CEMETERY PERPETUAL CARE TRUST INVESTMENTS

Care trusts’ corpus on our Consolidated Balance Sheets represent the corpus of those trusts plus undistributed income. The components of Care trusts’ corpus as of December 31, 2015 and September 30, 2016 were as follows (in thousands):



	December 31, 2015			September 30, 2016
Trust assets, at market value	$	43,127		$	45,048
Obligations due from trust	(711		)	(703		)
Care trusts’ corpus	$	42,416		$	44,345

We are required by various state laws to pay a portion of the proceeds from the sale of cemetery property interment rights into perpetual care trust funds. The income earned from these perpetual care trusts offsets maintenance expenses for cemetery property and memorials. This trust fund income is recognized, as earned, in Revenues: Cemetery. Trust management fees charged by CSV RIA are included in revenue in the period in which they are earned. At September 30, 2016, none of our cemetery perpetual care trust investments were under-funded.

Where quoted prices are available in an active market, investments held by the trusts are classified as Level 1 investments pursuant to the three-level valuation hierarchy. Our Level 1 investments include cash and common stock. Where quoted market prices are not available for the specific security, then fair values are estimated by using quoted prices of similar securities in active markets or other inputs other than quoted prices that can corroborate observable market data. These investments are municipal bonds, foreign debt, corporate debt, preferred stock, mortgage backed securities and fixed income mutual funds, all of which are classified within Level 2 of the valuation hierarchy. We review and update our fair value hierarchy classifications quarterly. There were no transfers between Levels 1 and 2 in the three and nine months ended September 30, 2016. There are no Level 3 investments in the cemetery perpetual care trust investment portfolio. See Note 9 to the Consolidated Financial Statements included herein for further information of the fair value measurement and the three-level valuation hierarchy.

The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at September 30, 2016 (in thousands):



	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses			Fair Market Value
Cash and money market accounts	1	$	4,656	$	—	$	—		$	4,656
Fixed income securities:
Municipal bonds	2	368		—		—			368
Foreign debt	2	5,772		175		(497		)	5,450
Corporate debt	2	15,927		1,099		(1,059		)	15,967
Preferred stock	2	11,465		18		(493		)	10,990
Mortgage backed securities	2	149		—		(10		)	139
Common stock	1	7,507		344		(1,950		)	5,901
Mutual funds:
Fixed Income	2	867		90		—			957
Trust securities		$	46,711	$	1,726	$	(4,009	)	$	44,428
Accrued investment income		$	620						$	620
Cemetery perpetual care investments									$	45,048
Market value as a percentage of cost									95.1		%

The estimated maturities of the fixed income securities included above are as follows (in thousands):



Due in one year or less	$	183
Due in one to five years	5,053
Due in five to ten years	4,145
Thereafter	23,533
	$	32,914

The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at December 31, 2015 (in thousands):



	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses			Fair Market Value
Cash and money market accounts	1	$	5,472	$	—	$	—		$	5,472
Fixed income securities:
Municipal bonds	2	325		—		(45		)	280
Foreign debt	2	3,232		—		(480		)	2,752
Corporate debt	2	16,216		57		(3,094		)	13,179
Preferred stock	2	11,263		20		(611		)	10,672
Common stock	1	11,945		393		(1,939		)	10,399
Trust securities		$	48,453	$	470	$	(6,169	)	$	42,754
Accrued investment income		$	373						$	373
Cemetery perpetual care investments									$	43,127
Market value as a percentage of cost									88.2		%

We determine whether or not the assets in the cemetery perpetual care trusts have an other-than-temporary impairment on a security-by-security basis. This assessment is made based upon a number of criteria including the length of time a security has been in a loss position, changes in market conditions and concerns related to the specific issuer. If a loss is considered to be other-than-temporary, the cost basis of the security is adjusted downward to its fair market value. Any reduction in the cost basis due to an other-than-temporary impairment is also recorded as a reduction to Care trusts’ corpus. In the three months ended September 30, 2016, we recorded a $0.1 million impairment for other-than-temporary declines in the fair value related to unrealized losses on certain investments. We did not record any impairments in the three months ended September 30, 2015. In the nine months ended September 30, 2015 and 2016, we recorded a $0.5 million impairment for other-than-temporary declines in the fair value related to unrealized losses on certain investments. There is no impact on earnings until such time that the loss is realized in the trusts, allocated to preneed contracts and the services are performed or the merchandise is delivered causing the contract to be withdrawn from the trust in accordance with state regulations.

At September 30, 2016, we had certain investments within our perpetual care trust investments that had tax lots in loss positions for more than one year. Based on our analyses of these securities, the companies’ businesses and current market conditions, we determined that these investment losses were temporary in nature.

Our perpetual care trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses for the periods ended September 30, 2016 and December 31, 2015 are shown in the following tables (in thousands):



	September 30, 2016
	In Loss Position Less than 12 months					In Loss Position Greater than 12 months					Total
	Fair Market Value		Unrealized Losses			Fair Market Value		Unrealized Losses			Fair Market Value		Unrealized Losses
Fixed income securities:
Foreign debt	1,632		(91		)	1,990		(406		)	3,622		(497		)
Corporate debt	4,948		(148		)	3,529		(911		)	8,477		(1,059		)
Preferred stock	1,126		(8		)	8,537		(485		)	9,663		(493		)
Mortgage backed securities	140		(10		)	—		—			140		(10		)
Common stock	2,932		(872		)	1,561		(1,078		)	4,493		(1,950		)
Total temporary impaired securities	$	10,778	$	(1,129	)	$	15,617	$	(2,880	)	$	26,395	$	(4,009	)



	December 31, 2015
	In Loss Position Less than 12 months					In Loss Position Greater than 12 months					Total
	Fair Market Value		Unrealized Losses			Fair Market Value		Unrealized Losses			Fair Market Value		Unrealized Losses
Fixed income securities:
Municipal bonds	$	280	$	(45	)	$	—	$	—		$	280	$	(45	)
Foreign debt	2,541		(265		)	281		(215		)	2,822		(480		)
Corporate debt	10,463		(2,164		)	2,210		(931		)	12,673		(3,095		)
Preferred stock	7,100		(301		)	3,568		(309		)	10,668		(610		)
Common stock	7,379		(1,220		)	2,186		(719		)	9,565		(1,939		)
Total temporary impaired securities	$	27,763	$	(3,995	)	$	8,245	$	(2,174	)	$	36,008	$	(6,169	)

Perpetual care trust investment security transactions recorded in Interest expense on our Consolidated Statements of Operations for the three and nine months ended September 30, 2015 and 2016 were as follows (in thousands):



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2016			2015			2016
Realized gains	$	731		$	44		$	1,706		$	156
Realized losses	(207		)	(261		)	(692		)	(1,943		)
Decrease (increase) in care trusts’ corpus	(524		)	217			(1,014		)	1,787
Total	$	—		$	—		$	—		$	—

Perpetual care trust investment security transactions recorded in Revenues: Cemetery for the three and nine months ended September 30, 2015 and 2016 were as follows (in thousands):



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2016		2015		2016
Investment income	$	1,371	$	1,523	$	3,739	$	4,503
Realized gain, net	213		14		497		(444		)
Total	$	1,584	$	1,537	$	4,236	$	4,059

Purchases and sales of investments in the perpetual care trusts were as follows (in thousands):



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2016			2015			2016
Purchases	$	(7,247	)	$	(936	)	$	(15,352	)	$	(12,888	)
Sales	$	2,532		$	3,832		$	8,885		$	11,702