 2017				December 31, 2016
Description	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(Dollars in thousands)

Financial services assets:
Mortgage loans held for investment, net	Level 2	$	25,613	$	25,613	$	24,924	$	24,924
Homebuilding liabilities:
Senior and convertible senior notes payable, net	Level 2	$	3,735,232	$	4,014,703	$	3,392,208	$	3,617,838

Mortgage Loans Held for Investment –

Fair value of these loans is based on the estimated market value of the underlying collateral based on market data and other factors for similar type properties as further adjusted to reflect the estimated net realizable value of carrying the loans through disposition.

Senior Notes Payable –

The senior notes are traded over the counter and their fair values were estimated based upon the values of their last trade at the end of the period.

The fair value of our cash and equivalents, restricted cash, accounts payable and accrued liabilities, secured project debt and other notes payable, revolving credit facility, and mortgage credit facility approximate their carrying amounts due to the short-term nature and/or variable interest rate attribute of these assets and liabilities.

- 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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