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Fair Value of Financial Instruments | 9 Months Ended
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Sep. 30, 2016
Fair Value Disclosures [Abstract] |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs to the extent possible to measure a financial instrument’s fair value. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability, and are affected by the type of product, whether the product is traded on an active exchange or in the secondary market, as well as current market conditions. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Fair value is estimated by applying the hierarchy discussed in Note—(2) Summary of Significant Accounting Policies, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized within Level 3 of the fair value hierarchy. The Company’s fair value measurement is based on a market approach, which utilizes prices and other relevant information generated by market transactions involving identical or comparable financial instruments. Sources of inputs to the market approach include third-party pricing services, independent broker quotations and pricing matrices. Management analyzes the third party valuation methodologies and its related inputs to perform assessments to determine the appropriate level within the fair value hierarchy and to assess reliability of values. Further, management has a process in place to review all changes in fair value that occurred during each measurement period. Any discrepancies or unusual observations are followed through to resolution through the source of the pricing as well as utilizing comparisons, if applicable, to alternate pricing sources. The Company utilizes observable and unobservable inputs within its valuation methodologies. Observable inputs may include: benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, bids, offers and reference data. In addition, specific issuer information and other market data is used. Broker quotes are obtained from sources recognized to be market participants. Unobservable inputs may include: expected cash flow streams, default rates, supply and demand considerations and market volatility. Available for Sale Securities Available for sale securities are generally classified within either Level 1 or Level 2 of the fair value hierarchy and are based on prices provided by an independent pricing service and a third party investment manager who provide a single price or quote per security. The following details the methods and assumptions used to estimate the fair value of each class of available for sale securities and the applicable level each security falls within the fair value hierarchy: U.S Treasury Securities, Obligations of U.S. Government Authorities and Agencies, Obligations of State and Political Subdivisions, Corporate Securities, Asset-Backed Securities, and Obligations of Foreign Governments: Fair values were obtained from an independent pricing service and a third party investment manager. The prices provided by the independent pricing service are based on quoted market prices, when available, non-binding broker quotes, or matrix pricing and fall under Level 2 of the fair value hierarchy. Certificates of Deposit: The estimated fair value of certificates of deposit approximate carrying value and fall under Level 1 of the fair value hierarchy. Equity Securities: The fair values of publicly traded common and preferred stocks were obtained from market value quotations provided by an independent pricing service and fall under Level 1 of the fair value hierarchy. The fair values of non-publicly traded common and preferred stocks were based on prices obtained from an independent pricing service using unobservable inputs and fall under Level 3 of the fair value hierarchy. Derivative Assets and Liabilities: Derivatives are comprised of credit default swaps (CDS), index credit default swaps (CDX), interest rate lock commitments (IRLC), to be announced mortgage backed securities (TBA) and interest rate swaps (IRS). The fair value of these instruments is based upon valuation pricing models, which represent the amount the Company would expect to receive or pay at the balance sheet date to exit the position. In general, the fair value of CDSs and CDXs are based on dealer quotes. Because significant inputs, other than unadjusted quoted prices in active markets are used to determine the dealer quotes, such as price volatility, the Company classifies them as Level 2 in the fair value hierarchy. The fair value of IRS is based upon either valuation pricing models, which represent the amount the Company would expect to pay at the balance sheet date if the contracts were exited, or by obtaining broker or counterparty quotes. Because there are observable inputs used to arrive at these prices, the Company has classified IRS within Level 2 of the fair value hierarchy. Our mortgage origination subsidiaries issue IRLCs to its customers, which are carried at estimated fair value on the Company’s Consolidated Balance Sheet. The estimated fair values of these commitments are generally calculated by reference to the value of the underlying loan associated with the IRLC net of costs to produce and an expected fall out assumption. The fair values of these commitments generally result in a Level 3 classification. Our mortgage origination subsidiaries manage their exposure by entering into forward delivery commitments with loan investors. For loans not locked with investors under a forward delivery commitment, the Company enters into hedge instruments, primarily TBAs, to protect against movements in interest rates. The fair values of TBA mortgage backed securities generally result in a Level 2 classification. The Company uses certain of its IRS as part of its risk management strategy to manage interest rate risk and cash flow risk that may arise in connection with the variable interest rate provision of the Company's preferred trust securities. These derivatives are classified as cash flow hedges. Trading Assets and Liabilities: Trading assets and liabilities consist primarily of privately held equity securities, exchange-traded equity securities, CLOs, collateralized debt obligations (CDOs), derivative assets and liabilities, tax exempt securities, and U.S. Treasury short positions. The fair value of privately held equity securities are based on quotes obtained from dealers or internally developed valuation models. Because significant inputs used to determine the dealer quotes or model values are not observable, such as projected future earnings and price volatility, the Company has classified them within Level 3 of the fair value hierarchy. The Company’s U.S. Treasury short position is priced through dealer indicative quotes and as such is classified as Level 2. Positions in securitized products such as CLOs and CDOs are based on quotes obtained from dealers and valuation models. When these quotes are based directly or indirectly on observable inputs such as quoted prices for similar assets exchanged in an active or inactive market, the Company has classified them within Level 2 of the fair value hierarchy. If these quotes are based on valuation models using unobservable inputs such as expected future cash flows, default rates, supply and demand considerations, and market volatility, the Company has classified them within Level 3 of the fair value hierarchy. The fair value of tax exempt securities is determined by obtaining quotes from independent pricing services. In most cases, quotes are obtained from two pricing services and the average of both quotes is used. The independent pricing services determine their quotes using observable inputs such as current interest rates, specific issuer information and other market data for such securities. Therefore, the estimate of fair value is subject to a high degree of variability based upon market conditions, the availability of issuer information and the assumptions made. The valuation inputs used to arrive at fair value for such debt obligations are generally classified within Level 2 or Level 3 of the fair value hierarchy. Nonperforming loans and REO: The Company determines the purchase price for NPLs at the time of acquisition and for each subsequent valuation by using a discounted cash flow valuation model and considering alternate loan resolution probabilities, including modification, liquidation, or conversion to REO. The significant unobservable inputs used in the fair value measurement of our NPLs are discount rates, loan resolution timeline, and the value of underlying properties. Observable inputs to the model include loan amounts, payment history, and property types. Our NPLs are on nonaccrual status at the time of purchase as it is probable that principal or interest is not fully collectible. NPLs are included in loans, at fair value and fall under Level 3 of the fair value hierarchy. NPLs that have become REOs were measured at fair value on a non-recurring basis during the nine months ended September 30, 2016 (the Company did not have investments in REO status in prior year period). The carrying value of REOs at September 30, 2016 was $10,233. Upon conversion to REO, the fair value is estimated using broker price opinion (BPO). BPOs are subject to judgments of a particular broker formed by visiting a property, assessing general home values in an area, reviewing comparable listings, and reviewing comparable completed sales. These judgments may vary among brokers and may fluctuate over time based on housing market activities and the influx of additional comparable listings and sales. REO is included in Other Assets. The following tables present the Company’s fair value hierarchies for financial assets and liabilities, including the balances associated with the consolidated CLOs, measured on a recurring basis:
| As of September 30, 2016
| Quoted prices in active markets Level 1 |  | Other significant observable inputs Level 2 |  | Significant unobservable inputs Level 3 |  | Fair value
Assets: |  |  |  |  |  |  |
Trading assets: |  |  |  |  |  |  |
Equity securities | $ | 44,669 |  |  | $ | — |  |  | $ | — |  |  | $ | 44,669 |
CLO | — |  |  | — |  |  | 1,660 |  |  | 1,660 |
Total trading securities | 44,669 |  |  | — |  |  | 1,660 |  |  | 46,329 |
Derivative assets: |  |  |  |  |  |  |
Interest rate lock commitments | — |  |  | — |  |  | 5,560 |  |  | 5,560 |
TBA – mortgage backed securities | — |  |  | 153 |  |  | — |  |  | 153 |
Credit derivatives | — |  |  | 12,106 |  |  | — |  |  | 12,106 |
Total derivative assets | — |  |  | 12,259 |  |  | 5,560 |  |  | 17,819 |
Total trading assets (included in other assets) | 44,669 |  |  | 12,259 |  |  | 7,220 |  |  | 64,148 |
Available for sale securities: |  |  |  |  |  |  |
Equity securities | 792 |  |  | — |  |  | 48 |  |  | 840 |
U.S. Treasury securities and U.S. government agencies | — |  |  | 7,802 |  |  | — |  |  | 7,802 |
Obligations of state and political subdivisions | — |  |  | 58,071 |  |  | — |  |  | 58,071 |
Obligations of foreign governments | — |  |  | 1,310 |  |  | — |  |  | 1,310 |
Certificates of deposit | 893 |  |  | — |  |  | — |  |  | 893 |
Asset backed securities | — |  |  | 1,513 |  |  | — |  |  | 1,513 |
Corporate bonds | — |  |  | 66,766 |  |  | — |  |  | 66,766 |
Total available for sale securities | 1,685 |  |  | 135,462 |  |  | 48 |  |  | 137,195 |
Investments in loans, at fair value: |  |  |  |  |  |  |  |  |  |
| As of September 30, 2016
| Quoted prices in active markets Level 1 |  | Other significant observable inputs Level 2 |  | Significant unobservable inputs Level 3 |  | Fair value
Corporate loans | — |  |  | 20,950 |  |  | 131,047 |  |  | 151,997 |
Mortgage loans held for sale | — |  |  | 166,503 |  |  | — |  |  | 166,503 |
Non-performing loans | — |  |  | — |  |  | 52,024 |  |  | 52,024 |
Other loans receivable | — |  |  | 126 |  |  | 1,284 |  |  | 1,410 |
Total investments in loans, at fair value | — |  |  | 187,579 |  |  | 184,355 |  |  | 371,934 |
Total financial instruments attributable to Non-CLOs included in consolidated assets | 46,354 |  |  | 335,300 |  |  | 191,623 |  |  | 573,277 |
Financial instruments included in assets of consolidated CLOs: |  |  |  |  |  |  |
Investments in loans, at fair value | — |  |  | 241,125 |  |  | 693,697 |  |  | 934,822 |
Total financial instruments included in assets of consolidated CLOs | — |  |  | 241,125 |  |  | 693,697 |  |  | 934,822 |
Total | $ | 46,354 |  |  | $ | 576,425 |  |  | $ | 885,320 |  |  | $ | 1,508,099 |
Liabilities: |  |  |  |  |  |  |
Trading liabilities: |  |  |  |  |  |  |
U.S. Treasury securities | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Total trading securities | — |  |  | — |  |  | — |  |  | — |
Derivative liabilities: |  |  |  |  |  |  |
Interest rate swaps | — |  |  | 3,116 |  |  | — |  |  | 3,116 |
TBA-mortgage backed securities | — |  |  | 855 |  |  | — |  |  | 855 |
Total derivative liabilities | — |  |  | 3,971 |  |  | — |  |  | 3,971 |
Total trading liabilities (included in other liabilities) | — |  |  | 3,971 |  |  | — |  |  | 3,971 |
Contingent consideration payable | — |  |  | — |  |  | 575 |  |  | 575 |
Preferred notes payable | — |  |  | — |  |  | 1,284 |  |  | 1,284 |
Total financial instruments attributable to Non-CLOs included in consolidated liabilities | — |  |  | 3,971 |  |  | 1,859 |  |  | 5,830 |
Financial instruments included in liabilities of consolidated CLOs: |  |  |  |  |  |  |
Notes payable of CLOs | — |  |  | — |  |  | 927,982 |  |  | 927,982 |
Total financial instruments included in liabilities of consolidated CLOs | — |  |  | — |  |  | 927,982 |  |  | 927,982 |
Total | $ | — |  |  | $ | 3,971 |  |  | $ | 929,841 |  |  | $ | 933,812 |
| As of December 31, 2015
| Quoted prices in active markets Level 1 |  | Other significant observable inputs Level 2 |  | Significant unobservable inputs Level 3 |  | Fair value
Assets: |  |  |  |  |  |  |
Trading assets: |  |  |  |  |  |  |
Equity securities | $ | 3,786 |  |  | $ | — |  |  | $ | 8,941 |  |  | $ | 12,727 |
Tax exempt securities | — |  |  | 1,732 |  |  | 8,314 |  |  | 10,046 |
CLO | — |  |  | — |  |  | 1,768 |  |  | 1,768 |
| As of December 31, 2015
| Quoted prices in active markets Level 1 |  | Other significant observable inputs Level 2 |  | Significant unobservable inputs Level 3 |  | Fair value
Total trading securities | 3,786 |  |  | 1,732 |  |  | 19,023 |  |  | 24,541 |
Derivative assets: |  |  |  |  |  |  |
Interest rate lock commitments | — |  |  | — |  |  | 3,384 |  |  | 3,384 |
TBA - mortgage backed securities | — |  |  | 179 |  |  | — |  |  | 179 |
Forward delivery contracts | — |  |  | — |  |  | 11 |  |  | 11 |
Credit derivatives | — |  |  | 11,945 |  |  | — |  |  | 11,945 |
Total derivative assets | — |  |  | 12,124 |  |  | 3,395 |  |  | 15,519 |
Total trading assets (included in other assets) | 3,786 |  |  | 13,856 |  |  | 22,418 |  |  | 40,060 |
Available for sale securities: |  |  |  |  |  |  |
Equity securities | 6,060 |  |  | — |  |  | 48 |  |  | 6,108 |
U.S. Treasury securities and U.S. government agencies | — |  |  | 53,136 |  |  | — |  |  | 53,136 |
Obligations of state and political subdivisions | — |  |  | 52,335 |  |  | — |  |  | 52,335 |
Obligations of foreign governments | — |  |  | 2,864 |  |  | — |  |  | 2,864 |
Certificates of deposit | 893 |  |  | — |  |  | — |  |  | 893 |
Asset backed securities | — |  |  | 1,529 |  |  | — |  |  | 1,529 |
Corporate bonds | — |  |  | 67,838 |  |  | — |  |  | 67,838 |
Total available for sale securities | 6,953 |  |  | 177,702 |  |  | 48 |  |  | 184,703 |
Investments in loans, at fair value |  |  |  |  |  |  |
Corporate loans | — |  |  | 55,956 |  |  | 177,905 |  |  | 233,861 |
Mortgage loans held for sale | — |  |  | 120,836 |  |  | — |  |  | 120,836 |
Non-performing loans | — |  |  | — |  |  | 38,289 |  |  | 38,289 |
Other loans receivable | — |  |  | 125 |  |  | 1,284 |  |  | 1,409 |
Total investments in loans, at fair value | — |  |  | 176,917 |  |  | 217,478 |  |  | 394,395 |
Total financial instruments attributable to Non-CLOs included in consolidated assets | 10,739 |  |  | 368,475 |  |  | 239,944 |  |  | 619,158 |
Financial instruments included in assets of consolidated CLOs: |  |  |  |  |  |  |
Investments in loans, at fair value | — |  |  | 159,892 |  |  | 520,892 |  |  | 680,784 |
Total financial instruments included in assets of consolidated CLOs | — |  |  | 159,892 |  |  | 520,892 |  |  | 680,784 |
Total | $ | 10,739 |  |  | $ | 528,367 |  |  | $ | 760,836 |  |  | $ | 1,299,942 |
Liabilities: |  |  |  |  |  |  |
Trading liabilities: |  |  |  |  |  |  |
U.S. Treasury securities | $ | — |  |  | $ | 19,679 |  |  | $ | — |  |  | $ | 19,679 |
Total trading securities | — |  |  | 19,679 |  |  | — |  |  | 19,679 |
Derivative liabilities: |  |  |  |  |  |  |
Interest rate swaps | — |  |  | 2,310 |  |  | — |  |  | 2,310 |
Forward delivery contracts | — |  |  | 8 |  |  | — |  |  | 8 |
TBA-mortgage backed securities | — |  |  | 150 |  |  | — |  |  | 150 |
Foreign currency forward contracts | — |  |  | 5 |  |  | — |  |  | 5 |
Total derivative liabilities | — |  |  | 2,473 |  |  | — |  |  | 2,473 |
Total trading liabilities (included in other liabilities) | — |  |  | 22,152 |  |  | — |  |  | 22,152 |
| As of December 31, 2015
| Quoted prices in active markets Level 1 |  | Other significant observable inputs Level 2 |  | Significant unobservable inputs Level 3 |  | Fair value
Contingent consideration payable | — |  |  | — |  |  | 936 |  |  | 936 |
Preferred notes payable | — |  |  | — |  |  | 1,562 |  |  | 1,562 |
Total financial instruments attributable to Non-CLOs included in consolidated liabilities | — |  |  | 22,152 |  |  | 2,498 |  |  | 24,650 |
Financial instruments included in liabilities of consolidated CLOs: |  |  |  |  |  |  |
Notes payable of CLOs | — |  |  | — |  |  | 683,827 |  |  | 683,827 |
Total financial instruments included in liabilities of consolidated CLOs | — |  |  | — |  |  | 683,827 |  |  | 683,827 |
Total | $ | — |  |  | $ | 22,152 |  |  | $ | 686,325 |  |  | $ | 708,477 |
The following table represents additional information about assets that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value for the following periods:
| Nine Months Ended September 30,
| 2016 | 2015
| Non-CLO assets |  | CLO assets |  | Non-CLO assets |  | CLO assets |  | Assets held for sale
Balance at January 1, | $ | 239,944 |  |  | $ | 520,892 |  |  | $ | 11,577 |  |  | $ | 576,811 |  |  | $ | 3,771,458 |
Net realized gains (losses) | 17,185 |  |  | 534 |  |  | 11,469 |  |  | 698 |  |  | — |
Net unrealized gains (losses) | 7,623 |  |  | 15,067 |  |  | 677 |  |  | (4,306 | ) |  | — |
Purchases | 38,053 |  |  | 77,373 |  |  | 37,234 |  |  | 13,625 |  |  | 141,292 |
Sales | (55,786 | ) |  | (78,206 | ) |  | (1,437 | ) |  | (63,214 | ) |  | (3,967,798 | )
Issuances | 1,400 |  |  | 1,436 |  |  | 2 |  |  | 550 |  |  | — |
Transfer into Level 3 (1) | 86,170 |  |  | 118,718 |  |  | 71,547 |  |  | 136,806 |  |  | — |
Transfer adjustments (out of) Level 3 (1) | (28,572 | ) |  | (66,215 | ) |  | (12,354 | ) |  | (152,636 | ) |  | — |
Adoption of ASU 2015-02 | — |  |  | — |  |  | — |  |  | (328,411 | ) |  | — |
Attributable to policyowner | — |  |  | — |  |  | — |  |  | — |  |  | 55,048 |
Conversion to real estate owned and mortgage held for sale | (10,296 | ) |  | — |  |  | (817 | ) |  | — |  |  | — |
Warehouse transfer to CLO | (104,098 | ) |  | 104,098 |  |  | — |  |  | — |  |  | — |
Balance at September 30, | $ | 191,623 |  |  | $ | 693,697 |  |  | $ | 117,898 |  |  | $ | 179,923 |  |  | $ | — |
Changes in unrealized gains (losses) included in earnings related to assets still held at period end | $ | 2,123 |  |  | $ | 10,372 |  |  | $ | 162 |  |  | $ | (1,020 | ) |  | $ | — |
(1) | All transfers are deemed to occur at end of period. Transfers between Level 2 and 3 were a result of subjecting third-party pricing on both CLO and Non-CLO assets to various liquidity, depth, bid-ask spread and benchmarking criteria as well as assessing the availability of observable inputs affecting their fair valuation.
The following table represents additional information about liabilities that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value for the following periods:
| Nine Months Ended September 30,
| 2016 |  | 2015
| Non-CLO Liabilities |  | CLO Liabilities |  | Non-CLO Liabilities |  | CLO Liabilities
Balance at January 1, | $ | 2,498 |  |  | $ | 683,827 |  |  | $ | 2,802 |  |  | $ | 1,785,207 |
Net unrealized gains (losses) | (262 | ) |  | 23,169 |  |  | — |  |  | 19,681 |
Purchases | — |  |  | — |  |  | — |  |  | — |
Sales | — |  |  | — |  |  | — |  |  | — |
Issuances | — |  |  | 222,303 |  |  | — |  |  | (41,272 | )
Settlements | (377 | ) |  | — |  |  | — |  |  | — |
Dispositions | — |  |  | (1,317 | ) |  | — |  |  | (31,155 | )
Adoption of ASU 2015-02 | — |  |  | — |  |  | — |  |  | (1,032,913 | )
Balance at September 30, | $ | 1,859 |  |  | $ | 927,982 |  |  | $ | 2,802 |  |  | $ | 699,548 |
Changes in unrealized (losses) gains included in earnings related to liabilities still held at period end | $ | (262 | ) |  | $ | 23,169 |  |  | $ | — |  |  | $ | 7,248 |
The following is quantitative information about Level 3 significant unobservable inputs used in fair valuation. Disclosure of this information is not required in circumstances where a valuation (unadjusted) is obtained from a third-party pricing service and the information regarding the unobservable inputs is not readily available to the Company.
| Fair Value as of |  |  |  |  |  | Actual or Range (Weighted average)
Assets (1) | September 30, 2016 |  | December 31, 2015 |  | Valuation Technique |  | Unobservable input(s) |  | September 30, 2016 |  | December 31, 2015
Tax exempt security | $ | — |  |  | $ | 121 |  |  | Discounted cash flow |  | Short term cash flows |  | N/A |  | 0.0%
Tax exempt security | — |  |  | 8,193 |  |  | Market yield analysis |  | Yield to maturity |  | N/A |  | 6.50%
Interest rate lock commitments | 5,560 |  |  | 3,384 |  |  | Internal model |  | Pull through rate |  | 45% - 95% |  | 55% - 95%
Forward delivery contracts | — |  |  | 11 |  |  | Internal model |  | Pull through rate |  | N/A |  | 80% - 100%
NPLs | 52,024 |  |  | 38,289 |  |  | Discounted cash flow |  | See table below (2) |  | See table below |  | See table below
Total | $ | 57,584 |  |  | $ | 49,998 |  |  |  |  |  |  |  |  |
(1) | Financial assets classified as Level 3 and fair valued using significant unobservable inputs classified as Level 3 have not been provided as these are not readily available to the Company (including servicing release premium for interest rate lock commitments and forward delivery contracts).
(2) | Significant changes in any of these inputs in isolation could result in a significant change to the fair value measurement. A decline in the discount rate in isolation would increase the fair value. A decrease in the housing pricing index in isolation would decrease the fair value. Individual loan characteristics, such as location and value of underlying collateral, affect the loan resolution timeline. An increase in the loan resolution timeline in isolation would decrease the fair value. A decrease in the value of underlying properties in isolation would decrease the fair value.
The following table sets forth quantitative information about the significant unobservable inputs used to measure the fair value of our NPLs as of the following periods:
|  | As of September 30, 2016 |  | As of December 31, 2015
Unobservable inputs |  | High |  | Low |  | Average(1) |  | High |  | Low |  | Average(1)
Discount rate |  | 30.0% |  | 16.0% |  | 22.5% |  | 30.0% |  | 15.1% |  | 22.0%
Loan resolution time-line (Years) |  | 2.15 |  | 0.45 |  | 1.08 |  | 2.7 |  | 0.6 |  | 1.2
Value of underlying properties |  | $1,250 |  | $32 |  | $220 |  | $1,375 |  | $40 |  | $224
Holding costs |  | 18.8% |  | 5.2% |  | 9.5% |  | 24.6% |  | 5.5% |  | 9.6%
Liquidation costs |  | 25.0% |  | 8.2% |  | 10.6% |  | 21.8% |  | 7.5% |  | 10.5%
(1) | Weighted based on value of underlying properties.
| Fair Value as of |  |  |  |  |  | Actual or Range (Weighted average)
Liabilities (1) | September 30, 2016 |  | December 31, 2015 |  | Valuation Technique |  | Unobservable input(s) |  | September 30, 2016 |  | December 31, 2015
Contingent consideration payable - Reliance | $ | 523 |  |  | $ | 900 |  |  | Internal model |  | Forecast EBITDA |  | $1,369 - $3,812 |  | $1,326 - $3,517
|  |  | Book value growth rate |  | 5.0% |  | 5.0%
|  |  | Asset volatility |  | 1.1% - 21.4% |  | 2.4% - 20.1%
Contingent consideration payable - Luxury | 52 |  |  | 36 |  |  | Internal model |  | Projected cash available for distribution |  | $854 - $1,281 |  | $828 - $1,281
Preferred notes payable | 1,284 |  |  | 1,562 |  |  | Internal model |  | Discount rate |  | 13.96% |  | 12.0%
Total | $ | 1,859 |  |  | $ | 2,498 |  |  |  |  |  |  |  |  |
(1) | Not included in this table are the debt obligations of consolidated CLOs, measured and leveled on the basis of the fair value of the (more observable) financial assets of the consolidated CLOs. See Note—(15) Assets and Liabilities of Consolidated CLOs.
The following table presents the carrying amounts and estimated fair values of financial assets and liabilities that are not recorded at fair value on a recurring or non-recurring basis and their respective levels within the fair value hierarchy:
| As of September 30, 2016 |  | As of December 31, 2015
| Level within Fair Value Hierarchy |  | Fair Value |  | Carrying Value |  | Level within Fair Value Hierarchy |  | Fair Value |  | Carrying Value
Assets: |  |  |  |  |  |  |  |  |  |  |
Notes receivable, net | 2 |  | $ | 26,353 |  |  | $ | 27,665 |  |  | 2 |  | $ | 20,250 |  |  | $ | 21,696 |
Total Assets |  |  | $ | 26,353 |  |  | $ | 27,665 |  |  |  |  | $ | 20,250 |  |  | $ | 21,696 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |
Debt, net | 3 |  | $ | 785,091 |  |  | $ | 780,671 |  |  | 3 |  | $ | 672,096 |  |  | $ | 671,648 |
Total Liabilities |  |  | $ | 785,091 |  |  | $ | 780,671 |  |  |  |  | $ | 672,096 |  |  | $ | 671,648 |
Notes receivable: To the extent that carrying amounts differ from fair value, fair value is determined based on contractual cash flows discounted at market rates for similar credits. Categorized as Level 2 of the fair value hierarchy. Debt: The fair value of notes payable is determined based on contractual cash flows discounted at market rates for mortgage notes payable and either dealer quotes or contractual cash flows discounted at market rates for other notes payable. Categorized as Level 3 of the fair value hierarchy. Additionally, the following financial assets and liabilities on the Consolidated Balance Sheets are not carried at fair value, but whose carrying amounts approximate their fair value: Cash and Cash Equivalents: The carrying amounts of cash and cash equivalents are carried at cost which approximates fair value. Categorized as Level 1 of the fair value hierarchy. Due from Brokers, Dealers, and Trustees and Due to Brokers, Dealers and Trustees: The carrying amounts are included in other assets and other liabilities and accrued expenses an approximate their fair value due to their short‑term nature. Categorized as Level 2 of the fair value hierarchy. Accounts and premiums receivable, net, and other receivables: The carrying amounts approximate fair value since no interest rate is charged on these short duration assets. Categorized as Level 2 of the fair value hierarchy. Loans Owned, at Amortized Cost: The fair value of loans owned, at amortized cost approximates its carrying value because the interest rates on the loans are based on a variable market interest rate. Categorized as Level 3 of the fair value hierarchy.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13433-108611 + Details
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