Star Equity Holdings, Inc.STRR
Star Equity Holdings, Inc. Fair Value Disclosure
FAIR VALUE MEASUREMENTS
The Financial Accounting Standards Board’s authoritative guidance for fair value measurements establishes a three-level hierarchy based upon the inputs to the valuation model of an asset or liability. Assets and liabilities presented at fair value in our Consolidated Balance Sheets are generally categorized as follows:
Level 1:Quoted prices in active markets for identical assets or liabilities.
Level 2:Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3:Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Such assets and liabilities may have values determined using pricing models, discounted cash flow methodologies, or similar techniques, and include instruments for which the determination of fair value requires significant management judgment or estimation.
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels. The following table sets forth by level within the fair value hierarchy our assets and liabilities that were recorded at fair value as of December 31, 2025:
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Fair Value as of December 31, 2025 | ||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
| Assets (Liabilities): | ||||||||||||||||||||||||||
| Equity securities | $ | 3,767 | $ | — | $ | — | $ | 3,767 | ||||||||||||||||||
| Total | $ | 3,767 | $ | — | $ | — | $ | 3,767 | ||||||||||||||||||
The table below presents a reconciliation for Level 3 liabilities for the period ended December 31, 2025. The Level 3 liabilities consist of an earnout liability associated with SOC's acquisition of Big Lake Lumber (“BLL”) in 2023. The change in the Level 3 liability during the period was primarily due to payments made on accruals. These changes are included in "Purchases, issuances, and settlements (net)" in the Level 3 rollforward below.
| 2025 | ||||||||
| Acquisition value at August 22, 2025 | $ | 201 | ||||||
| Net reductions (payments) | (201) | |||||||
Balance as at December 31, 2025 | $ | — | ||||||
Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
Certain assets acquired and liabilities assumed in connection with the SOC acquisition were measured at fair value on a nonrecurring basis as of the acquisition date.
Additional information regarding the valuation methodologies and assumptions used in determining these fair values is included in Note 5 – Acquisitions, which presents the allocation of purchase consideration and related fair value measurements required under ASC 805, Business Combinations.
No other assets or liabilities were measured at fair value on a nonrecurring basis during the period
Equity Securities
The investment in equity securities consists of common stock of publicly traded companies. The fair value of these securities is based on the closing prices observed on December 31, 2025, and is recorded in “Investments in equity securities” in the Consolidated Balance Sheet.
Gains and losses from investments in equity securities are recorded in other income (expense) in the Consolidated Statements of Operations and included the following for the period ended December 31, 2025.
| Year Ended December 31, | ||||||||
| 2025 | ||||||||
| Unrealized loss on equity securities | $ | (390) | ||||||
| Unrealized gain on equity securities | 241 | |||||||
| Realized gain on equity securities | 11 | |||||||
| Total loss on equity securities | $ | (138) | ||||||
Lumber Derivative Contracts
We may enter into lumber derivative contracts in order to protect our gross profit margins from fluctuations caused by lumber price volatility. Such contracts, which are generally entered into to protect the gross margins on our wall panel contracts at EdgeBuilder and Glenbrook Building Supply, Inc. (“Glenbrook” and referred to jointly with EdgeBuilder as “EBGL”), are recorded within current assets or liabilities in the Consolidated Balance Sheets. As of December 31, 2025, we did not have any lumber derivatives contracts open.
Gains and losses from lumber derivative contracts are recorded in the cost of revenues in the Consolidated Statements of Operations and included the following for the period ended December 31, 2025:
| Year Ended December 31, | ||||||||
| 2025 | ||||||||
| Realized loss on lumber derivatives | $ | (68) | ||||||
| Total loss on lumber derivatives | $ | (68) | ||||||
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About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.