Fair Value Measurements

9 Months Ended

Sep. 30, 2019

Under applicable accounting guidance, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

We determine the fair values of our financial instruments based on the fair value hierarchy established under applicable accounting guidance which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs used to measure fair value.

For more information regarding the fair value hierarchy and how we measure fair value, see Note 2–Summary of Significant Accounting Policies to the Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, 2018.

As of September 30, 2019 and December 31, 2018, our assets and liabilities carried at fair value on a recurring basis were as follows:



	Level 1		Level 2		Level 3		Total Fair Value
September 30, 2019	(In thousands)
Assets
Corporate bonds	$	—	$	10,028	$	—	$	10,028
Negotiable certificate of deposit	—		5,000		—		5,000
Agency bond securities	—		10,027		—		10,027
Agency mortgage-backed securities	—		165,100		—		165,100
Municipal bonds	—		355		—		355
Asset-backed securities	—		54,709		—		54,709
Total assets	$	—	$	245,219	$	—	$	245,219

Liabilities
Contingent consideration	$	—	$	—	$	10,300	$	10,300

December 31, 2018
Assets
Negotiable certificate of deposit	$	—	$	15,000	$	—	$	15,000
Agency bond securities	—		19,693		—		19,693
Agency mortgage-backed securities	—		86,813		—		86,813
Municipal bonds	—		483		—		483
Asset-backed securities	—		79,194		—		79,194
Total assets	$	—	$	201,183	$	—	$	201,183

Liabilities
Contingent consideration	$	—	$	—	$	15,800	$	15,800

We based the fair value of our fixed income securities held as of September 30, 2019 and December 31, 2018 on quoted prices in active markets for similar assets. We had no transfers between Level 1, Level 2 or Level 3 assets or liabilities during the three and nine months ended September 30, 2019 or 2018.

Note 13—Fair Value Measurements (continued)

The following table presents changes in our contingent consideration payable for the three and nine months ended September 30, 2019 and 2018, which is categorized in Level 3 of the fair value hierarchy:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(In thousands)
Balance, beginning of period	$	13,166		$	14,664		$	15,800		$	17,358
Payments of contingent consideration	(1,000		)	(1,162		)	(3,634		)	(3,856		)
Change in fair value of contingent consideration	(1,866		)	—			(1,866		)	—
Balance, end of period	$	10,300		$	13,502		$	10,300		$	13,502

- 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.

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