CEMETERY PERPETUAL CARE TRUST INVESTMENTS

Care trusts’ corpus on our Consolidated Balance Sheets represents the corpus of those trusts plus undistributed income. The components of Care trusts’ corpus as of December 31, 2017 and September 30, 2018 were as follows (in thousands):



	December 31, 2017			September 30, 2018
Trust assets, at market value	$	50,229		$	48,813
Obligations due from trust	(373		)	(417		)
Care trusts’ corpus	$	49,856		$	48,396

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 and is recorded in Accounts Receivable, net until received from the trust. Trust management fees charged by CSV RIA are included in revenue in the period in which they are earned. At September 30, 2018, none of our cemetery perpetual care trust investments were underfunded.

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 fixed income securities, including 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, 2018. There are no Level 3 investments in the cemetery perpetual care trust investment portfolio. See Note 11 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, 2018 (in thousands, except percentages):



	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses			Fair Market Value
Cash and money market accounts	1	$	5,227	$	—	$	—		$	5,227
Fixed income securities:
Foreign debt	2	3,474		128		(101		)	3,501
Corporate debt	2	12,298		487		(348		)	12,437
Preferred stock	2	8,273		53		(359		)	7,967
Mortgage-backed securities	2	561		228		(7		)	782
Common stock	1	18,596		2,112		(2,284		)	18,424
Trust securities		$	48,429	$	3,008	$	(3,099	)	$	48,338
Accrued investment income		$	475						$	475
Cemetery perpetual care investments									$	48,813
Market value as a percentage of cost									99.8		%

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



Due in one year or less	$	—
Due in one to five years	2,177
Due in five to ten years	4,262
Thereafter	18,248
	$	24,687

The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at December 31, 2017 (in thousands, except percentages):



	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses			Fair Market Value
Cash and money market accounts	1	$	1,906	$	—	$	—		$	1,906
Fixed income securities:
Foreign debt	2	3,580		227		(134		)	3,673
Corporate debt	2	12,557		805		(187		)	13,175
Preferred stock	2	11,545		364		(411		)	11,498
Mortgage-backed securities	2	621		152		(15		)	758
Common stock	1	16,326		3,116		(1,595		)	17,847
Mutual funds:
Fixed income	2	913		42		(10		)	945
Trust securities		$	47,448	$	4,706	$	(2,352	)	$	49,802
Accrued investment income		$	427						$	427
Cemetery perpetual care investments									$	50,229
Market value as a percentage of cost									105.0		%

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 and nine months ended September 30, 2017 and 2018, we did not record any impairments 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, 2018, 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, 2018 are shown in the following table (in thousands):



	September 30, 2018
	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	$	1,262	$	(24	)	$	769	$	(77	)	$	2,031	$	(101	)
Corporate debt	5,878		(211		)	314		(137		)	6,192		(348		)
Preferred stock	3,861		(92		)	3,114		(267		)	6,975		(359		)
Mortgage-backed securities	—		—			41		(7		)	41		(7		)
Common stock	9,266		(1,045		)	1,647		(1,239		)	10,913		(2,284		)
Total temporary impaired securities	$	20,267	$	(1,372	)	$	5,885	$	(1,727	)	$	26,152	$	(3,099	)

Our perpetual care trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses for the periods ended December 31, 2017 are shown in the following table (in thousands):



	December 31, 2017
	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	$	92	$	(3	)	$	1,128	$	(131	)	$	1,220	$	(134	)
Corporate debt	2,621		(59		)	555		(128		)	3,176		(187		)
Preferred stock	29		—			5,492		(411		)	5,521		(411		)
Mortgage-backed securities	76		(10		)	16		(5		)	92		(15		)
Common stock	5,119		(991		)	1,108		(604		)	6,227		(1,595		)
Mutual funds:
Fixed income	433		(10		)	—		—			433		(10		)
Total temporary impaired securities	$	8,370	$	(1,073	)	$	8,299	$	(1,279	)	$	16,669	$	(2,352	)

Perpetual care trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2018 were as follows (in thousands):



	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2018			2017			2018
Realized gains	$	—	$	435		$	925		$	739
Realized losses	—		(363		)	(630		)	(889		)
Net change in care trusts’ corpus	—		(72		)	(295		)	150
Total	$	—	$	—		$	—		$	—

Perpetual care trust investment security transactions recorded in Revenues: Cemetery for the three and nine months ended September 30, 2017 and 2018 were as follows (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2018			2017			2018
Investment income	$	1,539		$	1,158		$	4,831		$	3,749
Realized gain, net	(283		)	(241		)	(891		)	(955		)
Total	$	1,256		$	917		$	3,940		$	2,794

Purchases and sales of investments in the perpetual care trusts for the three and nine months ended September 30, 2017 and 2018 were as follows (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2018			2017			2018
Purchases	$	(556	)	$	(5,185	)	$	(12,430	)	$	(11,856	)
Sales	—			6,149			8,390			15,545