PRA GROUP INCPRAA
PRA GROUP INC Fair Value Disclosure
Fair Value:
As defined by ASC Topic 820, "Fair Value Measurement and Disclosures" ("ASC 820"), fair value 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. ASC 820 requires the consideration of different input levels in the determination of fair value, as follows:
•Level 1: Quoted prices in active markets for identical assets and liabilities.
•Level 2: Observable inputs other than Level 1 quoted prices, such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
•Level 3: Unobservable inputs that are supported by little or no market activity. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.
Financial instruments not carried at fair value
As of December 31, 2024 and 2023, the carrying amount and estimated fair value of financial instruments not carried at fair value were as follows (amounts in thousands):
| 2024 | 2023 | ||||||||||||||||||||||
| Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 105,938 | $ | 105,938 | $ | 112,528 | $ | 112,528 | |||||||||||||||
| Finance receivables, net | 4,140,742 | 3,523,949 | 3,656,598 | 3,167,798 | |||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| Interest-bearing deposits | 163,406 | 163,406 | 115,589 | 115,589 | |||||||||||||||||||
| Revolving credit facilities | 1,569,430 | 1,569,430 | 1,437,715 | 1,437,715 | |||||||||||||||||||
Term loan (1) | 470,111 | 470,111 | 442,500 | 442,500 | |||||||||||||||||||
Senior notes (1) | 1,298,000 | 1,301,244 | 1,046,000 | 964,907 | |||||||||||||||||||
(1)Carrying amounts and estimated fair values do not include debt issuance costs.
The Company uses the following methods and assumptions to estimate the fair value of the above financial instruments:
Cash equivalents: Carrying amount approximates fair value due to the short-term nature of the instruments and the observable quoted prices for identical assets in active markets. Accordingly, the Company uses Level 1 inputs.
Finance receivables, net: The Company estimates the fair value of these receivables using proprietary pricing models that the Company utilizes to make portfolio acquisition decisions. Accordingly, the Company's fair value estimates use Level 3 inputs as there is little observable market data available and management is required to use significant judgment in its estimates.
Interest-bearing deposits: Carrying amount approximates fair value due to the short-term nature of the deposits and the observable quoted prices for similar instruments in active markets. Accordingly, the Company uses Level 2 inputs for its fair value estimates.
Revolving credit facilities: Carrying amount approximates fair value due to the short-term nature of the interest rate periods and the observable quoted prices for similar instruments in active markets. Accordingly, the Company uses Level 2 inputs for its fair value estimate.
Term loan: Carrying amount approximates fair value due to the short-term nature of the interest rate periods and the observable quoted prices for similar instruments in active markets. Accordingly, the Company uses Level 2 inputs for its fair value estimate.
Senior notes: Fair value estimates for the Company's senior notes incorporate quoted market prices obtained from secondary market broker quotes, which were derived from a variety of inputs, including client orders, information from their pricing vendors, modeling software and actual trading prices when they occur. Accordingly, the Company uses Level 2 inputs for its fair value estimates.
Financial instruments carried at fair value
As of December 31, 2024 and 2023, financial instruments measured at fair value on a recurring basis were as follows (amounts in thousands):
| Fair Value Measurements as of December 31, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Government securities | $ | 55,762 | $ | — | $ | — | $ | 55,762 | |||||||||||||||
| Derivative contracts (recorded in Other assets) | — | 10,723 | — | 10,723 | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Derivative contracts (recorded in Other liabilities) | — | 4,963 | — | 4,963 | |||||||||||||||||||
| Fair Value Measurements as of December 31, 2023 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Government securities | $ | 59,470 | $ | — | $ | — | $ | 59,470 | |||||||||||||||
| Derivative contracts (recorded in Other assets) | — | 22,777 | — | 22,777 | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Derivative contracts (recorded in Other liabilities) | — | 20,403 | — | 20,403 | |||||||||||||||||||
The Company uses the following methods and assumptions to estimate the fair value of the above financial instruments:
Government securities: Fair value of the Company's investments in government securities is estimated using quoted market prices. Accordingly, the Company uses Level 1 inputs.
Derivative contracts: Fair value of derivative contracts is estimated using industry standard valuation models. These models project future cash flows and discount the future amounts to present value using market-based observable inputs, including interest rate curves and other factors. Accordingly, the Company uses Level 2 inputs for its fair value estimates.
Impairment of real estate
During the year ended December 31, 2023, the Company determined that it would cease call center operations at one of its owned regional offices in the U.S. As a result, the Company recorded an impairment charge of $5.2 million on the associated building and improvements. The impairment was determined by comparing the fair value of the building and improvements to carrying value, as required under ASC Topic 360, "Property, Plant, and Equipment". Fair value was based on an appraisal performed by a third-party specialist, which considered Level 2 inputs in the form of prices paid for comparable properties in the same marketFree Sentinel
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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.