Note 5 – Fair Value of Financial Instruments

The Company’s assets recorded at fair value have been categorized based upon a fair value hierarchy in accordance with ASC 820. Refer to "Note 2 – Summary of Significant Accounting Policies" for a discussion of the Company’s policies.

Investments measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations as of September 30, 2025 and December 31, 2024 (in thousands):


	Level 1		Level 2			Level 3		Measured at Net Asset Value(1)		Total
As of September 30, 2025
Portfolio Investments
Senior Secured Loans	$	9,362	$	-		$	848,274	$	-	$	857,636
Second Lien Loans		-		-			21,177		-		21,177
Preferred Stock/Units		-		-			37,386		-		37,386
Common Stock/Units		108		-			21		-		129
Equity Interest		-		-			1,194		12,855		14,049
Warrants		-		459			15,128		-		15,587
Total Portfolio Investments		9,470		459			923,180		12,855		945,964
Cash equivalents		7,656		-			-		-		7,656
Foreign Currency Forward Contract		-		(640	)		-		-		(640	)
Total	$	17,126	$	(181	)	$	923,180	$	12,855	$	952,980

As of December 31, 2024
Portfolio Investments
Senior Secured Loans	$	-	$	-		$	950,092	$	-	$	950,092
Second Lien Loans		-		-			20,152		-		20,152
Preferred Stock/Units		9,181		-			73,460		-		82,641
Common Stock/Units		2,817		-			16		-		2,833
Equity Interest		-		-			1,198		5,742		6,940
Warrants		-		430			13,752		-		14,182
Total Portfolio Investments		11,998		430			1,058,670		5,742		1,076,840
Cash equivalents		4,026		-			-		-		4,026
Total	$	16,024	$	430		$	1,058,670	$	5,742	$	1,080,866

(1)

In accordance with ASC 820, the Company's equity investment in Runway-Cadma I LLC is measured using the net asset value as a practical expedient for fair value, and thus has not been classified in the fair value hierarchy.

The Company transfers investments in and out of Levels 1, 2 and 3 as of the beginning balance sheet date, based on changes in the use of observable and unobservable inputs utilized to perform the valuation for the period. During the nine months ended September 30, 2025, the Company's preferred stock investment in CareCloud, Inc., valued at $9.2 million at the beginning of the reporting period, was reclassified from Level 2 to Level 3 due to delisting from the NASDAQ stock exchange. During the nine months ended September 30, 2024, the Company had warrant investments in portfolio companies that went public, resulting in asset transfers out of Level 3 and into Level 2 at the fair value of approximately $50 thousand.

The following table presents a rollforward of Level 3 assets measured at fair value as of September 30, 2025 (in thousands):


		Senior Secured Loans				Second Lien Loans			Convertible Notes				Preferred Stock/Units				Common Stock/Units			Equity Interest				Warrants			Total
Fair value at December 31, 2024	$		950,092		$		20,152	$		-		$		73,460		$		16	$		1,198		$		13,752		$	1,058,670
Transfers in (out) of Level 3			-				-			-				9,181				-			-				-			9,181
Purchases of investments(1)			86,073				-			1,000				2,773				-			-				2,041			91,887
PIK interest			10,801				648			-				-				-			-				-			11,449
Sales or prepayments of investments(1)			(186,751	)			-			(1,000	)			(37,355	)			-			-				-			(225,106	)
Scheduled principal repayments of investments			(9,431	)			-			-				-				-			-				-			(9,431	)
Amortization of fixed income premiums or accretion of discounts and ETP			3,216				128			-				-				-			-				-			3,344
Net realized gain (loss)			(1,501	)			-			-				9,255				-			-				(1,511	)		6,243
Net change in unrealized gain (loss)			(4,225	)			249			-				(19,928	)			5			(4	)			846			(23,057	)
Fair value at September 30, 2025	$		848,274		$		21,177	$		-		$		37,386		$		21	$		1,194		$		15,128		$	923,180
Net change in unrealized gain (loss) on Level 3 investments still held as of September 30, 2025	$		(2,650	)	$		248	$		-		$		(10,673	)	$		5	$		(4	)	$		(264	)	$	(13,338	)

(1)

Net of reorganization and restructuring of investments.

The following table presents a rollforward of Level 3 assets measured at fair value as of September 30, 2024 (in thousands):


		Senior Secured Loans				Second Lien Loans				Convertible Notes				Preferred Stock/Units			Common Stock/Units				Equity Interest			Warrants			Total
Fair value at December 31, 2023	$		964,099		$		14,399		$		1,357		$		26,285	$		872		$		950	$		12,838		$	1,020,800
Transfers in (out) of Level 3			-				-				-				-			-				-			(51	)		(51	)
Purchases of investments(1)			164,321				-				339				-			-				-			3,429			168,089
PIK interest			9,364				218				-				-			-				-			-			9,582
Sales or prepayments of investments			(144,575	)			-				-				-			-				-			(86	)		(144,661	)
Scheduled repayments of investments			(2,380	)			-				-				-			-				-			-			(2,380	)
Amortization of fixed income premiums or accretion of discounts and ETP			8,184				94				-				-			-				-			-			8,278
Net realized gain (loss)			-				-				-				-			-				-			-			-
Net change in unrealized gain (loss)			(9,628	)			(210	)			(1,696	)			6,387			(753	)			248			204			(5,448	)
Fair Value at September 30, 2024	$		989,385		$		14,501		$		-		$		32,672	$		119		$		1,198	$		16,334		$	1,054,209
Net change in unrealized gain (loss) on Level 3 investments still held as of September 30, 2024	$		(9,007	)	$		(210	)	$		(1,696	)	$		6,387	$		(753	)	$		248	$		203		$	(4,828	)

(1)

Net of reorganization and restructuring of investments.

The following table provides quantitative information regarding Level 3 fair value measurements as of September 30, 2025 (in thousands):


Description	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Senior Secured Loans(1)	$	786,687	Discounted Cash Flow Analysis	Discount rate	9.2% - 30.2% (15.3%)
				Origination yield	10.5% - 19.1% (13.6%)
				Revenue multiples	0.90x - 149.72x (6.73x)
		61,587	PWERM	Discount rate	17.1% - 41.6% (25.6%)
				Origination yield	12.4% - 29.9% (18.2%)
				Revenue multiples	0.26x - 1.45x (0.66x)
Second Lien Loans(1)		21,177	Discounted Cash Flow Analysis	Discount rate	20.1% - 20.2% (20.2%)
				Origination yield	13.0% - 18.4% (14.6%)
				Revenue Multiples	2.59x - 2.90x (2.68x)
Preferred Stock/Units		36,868	Current Value Method (5)	Risk-free interest rate	3.6% - 3.6% (3.6%)
				Average industry volatility	50.0% - 80.0% (57.9%)
				Estimated time to exit	2.0 - 3.0 (2.7 years)
		518	Option Pricing Model	Risk-free interest rate	3.6% - 3.7% (3.6%)
				Average industry volatility	30.0% - 52.5% (48.4%)
				Estimated time to exit	2.7 - 4.0 (2.9 years)
				Revenue multiples	2.90x - 2.97x (2.96x)
Common Stock/Units		21	Option Pricing Model	Risk-free interest rate	3.6% - 3.6% (3.6%)
				Average industry volatility	52.5% - 52.5% (52.5%)
				Estimated time to exit	3.0 - 3.0 (3.0 years)
Equity Interest		1,194	PWERM (4)	N/A	N/A
Warrants(2)		11,806	Option Pricing Model	Risk-free interest rate	3.6% - 3.9% (3.6%)
				Average industry volatility	25.0% - 95.0% (51.2%)
				Estimated time to exit	1.0 - 4.0 (2.9 years)
				Revenue multiples	1.45x - 149.72x (3.97x)
		3,322	PWERM (3)	N/A	N/A

Total Level 3 Investments	$	923,180

(1)

The significant unobservable inputs used in the fair value measurement of the Company’s debt securities are origination yields and discount rates. The origination yield is defined as the initial market price of an investment in a hypothetical market to hypothetical market participants where buyers and sellers are willing participants. The discount rate is related to company-specific characteristics such as underlying investment performance, projected cash flows, and other characteristics of the investment. Significant increases or decreases in the inputs in isolation may result in a significantly higher or lower fair value measurement, depending on the materiality of the investment. However, a significantly higher or lower fair value measurement of any of the Company’s portfolio investments may occur regardless of whether there is a significant increase or decrease in the unobservable inputs.

(2)

The significant unobservable inputs used in the fair value measurement of the Company’s warrant and equity-related securities are inputs used in the Option Pricing Model (“OPM”), which include industry volatility, risk free interest rate and estimated time to exit. The Equity Allocation model and the Black Scholes model were the main OPMs used during the period ended September 30, 2025. Probability Weighted Expected Return Models ("PWERM") and other techniques were used as determined appropriate. Significant increases (decreases) in the inputs in isolation would result in a significantly higher (lower) fair value measurement, depending on the materiality of the investment. However, a significantly higher or lower fair value measurement of any of the Company’s portfolio investments may occur regardless of whether there is a significant increase (decrease) in the unobservable inputs. For some investments, additional consideration may be given to data from the last round of financing or merger/acquisition events near the measurement date.

(3)

Warrant investments using a PWERM valuation technique contain success fees, in which case the inputs are not applicable because the nature of a success fee is a fixed payout dependent on certain liquidation events.

(4)

Investment valued using a PWERM valuation technique and includes inputs that are based on scenario analysis specific to the asset recovery of such investment.

(5)

Investments valued using the Current Value Method, which may include a Waterfall valuation technique or be based on the redemption value of preferred shares. In the case of the JobGet Holdings, Inc. valuation, the inputs applied are based on an option pricing model that was utilized to value the shares that JobGet Holdings, Inc. owns in JobGet, Inc. In the case of a redemption value technique, inputs may be utilized in order to calculate a DLOM.

The following table provides quantitative information regarding Level 3 fair value measurements as of December 31, 2024 (in thousands):


Description	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Senior Secured Loans(1)	$	944,513	Discounted Cash Flow Analysis (6)	Discount rate	10.2% - 45.7% (15.6%)
				Origination yield	11.1% - 29.9% (13.9%)
				Revenue multiples	0.28x - 15.25x (4.22x)
		2,148	PWERM	Discount rate	40.0% - 40.0% (40.0%)
				Origination yield	18.6% - 18.6% (18.6%)
				Revenue multiples	1.25x - 1.25x (1.25x)
		3,431	Waterfall Approach (5)	Risk-free interest rate	4.1% - 4.1% (4.1%)
				Average industry volatility	52.5% - 52.5% (52.5%)
				Estimated time to exit	3.0 - 3.0 (3.0 years)
				Revenue multiples	3.75x - 3.75x (3.75x)
Second Lien Loans(1)		20,152	Discounted Cash Flow Analysis	Discount rate	18.6% - 19.2% (19.1%)
				Origination yield	13.0% - 18.4% (14.5%)
				Revenue Multiples	1.90x - 2.85x (2.17x)
Preferred Stock/Units		35,563	Waterfall Approach (5)	Risk-free interest rate	4.1% - 4.1% (4.1%)
				Average industry volatility	52.5% - 52.5% (52.5%)
				Estimated time to exit	3.0 - 3.0 (3.0 years)
				Revenue multiples	3.75x - 3.75x (3.75x)
		37,897	Option Pricing Model (6)	Risk-free interest rate	4.1% - 4.1% (4.1%)
				Average industry volatility	45.0% - 62.5% (45.1%)
				Estimated time to exit	3.0 - 4.7 (3.0 years)
				Revenue multiples	2.82x - 12.87x (12.76x)
Common Stock/Units		16	Option Pricing Model	Risk-free interest rate	4.1% - 4.1% (4.1%)
				Average industry volatility	62.5% - 62.5% (62.5%)
				Estimated time to exit	3.0 - 3.0 (3.0 years)
Equity Interest		1,198	PWERM (4)	N/A	N/A
Warrants(2)		10,860	Option Pricing Model	Risk-free interest rate	4.1% - 4.3% (4.1%)
				Average industry volatility	22.5% - 110.0% (47.7%)
				Estimated time to exit	1.0 - 3.8 (2.9 years)
				Revenue multiples	1.27x - 8.89x (3.41x)
		2,802	PWERM (3)	N/A	N/A
		90	Waterfall Approach	Revenue multiples	1.93x - 1.93x (1.93x)

Total Level 3 Investments	$	1,058,670

(1)

(2)

The significant unobservable inputs used in the fair value measurement of the Company’s warrant and equity-related securities are inputs used in the OPM, which include industry volatility, risk free interest rate and estimated time to exit. The Equity Allocation model and the Black Scholes model were the main OPMs used during the year ended December 31, 2024. Probability Weighted Expected Return Models ("PWERM") and other techniques were used as determined appropriate. Significant increases (decreases) in the inputs in isolation would result in a significantly higher (lower) fair value measurement, depending on the materiality of the investment. However, a significantly higher or lower fair value measurement of any of the Company’s portfolio investments may occur regardless of whether there is a significant increase (decrease) in the unobservable inputs. For some investments, additional consideration may be given to data from the last round of financing or merger/acquisition events near the measurement date.

(3)

(4)

Investment valued using a PWERM valuation technique and includes inputs that are based on scenario analysis specific to the asset recovery of such investment.

(5)

Investment valued using a Waterfall valuation technique. The inputs utilized in the valuation are based on an option pricing model that was utilized to value the shares that JobGet Holdings, Inc. owns in JobGet, Inc.

(6)

Includes Gynesonics, Inc., which was sold on January 2, 2025. As of December 31, 2024, the Company valued its investments in Gynesonics, Inc. at the expected sales proceeds from the acquisition.

Fair Value of Financial Instruments Reported at Cost

The Company records its debt at amortized cost on the Consolidated Statements of Assets and Liabilities. The fair value of the Company’s Credit Facility, April 2026 Notes, December 2026 Notes, August 2027 Notes, and April 2028 Notes (each defined in "Note 7 – Borrowings") are estimated using Level 3 inputs, which involves discounting the remaining payments based on comparable market rates for similar instruments as of the measurement date. The July 2027 Notes and December 2027 Notes are publicly traded on NASDAQ and are valued using Level 1 inputs, reflecting the most recent market prices of $25.19 and $25.31 per share as of September 30, 2025, respectively. As of December 31, 2024, the market prices were $24.88 and $25.10 per share, respectively.

The following table provides additional information about the approximate fair value and level in the fair value hierarchy of the Company’s outstanding borrowings as of September 30, 2025 and December 31, 2024 (in thousands):


			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total
As of September 30, 2025
Credit Facility	$	181,475	$	-	$	-	$	192,745	$	192,745
April 2026 Notes		24,928		-		-		26,115		26,115
July 2027 Notes		79,509		81,112		-		-		81,112
December 2027 Notes		50,932		52,392		-		-		52,392
April 2028 Notes		106,662		-		-		92,015		92,015
Total	$	443,506	$	133,504	$	-	$	310,875	$	444,379

As of December 31, 2024
Credit Facility	$	308,449	$	-	$	-	$	321,785	$	321,785
April 2026 Notes		24,839		-		-		25,616		25,616
December 2026 Notes		69,630		-		-		65,512		65,512
July 2027 Notes		79,116		80,114		-		-		80,114
August 2027 Notes		19,628		-		-		20,054		20,054
December 2027 Notes		50,670		51,957		-		-		51,957
Total	$	552,332	$	132,071	$	-	$	432,967	$	565,038

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
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-Topic 820
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-URI https://asc.fasb.org/1943274/2147482106/820-10-50-2

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+ Details

Runway Growth Finance Corp. 10-Q