Company: BHR-PD
Filing Date: 2025-11-07
Form Type: 10-Q
Source: 0001574085-25-000130
Chunk: 155

Company: Braemar Hotels & Resorts Inc.
Filing Date: 2025-11-07
Form: 10-Q
Item: Part I, Item 8
Chunk 155
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 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.The fair value of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rose above the strike rates of the caps. Variable interest rates used in the calculation of projected receipts and payments on the caps are based on an expectation of future interest rates derived from observable market interest rate curves (SOFR forward curves) and volatilities (Level 2 inputs). We also incorporate credit valuation adjustments (Level 3 inputs) to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk.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, 2025, the SOFR interest rate forward curve (Level 2 inputs) assumed a downtrend from 4.129% to 3.087% for the remaining term of our 

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BRAEMAR HOTELS & RESORTS INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)(unaudited)

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.Investment in securities includes mortgage-backed securities. These securities are classified as available for sale and are generally reported at fair value utilizing Level 2 inputs where the Company obtains fair value measurements from an external pricing vendor. Prices received from the vendor are analyzed based on various sources of observable market data. If prices are not within certain tolerance levels that are