Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

14. Fair Value of Financial Instruments

Fair value is best evidenced by quoted bid or ask price, as appropriate, in an active market. Where bid or ask prices are not available, such as in an illiquid or inactive market, the closing price of the most recent transaction of that instrument subject to appropriate adjustments as required is used. Where quoted market prices are not available, the quoted prices of similar financial instruments or valuation models with observable market based inputs are used to estimate the fair value. These valuation models may use multiple observable market inputs, including observable interest rates, foreign exchange rates, index levels, credit spreads, equity prices, counterparty credit quality, corresponding market volatility levels and option volatilities. Minimal management judgment is required for fair values calculated using quoted market prices or observable market inputs for models. Greater subjectivity is required when making valuation adjustments for financial instruments in inactive markets or when using models where observable parameters do not exist. Also, the calculation of estimated fair value is based on market conditions at a specific point in time and may not be reflective of future fair values. For the Company’s financial instruments carried at cost or amortized cost, the book value is not adjusted to reflect increases or decreases in fair value due to market fluctuations, including those due to interest rate changes, as it is the Company’s intention to hold them until there is a recovery of fair value, which may be to maturity.

The Company classifies its investments in fixed income and equity securities as available-for-sale and reports these investments at fair value. Fair values of fixed income securities for which no active market exists are derived from quoted market prices of similar instruments or other third-party evidence.

The FASB has issued guidance that defines fair value as the exchange price that would be received for and asset (or paid to transfer a liability) in the principal, or most advantageous market in an orderly transaction between market participants. This guidance also establishes a fair value hierarchy that requires and entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance categorizes assets and liabilities at fair value into one of three different levels depending on the observation of the inputs employed in the measurements, as follows:

● Level 1 – inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets providing the most reliable measurement of fair value since it is directly observable.

● Level 2 – inputs to the valuation methodology which include quoted prices for similar assets or liabilities in active markets.  These inputs are observable, either directly or indirectly, for substantially the full-term of the financial instrument.

● Level 3 – inputs to the valuation methodology which are unobservable and significant to the measurement of fair value.

Financial instruments measured at fair value as of June 30, 2017 and December 31, 2016 in accordance with this guidance are as follows.

June 30, 2017	Level 1		Level 2		Level 3		Total
Fixed income securities:
U.S. government	$	—	$	1,990	$	—	$	1,990
State municipalities and political subdivisions		—		4,768		—		4,768
Asset-backed securities and collateralized mortgage obligations		—		15,042		—		15,042
Corporate		—		18,403		—		18,403
Total fixed income securities		—		40,203		—		40,203
Equity securities:
Common stock		1,108		—		—		1,108
Warrants to purchase common stock		123		—		—		123
Rights to purchase common stock		27		—		—		27
Total equity securities		1,258		—		—		1,258
Total fixed income and equity securities	$	1,258	$	40,203	$	—	$	41,461
December 31, 2016
Fixed income securities:
U.S. government	$	—	$	1,604	$	—	$	1,604
State municipalities and political subdivisions		—		2,246		—		2,246
Asset-backed securities and collateralized mortgage obligations		—		11,968		—		11,968
Corporate		—		10,741		—		10,741
Total fixed income securities	$	—	$	26,559	$	—	$	26,559
Equity securities:
Common stock		1,136		—		—		1,136
Total equity securities		1,136		—		—		1,136
Total fixed income and equity securities	$	1,136	$	26,559	$	—	$	27,695