Fair Value

The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis. There were no transfers into or out of level 1, level 2, or level 3 for the year ended December 31, 2017.



	As of December 31, 2017				As of December 31, 2016
	Level 1		Level 2	Total	Level 1	Level 2	Total
Assets:
Investments (available-for-sale and trading): (a)
Student loan and other asset-backed securities	$	—	76,866	76,866	—	103,780	103,780
Equity securities	3,928		—	3,928	2,694	—	2,694
Debt securities	108		—	108	119	—	119
Total investments (available-for-sale and trading)	4,036		76,866	80,902	2,813	103,780	106,593
Derivative instruments (b)	—		818	818	—	87,531	87,531
Total assets	$	4,036	77,684	81,720	2,813	191,311	194,124
Liabilities:
Derivative instruments (b):	$	—	7,063	7,063	—	77,826	77,826
Total liabilities	$	—	7,063	7,063	—	77,826	77,826

(a)

Investments represent investments recorded at fair value on a recurring basis. Level 1 investments are measured based upon quoted prices and include investments traded on an active exchange, such as the New York Stock Exchange, and corporate bonds, mortgage-backed securities, U.S. government bonds, and U.S. Treasury securities that trade in active markets. Level 2 investments include student loan asset-backed securities. The fair value for the student loan asset-backed securities is determined using indicative quotes from broker-dealers or an income approach valuation technique (present value using the discount rate adjustment technique) that considers, among other things, rates currently observed in publicly traded debt markets for debt of similar terms issued by companies with comparable credit risk.


(b)	All derivatives are accounted for at fair value on a recurring basis. The fair value of derivative financial instruments is determined using a market approach in which derivative pricing models use the stated terms of the contracts and observable yield curves, forward foreign currency exchange rates, and volatilities from active markets.

When determining the fair value of derivatives, the Company takes into account counterparty credit risk for positions where it is exposed to the counterparty on a net basis by assessing exposure net of collateral held. The net exposures for each counterparty are adjusted based on market information available for the specific counterparty.

The following table summarizes the fair values of all of the Company’s financial instruments on the consolidated balance sheets:



	As of December 31, 2017
	Fair value		Carrying value	Level 1	Level 2	Level 3
Financial assets:
Loans receivable	$	23,106,440	21,814,507	—	—	23,106,440
Cash and cash equivalents	66,752		66,752	66,752	—	—
Investments (available-for-sale)	80,902		80,902	4,036	76,866	—
Notes receivable	16,393		16,393	—	16,393	—
Restricted cash	688,193		688,193	688,193	—	—
Restricted cash – due to customers	187,121		187,121	187,121	—	—
Accrued interest receivable	430,385		430,385	—	430,385	—
Derivative instruments	818		818	—	818	—
Financial liabilities:
Bonds and notes payable	21,521,463		21,356,573	—	21,521,463	—
Accrued interest payable	50,039		50,039	—	50,039	—
Due to customers	187,121		187,121	187,121	—	—
Derivative instruments	7,063		7,063	—	7,063	—



	As of December 31, 2016
	Fair value		Carrying value	Level 1	Level 2	Level 3
Financial assets:
Loans receivable	$	25,653,581	24,903,724	—	—	25,653,581
Cash and cash equivalents	69,654		69,654	69,654	—	—
Investments (available-for-sale and trading)	106,593		106,593	2,813	103,780	—
Notes receivable	17,031		17,031	—	17,031	—
Restricted cash	980,961		980,961	980,961	—	—
Restricted cash – due to customers	119,702		119,702	119,702	—	—
Accrued interest receivable	391,264		391,264	—	391,264	—
Derivative instruments	87,531		87,531	—	87,531	—
Financial liabilities:
Bonds and notes payable	24,220,996		24,668,490	—	24,220,996	—
Accrued interest payable	45,677		45,677	—	45,677	—
Due to customers	119,702		119,702	119,702	—	—
Derivative instruments	77,826		77,826	—	77,826	—

The methodologies for estimating the fair value of financial assets and liabilities that are measured at fair value on a recurring basis are previously discussed. The remaining financial assets and liabilities were estimated using the following methods and assumptions:

Loans Receivable

If the Company has the ability and intent to hold loans for the foreseeable future, such loans are held for investment and carried at amortized cost. Fair values for loans receivable were determined by modeling loan cash flows using stated terms of the assets and internally-developed assumptions to determine aggregate portfolio yield, net present value, and average life. The significant assumptions used to project cash flows are prepayment speeds, default rates, cost of funds, required return on equity, and future interest rate and index relationships. A number of significant inputs into the models are internally derived and not observable to market participants.

Notes Receivable

Fair values for notes receivable were determined by using model-derived valuations with observable inputs, including current market rates.

Cash and Cash Equivalents, Restricted Cash, Restricted Cash – Due to Customers, Accrued Interest Receivable/Payable, and Due to Customers

The carrying amount approximates fair value due to the variable rate of interest and/or the short maturities of these instruments.

Bonds and Notes Payable

Bonds and notes payable are accounted for at cost in the financial statements except when denominated in a foreign currency. Foreign currency-denominated borrowings are re-measured at current spot rates in the financial statements. The fair value of bonds and notes payable was determined from quotes from broker-dealers or through standard bond pricing models using the stated terms of the borrowings, observable yield curves, market credit spreads, and weighted average life of underlying collateral. Fair value adjustments for unsecured corporate debt are made based on indicative quotes from observable trades.

Limitations

The fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Therefore, the calculated fair value estimates in many instances cannot be substantiated by comparison to independent markets and, in many cases, may not be realizable in a current sale of the instrument. Changes in assumptions could significantly affect the estimates.