Note 20 - Fair Value of Financial Instruments |
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| Fair Value of Financial Instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value of Financial Instruments |
We use a fair-value hierarchy which prioritizes the inputs used in measuring fair value as follows:
Our financial instruments measured at fair value on a recurring basis are summarized below:
(1) The aggregate unpaid principal balance was $123.9 million and $112.1 million at April 30, 2026 and October 31, 2025, respectively.
Fair value of mortgage loans held for sale is based on independent quoted market prices, where available, or the prices for other mortgage loans with similar characteristics.
The financial services segment had a pipeline of loan applications in process of $597.2 million at April 30, 2026. Loans in process for which interest rates were committed to the borrowers totaled $59.0 million as of April 30, 2026. Substantially all of these commitments were for periods of 60 days or less. Since a portion of these commitments are expected to expire without being exercised by the borrowers, the total commitments do not necessarily represent future cash requirements.
In addition, the financial services segment uses investor commitments and forward sales of mandatory MBS to hedge its mortgage-related interest rate exposure. These instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk is managed by entering into MBS forward commitments, option contracts with investment banks, federally regulated bank affiliates and loan sales transactions with permanent investors meeting the segment’s credit standards. Our risk, in the event of default by the purchaser, is the difference between the contract price and fair value of the MBS forward commitments and option contracts. At April 30, 2026, we had no open mandatory investor commitments to sell MBS.
Changes in fair value that are included in income are shown by financial instrument and financial statement line item, below:
Assets measured at fair value on a nonrecurring basis are those assets for which we have recorded valuation adjustments and write-offs during the three and six months ended April 30, 2026 and 2025. The assets measured at fair value on a nonrecurring basis are all within our homebuilding operations and are summarized below:
We estimate the fair value of each impaired community by determining the present value of the estimated future cash flows at a discount rate commensurate with the risk of the respective community. For the three and six months ended April 30, 2026, our discount rates used to determine the fair value ranged from 16.0% to 19.8%, respectively. We recorded inventory impairments of $5.3 million for both the three and six months ended April 30, 2026 and $1.2 million for both the three and six months ended April 30, 2025, which are included in the Condensed Consolidated Statements of Operations as "Inventory impairments and land option write-offs" and deducted from inventory.
The fair value of our cash equivalents, restricted cash and cash equivalents and customers' deposits approximates their carrying amount, based on Level 1 inputs. The fair value of each series of our notes and credit facilities are listed below. Level 2 measurements are estimated based on recent trades or quoted market prices for the same issues or based on recent trades or quoted market prices for our debt of similar security and maturity to achieve comparable yields. Level 3 measurements are estimated based on third-party broker quotes or management’s estimate of the fair value based on available trades for similar debt instruments. As shown in the table below, our 8.0% Senior Notes due 2031, 8.375% Senior Notes due 2033 and 5.0% Senior Notes due 2040 were a Level 2 measurement at April 30, 2026 and October 31, 2025 due to recent trades for the same notes.
The Senior Secured Revolving Credit Facility is not included in the above tables because there were no borrowings outstanding thereunder at April 30, 2026 and October 31, 2025. |
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