LTC PROPERTIES INC Fair Value Disclosure
19. Fair Value Measurements
In accordance with the accounting guidance regarding the fair value option for financial assets and financial liabilities, entities are permitted to choose to measure certain financial assets and liabilities at fair value, with the change in unrealized gains and losses reported in earnings. We did not adopt the elective fair market value option for our financial assets and financial liabilities.
The carrying amount of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments. We do not invest our cash in auction rate securities. The carrying value and fair value of our financial instruments as of December 31, 2025 and 2024 assuming election of fair value for our financial assets and financial liabilities were as follows (in thousands):
At December 31, 2025 | At December 31, 2024 | ||||||||||||
Carrying | Fair | Carrying | Fair | ||||||||||
Value | Value | Value | Value | ||||||||||
Financing receivables, net of credit loss reserve | $ | 359,457 | $ | 367,986 | (1) | $ | 357,867 | $ | 363,228 | (1) | |||
Mortgage loans receivable, net of credit loss reserve | 381,662 | 462,312 | (2) | 312,583 | 386,871 | (2) | |||||||
Notes receivable, net of credit loss reserve |
| 25,615 |
| 29,576 | (3) |
| 47,240 |
| 53,549 | (3) | |||
Revolving line of credit |
| 252,863 | 252,863 | (4) | 144,350 | 144,350 | (4) | ||||||
Term loans, net of debt issue costs | 198,213 | 198,213 | (4) | 99,808 | 100,000 | (4) | |||||||
Senior unsecured notes, net of debt issue costs |
| 391,105 | 372,511 | (5) | 440,442 | 402,394 | (5) | ||||||
| (1) | Our investment in financing receivables is classified as Level 3. The fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. The discount rate used to value our future cash inflows of the financing receivables at December 31, 2025 and 2024 was 7.5% and 7.7%, respectively. |
| (2) | Our investment in mortgage loans receivable is classified as Level 3. The fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. Subsequent to December 31, 2025, Prestige provided notice of its intent to repay the mortgage loan in 2026. Accordingly, at December 31. 2025, the estimated fair value of this mortgage loan approximated its carrying value. No such notice had been received as of December 31, 2024. The discount rate is determined using our assumption on market conditions adjusted for market and credit risk and current returns on our investments. The discount rate used to value our future cash inflows of the mortgage loans receivable at December 31, 2025 and 2024 was 8.8% and 10.0%, respectively. |
| (3) | Our investments in notes receivable are classified as Level 3. The discount rate is determined using our assumption on market conditions adjusted for market and credit risk and current returns on our investments. The discount rate used to value our future cash flows of the notes receivable at December 31, 2025 and 2024, were 7.7% and 7.6%, respectively. |
| (4) | Our revolving line of credit and term loans bear interest at a variable interest rate. The estimated fair value of our revolving line of credit and term loans approximated their carrying values at December 31, 2025 and 2024 based upon prevailing market interest rates for similar debt arrangements. |
| (5) | Our obligation under our senior unsecured notes is classified as Level 3 and thus the fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. The discount rate is measured based upon management’s estimates of rates currently prevailing for comparable loans available to us, and instruments of comparable maturities. At December 31, 2025, the discount rate used to value our future cash outflow of our senior unsecured notes was 5.25% for those maturing before year 2030 and 5.50% for those maturing at or beyond year 2030. At December 31, 2024, the discount rate used to value our future cash outflow of our senior unsecured notes was 6.25% for those maturing before year 2030 and 6.50% for those maturing beyond year 2030. |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 24, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Feb 22, 2017 | |
| 2015 | Feb 22, 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.