5.	Selected Balance Sheet Data

Other Assets

Other assets consisted of the following (in thousands):

 

		Current December 31,								Non-Current December 31,
		2018				2017				2018				2017
Mortgage servicing rights, net of amortization		$	—			$	—			$	2,209			$	—
Due from independent contractors, net(1)(2)			3,831				3,672				27,157				21,726
Security deposits			—				—				1,196				1,158
Employee notes receivable(3)			156				366				370				255
Customer trust accounts and other			2,381				1,491				846				24
		$	6,368			$	5,529			$	31,778			$	23,163

 

(1)	Represents amounts advanced, notes receivable and other receivables due from the Company’s investment sales and financing professionals. The notes receivable along with interest, are typically collected from future commissions and are generally due in one to four years.

(2)

Includes allowance for doubtful accounts related to current receivables of $514 and $494 as of December 31, 2018 and 2017, respectively. The Company recorded a provision for bad debt expense of $291, $219 and $47 and wrote off $271, $38 and $93 of these receivables for the years ended December 31, 2018, 2017 and 2016, respectively. Any cash receipts on notes are applied first to unpaid principal balance prior to any income being recognized.

(3)	See Note 8 – “Related-Party Transactions” for additional information.

MSRs

The net change in the carrying value of MSRs consisted of the following (in thousands):

 

		Non-Current December 31,
		2018				2017
Beginning balance		$	—			$	—
Additions from acquisition			2,121				—
Additions			391				—
Amortization			(303	)			—
		$	2,209			$	—

The portfolio of loans serviced by the Company aggregated $1.6 billion and $0 as of December 31, 2018 and 2017, respectively.

 

Deferred Rent and Other Liabilities

Deferred rent and other liabilities consisted of the following (in thousands):

 

		Non-Current December 31,
		2018				2017
Deferred rent and other		$	5,445			$	4,505
Contingent consideration(1)			2,054				—
		$	7,499			$	4,505

 

(1)	The current portion of contingent consideration in the amount of $821,000 is included in accounts payable and other liabilities in the consolidated balance sheets.

Deferred Compensation and Commissions

Deferred compensation and commissions consisted of the following (in thousands):

 

		Current December 31,								Non-Current December 31,
		2018				2017				2018				2017
Stock appreciation rights (“SARs”) liability(1)		$	1,810			$	1,662			$	19,299			$	20,217
Commissions payable to investment sales and financing professionals			44,812				46,257				23,983				21,924
Deferred compensation liability(1)			1,288				1,261				6,605				7,220
		$	47,910			$	49,180			$	49,887			$	49,361

 

(1)

The SARs and deferred compensation liability become subject to payout as a result of a participant no longer being considered as a service provider. As a result of the retirement of certain participants, estimated amounts to be paid to the participants within the next twelve months have been classified as current.

SARs Liability

Prior to the IPO, certain employees of the Company were granted SARs under a stock-based compensation program assumed by MMC. In connection with the IPO, the SARs agreements were revised, the MMC liability of $20.0 million for the SARs was frozen as of March 31, 2013, and was transferred to MMI through a capital distribution. The SARs liability will be settled with each participant in ten annual installments in January of each year upon retirement or termination from service, or in full upon consummation of a change in control of the Company.

Under the revised agreements, MMI is required to accrue interest on the outstanding balance beginning on January 1, 2014 at a rate based on the 10-year treasury note, plus 2%. The rate resets annually. The rates at January 1, 2018, 2017 and 2016 were 4.409%, 4.446% and 4.273%, respectively. MMI recorded interest expense related to this liability of $891,000, $931,000 and $914,000 for the years ended December 31, 2018, 2017 and 2016, respectively.

Estimated payouts within the next twelve months for participants that have separated from service have been classified as current. The Company made total payments consisting of accumulated interest of $1.7 million and $1.4 million during the years ended December 31, 2018 and 2017, respectively.

 

Commissions Payable

Certain investment sales professionals have the ability to earn additional commissions after meeting certain annual revenue thresholds. These commissions are recognized as cost of services in the period in which they are earned as they relate to specific transactions closed. The Company has the ability to defer payment of certain commissions, at its election, for up to three years. Commissions payable that are not expected to be paid within twelve months are classified as long-term.

Deferred Compensation Liability

A select group of management is eligible to participate in the Marcus & Millichap Deferred Compensation Plan (the “Deferred Compensation Plan”). The plan is a non-qualified deferred compensation plan that is intended to comply with Section 409A of the Internal Revenue Code and permits participants to defer compensation up to limits as determined by the plan. Amounts are paid out generally when the participant is no longer a service provider; however, an in-service payout election is available to participants. Participants may elect to receive payouts as a lump sum or quarterly over a two to fifteen-year period. The Company elected to fund the Deferred Compensation Plan through company owned variable life insurance policies. The Deferred Compensation Plan is managed by a third-party institutional fund manager, and the deferred compensation and investment earnings are held as a Company asset in a rabbi trust, which is recorded in assets held in rabbi trust in the accompanying consolidated balance sheets. The assets in the trust are restricted unless the Company becomes insolvent in which case the trust assets are subject to the claims of the Company’s creditors. The Company may also, in its sole and absolute discretion, elect to withdraw at any time a portion of the trust assets by an amount by which the fair market value of the trust assets exceeds 110% of the aggregate deferred compensation liability represented by the participants’ accounts. Estimated payouts within the next twelve months for participants that have separated from service have been classified as current. During the years ended December 31, 2018 and 2017, the Company made total payments to participants of $1.3 million and $607,000, respectively.

The net change in the carrying value of the assets held in the rabbi trust and the net change in the carrying value of the deferred compensation liability, each exclusive of additional contributions, distributions and trust expenses consisted of the following (in thousands):

 

		December 31,
		2018				2017				2016
(Decrease) increase in the carrying value of the assets held in the rabbi trust(1)		$	(326	)		$	849			$	470
(Decrease) increase in the net carrying value of the deferred compensation obligation(2)		$	(306	)		$	904			$	452

 

(1)	Recorded in other income (expense), net in the consolidated statements of net and comprehensive income.

(2)	Recorded in selling, general and administrative expense in the consolidated statements of net and comprehensive income.