Investment Securities and Fair Value Measurements

6 Months Ended

Jun. 30, 2023

Investment Securities and Fair Value Measurements

Note 3. Investment securities and fair value measurements

The following tables set forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy as of June 30, 2023 and December 31, 2022:


	June 30, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Money market funds	$	202,069	$	-	$	-	$	202,069
U.S. government agency bonds		-		315,082		-		315,082
U.S. treasury bonds		99,511		-		-		99,511
Corporate debt securities		-		46,677		-		46,677
Totals	$	301,580	$	361,759	$	-	$	663,339


	December 31, 2022
(in thousands)	Level 1		Level 2		Level 3		Total
Money market funds	$	92,850	$	-	$	-	$	92,850
U.S. government agency bonds		-		267,748		-		267,748
U.S. treasury bonds		186,477		-		-		186,477
Corporate debt securities		-		5,349		-		5,349
Totals	$	279,327	$	273,097	$	-	$	552,424

Cash equivalents consist of money market funds, which are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in an active market. U.S. treasury securities are also classified as Level 1 because they are valued using quoted prices. U.S. government agency and corporate securities are classified within Level 2 of the fair value hierarchy because they are valued using market-based models that consider inputs such as yield, prices of comparable securities, coupon rate, maturity, and credit quality.

During the periods presented, the Company has not changed the manner in which it values assets and liabilities that are measured at fair value. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy during the three and six months ended June 30, 2023 and 2022.

The Company's fixed income securities held as of June 30, 2023 and December 31, 2022 are classified as available-for-sale. The following table presents the amortized cost, fair value, and unrealized gains and losses by major security type, for the fixed income securities held by the Company:


	June 30, 2023
(in thousands)	Amortized cost		Gross unrealized gains in AOCI		Gross unrealized losses in AOCI			Fair value
U.S. government agency bonds	$	316,423	$	4	$	(1,345	)	$	315,082
U.S. treasury bonds		99,716		-		(205	)		99,511
Corporate debt securities		46,752		-		(74	)		46,678
Totals	$	462,891	$	4	$	(1,624	)	$	461,271


	December 31, 2022
(in thousands)	Amortized cost		Gross unrealized gains in AOCI		Gross unrealized losses in AOCI			Fair value
U.S. government agency bonds	$	254,881	$	87	$	(211	)	$	254,757
U.S. treasury bonds		186,496		19		(37	)		186,478
Corporate debt securities		5,358		-		(9	)		5,349
Totals	$	446,735	$	106	$	(257	)	$	446,584

The following table presents the amortized cost and fair value of the Company's fixed income securities by maturity grouping:


	June 30, 2023
(in thousands)	Amortized cost		Fair value
Due in one year or less	$	384,005	$	383,011
Due after one year through five years		78,886		78,260
Due after five years through ten years		-		—
Due after ten years		-		—
Total	$	462,891	$	461,271


	December 31, 2022
(in thousands)	Amortized cost		Fair value
Due in one year or less	$	328,405	$	328,359
Due after one year through five years		118,330		118,225
Due after five years through ten years		-		—
Due after ten years		-		—
Total	$	446,735	$	446,584

There were no securities with expected credit losses or non-credit related impairment as of June 30, 2023 and December 31, 2022. There were no sales of securities which resulted in a realized loss during the three and six months ended June 30, 2023. The Company recognized $5.5 million of interest income earned from its available-for-sale debt securities and money market funds during the three months ended June 30, 2023, and $10.5 million during the six months ended June 30, 2023. The Company recognized $2.5 million of accretion on its available-for-sale debt securities during the three months ended June 30, 2023, and $5.4 million during the six months ended June 30, 2023. The accretion recognized was recorded to interest income during these periods.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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