Jefferson Capital, Inc. / DE Fair Value Disclosure
4.Fair Value Measurements
The Company measures the fair values of its assets and liabilities, where applicable, based on the price that would be received upon sale of an asset or the price paid to transfer a liability, in an orderly transaction between market participants at the measurement date, i.e., the “exit price.” Under applicable accounting standards, fair value measurements are categorized into one of three levels based on the inputs to the valuation technique with the highest priority given to unadjusted quoted prices in active markets and the lowest priority given to unobservable inputs. The Company categorizes its fair value measurements of financial instruments based on this three-level hierarchy. The following is a brief description of each level:
Level 1 | Unadjusted 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 overall fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments for which the determination of fair value requires significant management judgment or estimation. The fair value for such assets and liabilities is generally determined using pricing models, discounted cash flow methodologies or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability. An example for the Company is Investments in Receivables, net (Note 5). |
The Company does not have any financial instruments that are subject to fair value measurements on a recurring basis.
Financial Instruments Not Required to Be Carried at Fair Value
The table below summarizes fair value estimates for the Company’s financial instruments that are not required to be carried at fair value.
The carrying amounts in the following table are recorded in the combined and consolidated balance sheet as of December 31, 2025 and December 31, 2024 (in thousands):
December 31, 2025 | December 31, 2024 | |||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||
| Amount | | Fair Value | | Amount | | Fair Value | |||||
Financial Assets | ||||||||||||
Investments in receivables, net | $ | 1,928,742 | $ | 2,156,926 | $ | 1,497,748 | $ | 1,646,535 | ||||
Credit card receivable, net | 16,312 | 16,312 | 17,176 | 17,176 | ||||||||
Financial Liabilities | ||||||||||||
Revolving credit facility | 231,584 | 231,584 | 508,146 | 513,799 | ||||||||
Senior unsecured bond due 2026 | 299,200 | 300,330 | 297,828 | 299,478 | ||||||||
Senior unsecured bond due 2029 | 395,775 | 421,200 | 394,405 | 424,792 | ||||||||
Senior unsecured bond due 2030 | 493,046 | 525,560 | — | — | ||||||||
Investment in receivables, net
The fair value of investments in receivables, net is measured using Level 3 inputs by discounting the estimated future cash flows generated by the Company’s proprietary forecasting models. The key inputs include the estimated future gross cash flow, average cost to collect, and a discount rate. The determination of such inputs requires significant judgment. The Company evaluates the use of key inputs on an ongoing basis and refines the data as it continues to obtain market data. See Note 5 to the combined and consolidated financial statements for additional information.
Credit card receivables, net
The fair value approximates the carrying value, due to their short-term nature and is measured using Level 3 inputs.
Revolving Credit Facility
The fair value of the Revolving Credit Facility, as supplemented or modified from time to time, (the “Revolving Credit Facility”) is measured using Level 3 inputs. The fair value approximates the principal value due to the short-term adjustable-rate nature of the notes payable.
Senior unsecured bonds due 2026, 2029 and 2030
The fair value estimates for the Senior Unsecured Bonds are based on quoted prices for identical assets or liabilities in markets that are not active. Accordingly, the Company uses Level 2 inputs for its fair value estimates.
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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.