Fair Value Measurements

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 9. Fair Value Measurements

The Company measures and reports certain financial and non-financial assets and liabilities on a fair value basis. Fair value is 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 (exit price). GAAP specifies a three-level hierarchy that is used when measuring and disclosing fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. The following is a description of the three hierarchy levels.

Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Active markets are considered to be those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2	Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in inactive markets.
Level 3	Unobservable inputs are not corroborated by market data. This category is comprised of financial and non-financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies using significant inputs that are generally less readily observable from objective sources.

Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no transfers between any levels during the years ended December 31, 2015 and 2014.

The fair value of equity method investments is not readily available nor have we estimated the fair value of these investments and disclosure is not required. The Company is not aware of any identified events or changes in circumstances that would have a significant adverse effect on the carrying value of any of its equity method investments included in the consolidated balance sheets as of December 31, 2015 and 2014.

The information following is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying consolidated financial statements and the related market or fair value. The disclosures include financial instruments and derivative financial instruments, other than investment in affiliates.

Following are descriptions of the valuation methodologies used to measure material assets and liabilities at fair value and details of the valuation models, key inputs to those models and significant assumptions utilized.

Cash and cash equivalents

The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’ fair values.

Securities available for sale

Certain common equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices).

Finance Receivables

The fair values of finance receivables are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the finance receivables. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. These receivables are classified as Level 3. Finance receivables are not measured at fair value on a recurring basis, but estimates of fair value are reflected below.

Marketable Investments and Warrants

Marketable Investments

If active market prices are available, fair value measurement is based on quoted active market prices and, accordingly, these securities would be classified as Level 1. If active market prices are not available, fair value measurement is based on observable inputs other than quoted prices included within Level 1, such as prices for similar assets or broker quotes utilizing observable inputs, and accordingly these securities would be classified as Level 2. If market prices are not available and there are no observable inputs, then fair value would be estimated by using valuation models including discounted cash flow methodologies, commonly used option-pricing models and broker quotes. Such securities would be classified as Level 3, if the valuation models and broker quotes are based on inputs that are unobservable in the market. If fair value is based on broker quotes, the Company checks the validity of received prices based on comparison to prices of other similar assets and market data such as relevant bench mark indices. Available-for-sale securities are measured at fair value on a recurring basis, while securities with no readily available fair market value are not, but estimates of fair value are reflected below.

 Derivative securities

For exchange-traded derivatives, fair value is based on quoted market prices, and accordingly, would be classified as Level 1. For non-exchange traded derivatives, fair value is based on option pricing models and are classified as Level 3.  

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2015 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Financial Assets:
Warrant assets	$	1,900	$	—	$	—	$	1,900
Marketable investments		5,286		2,429		—		2,857
Financial Liabilities:
Warrant liability	$	259	$	—	$	—	$	259

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2014 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Financial Assets:
Warrant assets	$	679	$	—	$	—	$	679
Marketable investments		3,119		—		—		3,119
Financial Liabilities:
Warrant liability	$	421	$	—	$	—	$	421

The changes on the value of the warrant assets during the years ended December 31, 2015 and 2014 were as follows (in thousands):

Fair value – December 31, 2013	$	204
Issuance		706
Transfers		(115	)
Change in fair value		(116	)
Fair value – December 31, 2014		679
Issuance		4,688
Transfers		—
Change in fair value		(3,467	)
Fair value – December 31, 2015	$	1,900

The Company holds warrants issued to the Company in conjunction with certain term loan investments. These warrants meet the definition of a derivative and are included in the consolidated balance sheets. The fair values for warrants outstanding, that have a readily determinable value, are measured using the Black-Scholes option pricing model. The following weighted average assumptions were used in the models to determine fair value:

The changes on the value of the warrant liability during the years ended December 31, 2015 and 2014 were as follows (in thousands):

Fair value – December 31, 2013	$	292
Issuances		—
Change in fair value		129
Fair value – December 31, 2014		421
Issuances		—
Changes in fair value		(162	)
Fair value – December 31, 2015	$	259

The following table presents financial assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2015 (in thousands):

	Total Carrying Value in Consolidated Balance Sheet		Quoted prices in active markets for identical assets or liabilities (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Financial Assets
Impaired loans	$	12,500	$	—	$	—	$	12,500

There were no remeasured assets or liabilities at fair value on a non-recurring basis during the year ended December 31, 2014.

For assets and liabilities measured on a non-recurring basis during the year, accounting guidance requires quantitative disclosures about the fair value measurements separately for each major category. There were no remeasured assets or liabilities at fair value on a non-recurring basis during the years ended December 31, 2015 and 2014.

Off-balance sheet financial instruments

Fair values for off-balance sheet, credit related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.

For the year ended December 31, 2015 (in thousands):

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and restricted cash	$	47,287	$	47,287	$	47,287	$	—	$	—
Finance receivables		99,346		99,346		—		—		99,346
Marketable investments		5,286		2,429		—		—		2,857
Warrant assets		1,900		1,900		—		—		1,900
Financial Liabilities
Warrant liability	$	259	$	259	$	—	$	—	$	259

For the year ended December 31, 2014 (in thousands): 

	Carry Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and restricted cash	$	58,728	$	58,728	$	58,728	$	—	$	—
Finance receivables		93,347		93,347		—		—		93,347
Marketable investments		4,849		4,849		—		—		4,849
Warrant assets		679		679		—		—		679
Financial Liabilities
Warrant liability	$	421	$	421	$	—	$	—	$	421