Marcus & Millichap, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Investments in Marketable Debt Securities

Investments in Marketable Debt Securities

9 Months Ended

Sep. 30, 2020

Investments, Debt and Equity Securities [Abstract]

Investment in Marketable Debt Securities

5.	Investments in Marketable Debt Securities

Amortized cost, allowance for credit losses, gross unrealized gains/losses in accumulated other comprehensive income/loss and fair value of marketable debt securities,

available-for-sale,

by type of security consisted of the following (in th

usands):


	September 30, 2020
	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments:
U.S. treasuries	$	93,425	$	—	$	216	$	—		$	93,641
U.S. government sponsored entities		37,721		—		19		—			37,740
Corporate debt		38,093		—		40		(1	)		38,132

	$	169,239	$	—	$	275	$	(1	)	$	169,513

Long-term investments:
U.S. treasuries	$	3,396	$	—	$	293	$	—		$	3,689
U.S. government sponsored entities		1,233		—		36		—			1,269
Corporate debt		32,584		—		1,837		(64	)		34,357
ABS and other		7,033		—		189		(32	)		7,190

	$	44,246	$	—	$	2,355	$	(96	)	$	46,505


	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments:
U.S. treasuries	$	124,389	$	196	$	(5	)	$	124,580
U.S. government sponsored entities		—		—		—			—
Corporate debt		26,128		44		—			26,172

	$	150,517	$	240	$	(5	)	$	150,752

Long-term investments:
U.S. treasuries	$	24,188	$	235	$	—		$	24,423
U.S. government sponsored entities		1,353		3		(1	)		1,355
Corporate debt		25,447		1,027		(3	)		26,471
ABS and other		8,480		93		(13	)		8,560

	$	59,468	$	1,358	$	(17	)	$	60,809

The Company’s investments in

available-for-sale

debt securities that have been in a continuous unrealized loss position, for which an allowance for credit losses has not been recorded, by type of security consisted of the following (in thousands):


	September 30, 2020
	Less than 12 months					12 months or greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. treasuries	$	5,051	$	—		$	—	$	—		$	5,051	$	—
Corporate debt		9,823		(65	)		—		—			9,823		(65	)
ABS and other		1,143		(25	)		155		(7	)		1,298		(32	)

	$	16,017	$	(90	)	$	155	$	(7	)	$	16,172	$	(97	)


	December 31, 2019
	Less than 12 months					12 months or greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. treasuries	$	39,823	$	(5	)	$	—	$	—		$	39,823	$	(5	)
U.S. government sponsored entities		—		—			566		(1	)		566		(1	)
Corporate debt		6,029		(3	)		—		—			6,029		(3	)
ABS and other		1,971		(13	)		—		—			1,971		(13	)

	$	47,823	$	(21	)	$	566	$	(1	)	$	48,389	$	(22	)

Gross realized gains and losses from the sales of the Company’s

available-for-sale

debt securities consisted of the following (in thousands):


	Three Months Ended September 30,					Nine Months Ended September 30,
	2020			2019		2020			2019
Gross realized gains (1)	$	97		$	58	$	229		$	117

Gross realized losses (1)	$	(34	)	$	—	$	(49	)	$	(47	)

(1)	Recorded in other income (expense), net in the condensed consolidated statements of net and comprehensive income. The cost basis of securities sold were determined based on the specific identification method.

The Company invests its excess cash in a diversified portfolio of fixed and variable rate debt securities to meet current and future cash flow needs. All investments are made in accordance with the Company’s approved investment policy. As of September 30, 2020, the portfolio had an average credit rating of AA and weighted term to final maturity of 1.7 years, with 20 securities in the portfolio with an unrealized loss aggregating $97,000, or 1% of amortized cost, and a weighted average credit rating of

AA-.

As of September 30, 2020, the Company performed an impairment analysis and determined an allowance for credit losses was not required. The Company determined that it did not have an intent to sell and it was not more likely than not that the Company would be required to sell any security based on its current liquidity position, or to maintain compliance with its investment policy, specifically as it relates to minimum credit ratings. The Company evaluated the securities with an unrealized loss considering severity of loss, credit ratings, specific credit events during the period since acquisition, overall likelihood of default, market sector, potential impact from the current economic situation and a review of an issuer’s and securities liquidity and financial strength, as needed. The Company concluded that it would receive all scheduled interest and principle payments. The Company, therefore, determined qualitatively that the unrealized loss was related to changes in interest rates and other market factors and therefore no allowance for credit losses was required.

Amortized cost and fair value of marketable debt securities,

available-for-sale,

by contractual maturity consisted of the following (in thousands, except weighted average data):


	September 30, 2020				December 31, 2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	169,239	$	169,513	$	150,517	$	150,752
Due after one year through five years		29,162		30,488		41,123		41,794
Due after five years through ten years		10,307		11,136		12,813		13,467
Due after ten years		4,777		4,881		5,532		5,548

	$	213,485	$	216,018	$	209,985	$	211,561

Weighted average contractual maturity				1.7 years				1.7 years

Actual maturities may differ from contractual maturities because certain issuers have the right to prepay certain obligations with or without prepayment penalties.