Fair Value of Financial Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2020

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 June 30, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Nasdaq Forwards	$	—	$	—	$	24,730	$	24,730
Loans held for sale, at fair value	—		1,089,429		—		1,089,429
Rate lock commitments	—		—		50,170		50,170
Forward sale contracts	—		—		2,325		2,325
Total	$	—	$	1,089,429	$	77,225	$	1,166,654
Liabilities:
Contingent consideration	$	—	$	—	$	33,567	$	33,567
Rate lock commitments	—		—		1,114		1,114
Forward sale contracts	—		—		50,617		50,617
Total	$	—	$	—	$	85,298	$	85,298



	As of December 31, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Marketable securities	$	36,795	$	—	$	—	$	36,795
Nasdaq Forwards	—		—		26,502		26,502
Loans held for sale, at fair value	—		215,290		—		215,290
Rate lock commitments	—		—		32,035		32,035
Forward sale contracts	—		—		14,389		14,389
Total	$	36,795	$	215,290	$	72,926	$	325,011
Liabilities:
Contingent consideration	$	—	$	—	$	45,172	$	45,172
Rate lock commitments	—		—		12,124		12,124
Forwards sale contracts	—		—		13,537		13,537
Total	$	—	$	—	$	70,833	$	70,833

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

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



	As of June 30, 2020
	Opening Balance		Total realized and unrealized gains (losses) included in Net income (loss)			Issuances		Settlements			Closing Balance		Unrealized gains (losses) outstanding as of June 30, 2020
Assets:
Rate lock commitments	$	32,035	$	50,170		$	—	$	(32,035	)	$	50,170	$	50,170
Forward sale contracts	14,389		2,325			—		(14,389		)	2,325		2,325
Nasdaq Forwards	26,502		(1,772		)	—		—			24,730		24,730
Total	$	72,926	$	50,723		$	—	$	(46,424	)	$	77,225	$	77,225
	Opening Balance		Total realized and unrealized (gains) losses included in Net income (loss)			Issuances		Settlements			Closing Balance		Unrealized (gains) losses outstanding as of June 30, 2020
Liabilities:
Contingent consideration	$	45,172	$	(12,263	)	$	2,221	$	(1,563	)	$	33,567	$	84
Rate lock commitments	12,124		1,114			—		(12,124		)	1,114		1,114
Forward sale contracts	13,537		50,617			—		(13,537		)	50,617		50,617
Total	$	70,833	$	39,468		$	2,221	$	(27,224	)	$	85,298	$	51,815



	As of December 31, 2019
	Opening Balance		Total realized and unrealized gains (losses) included in Net income (loss)			Issuances		Settlements			Closing Balance		Unrealized gains (losses) outstanding as of December 31, 2019
Assets:
Rate lock commitments	$	6,732	$	32,035		$	—	$	(6,732	)	$	32,035	$	32,035
Forward sale contracts	8,177		14,389			—		(8,177		)	14,389		14,389
Nasdaq Forwards	77,619		(51,117		)	—		—			26,502		26,502
Total	$	92,528	$	(4,693	)	$	—	$	(14,909	)	$	72,926	$	72,926
	Opening Balance		Total realized and unrealized (gains) losses included in Net income (loss)			Issuances		Settlements			Closing Balance		Unrealized (gains) losses outstanding as of December 31, 2019
Liabilities:
Contingent consideration	$	32,551	$	2,287		$	14,957	$	(4,623	)	$	45,172	$	2,287
Rate lock commitments	7,470		12,124			—		(7,470		)	12,124		12,124
Forward sale contracts	9,208		13,537			—		(9,208		)	13,537		13,537
Total	$	49,229	$	27,948		$	14,957	$	(21,301	)	$	70,833	$	27,948

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:



June 30, 2020
Level 3 assets and liabilities	Assets		Liabilities		Significant Unobservable Inputs	Range		Weighted Average
Accounts payable, accrued expenses and other liabilities:
Contingent consideration	$	—	$	33,567	Discount rate	0.3%-10.4%	⁽¹⁾	7.7%
					Probability of meeting earnout and contingencies	0%-100%	⁽¹⁾	98.5%
					Financial forecast information
Derivative assets and liabilities:
Nasdaq Forwards	$	24,730	$	—	Implied volatility	37.7% - 41.9%	⁽²⁾	41.3%
Forward sale contracts	$	2,325	$	50,617	Counterparty credit risk	N/A		N/A
Rate lock commitments	$	50,170	$	1,114	Counterparty credit risk	N/A		N/A



December 31, 2019
Level 3 assets and liabilities	Assets		Liabilities		Significant Unobservable Inputs	Range		Weighted Average
Accounts payable, accrued expenses and other liabilities:
Contingent consideration	$	—	$	45,172	Discount rate	0.3%-10.4%		8.6%
					Probability of meeting earnout and contingencies	90%-100%	⁽¹⁾	98.1%
					Financial forecast information
Derivative assets and liabilities:
Nasdaq Forwards	$	26,502	$	—	Implied volatility	25.7%-34.8%	⁽²⁾	32.2%
Forward sale contracts	$	14,389	$	13,537	Counterparty credit risk	N/A		N/A
Rate lock commitments	$	32,035	$	12,124	Counterparty credit risk	N/A		N/A


⁽¹⁾	Newmark’s estimate of contingent consideration as of June 30, 2020 and December 31, 2019 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.