11. Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value Measurements Tables

Assets measured at fair value on a recurring basis

We have no level 3 assets that are measured at fair value on a non-recurring basis. The table below presents a reconciliation for level 3 assets measured at fair value on a recurring basis using significant unobservable inputs:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2012		2011			2012			2011
	(in thousands)					(in thousands)
Residual Interest in Securitizations:
Balance at beginning of period	$	4,850	$	4,048		$	4,414		$	3,841
Cash paid (received) during period		45		–			23			–
Included in earnings		–		171			458			378
Balance at end of period	$	4,895	$	4,219		$	4,895		$	4,219
Warrant Derivative Liability:
Balance at beginning of period	$	51	$	1,595		$	967		$	1,639
Included in earnings		44		(350	)		435			(394	)
Reclassification to equity		–		–			(1,307	)		–
Balance at end of period	$	95	$	1,245		$	95		$	1,245

Debt measured at fair value on recurring basis

The table below presents a reconciliation of the acquired finance receivables and related debt measured at fair value on a recurring basis using significant unobservable inputs:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
	(in thousands)						(in thousands)
Finance Receivables Measured at Fair Value:
Balance at beginning of period	$	102,366		$	–		$	160,253		$	–
Acquisitions		–			199,554						199,554
Payments on finance receivables at fair value		(22,449	)		(6,886	)		(86,556	)		(6,886	)
Charge-offs on finance receivables at fair value		(1,259	)		–			(5,309	)		–
Discount accretion		1,870			(50	)		7,272			(50	)
Mark to fair value		(3,044	)		–			1,824			–
Balance at end of period	$	77,484		$	192,618		$	77,484		$	192,618
Debt Secured by Finance Receivables Measured at Fair Value:
Balance at beginning of period	$	104,662		$	–		$	166,828		$	–
New issuances		–			196,473						196,473
Principal payments on debt at fair value		(26,902	)		–			(97,703	)		–
Premium accretion		1,687			240			5,552			240
Mark to fair value		(2,817	)		–			1,953			–
Balance at end of period		76,630			196,713			76,630			196,713
Reduction for principal payments collected and payable		(7,002	)		(8,313	)		(7,002	)		(8,313	)
Adjusted balance at end of period	$	69,628		$	188,400		$	69,628		$	188,400

Estimated fair values of financial assets and liabilities

The table below compares the fair values of the Fireside receivables and the related secured debt to their contractual balances for the periods shown:

	September 30, 2012				December 31, 2011
	Contractual		Fair		Contractual		Fair
	Balance		Value		Balance		Value
	(In thousands)
Fireside receivables portfolio	$	80,306	$	77,484	$	172,167	$	160,253
Debt secured by Fireside receivables portfolio		62,621		76,630		162,812		166,828

The estimated fair values of financial assets and liabilities at September 30, 2012 and December 31, 2011, were as follows:

	As of September 30, 2012
Financial Instrument	(In thousands)
	Carrying		Fair Value Measurements Using:
	Value		Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	10,468	$	10,468	$	–	$	–	$	10,468
Restricted cash and equivalents		107,240		107,240		–		–		107,240
Finance receivables, net		670,150		–		–		671,022		671,022
Finance receivables measured at fair value		77,484		–		–		77,484		77,484
Residual interest in securitizations		4,895		–		–		4,895		4,895
Accrued interest receivable		8,819		–		–		8,819		8,819
Liabilities:
Warrant derivative liability	$	95	$	–	$	–	$	95	$	95
Warehouse lines of credit		20,398		–		–		20,398		20,398
Accrued interest payable		2,748		–		–		2,748		2,748
Residual interest financing		13,773		–		–		13,773		13,773
Securitization trust debt		721,396		–		–		743,878		743,878
Debt secured by receivables measured at fair value		76,630		–		–		76,630		76,630
Senior secured debt		54,452		–		–		54,452		54,452
Subordinated renewable notes		21,525		–		–		21,525		21,525

	As of December 31, 2011
Financial Instrument	(In thousands)
	Carrying		Fair Value Measurements Using:
	Value		Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	10,094	$	10,094	$	–	$	–	$	10,094
Restricted cash and equivalents		159,228		159,228		–		–		159,228
Finance receivables, net		506,279		–		–		506,647		506,647
Finance receivables measured at fair value		160,253		–		–		160,253		160,253
Residual interest in securitizations		4,414		–		–		4,414		4,414
Accrued interest receivable		6,432		–		–		6,432		6,432
Liabilities:
Warrant derivative liability	$	967	$	–	$	–	$	967	$	967
Warehouse lines of credit		25,393		–		–		25,393		25,393
Accrued interest payable		1,239		–		–		1,239		1,239
Residual interest financing		21,884		–		–		21,884		21,884
Securitization trust debt		583,065		–		–		594,224		594,224
Debt secured by receivables measured at fair value		166,828		–		–		166,828		166,828
Senior secured debt		58,344		–		–		58,344		58,344
Subordinated renewable notes	$	20,750		–	$	–		20,750		20,750

The following table provides certain qualitative information about our level 3 fair value measurements:

Financial Instrument	Fair Values as of							Inputs as of
		September 30,		December 31,		Valuation	Unobservable	September 30,	December 31,
		2012		2011		Techniques	Inputs	2012	2011
	(In thousands)
Assets:
Finance receivables		$	77,484	$	160,253	Discounted	Discount rate	20.4%		20.4%
measured at fair value						cash flows	Cumulative net losses	5.5%		5.5%
							Monthly average prepayments	0.5%		0.5%
Residual interest in			4,895		4,414	Discounted	Discount rate	20.0%		20.0%
securitizations						cash flows	Cumulative net losses	13.5%		13.0%
							Monthly average prepayments	0.5%		0.5%
Liabilities:
Warrant derivative liability			95		967	Binomial	Stock price	$3.00 / sh	$.89 / sh
							Volatility	40.0%		38.9%
							Risk free rate	1.3%		1.3% -- 1.7%
Debt secured by receivables measured at fair value			76,630		166,828	Discounted  cash flows	Discount rate	16.2%		16.2%