The carrying value and fair value of our financial instruments as of September 30, 2018 and December 31, 2017 assuming election of fair value for our financial assets and financial liabilities were as follows (in thousands):


	At September 30, 2018					At December 31, 2017
	Carrying		Fair			Carrying		Fair
	Value		Value			Value		Value
Mortgage loans receivable	$	242,609	$	274,698	(1)	$	223,907	$	278,224	(1)
Bank borrowings		120,000		120,000	(2)		96,500		96,500	(2)
Senior unsecured notes, net of debt issue costs		550,986		529,805	(3)		571,002		577,126	(3)
Accrued incentives and earn-outs		9,292		9,292	(4)		8,916		8,916	(4)

⁽¹⁾

Our investment in mortgage loans receivable is classified as Level 3. The fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. The discount rate is determined using our assumption on market conditions adjusted for market and credit risk and current returns on our investments. The discount rate used to value our future cash inflows of the mortgage loans receivable at September 30, 2018 and December 31, 2017 was 9.7% and 8.7%, respectively.

⁽²⁾

Our bank borrowings bear interest at a variable interest rate. The estimated fair value of our bank borrowings approximated their carrying values at September 30, 2018 and December 31, 2017 based upon prevailing market interest rates for similar debt arrangements.

⁽³⁾

Our obligation under our senior unsecured notes is classified as Level 3 and thus the fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. The discount rate is measured based upon management’s estimates of rates currently prevailing for comparable loans available to us, and instruments of comparable maturities. At September 30, 2018, the discount rate used to value our future cash outflow of our senior unsecured notes was 5.00% for those maturing before year 2026 and 5.25% for those maturing at or beyond year 2026. At December 31, 2017, the discount rate used to value our future cash outflow of our senior unsecured notes was 4.10% for those maturing before year 2026 and 4.30% for those maturing at or beyond year 2026.

⁽⁴⁾

Our accrued incentives and earn-outs are classified as Level 3. We estimated the fair value of the accrued incentives and earn‑out payments using a discounted cash flow analysis. The discount rate that we use consists of a risk‑free U.S. Treasury rate plus a company specific credit spread which we believe is acceptable by willing market participants. The discount rate used to value our accrued incentives and earn-outs was 6.0% at September 30, 2018 and 6.2% at December 31, 2017.