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Note 8 - Investments, Including Investments Accounted for Using the Equity Method
 9 Months Ended
Sep. 30, 2020
Notes to Financial Statements  
Investment [Text Block]

NOTE 8.     INVESTMENTS, INCLUDING INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

 

Short-term Investments

 

Short-term investments consist of certificates of deposit, U.S. Treasury securities, and corporate bonds.  Certificates of deposit, U.S. Treasury securities and corporate bonds held by UCS are classified as held to maturity, mature in less than twelve months, and are reported at amortized cost which approximates fair value. Other corporate bonds are classified as available for sale and reported at fair value. Because we have elected the fair value option for debt securities classified as available for sale, any unrealized holding gains and losses during the period are included in earnings. For the nine months ended September 30, 2020, gains on redemptions of U.S. Treasury notes held to maturity were $7,318. For the  nine months ended September 30, 2020, unrealized losses on corporate bonds were $161,068. 

 

  

September 30,

  

December 31,

 
  

2020

  

2019

 
         

Certificates of deposit

 $1,022,582  $987,599 
Corporate bonds available for sale  852,000   910,000 

U.S. Treasury notes and corporate bond

  5,420,081   4,649,572 
         

Total

 $7,294,663  $6,547,171 

 

 

Marketable Equity Securities

 

Our marketable equity securities are publicly traded stocks measured at fair value using quoted prices for identical assets in active markets and classified as Level 1 within the fair value hierarchy. Our marketable equity securities are held by UCS and Boston Omaha. Marketable equity securities as of  September 30, 2020 and December 31, 2019 are as follows:

 

      

Gross

     
      

Unrealized

  

Fair

 
  

Cost

  

Gain (Loss)

  

Value

 
             

Marketable equity securities, September 30, 2020

 $81,823,525  $(18,028,972) $63,794,553 
             
Marketable equity securities, December 31, 2019 $49,554,926  $6,353,001  $55,907,927 

 

U.S. Treasury Securities Available for Sale

 

We classify our investments in debt securities that we intend to hold for indefinite periods of time as “available for sale.” Our securities available for sale are carried at fair value in the consolidated balance sheets. Because we have elected the fair value option for these securities, unrealized holding gains and losses during the period are included in earnings. Interest income is recognized at the coupon rate.  For the nine months ended September 30, 2020, proceeds from sales of US Treasury securities available for sale were $333,109,337. US Treasury securities available for sale as of September 30, 2020 and December 31, 2019 are as follows:

 

 

      

Gross

     
      

Unrealized

  

Fair

 
  

Cost

  

Gain (Loss)

  

Value

 
             

U.S. Treasury securities, September 30, 2020

 $76,645,205  $22,333  $76,667,538 
             

U.S. Treasury securities, December 31, 2019

 $75,488,863  $(79,664) $75,409,199 

 

Long-term Investments

 

Long-term investments consist of certificates of deposit having maturity dates in excess of twelve months, U.S. Treasury securities, and certain equity investments. The certificates of deposit and U.S. Treasury securities have maturity dates ranging from 2021 through 2023. We have the intent and the ability to hold the certificates of deposit and U.S. Treasury securities to maturity. Certificates of deposit and U.S. Treasury securities are stated at amortized cost which approximates fair value and are held by UCS.

 

Long-term investments consist of the following:

 

  

September 30,

  

December 31,

 
  

2020

  

2019

 
         

U.S. Treasury securities, held to maturity

 $535,896  $1,094,983 

Certificates of deposit

  -   380,753 

Preferred stock

  104,019   104,019 
Non-voting preferred units of Dream Finders Holdings, LLC  -   12,000,000 

Non-voting common units of Dream Finders Holdings, LLC

  -   10,000,000 

Voting common stock of CBT Holding Corporation

  19,058,485   19,058,485 
         

Total

 $19,698,400  $42,638,240 

 

Equity Investments

 

On May 31, 2018, we invested $19,058,485 in voting common stock of CB&T Holding Corporation, which we refer to as “CBT,” the privately held parent company of Crescent Bank & Trust. Our investment represents 14.99% of CBT’s outstanding common stock. CBT is a closely held corporation, whose majority ownership rests with one family.

 

In late December 2017, we invested $10 million in non-voting common units of Dream Finders Holdings LLC, which we refer to as “DFH”, the parent company of Dream Finders Homes, LLC, a national home builder with operations in Florida, Texas, Georgia, Colorado and the greater northern Virginia and Maryland areas. During the first quarter of 2020, we obtained additional non-voting shares of DFH which increased our ownership in the company to approximately 5.6%. As a result, we began applying the equity method of accounting for our investment in DFH prospectively from January 1, 2020, the date we obtained the additional shares. 

 

In May 2019, our subsidiary BOC DFH, LLC invested an additional $12 million in DFH through the purchase of preferred units. DFH was required to pay to us a mandatory preferred return of at least 14% per annum on such preferred units and 25% of our preferred units were convertible, at our option, into non-voting common units after May 29, 2020 and the remaining preferred units were convertible, at our option, into non-voting common units after May 29, 2021. The mandatory 14% preferred return increased if the preferred units purchased were not redeemed or converted within one year of purchase. Also, we obtained additional beneficial conversion terms if the preferred units were not redeemed by May 29, 2021. During the first nine months of 2020, DFH redeemed all $12 million of the preferred units purchased in May 2019.

 

During January 2018, we exchanged our convertible note receivable from Breezeway Homes, Inc., which we refer to as “Breezeway,” for 31,227 shares of preferred stock. The preferred stock is noncumulative and has a dividend rate of $.2665 per share, should dividends be declared. The preferred stock has one vote per share and is convertible into whole shares of common stock, determined according to the conversion formula contained in Breezeway’s amended and restated articles of incorporation. In addition, our investment provides us with a multi-year right to sell insurance and/or warranty products through Breezeway's software platform to its customers.

 

We reviewed our investments as of September 30, 2020 and concluded that no impairment to the carrying value was required.

 

Investment in Unconsolidated Affiliates

 

We have various investments in equity method affiliates, whose businesses are in home building, real estate, real estate services, and asset management. Our interest in these affiliates ranges from 5.6% to 30%. Two of the investments in affiliates, Logic Real Estate Companies, LLC and 24th Street Holding Company, LLC, having a combined carrying amount of $753,904 as of  September 30, 2020, are managed by an entity controlled by a member of our board of directors.

 

During the first nine months of 2020, we invested $3,000,000 in 24th Street Fund I, LLC. The fund is managed by 24th Street Asset Management LLC, a subsidiary of 24th Street Holding Company, LLC, and will focus on opportunities within secured lending and direct investments in commercial real estate.

 

On September 25, 2020, we filed a Registration Statement on Form S-1 with the Securities and Exchange Commission for a proposed initial public offering of units of a special purpose acquisition company (“SPAC”) named Yellowstone Acquisition Company, which we refer to as “Yellowstone”. Our subsidiary, BOC Yellowstone LLC, which we refer to as “BOC Yellowstone”, served as the sponsor of Yellowstone. Under the terms of the proposed public offering, we would own approximately 20% of the issued and outstanding common stock and units sold in the offering through BOC Yellowstone. The purpose of the offering is to pursue a business combination in an industry other than the three industries in which we currently own and operate businesses: outdoor advertising, surety insurance and broadband services businesses.

 

The following table is a reconciliation of our investments in equity affiliates as presented in investments in unconsolidated affiliates on our consolidated balance sheets, together with combined summarized financial data related to the unconsolidated affiliates:

 

  

September 30,

  

December 31,

 
  

2020

  

2019

 
         

Beginning of period

 $771,805  $568,713 

Additional investment in unconsolidated affiliates

  13,175,000   264,834 

Distributions received

  (326,144)  (541,108)

Equity in income of unconsolidated affiliates

  2,406,151   479,366 
         

End of period

 $16,026,812  $771,805 

 

Combined summarized financial data for these affiliates is as follows:

 

  

For the Three Months Ended

  

For the Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2020

  

2019

  

2020

  

2019

 
                 
Revenue $288,403,203  $189,128,487  $676,336,442  $500,120,488 

Gross profit

  44,856,872   35,123,562   99,618,080   90,727,565 

Income from continuing operations

  23,983,417   11,657,183   41,911,245   27,144,185 

Net income

  23,429,704   10,693,812   41,162,122   24,710,096