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Fair Value of Financial Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Hierarchy of Financial Assets and Liabilities under U.S. GAAP Guidance

The following table sets forth, by level within the fair value hierarchy, financial assets and liabilities accounted for at fair value under U.S. GAAP guidance (in thousands):

	As of September 30, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Marketable securities	$	123,417	$	—	$	—	$	123,417
Nasdaq Forwards		—		—		40,438		40,438
Loans held for sale, at fair value		—		704,357		—		704,357
Rate lock commitments		—		—		26,691		26,691
Forward sale contracts		—		—		1,567		1,567
Total	$	123,417	$	704,357	$	68,696	$	896,470
Liabilities:
Accounts payable, accrued expenses and other liabilities—contingent consideration	$	—	$	—	$	40,051	$	40,051
Rate lock commitments		—		—		1,198		1,198
Forward sale contracts		—		—		25,971		25,971
Total	$	—	$	—	$	67,220	$	67,220

	As of December 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Marketable securities	$	48,942	$	—	$	—	$	48,942
Nasdaq Forwards		—		—		77,619		77,619
Loans held for sale, at fair value		—		990,864		—		990,864
Rate lock commitments		—		—		6,732		6,732
Forward sale contracts		—		—		8,177		8,177
Total	$	48,942	$	990,864	$	92,528	$	1,132,334
Liabilities:
Accounts payable, accrued expenses and other liabilities—contingent consideration	$	—	$	—	$	32,552	$	32,552
Rate lock commitments		—		—		7,470		7,470
Forward sale contracts		—		—		9,208		9,208
Total	$	—	$	—	$	49,230	$	49,230

Changes in Level 3 Nasdaq Forwards, Rate Lock Commitments, Forwards and Contingent Consideration Measured at Fair Value on Recurring Basis

Changes in Level 3 Nasdaq Forwards, rate lock commitments, forwards and contingent consideration measured at fair value on recurring basis were as follows (in thousands):

	Opening Balance July 1, 2019		Total realized and unrealized gains (losses) included in Net income⁽¹⁾			Issuances		Settlements			Closing Balance as of September 30, 2019		Unrealized gains (losses) outstanding as of September 30, 2019
Assets:
Rate lock commitments	$	21,951	$	26,691		$	—	$	(21,951	)	$	26,691	$	26,691
Forward sale contracts		2,845		1,567			—		(2,845	)		1,567		1,567
Nasdaq Forwards		48,652		(8,214	)		—		—			40,438		(8,214	)
Total	$	73,448	$	20,044		$	—	$	(24,796	)	$	68,696	$	20,044
	Opening Balance July 1, 2019		Total realized and unrealized (gains) losses included in Net income⁽¹⁾			Issuances		Settlements			Closing Balance as of September 30, 2019		Unrealized (gains) losses outstanding as of September 30, 2019
Liabilities:
Accounts payable, accrued expenses and other liabilities – contingent consideration(1)	$	38,712	$	1,492		$	1,180	$	(1,333	)	$	40,051	$	1,492
Rate lock commitments		2,428		1,198			—		(2,428	)		1,198		1,198
Forward sale contracts		27,261		25,971			—		(27,261	)		25,971		25,971
Total	$	68,401	$	28,661		$	1,180	$	(31,022	)	$	67,220	$	28,661

(1)

Realized and unrealized losses are reported in “Other income, net” on the accompanying unaudited condensed consolidated statements of operations.

Changes in Level 3 Nasdaq Forwards, rate lock commitments, forwards and contingent consideration measured at fair value on recurring basis for the three months ended September 30, 2018 were as follows (in thousands):

	Opening Balance as of July 1, 2018		Total realized and unrealized gains (losses) included in Net income⁽¹⁾		Issuances		Settlements			Closing Balance as of September 30, 2018		Unrealized gains (losses) outstanding as of September 30, 2018
Assets:
Rate lock commitments	$	14,448	$	6,219	$	—	$	(14,448	)	$	6,219	$	6,219
Forward sale contracts		16,442		20,515		—		(16,442	)		20,515		20,515
Nasdaq Forwards		19,085		6,327		58,617		—			84,029		6,327
Total	$	49,975	$	33,061	$	58,617	$	(30,890	)	$	110,763	$	33,061
	Opening Balance as of July 1, 2018		Total realized and unrealized (gains) losses included in Net income⁽¹⁾		Issuances		Settlements			Closing Balance as of September 30, 2018		Unrealized (gains) losses outstanding as of September 30, 2018
Liabilities:
Accounts payable, accrued expenses and other liabilities – contingent consideration(1)	$	21,573	$	271	$	10,006	$	(245	)	$	31,605	$	271
Rate lock commitments		13,945		12,089		—		(13,945	)		12,089		12,089
Forward sale contracts		641		37		—		(641	)		37		37
Total	$	36,159	$	12,397	$	10,006	$	(14,831	)	$	43,731	$	12,397

(1)

Realized and unrealized losses are reported in “Other income, net” on the accompanying unaudited condensed consolidated statements of operations.

Changes in Level 3 Nasdaq Forwards, rate lock commitments, forwards and contingent consideration measured at fair value on recurring basis for the nine months ended September 30, 2019 were as follows (in thousands):

	Opening Balance as of January 1, 2019		Total realized and unrealized gains (losses) included in Net income⁽¹⁾			Issuances		Settlements			Closing Balance as of September 30, 2019		Unrealized gains (losses) outstanding as of September 30, 2019
Assets:
Rate lock commitments	$	6,732	$	26,691		$	—	$	(6,732	)	$	26,691	$	26,691
Forward sale contracts		8,177		1,567			—		(8,177	)		1,567		1,567
Nasdaq Forwards		77,619		(37,181	)		—		—			40,438		40,438
Total	$	92,528	$	(8,923	)	$	—	$	(14,909	)	$	68,696	$	68,696
	Opening Balance as of January 1, 2019		Total realized and unrealized (gains) losses included in Net income⁽¹⁾			Issuances		Settlements			Closing Balance as of September 30, 2019		Unrealized (gains) losses outstanding as of September 30, 2019
Liabilities:
Accounts payable, accrued expenses and other liabilities – contingent consideration(1)	$	32,552	$	1,957		$	8,937	$	(3,395	)	$	40,051	$	1,957
Rate lock commitments		7,470		1,198			—		(7,470	)		1,198		1,198
Forward sale contracts		9,208		25,971			—		(9,208	)		25,971		25,971
Total	$	49,230	$	29,126		$	8,937	$	(20,073	)	$	67,220	$	29,126

(1)

Realized and unrealized losses are reported in “Other income, net” on the accompanying unaudited condensed consolidated statements of operations.

	Opening Balance as of January 1, 2018		Total realized and unrealized gains (losses) included in Net income⁽¹⁾		Issuances		Settlements			Closing Balance as of September 30, 2018		Unrealized gains (losses) outstanding as of September 30, 2018
Assets:
Rate lock commitments	$	2,923	$	6,219	$	—	$	(2,923	)	$	6,219	$	6,219
Forward sale contracts		3,753		20,515		—		(3,753	)		20,515		20,515
Nasdaq Forwards		—		6,327		58,617		—			84,029		6,327
Total	$	6,676	$	33,061	$	58,617	$	(6,676	)	$	110,763	$	33,061
	Opening Balance as of January 1, 2018		Total realized and unrealized (gains) losses included in Net income⁽¹⁾		Issuances		Settlements			Closing Balance as of September 30, 2018		Unrealized (gains) losses outstanding as of September 30, 2018
Liabilities:
Accounts payable, accrued expenses and other liabilities – contingent consideration(1)	$	23,711	$	700	$	10,695	$	(3,501	)	$	31,605	$	700
Rate lock commitments		2,390		12,089		—		(2,390	)		12,089		12,089
Forward sale contracts		657		37		—		(657	)		37		37
Total	$	26,758	$	12,826	$	10,695	$	(6,548	)	$	43,731	$	12,826

(1)

Realized and unrealized losses are reported in “Other income, net” on the accompanying unaudited condensed consolidated statements of operations.

Quantitative Information about Level 3 Fair Value Measurements

Quantitative Information About Level 3 Fair Value Measurements

The following tables present quantitative information about the significant unobservable inputs utilized by Newmark in the fair value measurement of Level 3 assets and liabilities measured at fair value on a recurring basis (in thousands):

September 30, 2019
Level 3 assets and liabilities	Assets		Liabilities		Significant Unobservable Inputs	Range	Weighted- Average
Accounts payable, accrued expenses and other liabilities:
Contingent consideration	$	—	$	40,051	Discount rate	0.3%-10.4%	8.0%
					Probability of meeting earnout and contingencies	99%-100%	99.5%
					Financial forecast information
Derivative assets and liabilities:
Nasdaq Forwards	$	40,438	$	—	Volatility	28.04%-35.62%	32.9%
Forward sale contracts	$	1,567	$	25,971	Counterparty credit risk	N/A	N/A
Rate lock commitments	$	26,691	$	1,198	Counterparty credit risk	N/A	N/A

December 31, 2018
Level 3 assets and liabilities	Assets		Liabilities		Significant Unobservable Inputs	Range	Weighted- Average
Accounts payable, accrued expenses and other liabilities:
Contingent consideration	$	—	$	32,552	Discount rate	0.3%-10.4%	8.0%
					Probability of meeting earnout and contingencies	99%-100%⁽¹⁾	99.6%
					Financial forecast information
Derivative assets and liabilities:
Nasdaq Forwards	$	77,619	$	—	Volatility	23.7%-34.8%⁽²⁾	30.2%
Forward sale contracts	$	8,177	$	9,208	Counterparty credit risk	N/A	N/A
Rate lock commitments	$	6,732	$	7,470	Counterparty credit risk	N/A	N/A

(1)

Newmark’s estimate of contingent consideration as of September 30, 2019 and December 31, 2018 was based on the acquired business’ projected future financial performance, including revenues.

(2)

The volatility of Newmark’s Nasdaq Forwards is primarily based on the volatility of the underlying Nasdaq stock price.