Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurement

v3.8.0.1
Fair Value Measurement
3 Months Ended
Mar. 31, 2018
Fair Value Measurement [Abstract]  
Fair Value Measurement

14.    Fair Value Measurement 



Fair value is defined as the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting literature defines an input fair value hierarchy that has three broad levels and gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).



The input fair value hierarchy is summarized below:





 



 

Level 1:

Unadjusted quoted prices in active markets for identical assets or liabilities



 

Level 2:

Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability



 

Level 3:

Unobservable inputs for the asset or liability



Financial Disclosures about Fair Value of Financial Instruments



The following tables present information for consolidated financial instruments at March 31, 2018 and December 31, 2017 (in thousands): 







 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

Fair Value Measurements Using



 

 

 

 

Quoted prices

 

 



 

Carrying

 

 

in Active

Significant

 



 

Amount

 

Fair Value

Markets

Other

Significant



 

As of

 

As of

for Identical

Observable

Unobservable



 

March 31,

 

March 31,

Assets

Inputs

Inputs



 

2018

 

2018

(Level 1)

(Level 2)

(Level 3)

Financial assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

349,945 

 

349,945  349,945 

 -

 -

Restricted cash

 

48,386 

 

48,386  48,386 

 -

 -

Loans receivable (1)

 

7,634 

 

9,183 

 -

 -

9,183 

Notes receivable, net

 

424,117 

 

510,000 

 -

 -

510,000 



 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

Receivable-backed notes payable

$

413,334 

 

416,300 

 -

 -

416,300 

Notes payable and other borrowings

 

125,324 

 

129,559 

 -

 -

129,559 

Junior subordinated debentures

 

135,725 

 

130,500 

 -

 -

130,500 

Redeemable 5% cumulative preferred stock

 

9,232 

 

9,053 

 -

 -

9,053 









 

 

 

 

 

 

 



 

 

 

 

 

 

 



 

 

 

 

Fair Value Measurements Using



 

 

 

 

Quoted prices

 

 



 

Carrying

 

 

in Active

Significant

 



 

Amount

 

Fair Value

Markets

Other

Significant



 

As of

 

As of

for Identical

Observable

Unobservable



 

December 31,

 

December 31,

Assets

Inputs

Inputs



 

2017

 

2017

(Level 1)

(Level 2)

(Level 3)

Financial assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

362,526 

 

362,526  362,526 

 -

 -

Restricted cash

 

46,721 

 

46,721  46,721 

 -

 -

Loans receivable (1)

 

19,454 

 

21,125 

 -

 -

21,125 

Notes receivable, net

 

426,858 

 

525,000 

 -

 -

525,000 

Notes receivable from preferred

 

 

 

 

 

 

 

shareholders (1)

 

5,000 

 

5,000 

 -

 -

5,000 



 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

Receivable-backed notes payable

$

421,118 

 

425,900 

 -

 -

425,900 

Notes payable and other borrowings

 

144,114 

 

149,438 

 -

 -

149,438 

Junior subordinated debentures

 

135,414 

 

132,000 

 -

 -

132,000 

Redeemable 5% cumulative preferred stock

 

13,974 

 

13,977 

 -

 -

13,977 





(1)

 Included in other assets in  the Company’s Condensed Consolidated Statements of Financial Condition as of March 31, 2018 and December 31, 2017.



Management has made estimates of fair value that it believes to be reasonable.  However, because there is no active market for many of these financial instruments, the fair value of these financial instruments has been derived using the income approach technique with Level 3 unobservable inputs. Estimates used in net present value financial models rely on assumptions and judgments regarding issues where the outcome is unknown, and actual results or values may differ significantly from these estimates. These fair value estimates do not consider the tax effect that would be associated with the disposition of the assets or liabilities at their fair value estimates. As such, the estimated value upon sale or disposition of the asset may not be received, and the estimated value upon disposition of the liability in advance of its scheduled maturity may not be paid.



The amounts reported in the consolidated statements of financial condition for cash and cash equivalents and restricted cash approximate fair value.



The fair value of the Company’s accruing loans is calculated using an income approach with Level 3 inputs by discounting forecasted cash flows using estimated market discount rates. The fair value of non-accruing collateral dependent loans is estimated using an income approach with Level 3 inputs utilizing the fair value of the collateral adjusted for operating and selling expenses and discounted over the estimated holding period based on the market risk inherent in the property. 



The fair values of notes receivable and note receivable from preferred shareholders are estimated using Level 3 inputs and are based on estimated future cash flows considering contractual payments and estimates of prepayments and defaults, discounted at a market rate. 



The fair value of the 5% Cumulative Preferred Stock, which is subject to mandatory redemption, is calculated using the income approach with Level 3 inputs by discounting the estimated cash flows at a market discount rate.



The amounts reported in the consolidated statements of financial condition relating to Bluegreen’s notes payable and other borrowings, including receivable-backed notes payable, approximate fair value for indebtedness that provides for variable interest rates.  The fair value of Bluegreen’s fixed rate, receivable-backed notes payable was determined using Level 3 inputs by discounting the net cash outflows estimated to be used to repay the debt. These obligations are to be satisfied using the proceeds from the consumer loans that secure the obligations. 



The fair value of Community Development Bonds is measured using the market approach with Level 3 inputs obtained based on estimated market prices of similar financial instruments.  Community Development Bonds are included in notes payable and other borrowings in the above table.



The fair value of other borrowings (other than Bluegreen’s notes payable and other borrowings and Community Development Bonds above) is measured using the income approach with Level 3 inputs obtained by discounting the forecasted cash flows based on estimated market rates.    



The fair value of junior subordinated debentures is estimated using Level 3 inputs based on the contractual cash flows discounted at a market rate or based on market price quotes from the over-the-counter bond market.