FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2014

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

In accordance with ASC Topic 820, the Company measures cash and equivalents, marketable debt and equity securities at fair value on a recurring basis. Other investments are measured at fair value on a nonrecurring basis.

The following are the major categories of assets and liabilities measured at fair value on a recurring basis during the three months ended March 31, 2014 and for the year ended December 31, 2013, using quoted prices in active markets for identical assets (Level 1) and significant other observable inputs (Level 2). For the periods presented, there were no major assets measured at fair value on a recurring basis which uses significant unobservable inputs (Level 3):

Assets and liabilities measured at fair value on a recurring basis are summarized below:

	Fair value measurement at reporting date using
	Total		Quoted Prices in Active		Significant Other		Significant
	March 31,		Markets for Identical Assets		Observable Inputs		Unobservable Inputs
Description	2014		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents:
U.S. Treasury bills	$	9,000,000	$	9,000,000	$	—		—
Money market mutual funds		4,330,000		4,330,000		—		—
Time deposits		55,000		—		55,000		—
Marketable securities:
Corporate debt securities		1,204,000				1,204,000		—
Marketable equity securities		7,224,000		7,224,000				—
Total assets	$	21,813,000	$	20,554,000	$	1,259,000	$	—

	Fair value measurement at reporting date using
	Total		Quoted Prices in Active		Significant Other		Significant
	December 31,		Markets for Identical Assets		Observable Inputs		Unobservable Inputs
Description	2013		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents:
Time deposits	$	55,000		—	$	55,000		—
Money market mutual funds		1,257,000	$	1,257,000		—		—
U.S. T-bills		15,305,000	$	15,305,000
Marketable securities:
Corporate debt securities		1,065,000		—		1,065,000		—
Marketable equity securities		3,658,000		3,658,000		—		—
Tota assets	$	21,340,000	$	20,220,000	$	1,120,000	$	—

Assets measured at fair value on a nonrecurring basis are summarized below:  

	Fair value measurement at reporting date using								Total gains
	Total		Quoted Prices in Active		Significant Other		Significant		(losses) for
	March 31,		Markets for Identical Assets		Observable Inputs		Unobservable Inputs		three months ended
Description	2014		(Level 1)		(Level 2) (a)		(Level 3) (b)		3/31/2014
Assets:
Other investments by investment focus:
Technology & Communication	$	473,000	$	—	$	473,000	$	—	$	—
Diversified businesses		1,093,000		—		1,093,000		—		—
Real estate and related		1,667,000		—		720,000		947,000		—
Other		625,000		—		—		625,000		—
	$	3,858,000	$	—	$	2,286,000	$	1,572,000	$	—

	Fair value measurement at reporting date using								Total
	Total		Quoted Prices in Active		Significant Other		Significant		losses for
	December 31,		Markets for Identical Assets		Observable Inputs		Unobservable Inputs		year ended
Description	2013		(Level 1)		(Level 2) (a)		(Level 3) (b)		12/31/2013
Assets:
Other investments by investment focus:
Technology & Communication	$	472,000	$	—	$	472,000	$	—	$	50,000
Diversified businesses		1,098,000		—		1,098,000		—		—
Real estate and related		1,409,000		—		462,000		947,000		—
Other		325,000		—		—		325,000		—
	$	3,304,000	$	—	$	2,032,000	$	1,272,000	$	50,000

(a)

Other investments measured at fair value on a non-recurring basis include investments in certain entities that calculate net asset value per share (or its equivalent such as member units or an ownership interest in partners’ capital to which a proportionate share of net assets is attributed, “NAV”).  This class primarily consists of private equity funds that have varying investment focus.  These investments can never be redeemed with the funds. Instead, the nature of the investments in this class is that distributions are received through the liquidation of the underlying assets of the fund.  If these investments were held it is estimated that the underlying assets of the fund would be liquidated over 5 to 10 years.  As of March 31, 2014, it is probable that all of the investments in this class will be sold at an amount different from the NAV of the Company’s ownership interest in partners’ capital.  Therefore, the fair values of the investments in this class have been estimated using recent observable information such as audited financial statements and/or statements of partners’ capital obtained directly from investees on a quarterly or other regular basis. During the three months ended March 31, 2014, the Company received distributions of approximately $107,000 from this type of investment primarily from investments in diversified businesses and real estate.  During the three months ended March 31, 2014, the Company made contributions totaling $358,000 in this type of investment. As of March 31, 2014, the amount of the Company’s unfunded commitments related to the aforementioned investments is approximately $1.3 million.

(b)

Other investments above which are measured on a nonrecurring basis using Level 3 unobservable inputs consist of investments primarily in commercial real estate in Florida through private partnerships and two investments in the stock of private banks in Florida and Texas.  The Company does not know when it will have the ability to redeem the investments and has categorized them as a Level 3 fair value measurement.  The Level 3 real estate and related investments of approximately $947,000 include one investment in a commercial building located near the Company’s offices purchased in 2005 with a carrying value as of March 31, 2014 of $724,000.  These investments are measured using primarily inputs provided by the managing member of the partnerships with whom the Company has done similar transactions in the past and is well known to management.  The fair values of these real estate investments have been estimated using the net asset value of the Company’s ownership interest in partners’ capital. The Level 3 other investments include private bank stocks totaling $300,000, as previously reported. Also included in this category is an investment made in March 2014 of $300,000 in a private placement by J.P. Morgan to fund a new Bermuda based reinsurance company.  The fair values of these investments have been estimated using the cost method less distributions received and other than temporary impairments. These investments are valued using inputs provided by the management of the investee.

The only activity in investments classified within level 3 of the fair value hierarchy for the three months ended March 31, 2014 is the aforementioned $300,000 investment in the reinsurance company.