18. Fair Value Measurements

Recurring Fair Value Measurements

In accordance with ASC 820, certain of the Company’s assets and liabilities, which are carried at fair value, are classified in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The Company’s financial assets that are measured at fair value on a recurring basis as of December 31, 2014 and 2013 are as follows (dollars in thousands):

	December 31,			Fair Value Measurements Using
	2014			Level 1		Level 2			Level 3
Financial assets (liabilities)
Forward currency exchange contracts	$	(213	)	$	—	$	(213	)	$	—
Nonqualified savings plan assets⁽¹⁾		755			755		—			—
Total	$	542		$	755	$	(213	)	$	—

	December 31,		Fair Value Measurements Using
	2013		Level 1		Level 2		Level 3
Financial assets (liabilities)
Nonqualified savings plan assets⁽¹⁾	$	559	$	559	$	—	$	—
Total	$	559	$	559	$	—	$	—

(1)	The non-qualified savings plan assets have an offsetting liability of equal amount, which is included in “Accounts payable and accrued expenses” in the Company’s consolidated balance sheets.

The Company measures the fair value of its forward currency exchange contracts under Level 2 inputs as defined by ASC 820. For these forward currency exchange contracts, current market rates are used to determine fair value. The significant inputs used in these models are derived from observable market rates. The fair value of the nonqualified savings plan assets is measured under a Level 1 input. These assets are publicly traded equity securities for which market prices are readily observable. During the years ended December 31, 2014 and 2013, there were no transfers of assets in or out of Level 1 fair value measurements. Prior to June 2014 the Company participated in Cash America’s derivative and hedging programs, which are coordinated through a centralized treasury function; therefore, the assets and liabilities related to derivative instruments were not recorded in the Company’s financial statements; however, the gains and losses associated with Cash America’s foreign currency forward contracts that relate to the Company’s business are included as “Foreign currency transaction loss” in the consolidated statements of income.

Fair Value Measurements on a Non-Recurring Basis

The Company measures non-financial assets and liabilities such as property and equipment and intangible assets at fair value on a nonrecurring basis or when events or circumstances indicate that the carrying amount of the assets may be impaired. At December 31, 2014 and 2013, there were no assets or liabilities recorded at fair value on a nonrecurring basis.

Financial Assets and Liabilities Not Measured at Fair Value

The Company’s financial assets and liabilities as of December 31, 2014 and 2013 that are not measured at fair value in the consolidated balance sheets are as follows (dollars in thousands):

	December 31,		Fair Value Measurements Using
	2014		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	75,106	$	75,106	$	—	$	—
Short-term loans and line of credit accounts, net ⁽¹⁾		140,905		—		—		140,905
Installment loans, net ⁽¹⁾		182,706		—		—		182,706
Total	$	398,717	$	75,106	$	—	$	323,611
Financial liabilities:
Liability for estimated losses on consumer loans guaranteed by the Company	$	1,576	$	—	$	—	$	1,576
Senior Notes		494,181		—		491,250		—
Total	$	495,757	$	—	$	491,250	$	1,576

	December 31,		Fair Value Measurements Using
	2013		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	47,480	$	47,480	$	—	$	—
Short-term loans and line of credit accounts, net ⁽¹⁾		156,845		—		—		156,845
Installment loans, net ⁽¹⁾		146,622		—		—		146,622
Total	$	350,947	$	47,480	$	—	$	303,467
Financial liabilities:
Liability for estimated losses on consumer loans guaranteed by the Company	$	2,047	$	—	$	—	$	2,047
Affiliate Line of Credit		424,133		—		429,978		—
Total	$	426,180	$	—	$	429,978	$	2,047

(1)	Short-term loans, line of credit accounts and installment loans are included in “Consumer loans, net” in the consolidated balance sheets.

Cash and cash equivalents bear interest at market rates and have maturities of less than 90 days.

Short-term loans, line of credit accounts and installment loans are carried in the consolidated balance sheet net of the allowance for estimated loan losses, which is calculated by applying historical loss rates combined with recent default trends to the gross consumer loan balance. The unobservable inputs used to calculate the fair value of these loans include historical loss rates, recent default trends and estimated remaining loan terms; therefore, the carrying value approximates the fair value. Short-term loans and line of credit accounts have relatively short maturity periods that are generally 12 months or less. The fair value of installment loans is estimated using a discounted cash flow analysis, which considers interest rates offered for loans with similar terms to borrowers of similar credit quality. The carrying values of the Company’s installment loans approximate the fair value of these loans. Unsecured installment loans typically have terms between two and 12 months, but may have available terms up to 60 months.

In connection with its CSO programs, the Company guarantees consumer loan payment obligations to unrelated third-party lenders for short-term consumer and installment loans and is required to purchase any defaulted loans it has guaranteed. The estimated fair value of the liability for estimated losses on consumer loans guaranteed by the Company was $1.6 million and $2.0 million as of December 31, 2014 and 2013, respectively. The Company measures the fair value of its liability for third-party lender-owned consumer loans under Level 3 inputs. The fair value of these liabilities is calculated by applying historical loss rates combined with recent default trends to the gross consumer loan balance. The unobservable inputs used to calculate the fair value of these loans include historical loss rates, recent default trends and estimated remaining loan terms; therefore, the carrying value of these liabilities approximates the fair value.

The Company measures the fair value of its long-term debt using Level 2 inputs. The fair value of the Company’s Senior Notes is estimated based on quoted prices in markets that are not active. As of December 31, 2014, the Company’s Senior Notes had a lower fair value than the carrying value based on the price of the last trade of the Senior Notes. As of December 31, 2013 the Company’s Affiliate Line of Credit had a higher fair market value than the carrying value due to the difference in yield when compared to similar types of credit.