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Investment Securities
 6 Months Ended
Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract]  
Investment Securities

Investment securities consisted of the following:
 
June 30,
2020
 
December 31, 2019
Debt securities available for sale
$
54,885

 
$
83,445

 
 
 
 
Equity securities at fair value:
 
 
 
Marketable equity securities
11,091

 
23,819

Mutual funds invested in debt securities
22,667

 
22,377

Long-term investment securities at fair value (1)
33,232

 
45,781

          Total equity securities at fair value
66,990

 
91,977

 
 
 
 
Total investment securities at fair value
121,875

 
175,422

Less:
 
 
 
Long-term investment securities at fair value
33,232

 
45,781

Current investment securities at fair value
88,643

 
129,641

 
 
 
 
Equity-method investments
$
14,817

 
$
15,942


(1) These assets are measured at net asset value (“NAV”) as a practical expedient under ASC 820.
Net gains (losses) recognized on investment securities were as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Net gains (losses) recognized on equity securities
$
4,711

 
$
2,311

 
$
(7,026
)
 
$
7,051

Net gains (losses) recognized on debt securities available for sale
70

 
6

 
(47
)
 
42

Impairment expense
—

 
(2
)
 
(386
)
 
(5
)
Net gains (losses) recognized on investment securities
$
4,781

 
$
2,315

 
$
(7,459
)
 
$
7,088


 
(a) Debt Securities Available for Sale
The components of debt securities available for sale at June 30, 2020 were as follows:

 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Marketable debt securities
$
53,741

 
$
1,144

 
$
—

 
$
54,885




The table below summarizes the maturity dates of debt securities available for sale at June 30, 2020.

Investment Type:
Fair Value
 
Under 1 Year
 
1 Year up to 5 Years
 
More than 5 Years
U.S. Government securities
$
12,754

 
$
8,761

 
$
3,993

 
$
—

Corporate securities
37,145

 
22,570

 
14,575

 
—

U.S. mortgage-backed securities
4,984

 
3,134

 
1,850

 
—

Commercial mortgage-backed securities
2

 
2

 
—

 
—

Total debt securities available for sale by maturity dates
$
54,885

 
$
34,467

 
$
20,418

 
$
—



The components of debt securities available for sale at December 31, 2019 were as follows:

 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Marketable debt securities
$
82,714

 
$
731

 
$
—

 
$
83,445



There were no available-for-sale debt securities with continuous unrealized losses for less than 12 months and 12 months or greater at June 30, 2020 and December 31, 2019, respectively.

Gross realized gains and losses on debt securities available for sale were as follows:

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Gross realized gains on sales
$
72

 
$
9

 
$
170

 
$
47

Gross realized losses on sales
(2
)
 
(3
)
 
(217
)
 
(5
)
Net gains (losses) recognized on debt securities available for sale
$
70

 
$
6

 
$
(47
)
 
$
42

 
 
 
 
 
 
 
 
Impairment expense
$
—

 
$
(2
)
 
$
(386
)
 
$
(5
)
 

 

 

 



Although management generally does not have the intent to sell any specific securities at the end of the period, in the ordinary course of managing the Company’s investment securities portfolio, management may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements.

(b) Equity Securities at Fair Value

The following is a summary of unrealized and realized net gains and losses recognized in net income on equity securities at fair value during the three and six months ended June 30, 2020 and 2019, respectively:

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Net gains (losses) recognized on equity securities
$
4,711

 
$
2,311

 
$
(7,026
)
 
$
7,051

Less: Net gains (losses) recognized on equity securities sold
601

 
278

 
(17
)
 
410

Net unrealized gains (losses) recognized on equity securities still held at the reporting date
$
4,110

 
$
2,033

 
$
(7,009
)
 
$
6,641

 
 
 
 
 
 
 
 

The Company’s marketable equity securities and mutual funds invested in debt securities are classified as Level 1 under the fair value hierarchy disclosed in Note 12. Their fair values are based on quoted prices for identical assets in active markets or inputs that are based upon quoted prices for similar instruments in active markets.

The Company received cash distributions of $23,510 and recorded $2,148 of in-transit redemptions as of June 30, 2020 related to its long-term investment securities at fair value. The Company classified $23,407 of these distributions as investing cash inflows for the six months ended June 30, 2020. The remaining distributions were classified as operating cash inflows.

(c) Equity-Method Investments:
Equity-method investments consisted of the following:
 
June 30,
2020
 
December 31, 2019
Mutual fund and hedge funds
$
14,817

 
$
15,509

Ladenburg Thalmann Financial Services Inc. (“LTS”)
—

 
433

 
$
14,817

 
$
15,942



At June 30, 2020, the Company’s ownership percentages in the mutual fund and hedge funds accounted for under the equity method ranged from 7.10% to 35.75%. The Company’s ownership percentage in these investments meets the threshold for equity-method accounting.
In November 2019, LTS entered into an Agreement and Plan of Merger with Advisor Group whereby each LTS common share would be converted into the right to receive $3.50 per common share. On February 14, 2020, the merger was completed and the Company received proceeds of $53,169 in exchange for the Company’s 15,191,205 common shares of LTS. The Company also tendered 240,000 shares of LTS 8% Series A Cumulative Redeemable Preferred Stock (Liquidation Preference $25.00 Per Share) for redemption and received an additional $6,009 in March 2020. At the closing of the transaction, the Company’s Executive Vice President resigned as Chairman, President and Chief Executive Officer of LTS, and the Company’s management agreement with LTS was terminated.
Equity in earnings (losses) from investments were:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Mutual fund and hedge funds
$
2,207

 
$
(230
)
 
$
(693
)
 
$
612

LTS
—

 
(1,480
)
 
53,052

 
(985
)
Other
—

 
25

 
—

 
50

Equity in earnings (losses) from investments
$
2,207

 
$
(1,685
)
 
$
52,359

 
$
(323
)


The Company received cash distributions of $53,484 (including the $53,169 received by the Company in exchange for the Company’s 15,191,205 common shares of LTS) and $855 from the Company’s equity-method investments for the six months ended June 30, 2020 and 2019, respectively. The Company classified its cash distributions of $53,484 and $855 as operating activities on the condensed consolidated statements of cash flows for the six months ended June 30, 2020 and June 30, 2019, respectively.

(d) Equity Securities Without Readily Determinable Fair Values That Do Not Qualify for the NAV Practical Expedient

Equity securities without readily determinable fair values that do not qualify for the NAV practical expedient consisted of investments in the common stock of a reinsurance company and membership units of a commercial real estate limited liability company at June 30, 2020 and December 31, 2019, respectively. Membership units of a real estate limited liability company were also included in the balance as of December 31, 2019. The total carrying value of these investments was $5,200 as of June 30, 2020 and $6,200 as of December 31, 2019, and was included in “Other assets” on the condensed consolidated balance sheets. No impairment or other adjustments related to observable price changes in orderly transactions for identical or similar investments were identified for the three and six months ended June 30, 2020 and 2019, respectively.