Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2019

Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs

We evaluate our financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them for each reporting period. Our interest rate cap is reported at fair value utilizing Level 2 inputs. The fair value is determined using third party valuations that are based on discounted cash flow analysis using observed market inputs.

The following tables present information about our assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018 (in thousands):



	June 30, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Interest rate cap	—		41		—		41
Total assets	$	—	$	41	$	—	$	41



	December 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Interest rate cap	$	—	$	1,253	$	—	$	1,253
Total assets	$	—	$	1,253	$	—	$	1,253

There were no transfers between levels for the three months ended June 30, 2019 and December 31, 2018.

Assets and Liabilities Disclosed at Fair Value

Because our loans and finance receivables and fixed-rate debt are not measured at fair value, we are required to disclose their fair value in accordance with ASC 825. Due to the lack of transparency and comparable loans and finance receivables, we utilize an income valuation technique to estimate fair value. We utilize industry-standard modeling, such as discounted cash flow models, to arrive at an estimate of fair value and may utilize third-party service providers to assist in the valuation process. This determination requires significant judgments to be made. The following tables summarize the carrying value and fair value of our loans held for investment and fixed-rate debt (in thousands):



	June 30, 2019
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets:
Loans and finance receivables, net	$	1,061,870	$	1,191,009	$	—	$	—	$	1,191,009
Total assets	$	1,061,870	$	1,191,009	$	—	$	—	$	1,191,009


Liabilities:
Fixed-rate debt	$	240,238	$	236,026	$	—	$	—	$	236,026
Total fixed-rate debt	$	240,238	$	236,026	$	—	$	—	$	236,026



	December 31, 2018
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets:
Loans and finance receivables, net	$	1,029,367	$	1,155,464	$	—	$	—	$	1,155,464
Total assets	$	1,029,367	$	1,155,464	$	—	$	—	$	1,155,464


Liabilities:
Fixed-rate debt	$	232,972	$	226,965	$	—	$	—	$	226,965
Total fixed-rate debt	$	232,972	$	226,965	$	—	$	—	$	226,965

- 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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