EVERTEC, Inc.EVTC
EVERTEC, Inc. Fair Value Disclosure
Financial Instruments and Fair Value Measurements
Fair value measurement provisions establish a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. These provisions describe three levels of input that may be used to measure fair value:
Level 1: Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level 2: Inputs, other than quoted prices included in Level 1, which are observable for the asset or liability through corroboration with market data at the measurement date.
Level 3: Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.
The Company uses observable inputs when available. Fair value is based upon quoted market prices when available. If market prices are not available, the Company may employ models that mostly use market-based inputs including yield curves, interest rates, volatilities, and credit curves, among others. The Company limits valuation adjustments to those deemed necessary to ensure that the financial instrument’s fair value adequately represents the price that would be received or paid in the marketplace. Valuation adjustments may include consideration of counterparty credit quality and liquidity as well as other criteria. The estimated fair value amounts are subjective in nature and may involve uncertainties and matters of significant judgment for certain financial instruments. Changes in the underlying assumptions used in estimating fair value could affect the results. The fair value measurement levels are not indicative of risk of investment.
The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value estimates are made at a specific point in time based on the type of financial instrument and relevant market information. Many of these estimates involve various assumptions and may vary significantly from amounts that could be realized in actual transactions.
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes fair value measurements by level at December 31, 2025 and 2024, for assets and liabilities measured at fair value on a recurring basis:
| (In thousands) | Level 2 | Level 3 | Measured at NAV | Total | |||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
| Debt securities AFS | $ | 3,202 | $ | — | $ | — | $ | 3,202 | |||||||||||||||
| Equity securities | — | — | 5,849 | 5,849 | |||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| Interest rate swaps | 5,225 | — | — | 5,225 | |||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
| Debt securities AFS | 1,807 | — | — | 1,807 | |||||||||||||||||||
| Equity securities | — | — | 4,976 | 4,976 | |||||||||||||||||||
| Interest rate swaps | 4,338 | — | — | 4,338 | |||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| Interest rate swap | 1,351 | — | — | 1,351 | |||||||||||||||||||
Debt Securities Available for Sale ("AFS")
Costa Rica government obligations are held by a trust in the Costa Rica National Bank as a collateral requirement for settlement activities. The Company may substitute securities as needed but must maintain certain levels of collateral based on transaction volumes. During the years ended December 31, 2025 and 2024, the Company acquired $2.4 million and $0.8 million, respectively, in available-for-sale debt securities. Debt securities amounting to $1.0 million and $1.1 million matured during 2025 and 2024, respectively. No debt securities were sold during the years ended December 31, 2025 and 2024. A provision for credit losses was not required for either December 31, 2025 or 2024. Debt securities that mature in less than 12 months are included in Prepaid and other assets on the consolidated balance sheet.
The fair value of debt securities is estimated based on observable inputs through corroboration with market data at the measurement date, therefore classified as a Level 2 asset within the fair value hierarchy.
Interest Rate Swaps
The fair value of the Company’s derivative instrument is determined using a standard valuation model. The significant inputs used in these models are readily available in public markets, or can be derived from observable market transactions, and therefore have been classified as Level 2. Inputs used in these standard valuation models for derivative instruments include the applicable forward rates and discount rates. The discount rates are based on the historical SOFR swap rates.
Equity Securities Measured at Net Asset Value (NAV)
At December 31, 2025 and 2024, the Company holds mutual funds classified as equity securities on the Company's consolidated balance sheet that are measured at fair value using the NAV per share, or its equivalent, as a practical expedient. Mutual funds consist of investments in venture capital strategies and start-ups with a focus on privately held technology companies. The NAV is based on the fair value of the underlying net assets owned by the mutual funds and the relative interest of each participating investor in the fair value of the underlying assets.
Financial assets and liabilities not measured at fair value
The following table presents the carrying value, as applicable, and estimated fair values for financial assets and liabilities at December 31, 2025 and 2024:
| December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| (In thousands) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| 2027 Term A Loan Facility | $ | 403,770 | $ | 405,737 | $ | 426,602 | $ | 433,890 | |||||||||||||||
| 2030 Term B Loan Facility | $ | 673,127 | $ | 690,000 | $ | 522,327 | $ | 545,400 | |||||||||||||||
| Revolving Facility | $ | 10,000 | $ | 10,000 | $ | — | $ | — | |||||||||||||||
The fair values of the term loans and the revolving facility at December 31, 2025 and 2024 was obtained using the prices provided by third-party service providers. Their pricing is based on various inputs such as market quotes, recent trading activity in a non-active market or imputed prices. These inputs are considered Level 3 inputs under the fair value hierarchy. Also, the pricing may include the use of an algorithm that could take into account movements in the general high yield market, among other variants. The secured term loans are not measured at fair value in the balance sheet.
The Company’s financial assets and liabilities not measured at fair value are cash, short-term investments, accounts receivable, accounts payable, and deferred consideration for business combinations. The carrying values of these instruments approximate fair value.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | May 26, 2016 | |
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.