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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2021
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements Fair Value Hierarchy—Our financial instruments measured at fair value either on a recurring or a non-recurring basis are classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs in the market place as discussed below: •Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. •Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. •Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Fair value of interest rate caps is determined using the net present value of expected cash flows of each derivative based on the market-based interest rate curve and adjusted for credit spreads of us and our counterparties. Fair value of credit default swaps is obtained from a third-party who publishes various information including the index composition and price data (Level 2 inputs). The fair value of credit default swaps does not contain credit-risk-related adjustments as the change in fair value is settled net through posting cash collateral or reclaiming cash collateral between us and our counterparty. Fair value of interest rate floors is calculated using a third-party discounted cash flow model based on future cash flows that are expected to be received over the remaining life of the floor. The fair value of warrants is determined by using the Black-Scholes option pricing model. When a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. However, when the valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties, which we consider significant (10% or more) to the overall valuation of our derivatives, the derivative valuations in their entirety are classified in Level 3 of the fair value hierarchy. Transfers of inputs between levels are determined at the end of each reporting period. In determining the fair values of our derivatives at September 30, 2021, the LIBOR interest rate forward curve (Level 2 inputs) assumed an uptrend from 0.080% to 1.188% for the remaining term of our derivatives. Credit spreads (Level 3 inputs) used in determining the fair values derivatives assumed an uptrend in nonperformance risk for us and all of our counterparties through the maturity dates. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table presents our assets and liabilities measured at fair value on a recurring basis aggregated by the level within which measurements fall in the fair value hierarchy (in thousands):
| Quoted Market Prices (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  |  |  | Total |
September 30, 2021 |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |
Interest rate derivatives - caps | $ | — |  |  | $ | 74 |  |  | $ | — |  |  |  |  | $ | 74 |  |
Total | $ | — |  |  | $ | 74 |  |  | $ | — |  |  |  |  | $ | 74 |  | (1)
Liabilities |  |  |  |  |  |  |  |  |  |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |
Warrants | — |  |  | (1,338) |  |  | $ | — |  |  |  |  | (1,338) |  | (2)
Net | $ | — |  |  | $ | (1,264) |  |  | $ | — |  |  |  |  | $ | (1,264) |  |
__________________ (1)Reported as “derivative assets” in our condensed consolidated balance sheet. (2)Reported as “derivative liabilities” in our condensed consolidated balance sheet.
Effect of Fair Value Measured Assets and Liabilities on Condensed Consolidated Statements of Operations The following table summarizes the effect of fair value measured assets and liabilities on our condensed consolidated statements of operations (in thousands):
| Gain (Loss) Recognized in Income |  |
| Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |
Assets |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |
Interest rate derivatives - caps | $ | (48) |  |  | $ | (30) |  |  | $ | (126) |  |  | $ | (93) |  |  |
Credit default swaps | — |  |  | 51 |  | (1) | — |  |  | 226 |  | (1) |
Total derivative assets | $ | (48) |  |  | $ | 21 |  |  | $ | (126) |  |  | $ | 133 |  |  |
Total | $ | (48) |  |  | $ | 21 |  |  | $ | (126) |  |  | $ | 133 |  |  |
Liabilities |  |  |  |  |  |  |  |  |
Derivative liabilities: |  |  |  |  |  |  |  |  |
Warrants | 190 |  |  | — |  |  | 190 |  |  | — |  |  |
Net | $ | 142 |  |  | $ | 21 |  |  | $ | 64 |  |  | $ | 133 |  |  |
Total combined |  |  |  |  |  |  |  |  |
Interest rate derivatives - floors | $ | — |  |  | $ | 3,540 |  |  | $ | — |  |  | $ | 3,615 |  |  |
Interest rate derivatives - caps | (48) |  |  | (30) |  |  | (126) |  |  | (93) |  |  |
Credit default swaps | — |  |  | 51 |  |  | — |  |  | 226 |  |  |
Warrants | 190 |  |  | — |  |  | 190 |  |  | — |  |  |
Unrealized gain (loss) on derivatives | 142 |  |  | 3,561 |  |  | 64 |  |  | 3,748 |  |  |
Realized gain (loss) on interest rate floors | — |  |  | (3,540) |  | (2) | — |  |  | (3,615) |  | (2) |
Net | $ | 142 |  |  | $ | 21 |  |  | $ | 64 |  |  | $ | 133 |  |  |
_______________ (1)Excludes costs associated with credit default swaps of $0 and $64 for the three months ended September 30, 2021 and 2020, respectively, as well as $0 and $191 for the nine months ended September 30, 2021 and 2020, respectively, which is included in “other income (expense)” in our condensed consolidated statements of operations. (2)Included in “other income (expense)” in our condensed consolidated statements of operations.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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