FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Company is required to use valuation techniques that are consistent with the market approach, income approach and/or cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability based on observable market data obtained from independent sources, or unobservable, meaning those that reflect the Company's own estimate about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. Accounting standards establish a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The hierarchy requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs.

The three levels of inputs used to measure fair value are listed below.

Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has access to at the measurement date.

Level 2 – Inputs include quoted market prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 – Unobservable inputs reflecting the Company's own judgments about the assumptions market participants would use in pricing the asset or liability because limited market data exists. The Company develops these inputs based on the best information available, including its own data.

Financial Assets and Liabilities Carried at Fair Value

The table below presents the assets and liabilities that were carried at fair value on the Consolidated Balance Sheets at December 31, 2019 (in thousands):



			Estimated Fair Value
	Carrying Value December 31, 2019		Level 1		Level 2		Level 3		Total
Financial assets:
Cash Surrender Value of Life Insurance	$	6,171	$	6,171	$	—	$	—	$	6,171
Financial liabilities:
Non-qualified deferred compensation plan	$	4,666	$	4,666	$	—	$	—	$	4,666

The table below presents the assets and liabilities that were carried at fair value on the Consolidated Balance Sheets at December 31, 2018 (in thousands):



			Estimated Fair Value
	Carrying Value December 31, 2018		Level 1		Level 2		Level 3		Total
Financial assets:
Cash Surrender Value of Life Insurance	$	4,790	$	4,790	$	—	$	—	$	4,790
Financial liabilities:⁽¹⁾
Non-qualified deferred compensation plan	$	3,639	$	3,639	$	—	$	—	$	3,639

Financial Assets and Liabilities Not Carried at Fair Value

The table below presents the assets and liabilities that were not carried at fair value on the Consolidated Balance Sheets at December 31, 2019 (in thousands).



			Estimated Fair Value
	Carrying Value December 31, 2019		Level 1		Level 2		Level 3		December 31, 2019
Financial assets:
Cash	$	75,242	$	75,242	$	—	$	—	$	75,242
Restricted cash	34,779		34,779		—		—		34,779
Loans receivable, net	558,993		—		—		558,993		558,993
Equity method investment	10,068		—		—		10,068		10,068
Financial liabilities:
Liability for losses on CSO lender-owned consumer loans	$	10,623	$	—	$	—	$	10,623	$	10,623
8.25% Senior Secured Notes	678,323		—		596,924		—		596,924
Non-Recourse Canada SPV facility	112,221		—		—		115,243		115,243

The table below presents the assets and liabilities that were not carried at fair value on the Consolidated Balance Sheets at December 31, 2018 (in thousands).



			Estimated Fair Value
	Carrying Value December 31, 2018		Level 1		Level 2		Level 3		December 31, 2018
Financial assets:
Cash	$	61,175	$	61,175	$	—	$	—	$	61,175
Restricted cash	25,439		25,439		—		—		25,439
Loans receivable, net	497,534		—		—		497,534		497,534
Equity method investment	6,558		—		—		6,558		6,558
Financial liabilities:
Liability for losses on CSO lender-owned consumer loans	$	12,007	$	—	$	—	$	12,007	$	12,007
8.25% Senior Secured Notes	676,661		—		531,179		—		531,179
Non-Recourse Canada SPV facility	107,479		—		—		111,335		111,335
Senior Revolver	20,000		—		—		20,000		20,000

Loans receivable are carried on the Consolidated Balance Sheets net of the Allowance for estimated loan losses. The unobservable inputs used to calculate the carrying values include quantitative factors, such as current default trends. Also considered in evaluating the accuracy of the models are changes to the loan portfolio mix, the impact of new loan products, changes to underwriting criteria or lending policies, new store development or entrance into new markets, changes in jurisdictional regulations or laws, recent credit trends and general economic conditions. The carrying value of loans receivable approximates their fair value. Refer to Note 6, "Loans Receivable and Revenue" for additional information.

During 2019, Katapult completed an equity raising round at a value per share less than the value per share raised in prior raises. This round included additional investments from existing shareholders and investments by new investors and is considered indicative of the fair value of shares in Katapult. Accordingly, the Company recognized a $3.7 million loss on the investment to adjust it to market value. As of December 31, 2019, the Company owned approximately 43.8% of the outstanding shares of Katapult. Refer to Note 1, "Summary of Significant Accounting Policies and Nature of Operations," for additional information on the Company's investment in Katapult.

In connection with the Company's CSO programs, the accounting for which is discussed in detail in Note 1, "Summary of Significant Accounting Policies and Nature of Operations," the Company guarantees consumer loan payment obligations to unrelated third-party lenders for loans that the Company arranges for consumers on the third-party lenders’ behalf. The Company is required to purchase from the lender defaulted loans that it has guaranteed. Refer to Note 6, "Loans Receivable and Revenue" for additional information.

The 8.25% Senior Secured Notes fair value level was transferred from Level 3, as previously reported, to Level 2 for the years ended December 31, 2019 and 2018. Upon management's review of the inputs, the Level 2 disclosure is appropriate given the limited trading activity in this public (observable) market. The fair values of the Non-Recourse Canada SPV facility and the Senior Revolver were based on the cash needed for their respective final settlement. Refer to Note 9, "Debt" for additional information.