UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017MARCH 31, 2021
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM             TO
Commission file number: 001-37401
Community Healthcare Trust Incorporated
(Exact Name of Registrant as Specified in Its Charter)
Maryland
Maryland46-5212033
(State or Other Jurisdiction of Incorporation or Organization)
46-5212033
(I.R.S. Employer Identification No.)
3326 Aspen Grove Drive
Suite 150
Franklin, Tennessee 37067
(Address of Principal Executive Offices) (Zip Code)
(615) 771-3052
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each ClassTrading SymbolName of each exchange on which registered
Common stock, $0.01 par value per shareCHCTNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x     No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x     No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated
filer¨
Accelerated filerx
Emerging-growth companyx
Non-accelerated filer¨
(Do not check if a
smaller reporting company)
Smaller reporting 
company¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 
Yes  ¨     No x

The Registrant had 18,085,79824,417,124 shares of Common Stock, $0.01 par value per share, outstanding as of October 31, 2017.April 30, 2021.

1


COMMUNITY HEALTHCARE TRUST INCORPORATED
FORM 10-Q
September 30, 2017March 31, 2021
TABLE OF CONTENTS

Page

2


PART I. FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
March 31, 2021December 31, 2020
ASSETS
Real estate properties
Land and land improvements$91,428 $83,714 
Buildings, improvements, and lease intangibles705,224 651,398 
Personal property218 247 
Total real estate properties796,870 735,359 
Less accumulated depreciation(109,908)(102,899)
Total real estate properties, net686,962 632,460 
Cash and cash equivalents5,605 2,483 
Restricted cash398 409 
Other assets, net42,346 33,050 
Total assets$735,311 $668,402 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Debt, net$260,446 $212,374 
Accounts payable and accrued liabilities6,526 5,743 
Other liabilities, net18,253 20,369 
Total liabilities285,225 238,486 
Commitments and contingencies


0
0Stockholders' Equity
Preferred stock, $0.01 par value; 50,000,000 shares authorized; NaN issued and outstanding
Common stock, $0.01 par value; 450,000,000 shares authorized; 24,417,124 and 23,888,090 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively
244 239 
Additional paid-in capital571,781 550,391 
Cumulative net income41,946 36,631 
Accumulated other comprehensive loss(8,111)(11,846)
Cumulative dividends(155,774)(145,499)
Total stockholders’ equity450,086 429,916 
Total liabilities and stockholders' equity$735,311 $668,402 
 (Unaudited)  
 September 30, 2017 December 31, 2016
ASSETS   
Real estate properties   
Land and land improvements$39,810
 $29,884
Buildings, improvements, and lease intangibles307,492
 222,755
Personal property112
 97
Total real estate properties347,414
 252,736
Less accumulated depreciation(31,153) (18,404)
Total real estate properties, net316,261
 234,332
Cash and cash equivalents17,479
 1,568
Mortgage note receivable, net10,633
 10,786
Other assets, net10,776
 4,843
Total assets$355,149
 $251,529
    
LIABILITIES AND STOCKHOLDERS' EQUITY   
Liabilities   
Debt, net$59,284
 $51,000
Accounts payable and accrued liabilities3,226
 3,541
Other liabilities4,743
 2,981
Total liabilities67,253
 57,522
    
Commitments and contingencies

 

    
Stockholders' Equity   
Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued and outstanding
 
Common stock, $0.01 par value; 450,000,000 shares authorized; 18,085,798 and 12,988,482 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively181
 130
Additional paid-in capital323,877
 214,323
Cumulative net income3,223
 1,265
Accumulated other comprehensive loss(386) 
Cumulative dividends(38,999) (21,711)
Total stockholders’ equity287,896
 194,007
Total liabilities and stockholders' equity$355,149
 $251,529

See accompanying notes to the condensed consolidated financial statements.

3


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2021 AND 20162020
(Unaudited; Dollars in thousands, except per share amounts)
Three Months Ended
March 31,
20212020
REVENUES
Rental income$20,780 $17,428 
Other operating interest615 508 
21,395 17,936 
EXPENSES
Property operating3,729 3,343 
General and administrative2,859 2,192 
Depreciation and amortization7,225 6,059 
13,813 11,594 
INCOME FROM OPERATIONS7,582 6,342 
Interest expense(2,229)(2,249)
Deferred income tax expense(39)
Interest and other income, net
NET INCOME$5,315 $4,100 
NET INCOME PER COMMON SHARE:
Net income per common share – Basic$0.21 $0.18 
Net income per common share – Diluted$0.21 $0.18 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-BASIC22,809,222 20,734,618 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-DILUTED22,809,222 20,734,618 
 Three Months Ended September 30, Nine Months Ended
September 30,
 2017 2016 2017 2016
REVENUES       
Rental income$8,012
 $4,985
 $21,968
 $13,188
Tenant reimbursements1,158
 1,188
 3,620
 3,250
Mortgage interest255
 270
 774
 1,367
Other operating19
 
 19
 
 9,444
 6,443
 26,381
 17,805
        
EXPENSES       
Property operating2,225
 963
 6,103
 3,240
General and administrative1,069
 671
 2,674
 2,372
Depreciation and amortization4,544
 3,496
 12,749
 9,643
Bad debts
 73
 67
 103
 7,838
 5,203
 21,593
 15,358
OTHER INCOME (EXPENSE)       
Interest expense(1,091) (185) (2,897) (787)
Interest and other income, net64
 9
 67
 28
 (1,027) (176) (2,830) (759)
NET INCOME$579
 $1,064
 $1,958
 $1,688
        
NET INCOME PER COMMON SHARE:       
Net income per common share – Basic$0.02
 $0.08
 $0.10
 $0.16
Net income per common share – Diluted$0.02
 $0.08
 $0.10
 $0.16
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-BASIC16,241,986
 12,686,183
 13,884,476
 10,752,333
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-DILUTED16,241,986
 12,750,967
 13,884,476
 10,802,095
DIVIDENDS DECLARED, PER COMMON SHARE, DURING THE PERIOD$0.3925
 $0.3825
 $1.1700
 $1.1400


See accompanying notes to the condensed consolidated financial statements.

4


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017MARCH 31, 2021 AND 20162020
(Unaudited; Dollars in thousands)

Three Months Ended
March 31,
20212020
NET INCOME$5,315 $4,100 
Other comprehensive income (loss):
Increase (decrease) in fair value of cash flow hedges2,803 (8,875)
Reclassification for amounts recognized as interest expense932 257 
Total other comprehensive income (loss)3,735 (8,618)
COMPREHENSIVE INCOME (LOSS)$9,050 $(4,518)
   Three Months Ended September 30, 
Nine Months Ended
 September 30,
   2017 2016 2017 2016
          
NET INCOME$579
 $1,064
 $1,958
 $1,688
 Other comprehensive income (loss):       
  Unrealized losses on cash flow hedges(74) 
 (672) 
  Reclassification of loss amounts recognized as interest expense124
 
 286
 
 Total other comprehensive income (loss)50
 
 (386) 
COMPREHENSIVE INCOME$629
 $1,064
 $1,572
 $1,688



See accompanying notes to the condensed consolidated financial statements.



5


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(Unaudited; Dollars in thousands, except per share amounts)
Preferred StockCommon StockAdditional Paid in CapitalCumulative Net IncomeAccumulated Other Comprehensive (Loss) IncomeCumulative DividendsTotal Stockholders' Equity
SharesAmountSharesAmount
Balance at December 31, 2020$23,888,090 $239 $550,391 $36,631 $(11,846)$(145,499)$429,916 
Issuance of common stock, net of issuance costs— — 435,272 19,841 — — — 19,845 
Stock-based compensation— — 93,762 1,549 — — — 1,550 
Unrecognized gain on cash flow hedges— — — — — — 2,803 — 2,803 
Reclassification adjustment for losses included in net income (interest expense)— — — — — — 932 — 932 
Net income— — — — — 5,315 — — 5,315 
Dividends to common stockholders ($0.4275 per share)— — — — — — — (10,275)(10,275)
Balance at March 31, 2021$24,417,124 $244 $571,781 $41,946 $(8,111)$(155,774)$450,086 
Balance at December 31, 2019$21,410,578 $214 $447,916 $17,554 $(4,808)$(107,465)$353,411 
Issuance of common stock, net of issuance costs— — 610,786 26,896 — — — 26,902 
Stock-based compensation— — 103,905 1,012 — — — 1,013 
Unrecognized loss on cash flow hedges— — — — — — (8,875)— (8,875)
Reclassification adjustment for losses included in net income (interest expense)— — — — — — 257 — 257 
Net income— — — — — 4,100 — — 4,100 
Dividends to common stockholders ($0.4175 per share)— — — — — — — (9,033)(9,033)
Balance at March 31, 2020$22,125,269 $221 $475,824 $21,654 0$(13,426)$(116,498)$367,775 
 Preferred Stock 

Common Stock
 Additional Paid in Capital Cumulative Net Income Accumulated Other Comprehensive Loss Cumulative Dividends Total Stockholders' Equity
Balance at December 31, 2016$
 $130
 $214,323
 $1,265
 $
 $(21,711) $194,007
Issuance of common stock, net of issuance costs
 49
 108,506
 
 
 
 108,555
Stock-based compensation
 2
 1,048
 
 
 
 1,050
Unrecognized loss on cash flow hedges
 
 
 
 (672) 
 (672)
Reclassification adjustment for losses included in net income (interest expense)
 
 
 
 286
 
 286
Net income
 
 
 1,958
 
 
 1,958
Dividends to common stockholders ($1.17 per share)
 
 
 
 
 (17,288) (17,288)
Balance at September 30, 2017$
 $181
 $323,877
 $3,223
 $(386) $(38,999) $287,896



See accompanying notes to the condensed consolidated financial statements.

6


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
Nine Months Ended September 30,Three Months Ended March 31,
2017 201620212020
OPERATING ACTIVITIES   OPERATING ACTIVITIES
Net income$1,958
 $1,688
Net income$5,315 $4,100 
Adjustments to reconcile net income to net cash provided by operating activities:   Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization13,053
 9,749
Depreciation and amortization7,225 6,059 
Other amortizationOther amortization229 127 
Stock-based compensation1,050
 453
Stock-based compensation1,550 1,013 
Straight-line rent receivable(980) (405)Straight-line rent receivable(838)(878)
Straight-line rent liability27
 
Provision for bad debts, net of recoveries67
 103
Reduction in contingent purchase price(5) (974)
Deferred income tax expenseDeferred income tax expense39 
Changes in operating assets and liabilities:   Changes in operating assets and liabilities:
Other assets(636) (1,284)Other assets(291)(235)
Accounts payable and accrued liabilities(404) 1,732
Accounts payable and accrued liabilities(820)396 
Other liabilities1,234
 (262)Other liabilities1,084 (329)
Net cash provided by operating activities15,364
 10,800
Net cash provided by operating activities13,493 10,253 
   
INVESTING ACTIVITIES   INVESTING ACTIVITIES
Acquisitions of real estate(93,442) (58,249)Acquisitions of real estate(60,007)(36,384)
Funding of notes receivable(5,000) (12,406)
Acquisition and funding of notes receivable Acquisition and funding of notes receivable(7,110)(1,750)
Proceeds from the repayment of notes receivable296
 
Proceeds from the repayment of notes receivable890 3,300 
Capital expenditures on existing real estate properties(545) (1,123)Capital expenditures on existing real estate properties(1,045)(673)
Net cash used in investing activities(98,691) (71,778)Net cash used in investing activities(67,272)(35,507)
   
FINANCING ACTIVITIES   FINANCING ACTIVITIES
Net repayments on revolving credit facility(51,000) (12,000)
Net (repayments) borrowings on revolving credit facilityNet (repayments) borrowings on revolving credit facility(26,000)9,000 
Term loan borrowings60,000
 
Term loan borrowings125,000 
Term loan repaymentsTerm loan repayments(50,000)
Mortgage note repaymentsMortgage note repayments(29)(27)
Dividends paid(17,288) (12,782)Dividends paid(10,275)(9,033)
Net proceeds from issuance of common stock109,168
 86,805
Proceeds from issuance of common stockProceeds from issuance of common stock19,919 26,928 
Equity issuance costs(465) (680)Equity issuance costs(76)(29)
Debt issuance costs(784) (641)Debt issuance costs(1,649)
Settlement of contingent purchase price(393) 
Net cash provided by financing activities99,238
 60,702
Net cash provided by financing activities56,890 26,839 
Increase (decrease) in cash and cash equivalents15,911
 (276)
Cash and cash equivalents, beginning of period1,568
 2,018
Cash and cash equivalents, end of period$17,479
 $1,742
Increase in cash and cash equivalents and restricted cashIncrease in cash and cash equivalents and restricted cash3,111 1,585 
Cash and cash equivalents and restricted cash, beginning of periodCash and cash equivalents and restricted cash, beginning of period2,892 2,023 
Cash and cash equivalents and restricted cash, end of periodCash and cash equivalents and restricted cash, end of period$6,003 $3,608 
   
Supplemental Cash Flow Information:   Supplemental Cash Flow Information:
Interest paid$2,390
 $504
Interest paid$2,105 $1,876 
Invoices accrued for construction, tenant improvement and other capitalized costs$3
 $145
Invoices accrued for construction, tenant improvement and other capitalized costs$1,591 $1,165 
Reclassification between accounts and notes receivable$615
 $
Reclassification of registration statement costs incurred in prior year to equity issuance costs$148
 $
Reclassification of registration statement costs incurred in prior year to equity issuance costs$81 $32 
Conversion of mortgage note upon acquisition of real estate property$
 $12,500
Decrease in fair value of cash flow hedges$(672) $
Leasing commission accruedLeasing commission accrued$$125 
Increase (decrease) in fair value of cash flow hedgesIncrease (decrease) in fair value of cash flow hedges$2,803 $(8,875)
Income taxes paidIncome taxes paid$25 $
See accompanying notes to the condensed consolidated financial statements.

7


COMMUNITY HEALTHCARE TRUST INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2017March 31, 2021
(Unaudited)



Note 1. Summary of Significant Accounting Policies


Business Overview
Community Healthcare Trust Incorporated (the ‘‘Company’’, ‘‘we’’, ‘‘our’’) was organized in the State of Maryland on March 28, 2014. The Company is a fully-integrated healthcare real estate company that owns and acquires real estate properties that are leased to hospitals, doctors, healthcare systems or other healthcare service providers in our target submarkets. The Company conducts its business through an UPREIT structure in which its properties are owned by its operating partnership (the "OP"), either directly or through subsidiaries. The Company is the sole general partner of the OP, owning 100% of the OP units.providers. As of September 30, 2017,March 31, 2021, the Company had investments of approximately $358.0$801.0 million in 80147 real estate properties including(including a mortgage note,portion of 1 property accounted for as a financing lease with a gross amount totaling approximately $3.0 million and 1 property classified as held for sale with a gross amount totaling approximately $1.1 million). The properties are located in 2633 states, totaling approximately 1.83.2 million square feet in the aggregate.aggregate and were approximately 89.1% leased at March 31, 2021 with a weighted average remaining lease term of approximately 8.3 years. Any references to square footage, property count, or occupancy percentages, and any amounts derived from these values in these notes to the condensed consolidated financial statements, are outside the scope of our independent registered public accounting firm's review.


COVID-19 Pandemic
The world was, and continues to be, impacted by the novel coronavirus (COVID-19) pandemic. COVID-19 and measures to prevent its spread impacted many healthcare providers, including some of our tenants. During 2020, some of them were not seeing patients, others saw a reduced number of elective procedures and/or patient visits, while others experienced limited impact, or even saw improved cash flows from either increases in census or government funding.

As a result of the pandemic, the Company entered into deferral agreements with 18 tenants, with deferrals representing less than 1 percent of our annualized rent in the aggregate. Amounts due under the deferral agreements were generally repaid during 2020, however, at March 31, 2021, there was approximately $51,000 remaining to be billed and paid during the remainder of 2021.

Basis of Presentation
The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements.

This interim financial information should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

2020. Management believes that all adjustments of a normal, recurring nature considered necessary for a fair presentation have been included. This interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2017.

Principles of Consolidation
Our Condensed Consolidated Financial Statements include the accounts of the Company, its wholly-owned subsidiaries, and may also include joint ventures, partnerships and variable interest entities, or VIEs, where the Company controls the operating activities.2021. All material intercompany accounts and transactions have been eliminated.

Management must make judgments regarding the Company's level of influence or control over an entity and whether or not the Company is the primary beneficiary of a VIE. Consideration of various factors include, but is not limited to, the Company's ability to direct the activities that most significantly impact the entity's governing body, the size and seniority of the Company's investment, and the Company's ability to replace the manager and/or liquidate the entity. Management's ability to correctly assess its influence or control over an entity when determining the primary beneficiary of a VIE affects the presentation of these entities in the Company's Condensed Consolidated Financial Statements. If it is determined that the Company is the primary beneficiary of a VIE, the Company's Condensed Consolidated Financial Statements would include the operating results of the VIE rather than the results of the variable interest in the VIE. Untimely or inaccurate financial information provided to the Company or deficiencies in the VIEs internal control over financial reporting could impact the Company's Condensed Consolidated Financial Statements and its own internal control over financial reporting.

During the third quarter of 2017, concurrent with the acquisition of a property, the Company entered into a $5.0 million note receivable with the tenant in the building. See Note 4. The Company identified the borrower as a VIE, but management determined that the Company was not the primary beneficiary of the VIE because we lack either directly or through related parties any material impact in the activities that impact its economic performance.

8

Notes to Condensed Consolidated Financial Statements - Continued


We are not obligated to provide support beyond our stated commitment to the borrower, and accordingly our maximum exposure to loss as a result of this relationship is limited to the amount of our outstanding note receivable as noted above.

Jumpstart Our Business Startups Act of 2012
The Company has elected the "emerging growth company" status as permitted under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. The Company elected to "opt out" of the provision allowed under the JOBS Act to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. As a result, we must comply with new or revised accounting standards as required when they are adopted. Our decision to opt out of the extended transition period under the JOBS Act is irrevocable.


Use of Estimates in the Condensed Consolidated Financial Statements
Preparation of the Condensed Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results may materially differ from those estimates.


Segment Reporting
8

The Company acquires and owns healthcare-related real estate properties that are leased
Notes to hospitals, doctors, healthcare systems or other healthcare service providers in our target submarkets. The Company is managed as one reporting unit, rather than multiple reporting units, for internal reporting purposes and for internal decision-making. Therefore, the Company discloses its operating results in a single segment.Condensed Consolidated Financial Statements - Continued

Cash, and Cash Equivalents and Restricted Cash
Cash and cash equivalents includes short-term investments with original maturities of three months or less when purchased.

Accounting for Real Estate Property Acquisitions
Real estate property acquisitions are accounted for as a business combination or an asset acquisition. An acquisition accounted for as a business combination is recorded at fair value and related closing costs are expensed. An acquisition accounted for as an asset acquisition is recorded at its purchase price, inclusive Restricted cash consists of acquisition costs, which is allocated amongamounts held by the acquired assets and assumed liabilities based upon their relative fair values at the datelender of acquisition. The Company adopted Accounting Standards Update ("ASU") No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, on January 1, 2017, and Company expects that substantially all of its acquisitions will be accounted for as asset acquisitions.
The allocation of real estate property acquisitions may include land and land improvements, building and building improvements, personal property, and identified intangible assets and liabilities (consisting of above- and below-market leases, in-place leases, and tenant relationships) based on the evaluation of information and estimates available at that date, and we allocate the purchase price based on these assessments. We make estimates of the acquisition date fair value of the tangible and intangible assets and acquired liabilities using information obtained from multiple sources as a result of pre-acquisition due diligence, tax records, and other sources. Based on these estimates, we recognize the acquired assets and liabilities at their estimated fair values. We expense transaction costs associated with business combinations in the period incurred. The fair value of tangible property assets acquired considers the value of the property as if vacant determined by comparable sales and other relevant data. The determination of fair value involves the use of significant judgment and estimation. We value land based on various inputs, which may include internal analysis of recently acquired properties, existing comparable properties within our portfolio, or third party appraisals or valuations based on comparable sales.
In recognizing identified intangible assets and liabilities of an acquired property, the value of above- or below-market leases is estimated based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between contractual amounts to be received pursuant to the leases and management’s estimate of market lease rates measured over a period equal to the estimated remaining term of the

9

Notes to Condensed Consolidated Financial Statements - Continued

lease. In the case of a below-market lease, the Company would also evaluate any renewal options associated with that lease to determine if the intangible should include those periods. The capitalized above-market or below-market lease intangibles are amortized as a reduction from or an addition to rental income over the estimated remaining term of the respective leases.
In determining the value of in-place leases and tenant relationships, management considers current market conditions and costs to execute similar leases in arriving at an estimate of the carrying costs during the expected lease-up period from vacant to existing occupancy. In estimating carrying costs, management includes real estate taxes, insurance, other property operating expenses, estimates of lost rental revenue during the expected lease-up periods, and costs to execute similar leases, including leasing commissions. The values assigned to in-place leases and tenant relationships are amortized over the estimated remaining term of the lease. If a lease terminates prior to its scheduled expiration, all unamortized costs related to that lease are written off.
Depreciation and amortization of real estate assets and liabilities in place as of September 30, 2017, is recognized on a straight-line basis over the estimated useful life of the asset. The estimated useful lives at September 30, 2017 are as follows:
Land improvements3 - 15 years
Buildings20 - 40 years
Building improvements3.0 - 39.8 years
Tenant improvements2.3 - 6.9 years
Lease intangibles1.4 - 13.7 years
Personal property3 -10 years

Asset Impairments
The Company assesses the potential for impairment of identifiable, definite-lived, intangible assets and long-lived assets, including real estate properties, whenever events occur or a change in circumstances indicates that the carrying value might not be fully recoverable. Indicators of impairment may include significant under-performance of an asset relative to historical or expected operating results; significant changes in the Company’s use of assets or the strategy for its overall business; plans to sell an asset before its depreciable life has ended; the expiration of a significant portion of leases in a property; or significant negative economic trends or negative industry trends for the Company or its operators. In addition, the Company’s review for possible impairment may include those assets subject to purchase options and those impacted by casualties, such as tornadoes and hurricanes. If management determines that the carrying value of the Company’s assets may not be fully recoverable based on the existence of any of the factors above, or others, management would measure and record an impairment charge based on the estimated fair value of the property or the estimated fair value less costs to sell the property.

Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. In calculating fair value, a company must maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements.

A hierarchy of valuation techniques is defined to determine whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:
Level 1 – quoted prices for identical instruments in active markets;
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

10

Notes to Condensed Consolidated Financial Statements - Continued

Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Our interest rate swaps are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 inputs. The market inputs are utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation model for interest rate swaps are observable in active markets and are classified as Level 2 in the hierarchy.

Lease Accounting
We, as a lessor, make a determination with respect to each of our leases whether they should be accounted for as operating leases or capital leases. The classification criteria is based on estimates regarding the fair value of the leased facilities, minimum lease payments, effective cost of funds, the economic useful life of the facilities, the existence of a bargain purchase option, and certain other terms in the lease agreements. We believe all of our leases meet the accounting criteria to be accounted for as operating leases. Payments received under operating leases are accounted for in the Condensed Consolidated Statements of Income as rental revenue for actual cash rent collected plus or minus straight-line adjustments resulting from lease escalators. Assets subject to operating leases are reported as real estate investments in the Condensed Consolidated Balance Sheets.

Substantially all of our leases contain fixed or formula-based rent escalators. To the extent that the escalators are tied to a fixed index or rate, lease payments are accounted for on a straight-line basis over the life of the lease.

Revenue Recognition
The Company recognizes rental revenue when it is realized or realizable and earned. There are four criteria that must be met before a company may recognize revenue, including persuasive evidence that an arrangement exists, delivery has occurred or services have been rendered (i.e., the tenant has taken possession of and controls the physical use of the leased asset), the price has been fixed or is determinable, and collectability is reasonably assured.

The Company derives most of its revenues from its real estate and mortgage note portfolio. The Company's rental and interest income is recognized based on contractual arrangements with its tenants and borrowers.

Rental income is recognized as earned over the life of the lease agreement on a straight-line basis. Recognizing rental revenue on a straight-line basis for leases may result in recognizing revenue in amounts more or less than amounts currently due from tenants. If management determines that the collectability of straight-line rents is not reasonably assured, the amount of future revenue recognized may be limited to amounts contractually owed and, where appropriate, establish an allowance for estimated losses. Straight-line rent included in rental income was approximately $0.4 million and $0.2 million, respectively, for the three months ended September 30, 2017 and 2016 and $1.0 million and $0.4 million, respectively, for the nine months ended September 30, 2017 and 2016.

Interest income is recognized based on the interest rates, maturity dates and amortization periods set forth within each note agreement. Fees received related to our mortgage note are amortizedpayable to mortgage interest income on a straight-line basis whichprovide for future real estate tax, insurance expenditures and tenant improvements related to one property. The carrying amount approximates amortization under the effective interest method.

Income received but not yet earned is deferred until such time it is earned. Deferred revenue, included in other liabilities, was approximately $0.9 million and $0.8 million, respectively, at September 30, 2017 and December 31, 2016.

Allowance for Doubtful Accounts and Credit Losses
Accounts Receivable
Management monitors the aging and collectability of its accounts receivable balances on an ongoing basis. Whenever deterioration in the timeliness of payment from a tenant is noted, management investigates and determines the reason or reasons for the delay. Considering all information gathered, management’s judgment is exercised in determining whether a receivable is potentially uncollectible and, if so, how much or what percentage

11

Notes to Condensed Consolidated Financial Statements - Continued

may be uncollectible. Among the factors management considers in determining collectability are: the type of contractual arrangement under which the receivable was recorded (e.g., triple net lease, gross lease, or other type of agreement); the tenant’s reason for slow payment; industry influences under which the tenant operates; evidence of willingness and ability of the tenant to pay the receivable; credit-worthiness of the tenant; collateral, security deposit, letters of credit or other monies held as security; tenant’s historical payment pattern; other contractual agreements between the tenant and the Company; relationship between the tenant and the Company; the state in which the tenant operates; and the existence of a guarantor and the willingness and ability of the guarantor to pay the receivable. Considering these factors and others, management concludes whether all or some of the aged receivable balance is likely uncollectible. Upon determining that some portion of the receivable is likely uncollectible, the Company will record a provision for bad debts for the amount it expects will be uncollectible. When efforts to collect a receivable are exhausted, the receivable amount is charged off against the allowance. At September 30, 2017 and December 31, 2016, the Company had an allowance for bad debts of approximately $293,000 and $154,000, respectively.

Mortgage Note and Notes Receivable
The Company evaluates collectability of its notes receivable and records allowances as necessary. A note is impaired when it is probable that the Company will be unable to collect all amountsfair value due according to the contractual termsshort term maturity of the loan as scheduled, including both contractual interest and principal payments. This assessment also includes an evaluation of the loan collateral. Ifthese investments. The following table provides a mortgage loan becomes past due, the Company will review the specific circumstances and may discontinue the accrual of interest on the loan. The loan is not returned to accrual status until the debtor has demonstrated the ability to continue debt service in accordance with the contractual terms. Loans placed on non-accrual status will be accounted for on a cash basis, in which income is recognized only upon the receiptreconciliation of cash or on a cost-recovery basis, in which alland cash receipts reduce the carrying value of the loan, based on the Company's expectation of future collectability.equivalents and restricted cash:

 Balance as of March 31,
(Dollars in thousands)20212020
Cash and cash equivalents$5,605 $3,326 
Restricted cash398 282 
Cash, cash equivalents and restricted cash$6,003 $3,608 
The Company had one mortgage note receivable outstanding as of September 30, 2017 and December 31, 2016 with a principal balance of $10.6 million and $10.9 million, respectively. Principal and interest are due monthly based on a 20-year amortization schedule, with a balloon payment due at maturity on September 30, 2026. At September 30, 2017 and December 31, 2016, approximately $336,000 and $87,000, respectively, in interest was due from the borrower and is included in other assets on our Condensed Consolidated Balance Sheets, of which approximately $253,000 and $0, respectively, was past due in accordance the terms of the underlying note.

The borrower and several related entities filed for voluntary bankruptcy on June 23, 2017. Upon filing for bankruptcy, the borrower was current on all obligations to the Company but no payments have been received during the bankruptcy. The Company has evaluated the collectability of the mortgage note which included an evaluation of the loan collateral, and based on information currently available, has determined that no impairment is required. As a result of the loan's past due status and the related circumstances surrounding the loan, the Company will continue to closely review the circumstances and reserve against accrued interest as needed based on events as they occur. The Company will continue to evaluate the collectability of the note as additional information becomes available.

The Company may receive loan or commitment fees upon the funding of a mortgage note. The Company will amortize those fees into income over the life of the mortgage note on a straight-line basis and will reflect the mortgage note, net of the unamortized fees, on its Consolidated Balance Sheet.

Stock-Based Compensation
The Company's 2014 Incentive Plan, as amended, (our "2014 Incentive Plan"), is intended to attract and retain qualified persons upon whom, in large measure, our sustained progress, growth and profitability depend, to motivate the participants to achieve long-term company goals and to more closely align the participants’ interests with those of our other stockholders by providing them with a proprietary interest in our growth and performance. The three distinct programs under the 2014 Incentive Plan are the Amended and Restated Alignment of Interest Program, the Amended and Restated Executive Officer Incentive Program and the Non-Executive Officer Incentive Program. Our executive officers, officers, employees, consultants and non-employee directors are eligible to participate in the 2014 Incentive Plan. The 2014 Incentive Plan increases, on an annual basis, the number of shares of common stock available for issuance to an amount equal to 7% of the total number of shares of the Company’s common stock

12

Notes to Condensed Consolidated Financial Statements - Continued

outstanding on December 31 of the immediately preceding year. The 2014 Incentive Plan is administered by the Company’s compensation committee, which interprets the 2014 Incentive Plan and has broad discretion to select the eligible persons to whom awards will be granted, as well as the type, size and terms and conditions of each award, including the number of shares subject to awards and the expiration date of, and the vesting schedule or other restrictions (including, without limitation, restrictive covenants) applicable to, awards. The Company recognizes share-based payments to its directors and employees in its Condensed Consolidated Statements of Income on a straight-line basis over the requisite service period based on the fair value of the award on the measurement date.

Intangible Assets
Intangible assets with indefinite lives are not amortized, but are tested at least annually for impairment. Intangible assets with finite lives are amortized over their respective lives to their estimated residual values and are reviewed for impairment only when impairment indicators are present.

Identifiable intangible assets of the Company are generally comprised of in-place lease intangible assets, above- and below-market lease intangibles and deferred financing costs. In-place lease intangible assets are amortized on a straight-line basis over the applicable lives of the assets. Deferred financing costs are amortized to interest expense over the term of the related credit facility or other debt instrument using the straight-line method, which approximates the effective interest method.

Contingent Liabilities
From time to time, the Company may be subject to loss contingencies arising from legal proceedings and similar matters. Additionally, while the Company maintains comprehensive liability and property insurance with respect to each of its properties, the Company may be exposed to unforeseen losses related to uninsured or under-insured damages.

Management will monitor any matter that may present a contingent liability, and, on a quarterly basis, will review any reserves and accruals relating to the liabilities, adjusting provisions as necessary based on changes in available information. Liabilities for contingencies are first recorded when a loss is determined to be both probable and can be reasonably estimated. Changes in estimates regarding the exposure to a contingent loss will be reflected as adjustments to the related liability in the periods when they occur and will be disclosed in the notes to the Condensed Consolidated Financial Statements.

On occasion, the Company may also have acquisitions which include contingent consideration. In 2016, the Company acquired a medical office building and concurrently recorded the fair value of contingent purchase price of approximately $0.5 million. Subsequently, management monitored this contingency and adjusted its liability to its estimated fair value on a quarterly basis, offsetting property operating expense in the periods when they occurred. In April 2017, the Company paid approximately $0.4 million in settlement of this contingent liability.


Income Taxes
The Company has elected to be taxed as a real estate investment trust ("REIT"), as defined under the Internal Revenue Code of 1986, as amended (the "Code"). WeThe Company and one subsidiary have also elected for one of our subsidiariesthat subsidiary to be treated as a taxable REIT subsidiary ("TRS"), which is subject to federal and state income taxes. No provision has been made for federal income taxes for the REIT; however, the Company has made provisions for federal and staterecorded income taxestax expense or benefit for the TRS.TRS to the extent applicable. The Company also evaluates the realizability of its deferred tax assets and will record valuation allowances if it is determined that more likely than not the asset will not be recovered. The Company intends at all times to qualify as a REIT under Sections 856 and 860 of the Code. The Company must distribute at least 90% per annum of its REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with generally accepted accounting principles) and meet other requirements to continue to qualify as a real estate investment trust.REIT.


New Accounting Pronouncements
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company classifies interestcontinues to evaluate the impact of the guidance and penalties related to uncertain tax positions, if any,may apply other elections as applicable as additional changes in the Condensed Consolidated Statements of Income as a component of general and administrative expenses.market occur.


Sales and Use Taxes


13
9

Notes to Condensed Consolidated Financial Statements - Continued

The Company must pay sales and use taxes to certain state tax authorities based on rent collected from tenants in properties located in those states. The Company is generally reimbursed for those taxes by those tenants. The Company accounts for the payments to the taxing authority and subsequent reimbursement from the tenant on a net basis, included in tenant reimbursement revenue on the Company’s Condensed Consolidated Statements of Income.

Concentration of Credit Risks
Our credit risks primarily relate to cash and cash equivalents, our mortgage note receivable and our interest rate swaps, which are discussed below. Cash and cash equivalents are primarily held in bank accounts and overnight investments. We maintain our bank deposit accounts with large financial institutions in amounts that often exceed federally-insured limits. We have not experienced any losses in such accounts.

Derivative Financial Instruments
In the normal course of business, we are subject to risk from adverse fluctuations in interest rates. We have chosen to manage this risk through the use of derivative financial instruments, or interest rate swaps. Counterparties to these contracts are major financial institutions. We are exposed to credit loss in the event of nonperformance by these counterparties. We do not use derivative instruments for trading or speculative purposes. Our objective in managing exposure to market risk is to limit the impact on cash flows. To qualify for hedge accounting, our interest rate swaps must effectively reduce the risk exposure that they are designed to hedge. In addition, at inception of a qualifying cash flow hedging relationship, the underlying transaction or transactions must be, and be expected to remain, probable of occurring in accordance with our related assertions. All of our hedges are cash flow hedges and are recognized at their fair value in the Condensed Consolidated Balance Sheets. Changes in the fair value of the derivatives are recognized in accumulated other comprehensive loss.

Earnings per Share
Basic earnings per common share is calculated using weighted average shares outstanding less issued and outstanding non-vested shares of common stock. Diluted earnings per common share is calculated using weighted average shares outstanding plus the dilutive effect of the non-vested shares of common stock using the treasury stock method and the average stock price during the period.

New Accounting Pronouncements
On July 1, 2017, the Company adopted the Financial Accounting Standard Board's ("FASB") ASU No. 2017-12, Derivatives and Hedging Topic 815: Targeted Improvements to Accounting for Hedging Activities, ("ASU 2017-12"). ASU 2017-12 is intended to better align an entity’s financial reporting for hedging activities with the economic objectives of those activities. Upon adoption of ASU 2017-12, the cumulative ineffectiveness that a company had previously recognized on existing cash flow and net investment hedges is adjusted and removed from beginning retained earnings and placed in accumulated other comprehensive income. The adoption of ASU 2017-12 did not have an impact on our financial statements as we had not previously recognized any hedge ineffectiveness related to our existing cash flow hedges. In future periods, for hedges that are deemed highly effective, we will no longer need to recognize any hedge ineffectiveness, and all gains or losses will be recognized in other comprehensive income.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). This standard requires a lessor to classify leases as either sales-type, finance or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing. If the lessor doesn’t convey risks and rewards or control, an operating lease results. ASU 2016-02 is effective for fiscal years, and interim periods within, beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessors for sales-type, direct financing, and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. Lease components will continue to be recognized on a straight-line basis over the lease term and certain non-lease components will be accounted for under the new revenue recognition guidance in the Revenue ASUs. The Company is still evaluating the complete impact of the adoption of ASU 2016-02 on January 1, 2019 to its consolidated financial position, results of operations and disclosures.

14

Notes to Condensed Consolidated Financial Statements - Continued


Between May 2014 and May 2016, the FASB issued three ASUs changing the requirements for recognizing and reporting revenue (together, herein referred to as the “Revenue ASUs”): (i) ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), (ii) ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”) and (iii) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”). ASU 2014-09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2016-12 provides practical expedients and improvements on the previously narrow scope of ASU 2014-09. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 defers the effective date of ASU 2014-09 by one year to fiscal years, and interim periods within, beginning after December 15, 2017. The Company intends on adopting the Revenue ASUs on January 1, 2018. A reporting entity may apply the amendments in the Revenue ASUs using either a modified retrospective approach, by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or full retrospective approach.

The primary source of revenue for the Company is generated through leasing arrangements, which are excluded from the Revenue ASUs. However, we expect that the recognition of non-lease revenue will be impacted due to the principle versus agent considerations in the Revenue ASUs that will become effective upon the adoption of ASU 2016-02 on January 1, 2019. Also, under ASU 2014-09, revenue recognition for real estate sales is largely based on the transfer of control versus continuing involvement under current guidance. The Company has not yet elected a transition method and is evaluating the complete impact of the adoption of the Revenue ASUs on January 1, 2018 to its consolidated financial position, results of operations and disclosures. The Company expects to complete its overall evaluation of the impact of the Revenue ASUs during the fourth quarter of 2017, with continued evaluations during 2018 of the impact to its non-lease revenue upon adoption of ASU 2016-02 in 2019.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses, ("ASU 2016-13"), which changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, companies will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, companies will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. Companies will have to disclose significantly more information, including information they use to track credit quality by year of origination for most financing receivables. Companies will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. This standard is effective for the Company on January 1, 2020 with early adoption permitted. The Company is in the initial stage of evaluating the impact of this new standard on its notes and trade receivables.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments, ("ASU 2016-15"), which clarifies or provides guidance relating to eight specific cash flow classification issues. The standard should be applied retrospectively for each period presented, as appropriate. This new standard is effective for the Company on January 1, 2018 with early adoption permitted. Of the eight areas addressed, the Company expects that its presentation on its statements of cash flows could be impacted relating to cash payments of contingent consideration or settlement of insurance claims, based on historical transactions. In the future, however, the impact of this new guidance will depend on future transactions, though the impact will only be related to the classification of those items on the statement of cash flows and will not impact the Company's cash flows or its results of operations.

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718), ("ASU 2017-09"), which provides guidance about which changes in the terms or conditions of a share-based payment award require a company to apply modification accounting in Topic 718. Under ASU No. 2017-09, a company will generally be required to apply modification accounting unless the fair value or intrinsic value of the modified award, the vesting conditions of the modified award, and the classification of the modified award as equity or a liability are

15

Notes to Condensed Consolidated Financial Statements - Continued

the same as the original award immediately before the award is modified. This standard is effective for the Company on January 1, 2018 with early adoption permitted. The Company does not believe the adoption of this standard will have an impact on its results of operations, but could impact the accounting on future modifications of share-based awards.


Note 2. Real Estate InvestmentsProperties


At September 30, 2017, the CompanyAs of March 31, 2021, we had investments of approximately $358.0$801.0 million in 80147 real estate properties including(including a mortgage note.portion of 1 property accounted for as a financing lease with a gross amount totaling approximately $3.0 million and 1 property classified as held for sale with a gross amount totaling approximately $1.1 million). The Company's investments are diversified by property type, geographic location, and tenant as shown in the following table summarizes the Company's real estate investments.tables:
Property Type# of PropertiesGross Investment
(in thousands)
Medical Office Building55 $256,204 
Acute Inpatient Behavioral130,257 
Inpatient Rehabilitation Facilities127,676 
Specialty Centers34 106,054 
Physician Clinics28 80,886 
Surgical Centers and Hospitals10 54,071 
Behavioral Specialty Facilities30,945 
Long-term Acute Care Hospitals14,937 
Total147 $801,030 

State# of PropertiesGross Investment
(in thousands)
Texas14 $131,131 
Illinois16 119,233 
Florida14 65,649 
Ohio18 63,188 
Massachusetts35,298 
All Others (Less than 4%)83 386,531 
Total147 $801,030 

Primary Tenant# of PropertiesGross Investment
(in thousands)
US Healthvest$77,964 
Everest Rehabilitation57,100 
Genesis Care38,450 
Summit Behavioral Healthcare25,155 
All Others131 602,361 
Total147 $801,030 



(Dollars in thousands)
Number of Facilities 
Land and
Land Improvements
 Buildings, Improvements, and Lease Intangibles 

Personal
Property
 


Total
 

Accumulated Depreciation
Medical office buildings:           
Florida4
 $4,138
 $23,777
 $
 $27,915
 $2,168
Ohio5
 3,167
 23,518
 
 26,685
 2,912
Texas3
 3,096
 12,315
 
 15,411
 2,950
Kansas2
 1,427
 10,497
 
 11,924
 2,317
Iowa1
 2,241
 8,979
 
 11,220
 885
Illinois2
 1,134
 11,791
 
 12,925
 1,374
Virginia1
 369
 4,649
 
 5,018
 156
Other states13
 3,273
 22,695
 
 25,968
 1,970
 31
 18,845
 118,221
 
 137,066
 14,732
Physician clinics:           
Kansas3
 1,638
 10,899
 
 12,537
 1,780
Florida3
 
 5,950
 
 5,950
 462
Illinois1
 1,891
 3,134
 
 5,025
 31
Other states9
 3,195
 18,461
 
 21,656
 2,719
 16
 6,724
 38,444
 
 45,168
 4,992
Surgical centers and hospitals:           
Louisiana1
 1,683
 21,353
 
 23,036
 444
Indiana1
 523
 14,405
 
 14,928
 188
Michigan2
 628
 8,272
 
 8,900
 1,713
Illinois1
 2,183
 5,410
 
 7,593
 634
Florida1
 271
 7,004
 
 7,275
 118
Arizona2
 576
 5,389
 
 5,965
 874
Other states5
 1,555
 11,001
 
 12,556
 2,675
 13
 7,419
 72,834
 
 80,253
 6,646
Specialty centers:           
Alabama3
 415
 4,417
 
 4,832
 1,170
Nevada1
 276
 4,402
 
 4,678
 183
Kentucky1
 193
 3,432
 
 3,625
 732
Other states10
 1,716
 15,227
 
 16,943
 1,786
 15
 2,600
 27,478
 
 30,078
 3,871
Behavioral facilities:           
West Virginia1
 2,138
 22,897
 
 25,035
 7
Illinois1
 1,300
 18,803
 
 20,103
 627
Ohio1
 514
 4,153
 
 4,667
 52
Indiana1
 270
 2,651
 
 2,921
 127
 4
 4,222
 48,504
 
 52,726
 813
Corporate property
 
 2,011
 112
 2,123
 99
Total owned properties79
 $39,810
 $307,492
 $112
 $347,414
 $31,153
Mortgage note receivable, net1
 
 
 
 10,633
 
     Total real estate investments80
 $39,810
 $307,492
 $112
 $358,047
 $31,153

17

Notes to Condensed Consolidated Financial Statements - Continued

Note 3. Real Estate Leases


The Company’s properties are generally leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2033.2039. The Company’s leases generally require the lessee to pay minimum rent, with fixed rent renewal terms or increases based on a Consumer Price Index and may also include additional rent, which may include the reimbursement of taxes (including property tax)taxes), insurance, maintenance and other operating costs associated with the leased property.

10

Notes to Condensed Consolidated Financial Statements - Continued

Some leases provide the lessee, during the term of the lease, with an option or right of first refusal to purchase the leased property. Some leases also allow the lessee to renew or extend their lease term or in some cases terminate their lease, based on conditions provided in the lease.

Future minimum lease payments under the non-cancelable operating leases due to the Company for the years ending December 31, as of September 30, 2017,March 31, 2021, are as follows (in thousands):
2021 (nine months ending December 31)$54,162 
202269,078 
202364,608 
202461,072 
202556,774 
2026 and thereafter365,330 
$671,024 
2017$8,292
201830,409
201927,202
202024,497
202121,541
2022 and thereafter134,018
 $245,959


Straight-line rental income
Rental income is recognized as earned over the life of the lease agreement on a straight-line basis when collection of rental payments over the term of the lease is probable. Straight-line rent included in rental income was approximately $0.8 million and $0.9 million, respectively, for the three months ended March 31, 2021 and 2020.


Note 4. Real Estate Acquisitions and Dispositions


Property2021 Real Estate Acquisitions
During the thirdfirst quarter of 2017,2021, the Company acquired two6 real estate properties totaling approximately 147,000 square feet for an aggregate purchase price and cash consideration of approximately $28.3 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations ranging from 2022 through 2032. In addition, we funded a $5.0 million mezzanine loan to the tenant of one of the properties. Amounts reflected in revenues and net income for the three months ended September 30, 2017 for these properties was approximately $44,000 and $31,000, respectively. Transaction costs totaling approximately $65,000 related to these acquisitions were capitalized in the period as part of the real estate assets and approximately $11,000 was expensed related to the mezzanine loan.

During the second quarter of 2017, the Company acquired 10 real estate properties totaling approximately 203,000 square feet for an aggregate purchase price of approximately $36.2 million, including cash consideration of approximately $35.9 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations ranging from 2019 through 2032.2036. Amounts reflected in revenues and net income for these properties for the ninethree months ended September 30, 2017 for these properties wasMarch 31, 2021 were approximately $1.3$0.7 million and $0.6$0.4 million, respectively. Transactionrespectively, and transaction costs totaling approximately $0.3$0.2 million relatedwere capitalized relating to these acquisitions were capitalized inproperty acquisitions. Concurrent with the period as part of the real estate assets.

During the first quarter of 2017,acquisitions, the Company acquired 10 real estate properties totaling approximately 145,000 square feet for an aggregate purchase priceentered into a $6.0 million term loan and a revolver loan up to $4.0 million with the tenant on two of approximately $28.5 million, including cash consideration of approximately $28.4 million. Upon acquisition, the properties were 95.2% leased in the aggregate with lease expirations ranging from 2018 through 2032. Amounts reflected in revenues and net income for the nine months ended September 30, 2017 for these properties was approximately $1.9 million and $0.5 million, respectively. Transaction costs totaling approximately $0.4 million related to these acquisitions were capitalized in the period as part of the real estate assets. During the first quarter of 2017, the Company also acquired a property, adjacent to its corporate office, for a cash purchase price of approximately $0.9 million. The property is currently leased to a tenant but the Company intends to use the property for future expansion of its corporate office.properties.


Location
Property
Type (1)
Date
Acquired
Purchase
Price
Cash
Consideration
Real EstateOtherSquare Footage
(000's)(000's)(000's)(000's)
Brenham, TXPC01/19/21$5,029 $5,034 $5,072 $(38)37,354 
Lexington, VAPC01/25/213,101 3,142 3,151 (9)15,820 
Toledo, OHBSF02/05/214,825 4,893 4,893 13,290 
Hudson, OHBSF02/05/214,825 4,892 4,892 13,290 
Oklahoma City, OKIRF03/01/2121,000 21,025 21,025 39,637 
Keller, TXIRF03/01/2121,000 21,021 21,021 39,761 
$59,780 $60,007 $60,054 $(47)159,152 
(1) PC - Physician Clinic; BSF - Behavioral Specialty Facility; IRF - Inpatient Rehabilitation Facility
18
11

Notes to Condensed Consolidated Financial Statements - Continued

The following table summarizes the estimatedrelative fair values of the assets acquired and liabilities assumed in the property acquisitions for the ninethree months ended September 30, 2017.
March 31, 2021.
 Estimated Fair Value Estimated Useful Life
 (In thousands) (In years)
Land and land improvements$9,715
 5 - 7.5
Building and building improvements74,891
 20 - 40
Intangibles:   
In place lease intangibles9,527
 1.4 - 8.9
Total intangibles9,527
  
Accounts receivable and other assets assumed32
  
Accounts payable, accrued liabilities and other liabilities assumed (1)
(416)  
Prorated rent, interest and operating expense reimbursement amounts collected(307)  
Total cash consideration$93,442
  
    
(1) Includes security deposits received.
Relative
Fair Value
Estimated
Useful Life
(in thousands)(in years)
Land and land improvements$7,813 13.2
Building and building improvements49,630 46.4
Intangibles:
At-market lease intangibles2,611 4.2
Total intangibles2,611 
Accounts payable, accrued liabilities and other liabilities assumed(12)
Prorated rent, interest and operating expense reimbursement amounts collected(35)
Total cash consideration$60,007 



Asset Held for Sale
Pursuant to the exercise of a purchase option by a tenant, the Company entered into a sales contract to dispose of a medical office building in Haleyville, Alabama during the first quarter of 2021. Assets held for sale totaling approximately $1.0 million are included in Other assets, net and Liabilities held for sale totaling $35,000 are included in Other liabilities, net on the Condensed Consolidated Balance Sheet as of March 31, 2021.

Note 5. Debt, net


The table below details the Company's debt as of September 30, 2017March 31, 2021 and December 31, 2016.2020.
Balance as of
(Dollars in thousands)March 31, 2021December 31, 2020Maturity Dates
Revolving Credit Facility$7,000 $33,000 3/26
A-1 Term Loan, net49,908 n/a
A-2 Term Loan, net49,749 49,828 3/24
A-3 Term Loan, net74,396 74,524 3/26
A-4 Term Loan, net124,211 3/28
Mortgage Note Payable, net5,090 5,114 5/24
$260,446 $212,374 
 Balance as of 
(Dollars in thousands)
September 30,
 2017
December 31, 2016Maturity Dates
    
Revolving Credit Facility$
$51,000
8/19
5-Year Term Loan, net29,648

3/22
7-Year Term Loan, net29,636

3/24
 $59,284
$51,000
 


On March 29, 2017, we19, 2021, Community Healthcare Trust Incorporated, as borrower, entered into a secondthird amended and restated credit agreement (the “Third Amended and Restated Credit Facility (as amendedAgreement”) with a syndicate of lenders, under which Truist Bank serves as administrative agent. The Third Amended and restated,Restated Credit Agreement amends and restates the "Credit Facility"). TheSecond Amended and Restated Credit Facility isAgreement dated as of March 29, 2017, by and among the Company’s operating partnership, Community Healthcare OP, LP, the Company, the Lenders from time to timeseveral banks and financial institutions party thereto as lenders (collectively, the “Lenders”), and SunTrust Bank (the predecessor in interest to Truist Bank), as Administrative Agent.the administrative agent. The Company’s material subsidiaries are guarantors ofThird Amended and Restated Credit Agreement allows the obligations underCompany to borrow, through the accordion feature, up to $600.0 million, including the ability to add and fund incremental term loans (the “Credit Facility”). The Third Amended and Restated Credit Facility. The Credit Facility provides for a $150.0 millionAgreement extended the revolving credit facility (the "Revolving Credit Facility") maturity to March 19, 2026, removed collateral security provisions, repaid the five-year term loan facility in the aggregate principal amount of $50.0 million (the "A-1 Term Loan") which was set to mature
12

Notes to Condensed Consolidated Financial Statements - Continued
on March 29, 2022, entered into a new seven-year term loan facility in the aggregate principal amount of $125.0 million (the "A-4 Term Loan"), which matures on March 19, 2028, provides the Company the ability to apply lower margins to its annual interest rate after it obtains an investment grade rating of BBB-/Baa3 (or the equivalent) from a rating agency; and $100.0modified its debt covenants.

The Credit Facility, as amended, provides for a $150.0 million Revolving Credit Facility and $250.0 million in term loans (the "Term Loans"). The Credit Facility, through the accordion feature, allows borrowings up to a total of $450.0$600.0 million including the ability to add and fund additional term loans. The Revolving Credit Facility matures on August 9, 2019March 19, 2026 and includes two1 12-month optionsoption to extend the maturity date of the Revolving Credit Facility, subject to the satisfaction of certain conditions. The Term Loans include a five-year term loan facility in the aggregate principal amount of $50.0 million (the "5-Year Term Loan") which matures on March 29, 2022 and a seven-year term loan facility in the aggregate principal amount of $50.0 million (the "7-Year"A-2 Term Loan"), which matures on March 29, 2024. Upon closing2024, a seven-year term loan facility in the aggregate principal amount of the Credit Facility$75.0 million (the "A-3 Term Loan"), which matures on March 29, 2017,2026, and the Company borrowed $30.0 million under each of the 5-YearA-4 Term Loan andin the 7-Year Term Loan. Eachaggregate principal amount of the 5-Year Term Loan and 7-Year Term Loan has a delayed draw feature that is available in up to three draws within 15 months from$125.0 million, which matures on March 29, 2017, subject to a minimum draw of $10.0 million and pro forma compliance. The Company incurred approximately $784,000 in fees and other costs upon closing of the Credit Facility which are netted against the term loans and are being amortized to interest expense on a straight-line basis which approximates the effective interest method.19, 2028.


19

Notes to Condensed Consolidated Financial Statements - Continued


Amounts outstanding under the Revolving Credit Facility, as amended, bear annual interest at a floating rate that is based, at the Company’s option, on either: (i) LIBOR plus 1.75%1.25% to 2.75%1.90% or (ii) a base rate plus 0.75%0.25% to 1.75%,0.90% in each case, depending upon the Company’s leverage ratio. In addition, the Company is obligated to pay an annual fee equal to 0.25%0.20% of the amount of the unused portion of the Revolving Credit Facility if amounts borrowed are greater than 33.3% of the borrowing capacity under the Revolving Credit Facility and 0.35%0.25% of the unused portion of the Revolving Credit Facility if amounts borrowed are less than or equal to 33.3% of the borrowing capacity under the Revolving Credit Facility. At September 30, 2017, theThe Company had no balance$7.0 million outstanding under the Revolving Credit Facility withand had a remaining borrowing capacity remaining of $150.0 million.$143.0 million at March 31, 2021.


Amounts outstanding under the Term Loans, as amended, bear annual interest at a floating rate that is based, at the Company’s option, on either: (i) LIBOR plus 2.2%1.45% to 2.9%2.30% or (ii) a base rate plus 1.25%0.25% to 1.9%1.30%, in each case, depending upon the Company’s leverage ratio. In addition, theThe Company is obligated to pay an annual fee equal to 0.35% of the amount of the unused portion of the Term Loans. The Companyhas entered into interest rate swaps to fix the interest rates on the term loans as discussed inTerm Loans. See Note 6.6 for more details on the interest rate swaps. At September 30, 2017,March 31, 2021, the Company had $60.0$250.0 million outstanding under the Term Loans withwhich had a fixed weighted average interest rate under the swaps of approximately 4.34% and remaining borrowing capacity of $40.0 million.approximately 3.95%.


The Company’s ability to borrow under the Credit Facility is subject to its ongoing compliance with a number of customary affirmative and negative covenants, including limitations with respect to liens, indebtedness, distributions, mergers, consolidations, investments, restricted payments and asset sales, as well as financial maintenance covenants. Also, the Company’s present financing policy prohibits incurring debt (secured or unsecured) in excess of 40% of its total book capitalization. The Company was in compliance with its financial covenants under its Credit Facility at September 30, 2017.as of March 31, 2021.


Note 6. Derivative Financial Instruments


Risk Management Objective of Using Derivatives
The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations.



13

Notes to Condensed Consolidated Financial Statements - Continued
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective,these objectives, the Company primarily uses interest rate swaps and/or caps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above the cap strike rate on the contract.


As of September 30, 2017,March 31, 2021, the Company had two14 outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk for notional amounts totaling $60.0 million. $250.0 million, including 4 forward-starting interest rate swaps for notional amounts totaling $50.0 million, which will not become effective until March 31, 2022.

Tabular Disclosure of Fair Value of Derivative Instruments on the Balance Sheet
The Company had recordedtable below presents the fair value of its interest rate derivatives totaling approximately $386,000 in other liabilities in itsthe Company’s derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheet.Sheets as of March 31, 2021 and December 31, 2020.

Asset Derivatives Fair Value atLiability Derivatives Fair Value at
(Dollars in thousands)March 31, 2021December 31, 2020Balance Sheet ClassificationMarch 31, 2021December 31, 2020Balance Sheet Classification
Interest rate swaps$538 $Other assets, net$8,649 $11,846 Other liabilities, net

20

Notes to Condensed Consolidated Financial Statements - Continued


The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive loss ("AOCI") and isare subsequently reclassified to interest expense in the period that the hedged forecasted transaction affects earnings.


Amounts reported in accumulated other comprehensive lossAOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s Term Loans. During the next twelve months, the Company estimates that an additional $0.3$4.5 million will be reclassified from other comprehensive income ("OCI")AOCI as an increase to interest expense.


Tabular Disclosure of the Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss)
The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the three and nine months ended September 30, 2017.March 31, 2021 and 2020.
Three Months Ended
March 31,
(Dollars in thousands)20212020
Amount of unrealized gain (loss) recognized in OCI on derivatives$2,803 $(8,875)
Amount of loss reclassified from AOCI into interest expense$932 $257 
Total interest expense presented in the Condensed Consolidated Statements of Income in which the effects of the cash flow hedges are recorded$2,229 $2,249 

Tabular Disclosures of Offsetting Derivatives
The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company's derivatives as of March 31, 2021 and December 31, 2020. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Condensed Consolidated Balance Sheets.
14

Notes to Condensed Consolidated Financial Statements - Continued
(Dollars in thousands)Three Months Ended
September 30, 2017
 Nine Months Ended
September 30, 2017
Amount of gain (loss) recognized in OCI on derivative$(74) $(672)
Amount of gain (loss) reclassified from accumulated OCI into interest expense$(124) $(286)
Total Interest (Expense) presented in the Condensed Consolidated Statements of Income in which the effects of the cash flow hedges are recorded$1,091
 $2,897
Offsetting of Derivative Assets (as of March 31, 2021)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(in thousands)Gross Amounts of Recognized AssetsGross Amounts Offset in the Condensed Consolidated Balance SheetNet Amounts of Assets in the Condensed Consolidated Balance SheetsFinancial InstrumentsCash Collateral ReceivedNet Amount
Derivatives$538 $$538 $(278)$$260 


Offsetting of Derivative Liabilities (as of March 31, 2021)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(in thousands)Gross Amounts of Recognized LiabilitiesGross Amounts Offset in the Condensed Consolidated Balance SheetNet Amounts of Liabilities in the Condensed Consolidated Balance SheetsFinancial InstrumentsCash Collateral ReceivedNet Amount
Derivatives$(8,649)$$(8,649)$278 $$(8,371)

Offsetting of Derivative Assets (as of December 31, 2020)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(in thousands)Gross Amounts of Recognized AssetsGross Amounts Offset in the Condensed Consolidated Balance SheetNet Amounts of Assets in the Condensed Consolidated Balance SheetsFinancial InstrumentsCash Collateral ReceivedNet Amount
Derivatives$$$$$$

Offsetting of Derivative Liabilities (as of December 31, 2020)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(in thousands)Gross Amounts of Recognized LiabilitiesGross Amounts Offset in the Condensed Consolidated Balance SheetNet Amounts of Liabilities in the Condensed Consolidated Balance SheetsFinancial InstrumentsCash Collateral ReceivedNet Amount
Derivatives$(11,846)$$(11,846)$$$(11,846)

Credit-risk-related Contingent Features
As of September 30, 2017,March 31, 2021, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $0.4$8.6 million. As of September 30, 2017,March 31, 2021, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of approximately $0.4$8.6 million at September 30, 2017.March 31, 2021.



15

Notes to Condensed Consolidated Financial Statements - Continued
Note 7. Stockholders’ Equity


Common Stock
The following table provides a reconciliation of the beginning and ending common stock balances for the ninethree months ended September 30, 2017March 31, 2021 and for the year ended December 31, 2016:2020:
Three Months Ended
March 31, 2021
Year Ended
December 31, 2020
Balance, beginning of period23,888,090 21,410,578 
Issuance of common stock435,272 2,206,976 
Restricted stock-based awards93,762 270,536 
Balance, end of period24,417,124 23,888,090
 Nine Months Ended
September 30, 2017
Year Ended
December 31, 2016
Balance, beginning of period12,988,482
7,596,940
Issuance of common stock4,887,500
5,175,000
Restricted stock-based awards209,816
216,542
Balance, end of period18,085,798
12,988,482


ATM Program
Equity Offering
On July 26, 2017,The Company has an at-the-market offering program ("ATM Program"), with Piper Sandler & Co., Evercore Group L.L.C., Truist Securities, Inc., Regions Securities LLC, Robert W. Baird & Co. Incorporated, Fifth Third Securities, Inc. and Janney Montgomery Scott LLC., as sales agents (collectively, the “Agents”). Under the ATM Program, the Company completed a public offering of 4,887,500may issue and sell shares of its common stock, including 637,500having an aggregate gross sales price of up to $360.0 million. The shares of common stock issued in connection with the exercise in fullmay be sold from time to time through or to one or more of the underwriters' option to purchase additional shares, and received net proceeds of approximately $108.9 million after deducting underwriting discount and commissions and estimated offering expenses payableAgents, as may be determined by the Company.Company in its sole discretion, subject to the terms and conditions of the agreement and applicable law.


Proceeds fromThe Company's activity under the offering were used to repayATM Program for the outstanding balance on our revolving credit facility totaling $58.0three months ended March 31, 2021 is detailed in the table below. As of March 31, 2021, the Company had approximately $119.9 million and for investments duringremaining that may be issued under the third and fourth quarters of 2017.ATM Program.

Three Months Ended
March 31, 2021
Shares issued435,272 
Net proceeds received (in millions)
$19.9 
Average gross sales price per share$46.70 



21
16

Notes to Condensed Consolidated Financial Statements - Continued

Universal Shelf S-3 Registration Statement
On September 13, 2016, the Company filed a registration statement on Form S-3 that allows us to offer debt or equity securities (or a combination thereof) of up to $750.0 million from time to time. The Form S-3 registration statement was declared effective as of September 26, 2016. In July 2017, the Company completed an equity offering and issued approximately 4,887,500 shares of its common stock for gross proceeds of approximately $114.6 million under its Form S-3 registration statement, resulting in approximately $635.4 million remaining to be issued under the Form S-3 registration statement.

Note 8. Net Income Per Common Share


The following table sets forth the computation of basic and diluted net income per common share.
share for the three months ended March 31, 2021 and 2020, respectively.

Three Months Ended
March 31,


Three Months Ended
September 30, 2017
 Nine Months Ended
September 30, 2017
(Dollars in thousands, except per share data)2017 2016 2017 2016
(In thousands, except per share data)(In thousands, except per share data)20212020
Net income$579
 $1,064
 $1,958
 $1,688
Net income$5,315 $4,100 
Participating securities' share in earnings(200) 
 (526) 
Participating securities' share in earnings(538)(424)
Net income, less participating securities' share in earnings$379
 $1,064
 $1,432
 $1,688
Net income, less participating securities' share in earnings$4,777 $3,676 
       
Weighted average Common Shares outstanding       Weighted average Common Shares outstanding
Weighted average Common Shares outstanding16,719,150
 12,948,097
 14,319,231
 10,972,011
Weighted average Common Shares outstanding24,053 21,733 
Unvested restricted stock(477,164) (261,914) (434,755) (219,678)
Unvested restricted sharesUnvested restricted shares(1,244)(998)
Weighted average Common Shares outstanding–Basic16,241,986
 12,686,183
 13,884,476
 10,752,333
Weighted average Common Shares outstanding–Basic22,809 20,735 
Weighted average Common Shares outstanding–Basic16,241,986
 12,686,183
 13,884,476
 10,752,333
Dilutive potential common shares
 64,784
 
 49,762
Dilutive potential common shares
Weighted average Common Shares outstanding –Diluted16,241,986
 12,750,967
 13,884,476
 10,802,095
Weighted average Common Shares outstanding –Diluted22,809 20,735 
       
Basic Net Income per Common Share$0.02
 $0.08
 $0.10
 $0.16
Basic Net Income per Common Share$0.21 $0.18 
       
Diluted Net Income per Common Share$0.02
 $0.08
 $0.10
 $0.16
Diluted Net Income per Common Share$0.21 $0.18 


Note 9. Incentive Plan


UnderA summary of the activity under the Company's 2014 Incentive Plan, awards may be madeas amended, for the three months ended March 31, 2021 and 2020 is included in the form of restricted stock, cash or a combination of both. Compensationtable below, as well as compensation expense recognized from the amortization of the value of the Company's officer, employee and director shares over the applicable vesting periods during the three months ended September 30, 2017 and 2016 was approximately $0.4 million and $0.2 million, respectively, and during the nine months ended September 30, 2017 and 2016 was approximately $1.1 million and $0.5 million, respectively.periods.

Three Months Ended
March 31,
(Dollars in thousands)20212020
Stock-based awards, beginning of period1,164,518 909,892 
Stock in lieu of compensation44,625 50,245 
Stock awards49,137 53,660 
   Total stock granted93,762 103,905 
Vested shares(100)
Stock-based awards, end of period1,258,180 1,013,797 
Amortization expense$1,558 $1,019 


A summary of the activity under the 2014 Incentive Plan for the three and nine months ended September 30, 2017 and 2016 is included in the table below.

17

  Three Months Ended September 30,Nine Months Ended September 30,
  2017201620172016
Stock-based awards, beginning of period434,980
224,895
302,299
85,757
 Stock in lieu of compensation16,452
38,703
80,580
104,110
 Stock awards60,683
38,701
129,236
112,432
    Total stock granted77,135
77,404
209,816
216,542
Stock-based awards, end of period512,115
302,299
512,115
302,299


Note 10. Other Assets, net


Other assets, consists primarily of notes receivable, accounts receivable, straight-line rent receivables, prepaid assets, deferred financing costs, and above-market intangible assets. Items included in "Other assets, net"net on the Company's Condensed Consolidated Balance Sheets as of September 30, 2017March 31, 2021 and December 31, 20162020 are detailed in the table below.

Balance as of
(Dollars in thousands)March 31, 2021December 31, 2020
Notes receivable$21,630 $15,010 
Accounts and interest receivable1,522 1,675 
Straight-line rent receivable9,461 8,682 
Prepaid assets642 600 
Deferred financing costs, net1,058 479 
Leasing commissions, net1,093 1,134 
Deferred tax assets, net476 515 
Fair value of interest rate swaps538 
Above-market lease intangible assets, net581 617 
Sales-type lease receivable3,021 3,016 
Assets held for sale1,023 
Operating lease right-of-use assets821 821 
Other480 501 
$42,346 $33,050 

The Company's notes receivable mainly included:

At March 31, 2021 and December 31, 2020, notes receivable included a $14.3 million and $15.0 million, respectively, term loan, secured by all assets and ownership interests in 7 long-term acute care hospitals and 1 inpatient rehabilitation hospital owned by the borrower. The term loan will be repaid in equal monthly installments of $250,000 through the maturity date of December 31, 2025 and bears interest at 9% per annum.

At March 31, 2021, notes receivable included a $6.0 million term loan and $1.1 million drawn at March 31, 2021 of a $4.0 million revolving credit facility, secured by assets and ownership interests of 6 geriatric behavioral hospitals and affiliated companies all of which are co-borrowers on the loans. The term loan bears interest at 9% per annum, with interest only payments due for the first year and then equal monthly installments of principal payments due beginning March 31, 2022. The term loan facility matures on July 1, 2027. The revolving credit facility bears interest at 9% per annum and matures on December 31, 2025.

The Company identified the borrowers of these notes as variable interest entities ("VIEs"), but management determined that the Company was not the primary beneficiary of the VIEs because we lack either directly or through related parties any material impact in the activities that impact the borrowers' economic performance. We are not obligated to provide support beyond our stated commitment to the borrowers, and accordingly our maximum exposure to loss as a result of this relationship is limited to the amount of our outstanding notes receivable.
18


 Balance as of
(Dollars in thousands)September 30, 2017December 31, 2016
Notes receivable$5,704
$
Accounts receivable1,918
2,472
Straight-line rent receivables1,723
744
Allowance for doubtful accounts(293)(154)
Prepaid assets355
260
Deferred financing costs, net716
1,010
Above-market intangible assets, net
25
Other653
486
 $10,776
$4,843
The VIEs that we have identified at March 31, 2021 are summarized in the table below.

Classification
Carrying Amount
(in millions)
Maximum Exposure to Loss
(in millions)
Note receivable$14.3 $14.3 
Note receivable$1.1 $1.1 
Note receivable$6.0 $6.0 

Note 11. Other Liabilities, net

Other liabilities, net on the Company's Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 are detailed in the table below.

Balance as of
(Dollars in thousands)March 31, 2021December 31, 2020
Deferred rent$3,587 $2,596 
Security deposits4,208 4,141 
Below-market lease intangibles, net576 613 
Fair value of derivatives8,649 11,846 
Lease liability795 793 
Liabilities held for sale35 
Other403 380 
$18,253 $20,369 

Note 11.12. Fair Value of Financial Instruments


The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practical to estimate the fair value.


Cash and cash equivalents and restricted cash - The carrying amount approximates the fair value.


Mortgage note receivable - The fair value is estimated using cash flow analyses, based on an assumed market rate of interest or at a rate consistent with the rates on mortgage notes acquired by the Company.

Notes receivable - The fair value is estimated using cash flow analyses, based on an assumed market rate of interest or at a rate consistent with the rates on notes carried by the Company.Company and are classified as level 2 in the hierarchy.


Borrowings under our Credit Facility - The carrying amount approximates the fair value because the borrowings are based on variable market interest rates.



Derivative financial instruments - The fair value is estimated using discounted cash flow techniques. These techniques incorporate primarily level 2 inputs. The market inputs are utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation model for interest rate swaps are observable in active markets and are classified as level 2 in the hierarchy.

Mortgage note payable - The fair value is estimated using cash flow analyses which are based on an assumed market rate of interest or at a rate consistent with the rates on mortgage notes assumed by the Company and are classified as level 2 in the hierarchy.

19


The table below details the fair values and carrying values for our notes receivable, interest rate swaps, and mortgage note and notes receivablepayable at September 30, 2017March 31, 2021 and December 31, 2016,2020, using Levellevel 2 inputs.

March 31, 2021December 31, 2020
(Dollars in thousands)Carrying ValueFair ValueCarrying ValueFair Value
Notes receivable$21,630 $22,063 $15,010 $15,010 
Interest rate swap asset$538 $538 $$
Interest rate swap liability$8,649 $8,649 $11,846 $11,846 
Mortgage note payable$5,151 $5,391 $5,180 $5,432 

 September 30, 2017 December 31, 2016
(Dollars in thousands)Carrying ValueFair Value Carrying ValueFair Value
Mortgage note receivable$10,633
$10,633
 $10,786
$10,786
Notes receivable$5,704
$5,669
 $
$


Note 12.13. Subsequent Events


Dividend Declared
On November 2, 2017,April 29, 2021, the Company’s Board of Directors declared a quarterly common stock dividend in the amount of $0.395$0.43 per share. The dividend is payable on December 1, 2017May 28, 2021 to stockholders of record on November 17, 2017.May 14, 2021.


PropertyReal Estate Acquisitions
During the fourth quarter of 2017, through November 7, 2017,Subsequent to March 31, 2021, the Company acquired three real estate properties totaling1 property for a purchase price of approximately 105,500 square feet for an aggregate purchase price$4.2 million and cash consideration of approximately $25.9$3.5 million. Upon acquisition, the properties were 100%The property was approximately 90.9% leased with lease expirations ranging from 2025 through 2032. These acquisitions were2028. This acquisition was funded with net proceeds remaining from the Company's July 2017 equity offering and from the Company's Revolving Credit Facility.cash on hand.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Disclosure Regarding Forward-Looking Statements
This report and other materials that Community Healthcare Trust Incorporated (the "Company") has filed or may file with the Securities and Exchange Commission, as well as information included in oral statements or other written statements made, or to be made, by management of the Company, contain, or will contain,contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “believes”, “expects”, “may”, “should”, “seeks”, “approximately”, “intends”, “plans”, “estimates”, “anticipates” or other similar words or expressions, including the negative thereof. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections or other forward-looking information. Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. Because forward-looking statements relate to future events, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company’s control. Thus, the Company’s actual results and financial condition may differ materially from those indicated in such forward-looking statements. Some factors that might cause such a difference include the following: general volatility of the capital markets and the market price of the Company’s common stock, changes in the Company’s business strategy, availability, terms and deployment of capital, the Company’s ability to refinance existing indebtedness at or prior to maturity on favorable terms, or at all, changes in the real estate industry in general, interest rates or the general economy, adverse developments related to the healthcare industry, the degree and nature of the Company’s competition, the ability to consummate acquisitions under contract, effects on global and national markets as well as businesses resulting from the COVID-19 pandemic, and the other factors described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, the Company's Quarterly Reports on Form 10-Q for the three months ended March 31, 2017 and June 30, 2017,2020, and the Company’s other filings with the Securities and Exchange Commission from time to time. Readers are therefore cautioned not to place undue reliance on the forward-looking statements contained herein which speak only as of the date hereof. The Company intends these forward-looking statements to speak only as of the time of this report and the Company undertakes no obligation to update forward-looking statements, whether as a result of new information, future developments, or otherwise, except as may be required by law.


The purpose of this Management's Discussion and Analysis ("MD&A") is to provide an understanding of the Company's consolidated financial condition, results of operations and cash. MD&A is provided as a supplement to, and should be read in conjunction with, the Company's Condensed Consolidated Financial Statements and accompanying notes.


Overview
References such as "we," "us," "our," and "the Company" mean Community Healthcare Trust Incorporated, a Maryland corporation, and its consolidated subsidiaries, including Community Healthcare OP, LP, a Delaware limited partnership of which we are the sole general partner (the "OP").subsidiaries.


We were organized in the State of Maryland on March 28, 2014. We are a self-administered, self-managed healthcare real estate investment trust, or REIT, that acquires and owns properties that are leased to hospitals, doctors, healthcare systems or other healthcare service providers in our target submarkets. The Company conducts its business through an UPREIT structure in which its properties are owned by the OP, either directly or through subsidiaries. The Company is the sole general partner, owning 100% of the OP units.providers.




21


Trends and Matters Impacting Operating Results

Management will monitormonitors factors and trends that it believes are important to the Company and the REIT industry in order to gauge their potential impact on the operations of the Company. Certain of the factors and trends that management believes may impact the operations of the Company are discussed below.


PropertyReal estate acquisitions

During the thirdfirst quarter of 2017,2021, the Company acquired twosix real estate properties totaling approximately 147,000159,000 square feet for an aggregate purchase price of approximately $59.8 million and cash consideration of approximately $28.3$60.0 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations ranging from 2022 through 2032. In addition, we funded2036. Concurrent with the acquisitions, the Company entered into a $5.0$6.0 million mezzanineterm loan and a revolver loan up to $4.0 million with the tenant on two of one ofthese properties. These acquisitions were funded with cash on hand, proceeds from the properties.

DuringCompany's ATM Program, and proceeds from the second quarter of 2017, the Company acquired 10 real estate properties totaling approximately 203,000 square feet for an aggregate purchase price of approximately $36.2 million, including cash consideration of approximately $35.9 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations ranging from 2019 through 2032.

During the first quarter of 2017, the Company acquired ten real estate properties totaling approximately 145,000 square feet for an aggregate purchase price of approximately $28.5 million, including cash consideration of approximately $28.4 million. Upon acquisition, the properties were approximately 95.2% leased in the aggregate with lease expirations ranging from 2018 through 2032. During the first quarter of 2017, the Company also acquired a property, adjacent to its corporate office, for a cash purchase price of approximately $0.9 million. The property is currently leased to a tenant but the Company intends to use the property for future expansion of its corporate office.

Company's Revolving Credit Facility. See Note 4 to the Condensed Consolidated Financial Statements for more details on these acquisitions.


Subsequent acquisitions

During the fourth quarter of 2017, through November 7, 2017,to March 31, 2021, the Company acquired three real estate properties totalingone property for a purchase price of approximately 105,500 square feet for an aggregate purchase price$4.2 million and cash consideration of approximately $25.9$3.5 million. Upon acquisition, the properties were 100%The property was approximately 90.9% leased with lease expirations ranging from 2025 through 2032. These acquisitions were2028. This acquisition was funded with net proceeds remaining from the Company's July 2017 equity offering and from the Company's Revolving Credit Facility.cash on hand.


Acquisition Pipeline

The Company has fourtwo properties under definitive purchase agreements for an aggregate expected purchase price of approximately $20.3 million. The Company's$8.4 million and expected return on these investments range from approximately 9% to 10.5%. The Company anticipates these properties will close during the fourth quarter.  However, the Company is currently performing due diligence procedures customary for these types of transactions and cannot provide assurance as to the timing of when, or whether, these transactions will actually close.

The Company also has three properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase pricereturns of approximately $40.4 million.9.3%. The Company expects to close on one of these properties sometime in the first half of 2018 and expects to close on the remaining two properties sometime induring the second halfor third quarter of 2018. The Company's expected aggregate return on these investments ranges up to approximately 11%.  However,2021; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close.

The Company anticipates fundingexpects to fund these investmentsacquisitions with cash from operations, throughon hand, proceeds from its Credit Facility or from netthe Company's ATM Program, and proceeds from additional debt or equity offerings.the Company's Revolving Credit Facility.



Asset Held for Sale
Pursuant to the exercise of a purchase option by a tenant, the Company entered into a sales contract to dispose of a medical office building in Haleyville, Alabama during the first quarter of 2021. The Company expects to close on this transaction in the second quarter of 2021 and expects to recognize a gain on the sale. Assets held for sale totaling approximately $1.0 million are included in Other assets, net and Liabilities held for sale totaling $35,000 are included in Other liabilities, net on the Condensed Consolidated Balance Sheet as of March 31, 2021.

Leased square footage

As of September 30, 2017,March 31, 2021, our real estate portfolio was approximately 92.1%89.1% leased. During the third quarterfirst three months of 2017,2021, we had expiring or terminated leases related to approximately 40,0007,000 square feet, and we leased or renewed leases relating to approximately 20,00021,000 square feet.


Equity OfferingCOVID-19 pandemic

During 2020, the world was, and continues to be, impacted by the novel coronavirus (COVID-19) pandemic. COVID-19 and measures to prevent its spread impacted many healthcare providers, including some of our tenants. During 2020, some of them were not seeing patients, others saw a reduced number of elective procedures and/or patient visits, while others experienced limited impact, or even saw improved cash flows from either increases in census or government funding.
On July 26, 2017,During 2020, as a result of the pandemic, the Company completed a public offeringentered into deferral agreements with 18 tenants, with deferrals representing less than one percent of 4,887,500 shares of its common stock, including 637,500 shares of common stock issuedour annualized rent in connection with the exercise in full ofaggregate. Amounts due under the underwriters' optiondeferral agreements were generally repaid during 2020, however, at March 31, 2021, there was approximately $51,000 remaining to purchase additional shares,be billed and received net proceeds of approximately $108.9 million after deducting underwriting discount and commissions and estimated offering expenses payable by the Company.

Proceeds from the offering were used to repay the outstanding balance on our revolving credit facility totaling $58.0 million and for investmentspaid during the third and fourth quartersremainder of 2017.2021.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that are reasonably likely to have a material effect on the Company's consolidated financial condition, results of operations or liquidity.

Inflation

We believe inflation will have a minimal impact on the operating performance of our properties. Many of our lease agreements contain provisions designed to mitigate the adverse impact of inflation. These provisions include clauses that enable us to receive payment of increased rent pursuant to escalation clauses which generally increase rental rates during the terms of the leases. These escalation clauses often provide for fixed rent increases or indexed escalations (based upon the Consumer Price Index or other measures). However, some of these contractual rent increases may be less than the actual rate of inflation. Generally, our lease agreements require the tenant to pay property operating expenses, including maintenance costs, real estate taxes and insurance. This requirement reduces our exposure to increases in these costs and property operating expenses resulting from inflation.


Seasonality

We do not expect our business to be subject to material seasonal fluctuations.

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New Accounting Pronouncements

See Note 1 to the Company’s Condensed Consolidated Financial Statements accompanying this report for information on new accounting standards recently adopted and not yet adopted.





Results of Operations

The Company's results of operations for the three months ended September 30, 2017March 31, 2021 compared to the same period in 20162020 have most significantly been impacted by its real estate acquisitions. As of September 30, 2017March 31, 2021 and 2016,2020, the Company had investments in real estate properties including a mortgage note, totaling approximately $358.0$801.0 million (including a portion of one property accounted for as a financing lease with a gross amount totaling approximately $3.0 million and $217.6one property classified as held for sale with a gross amount totaling approximately $1.1 million) and $641.9 million, respectively.


Three Months Ended September 30, 2017March 31, 2021 Compared to Three Months Ended September 30, 2016

March 31, 2020
The table below shows our results of operations for the three months ended September 30, 2017March 31, 2021 compared to the same period in 20162020 and the effect of changes in those results from period to period on our net income.

Three Months Ended March 31,Increase (decrease) to
Net income
(dollars in thousands)20212020$%
REVENUES
Rental income$20,780 $17,428 $3,352 19.2 %
Other operating interest615 508 107 21.1 %
21,395 17,936 3,459 19.3 %
EXPENSES
Property operating3,729 3,343 (386)(11.5)%
General and administrative2,859 2,192 (667)(30.4)%
Depreciation and amortization7,225 6,059 (1,166)(19.2)%
13,813 11,594 (2,219)(19.1)%
INCOME FROM OPERATIONS7,582 6,342 1,240 19.6 %
Interest expense(2,229)(2,249)20 0.9 %
Deferred income tax expense(39)— (39)n/m
Other income(6)(85.7)%
NET INCOME$5,315 $4,100 $1,215 29.6 %
n/m - not meaningful
 Three Months Ended September 30, Increase (Decrease) to Net Income
(dollars in thousands)2017 2016 $
REVENUES     
Rental income$8,012
 $4,985
 $3,027
Tenant reimbursements1,158
 1,188
 (30)
Mortgage interest255
 270
 (15)
Other operating19
 
 19
 9,444
 6,443
 3,001
EXPENSES     
Property operating2,225
 963
 (1,262)
General and administrative1,069
 671
 (398)
Depreciation and amortization4,544
 3,496
 (1,048)
Bad debts
 73
 73
 7,838
 5,203
 (2,635)
OTHER INCOME (EXPENSE)     
Interest expense(1,091) (185) (906)
Interest and other income, net64
 9
 55
 (1,027) (176) (851)
NET INCOME$579
 $1,064
 $(485)


Revenues

Our revenuesRevenues increased approximately $3.5 million, or 19.3%, for the three months ended September 30, 2017 and 2016 totaling approximately $9.4 million and $6.4 million, respectively, represented income generated from our investments in 80 and 52 real estate properties and mortgage notes, respectively. Revenues generally include contractual rents and late fees due under the leases with our tenants, as well as straight-line rent adjustments and estimated operating expense recoveries under our tenant leases, and mortgage interest related to our mortgage notes receivable. The increase in rental income for the three months ended September 30, 2017March 31, 2021 compared to the same period in 2016 was substantially related2020 mainly due to properties acquired since June 30, 2016.acquisitions of real estate and the issuance of new notes receivable.


Expenses

OurProperty operating expenses increased approximately $0.4 million, or 11.5%, for the three months ended September 30, 2017 and 2016 totaling approximately $7.8 million and $5.2 million, respectively, generally represented expenses related to our real estate properties, general and administrative expenses, depreciation and amortization expense, and bad debt expense.


Property operating expenses included expenses incurred related to our owned real estate properties and generally include real estate taxes and insurance, utilities, repairs and maintenance and other operating expenses of the properties. Property operating expenses for the three months ended September 30, 2017March 31, 2021 compared to the same period in 20162020 mainly due to acquisitions of real estate.

General and administrative expenses increased approximately $0.6$0.7 million, related to properties acquired since June 30, 2016. Property operating expenses for the remaining portfolio increased approximately $0.2 millionor 30.4%, for the three months ended September 30, 2017March 31, 2021 compared to the same period in 2016. Property operating2020 due mainly to compensation-related expenses related to new employees and annual salary increases and stock issuances totaling approximately $0.7 million, including the non-cash amortization of non-vested restricted common shares of approximately $0.5 million.
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Depreciation and amortization expense increased approximately $1.2 million, or 19.2%, for the three months ended September 30, 2016 were also reduced by approximately $0.5 million due to net fair value adjustments of the contingent purchase price initially recognized upon the acquisition of three properties in 2016.

General and administrative expenses generally included legal, regulatory, and accounting fees, as well as certain compensation-related and occupancy costs related to its officers, employees and corporate office. Compensation-related expenses increased approximately $0.3 million for the three months ended September 30, 2017March 31, 2021 compared to the same periodperiod in 2016. General and administrative expenses2020. Acquisitions accounted for the three months ended September 30, 2016 also includedan increase of approximately $0.1$1.5 million, in closing expenses related to the Company's acquisitions while in 2017 the Company included closing costs as part of the purchase price for its acquisitions upon the adoption of ASU No, 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which is discussed in more detail in Note 1 to our Condensed Consolidated Financial Statements.

Depreciation and amortization generally included depreciation on its buildings and improvements, as well as amortization of intangible assets resulting from the acquisition of its real estate properties, Depreciation and amortization for the three months ended September 30, 2017 compared to the same period in 2016 increased approximately $1.6 million related to properties acquired since June 30, 2016 while certain intangible assets became fully depreciated resulting inoffset by a decrease of approximately $0.6 million.

During the three months ended September 30, 2016, the Company recognized approximately $73,000 in bad debt expense related to four tenants. No bad debt expense was recognized during the three months ended September 30, 2017.

Interest expense

Interest expense for the three months ended September 30, 2017 compared to the same period in 2016 increased approximately $0.9 million. In the first quarter of 2017, the Company entered into its Credit Facility, as amended and restated, and borrowed $60$0.5 million in Term Loans, resulting in additional interest expense of approximately $0.7 million during the three months ended September 30, 2017 comparedamortization due to the same period in 2016. In addition, the balance outstanding on our Revolving Credit Facility was higher during the three months ended September 30, 2017 compared to the same period in 2016 resulting in additional interest expense of approximately $0.2 million.


Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

The table below shows our results of operations for the nine months ended September 30, 2017 compared to the same period in 2016 and the effect of changes in those results from period to period on our net income.

 Nine Months Ended September 30, Increase (Decrease) to Net Income
(dollars in thousands)2017 2016 $
REVENUES     
Rental income$21,968
 $13,188
 $8,780
Tenant reimbursements3,620
 3,250
 370
Mortgage interest774
 1,367
 (593)
Other operating19
 
 19
 26,381
 17,805
 8,576
EXPENSES     
Property operating6,103
 3,240
 (2,863)
General and administrative2,674
 2,372
 (302)
Depreciation and amortization12,749
 9,643
 (3,106)
Bad debts67
 103
 36
 21,593
 15,358
 (6,235)
OTHER INCOME (EXPENSE)     
Interest expense(2,897) (787) (2,110)
Interest and other income, net67
 28
 39
 (2,830) (759) (2,071)
NET INCOME$1,958
 $1,688
 $270

Revenues

Our revenues for the nine months ended September 30, 2017 and 2016 totaling approximately $26.4 million and $17.8 million, respectively, represented income generated from our investments in 80 and 52fully amortized real estate properties and mortgage notes, respectively. Revenueslease intangibles which generally include contractual rents and late fees due under the leases with our tenants, as well as straight-line rent adjustments and estimated operating expense recoveries under our tenant leases, and mortgage interest related to our mortgage notes receivable.

Rental income for the nine months ended September 30, 2017 compared to the same period in 2016 increased approximately $7.4 million related to properties acquired since June 30, 2016.have a shorter depreciable life than a building. The remaining increase is mostlygenerally due to rent increases, straight-line rentthe depreciation of building and additional leasing ontenant improvements.

Non-GAAP Financial Measures and Key Performance Indicators
Management considers certain non-GAAP financial measures and key performance indicators to be useful supplemental measures of the remaining portfolio.

Tenant reimbursements forCompany's operating performance. A non-GAAP financial measure is generally defined as one that purports to measure financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the nine months ended September 30, 2017 comparedmost comparable measure determined in accordance with GAAP. The Company reports Non-GAAP financial measures because these measures are observed by management to also be among the most predominant measures used by the REIT industry and by industry analysts to evaluate REITs. For these reasons, management deems it appropriate to disclose and discuss these Non-GAAP financial measures. Set forth below are descriptions of the non-GAAP financial measures management considers relevant to the same period in 2016 increased approximately $0.6 million relatedCompany's business and useful to properties acquired since June 30, 2016, partially offset by decreases in current and prior year reconciliations.

Mortgage interest decreased approximately $0.6 million for the nine months ended September 30, 2017 compared to the same period in 2016 due to interest recorded during 2016 related to a $12.5 million mortgage note that the Company funded in the first quarter of 2016 and then converted to real estate upon the acquisition of the property in the second quarter of 2016.


Expenses

Our expenses for the nine months ended September 30, 2017 and 2016 totaling approximately $21.6 million and $15.4 million, respectively, generally represented expenses related to our real estate properties, general and administrative expenses, depreciation and amortization expense, and bad debt expense.


Property operating expenses included expenses incurred related to our owned real estate properties and generally include real estate taxes and insurance, utilities, repairs and maintenance and other operating expenses of the properties. Property operating expenses for the nine months ended September 30, 2017 compared to the same period in 2016 increased approximately $1.3 million related to properties acquired since June 30, 2016. Maintenance and repairs and management fees for the remaining portfolio increased approximately $0.4 million for the nine months ended September 30, 2017 compared to the same period in 2016. Property operating expenses for the nine months ended September 30, 2016 were also reduced by approximately $1.0 million due to net fair value adjustments of the contingent purchase price initially recognized upon the acquisition of three properties in 2016.

General and administrative expenses generally included legal, regulatory, and accounting fees,investors, as well as certain compensation-related and occupancy costs related to its officers, employees and corporate office. Compensation-related expenses increased approximately $0.5 million for the nine months ended September 30, 2017 comparedreconciliations of those measures to the same period in 2016. Generalmost directly comparable GAAP financial measure.

The non-GAAP financial measures and administrative expenses for the nine months ended September 30, 2016 also included approximately $0.6 million in closing expenses relatedkey performance indicators presented herein are not necessarily identical to those presented by other real estate companies due to the Company's acquisitions while in 2017fact that not all real estate companies use the Company included closing costssame definitions. These measures should not be considered as partalternatives to net income, as indicators of the purchase price for its acquisitions uponCompany's financial performance, or as alternatives to cash flow from operating activities as measures of the adoptionCompany's liquidity, nor are these measures necessarily indicative of ASU No, 2017-01, Business Combinations (Topic 805): Clarifyingsufficient cash flow to fund all of the DefinitionCompany's needs. Management believes that in order to facilitate a clear understanding of a Business, which is discussedthe Company's historical consolidated operating results, these measures should be examined in more detailconjunction with net income and cash flows from operations as presented in Note 1 to ourthe Condensed Consolidated Financial Statements. Other legal, regulatoryStatements and accounting fees increased approximately $0.4 million for the nine months ended September 30, 2017 compared to the same periodother financial data included elsewhere in 2016.
this Quarterly Report on Form 10-Q.

Depreciation and amortization generally included depreciation on its buildings and improvements, as well as amortization of intangible assets resulting from the acquisition of its real estate properties. Depreciation and amortization for the nine months ended September 30, 2017 compared to the same period in 2016 increased approximately $3.6 million related to properties acquired since June 30, 2016 and increased approximately $0.5 million related to the remaining portfolio, while certain intangible assets became fully depreciated resulting in a decrease of approximately $1.0 million.

Interest expense

Interest expense for the nine months ended September 30, 2017 compared to the same period in 2016 increased approximately $2.1 million. In the first quarter of 2017, the Company entered into its Credit Facility, as amended, and borrowed $60 million in Term Loans, resulting in additional interest expense of approximately $1.5 million during the nine months ended September 30, 2017 compared to the same period in 2016. In addition, in April 2016, the Company completed a follow-on public offering of 5,175,000 shares of its common stock and received $86.8 million from the offering which was partially used to repay the outstanding balance on its revolving credit facility. The Company had no borrowings on its Revolving Credit Facility throughout the second or third quarters of 2016, until the last day of the third quarter, resulting in lower interest expense in 2016 of approximately $0.6 million.





Funds from Operations

("FFO") and Adjusted Funds from operations (“FFO”Operations ("AFFO")
FFO and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). NAREIT defines FFO as the most commonly accepted and reported measure of a REIT’s operating performance equal to “netnet income (computed(calculated in accordance with GAAP), excluding gains (or losses)or losses from salesthe sale of property,certain real estate assets, gains and losses from change in control, impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, plus depreciation and amortization related to real estate properties, and after adjustments for unconsolidated partnerships and joint ventures. NAREIT also provides REITs with an option to exclude gains, losses and impairments of assets that are incidental to the main business of the REIT from the calculation of FFO.


In addition to FFO, the Company presents AFFO and AFFO per share. The Company defines AFFO as FFO, excluding certain expenses related to closing costs of properties acquired accounted for as business combinations and mortgages funded, excluding straight-line rent and the amortization of stock-based compensation, and including or excluding other non-cash items from time to time. AFFO presented herein may not be comparable to similar measures presented by other real estate companies due to the fact that not all real estate companies use the same definition.

Management believes that net income, as defined by GAAP, is the most appropriate earnings measurement. However, management believes FFO, andAFFO, FFO per share to be supplemental measures of a REIT’s performance because theyand AFFO per share provide an understanding of the operating performance of the Company’s properties without giving effect to certain significant non-cash items, primarily depreciation and amortization expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate values
24


instead have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation, amortization, impairments and gains or losses from sales of real estate, losses and impairment of incidental assets, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO, AFFO, FFO per share and FFOAFFO per share can facilitate comparisons of operating performance between periods.

The Company reportstable below reconciles net income to FFO and FFO per share because these measures are observed by managementAFFO for the three months ended March 31, 2021 compared to also be the predominant measures used by the REIT industry and by industry analysts to evaluate REITs and because FFO per share is consistently reported, discussed, and compared by research analystssame period in their notes and publications about REITs. For these reasons, management has deemed it appropriate to disclose and discuss2020.
Three Months Ended
March 31,
(In thousands, excepts per share amounts)20212020
Net income$5,315 $4,100 
Real estate depreciation and amortization7,276 6,109 
FFO$12,591 $10,209 
Straight-line rent(838)(878)
Stock-based compensation1,558 1,019 
AFFO$13,311 $10,350 
FFO per diluted common share$0.54 $0.48 
AFFO per diluted common share$0.57 $0.49 
Weighted average common shares outstanding - diluted (1)
23,500 21,310 
___________________
(1) Diluted weighted average common shares outstanding for FFO and FFOAFFO are calculated based on the treasury method, rather than the 2-class method used to calculate earnings per share. However, FFO does not represent cash generated from operating activities determined

Net Operating Income ("NOI")
NOI is a key performance indicator. NOI is defined as net income or loss, computed in accordance with GAAP, generated from our total portfolio of properties and isother investments before general and administrative expenses, depreciation and amortization expense, gains or loss on the sale of real estate properties or other investments, interest expense, and income tax expense. We believe that NOI provides an accurate measure of operating performance of our operating assets because NOI excludes certain items that are not necessarily indicativeassociated with management of cash available to fund cash needs. FFO shouldthe properties. The Company's use of the term NOI may not be consideredcomparable to that of other real estate companies as an alternative to net income attributable to common stockholders as an indicator of the Company’s operating performance or as an alternative to cash flow from operating activities as a measure of liquidity. they may have different methodologies for computing NOI.

The table below reconciles FFOnet income to net incomeNOI for the three and nine months ended September 30, 2017March 31, 2021 compared to the same period in 2020.

Three Months Ended
March 31,
(In thousands)20212020
Net income$5,315 $4,100 
General and administrative2,859 2,192 
Depreciation and amortization7,225 6,059 
Interest expense2,229 2,249 
Deferred income tax expense39 — 
NOI$17,667 $14,600 

EBITDAre and 2016, respectively.Adjusted EBITDAre
The Company uses the NAREIT definition of EBITDAre which is net income plus interest expense, income tax expense, and depreciation and amortization, plus losses or minus gains on the disposition of depreciable property,
25


 Three Months Ended
September 30,
 Nine Months Ended September 30,
(Dollars in thousands, excepts per share amounts)2017 2016 2017 2016
Net income$579
 $1,064
 1,958
 $1,688
Real estate depreciation and amortization4,539
 3,493
 12,736
 9,637
Total adjustments4,539
 3,493
 12,736
 9,637
Funds from Operations$5,118
 $4,557
 $14,694
 $11,325
Funds from Operations per Common Share-Basic$0.32
 $0.36
 $1.06
 $1.05
Funds from Operations per Common Share-Diluted$0.31
 $0.36
 $1.05
 $1.05
Weighted Average Common Shares Outstanding-Basic16,241,986
 12,686,183
 13,884,476
 10,752,333
Weighted Average Common Shares Outstanding-Diluted16,401,718
 12,750,967
 14,035,185
 10,802,095
including losses/gains on change of control, plus impairment write-downs of depreciable property and of investments in unconsolidated affiliates caused by a decrease in value of depreciable property in the affiliate, plus or minus adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates and consolidated affiliates with non-controlling interest. The Company also presents Adjusted EBITDAre which is EBITDAre before non-cash stock-based compensation amortization.



We consider EBITDAre and Adjusted EBITDAre important measures because they provide additional information to allow management, investors, and our current and potential creditors to evaluate and compare our core operating results and our ability to service debt.


The table below reconciles net income to EBITDAre and Adjusted EBITDAre for the three months ended March 31, 2021 compared to the same period in 2020.


Three Months Ended
March 31,
(In thousands)20212020
Net income$5,315 $4,100 
Interest expense2,229 2,249 
Depreciation and amortization7,225 6,059 
Deferred income tax expense39 — 
EBITDAre
$14,808 $12,408 
Non-cash stock-based compensation expense1,558 1,019 
Adjusted EBITDAre
$16,366 $13,427 


Liquidity and Capital Resources

The Company monitors its liquidity and capital resources and relies on several key indicators in its assessment of capital markets for financing acquisitions and other operating activities as needed, including the following:


Leverage ratios and financial covenants included in our Credit Facility;

Dividend payout percentage; and

Interest rates, underlying treasury rates, debt market spreads and equity markets.


The Company uses these indicators and others to compare its operations to its peers and to help identify areas in which the Company may need to focus its attention.


Sources and Uses of Cash

The Company derives most of its revenues from its real estate property and mortgage note portfolio, collectingproperties. Our rental income operating expense reimbursements and mortgage interest based on contractual arrangements with its tenants and borrowers. These sources of revenue representrepresents our primary source of liquidity to fund our dividends, general and administrative expenses, property operating expenses, interest expense on our Credit Facility, and other expenses incurred related to managing our existing portfolio and investing in additional properties.portfolio. To the extent additional resources are needed, the Company will fund its investment activity generally through equity or debt issuances either in the public or private markets or through proceeds from our Credit Facility.


The Company expects to meet its liquidity needs through cash on hand, cash flows from operations and cash flows from sources discussed above. The Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements. The Company cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to the Company in sufficient amounts to meet its liquidity needs.


On March 29, 2017, we entered into our second amended and restated
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The Company's Credit Facility, whichas amended, provides for a $150.0 million Revolving Credit Facility that matures on March 19, 2026 and $100.0includes one 12-month option to extend the maturity date, and $250.0 million in Term Loans. The Credit Facility, through theLoans, as well as an accordion feature which allows borrowings up to a total of $450.0$600.0 million, including the ability to add and fund additional term loans. The Note 5 to the Condensed Consolidated Financial Statements provides more details on the Company's Credit Facility. At March 31, 2021, the Company had borrowing capacity remaining under the
Revolving Credit Facility matures on August 9, 2019 and includes two 12-month options to extend the maturity date of the Revolving Credit Facility, subject to the satisfaction of certain conditions. The Term Loans include a five-year term loan facility in the aggregate principal amount of $50.0 million which matures on March 29, 2022 and a seven-year term loan facility in the aggregate principal amount of $50.0 million which matures on March 29, 2024. Upon closing of the Credit Facility on March 29, 2017, the Company borrowed $30.0 million under each of the 5-Year Term Loan and the 7-Year Term Loan. Each of the 5-Year Term Loan and 7-Year Term Loan has a delayed draw feature that is available in up to three draws within 15 months from March 29, 2017, subject to a minimum draw of $10.0 million and pro forma compliance. The Company entered into interest rate swaps to fix the interest rates on each of the Term Loans. At September 30, 2017, the Company had no balance outstanding under the Revolving Credit Facility with a remaining borrowing capacity of $150.0 million; and had $60.0 million outstanding under the Term Loans with a fixed weighted average interest rate under the swaps of approximately 4.34% and a remaining borrowing capacity of $40.0$143.0 million. Our debt to total book capitalization ratio was approximately 17.1% at September 30, 2017.


The Company’s ability to borrow under the Credit Facility is subject to its ongoing compliance with a number of customary affirmative and negative covenants, including limitations with respect to liens, indebtedness, distributions, mergers, consolidations, investments, restricted payments and asset sales, as well as financial maintenance covenants. Also, our presentthe Company’s current financing policy prohibits incurringaggregate debt (secured or unsecured) in excess of 40% of the Company's total capitalization, except for short-term, transitory periods. At March 31, 2021, our debt to total book capitalization. At September 30, 2017, thecapitalization ratio (debt plus stockholders' equity plus accumulated depreciation) was approximately 31.7%. The Company was in compliance with its financial covenants under its Credit Facility as of March 31, 2021.

The Company also had outstanding at March 31, 2021, a $5.2 million mortgage note payable, secured by one of its properties, with a maturity date in 2024. See Note 5 to the Credit Facility.Condensed Consolidated Financial Statements for more details.



Subsequent Acquisitions

During the fourth quarter of 2017, through November 7, 2017,Subsequent to March 31, 2021, the Company acquired three real estate properties totalingone property for a purchase price of approximately 105,500 square feet for an aggregate purchase price$4.2 million and cash consideration of approximately $25.9$3.5 million. Upon acquisition, the properties were 100%The property was approximately 90.9% leased with lease expirations ranging from 2025 through 2032. These acquisitions were2028. This acquisition was funded with net proceeds remaining from the Company's July 2017 equity offering and from the Company's Revolving Credit Facility. See Note 7 in the Company's Condensed Consolidated Financial Statements.cash on hand.


Acquisition Pipeline

The Company has fourtwo properties under definitive purchase agreements for an aggregate expected purchase price of approximately $20.3 million. The Company's$8.4 million and expected return on these investments range from approximately 9% to 10.5%. The Company anticipates these properties will close during the fourth quarter.  However, the Company is currently performing due diligence procedures customary for these types of transactions and cannot provide assurance as to the timing of when, or whether, these transactions will actually close.

The Company also has three properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase pricereturns of approximately $40.4 million.9.3%. The Company expects to close on one of these properties sometime in the first half of 2018 and expects to close on the remaining two properties sometime induring the second halfor third quarter of 2018. The Company's expected aggregate return on these investments ranges up to approximately 11%.  However,2021; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close. The Company expects to fund these acquisitions with cash on hand, proceeds from the Company's ATM Program, and proceeds from the Company's Revolving Credit Facility.


Asset Held for Sale
Pursuant to the exercise of a purchase option by a tenant, the Company entered into a sales contract to dispose of a medical office building in Haleyville, Alabama during the first quarter of 2021. The Company expects to close on this transaction in the second quarter of 2021 and expects to recognize a gain on the sale. Assets held for sale totaling approximately $1.0 million are included in Other assets, net and Liabilities held for sale totaling $35,000 are included in Other liabilities, net on the Condensed Consolidated Balance Sheet as of March 31, 2021.

Other Contractual Obligations
Subject to Company approval, we may fund or reimburse tenants for tenant improvements, which are allowed for in certain leases, of up to approximately $2.7 million as of March 31, 2021.

The Company anticipates fundinghas also entered into contracts regarding certain capital expenditures totaling approximately $2.1 million as of March 31, 2021. Reimbursement of these investmentsexpenditures by our tenants will be determined by each tenant's lease.

The Company has ground lease obligations relating to three properties, with total obligations of approximately $1.5 million with maturities through 2054.

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The Company expects to fund these obligations with cash from operations, throughon hand, proceeds from its Credit Facility or from netthe Company's ATM Program, and proceeds from additional debt or equity offerings.

Equity Offering

On July 26, 2017, the Company completed a public offering of 4,887,500 shares of its common stock, including 637,500 shares of common stock issued in connection with the exercise in full of the underwriters' option to purchase additional shares, and received net proceeds of approximately $108.9 million after deducting underwriting discount and commissions and estimated offering expenses payable by the Company.

Proceeds from the offering were used to repay the outstanding balance on ourCompany's Revolving Credit Facility totaling $58.0 million and for investments during the third and fourth quarters of 2017.Facility.


UniversalAutomatic Shelf S-3 Registration Statement

On September 13, 2016,November 5, 2019, the Company filed aan automatic shelf registration statement on Form S-3 that will allow uswith the Securities and Exchange Commission. The registration statement is for an indeterminate number of securities and is effective for three years. Under this registration statement, the Company has the capacity to offer debt or equity securities (or a combination thereof) of up to $750.0 millionand sell from time to time. The Form S-3 registration statement was declared effective astime various types of September 26, 2016. During July 2017, the Company completed an equity offering, discussed in more detail in Note 10, and issued approximately 4,887,500 shares of itssecurities, including common stock, for gross proceeds of approximately $114.6 million under its Form S-3 registration statement, resulting in approximately $635.4 million remaining to be issued under the Form S-3 registration statement.preferred stock, depository shares, rights, debt securities, warrants and units.


Operating Activities

Cash flows provided by operating activities for the ninethree months ended September 30, 2017March 31, 2021 and 20162020 were approximately $15.4$13.5 million and $10.8$10.3 million, respectively. Cash flows provided by operating activities were generally provided by contractual rents, net of expenses, on our real estate property portfolio.



Investing Activities

Cash flows used in investing activities for the ninethree months ended September 30, 2017March 31, 2021 and 20162020 were approximately $98.7$67.3 million and $71.8$35.5 million, respectively. During the ninethree months ended September 30, 2017,March 31, 2021, the Company invested in 226 properties for an aggregate purchase pricecash consideration of approximately $93.0$60.0 million includingand funded notes totaling approximately $92.6 million in cash consideration. The Company also acquired a property, adjacent to its corporate office, for a cash purchase price of approximately $0.9$7.1 million. The property is currently leased to a tenant butAlso, during the three months ended March 31, 2021, the Company intends to use the property for future expansion ofreceived payments on its corporate office. notes totaling $0.9 million and funded capital expenditures on its existing portfolio totaling approximately $1.0 million.

During the ninethree months ended September 30, 2016,March 31, 2020, the Company invested in 11six properties for an aggregate purchase pricecash consideration of approximately $71.1$36.4 million, including approximately $58.8acquired a $2.5 million in cash consideration, including transaction costs incurred,note receivable for $1.8 million, and the conversion of a $12.5 million mortgage note thatreceived payments on its notes receivable totaling $3.3 million. Also, the Company had funded during the first quarter of 2016.capital expenditures on its existing portfolio totaling approximately $0.7 million.


Financing Activities

Cash flows provided by financing activities for the ninethree months ended September 30, 2017March 31, 2021 and 20162020 were approximately $99.2$56.9 million and $60.7$26.8 million, respectively. During the ninethree months ended September 30, 2017,March 31, 2021, the Company completed a public offering of 4,887,500 shares ofrepaid $26.0 million under its common stock, including 637,500 shares of common stock issuedCredit Facility, entered into an amended and restated credit facility in connection with the exercise in full of the underwriters' option to purchase additional shares, and received net proceeds of approximately $108.9 million after deducting underwriting discount and commissions and estimated offering expenses payable by the Company. The net proceeds from the equity offering were partially used to repay $58.0 million outstanding under the Company's Revolving Credit Facility. Also,which the Company entered into a $125.0 million, 7-year term loan facility, repaid a $50.0 million term loan facility, and incurred $1.6 million in additional debt issuance costs. The Company also sold shares under its ATM Program and received proceeds of approximately $19.9 million, and paid dividends totaling $10.3 million.

During the three months ended March 31, 2020, the Company borrowed $9.0 million under its Credit Facility, borrowing $60.0 million in Term Loans,sold shares under its ATM Program and paid $17.3 million in dividends.

During the nine months ended September 30, 2016, the Company completed a public offering of 5,175,000 shares of its common stock, including 675,000 shares of common stock issued in connection with the exercise in full of the underwriters' option to purchase additional shares, and received net proceeds of approximately $86.1$26.9 million, after underwriting discount and commissions and estimated offering expenses payable by the Company. The Company also paid $12.8 million in dividends during the nine months ended September 30, 2016.totaling $9.0 million.


Security Deposits

As of September 30, 2017,March 31, 2021, the Company held approximately $2.1$4.2 million in security deposits for the benefit of the Company in the event the obligated tenant fails to perform under the terms of its respective lease. Generally, the Company may, at its discretion and upon notification to the tenant, draw upon the security deposits if there are any defaults under the leases.


Dividends

The Company is required to pay dividends to its stockholders at least equal to 90% of its taxable income in order to maintain its qualification as a REIT.


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On November 2, 2017,April 29, 2021, the Company’s Board of Directors declared a quarterly common stock dividend in the amount of $0.3950$0.43 per share. The dividend is payable on December 1, 2017May 28, 2021 to stockholders of record on November 17, 2017.May 14, 2021. This rate equates to an annualized dividend of $1.58$1.72 per share.

On September 1, 2017, 2017, the Company paid a cash dividend in the amount of $0.3925 per share to stockholders of record on August 28, 2017. This rate equates to an annualized dividend of $1.57 per share.

On May 4, 2017, the Company paid a cash dividend in the amount of $0.39 per share to stockholders of record on May 19, 2017. This rate equates to an annualized dividend of $1.56 per share.


On March 3, 2017, the Company paid a cash dividend in the amount of $0.3875 per share to shareholders of record on February 17, 2017. This rate equates to an annual dividend of $1.55 per share.


The ability of the Company to pay dividends is dependent upon its ability to generate cash flows and to make accretive new investments.



29


ITEM 3. Quantitative and Qualitative Disclosures about Market Risk


Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We may use certain derivative financial instruments to manage, or hedge, interest rate risks related to our borrowings. We will not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based upon their credit rating and other factors. An interest rate swap is a contractual agreement entered into by two counterparties under which each agrees to make periodic payments to the other for an agreed period of time based on a notional amount of principal. Under the most common form of interest rate swap, known from our perspective as a floating-to-fixed interest rate swap, a series of floating, or variable, rate payments on a notional amount of principal is exchanged for a series of fixed interest rate payments on such notional amount.

In During the three months ended March 2017, we entered into our Credit Facility which provides for $100.0 million in variable rate Term Loans. Upon closing of the Credit Facility, we borrowed $60.0 million31, 2021, there were no material changes in the aggregatequantitative and qualitative disclosures about market risks presented in the Company’s Annual Report on the Term Loans, with a delayed draw featureForm 10-K for the remaining $40.0 million, and subsequently entered into interest rate swaps to fix the interest rates on the Term Loans. See Notes 5, 6 and 10 for more information on the Term Loans and interest rate swaps.year ended December 31, 2020.



ITEM 4. Controls and Procedures


Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(b)13a-15(e) and 15d-15(b)15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based on this evaluation, the Company’s management hasChief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports it files or submits under the Exchange Act.effective.


Changes In Internal Control Over Financial Reporting
There were no changes in our system of internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2017March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.




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PART II. OTHER INFORMATION



ITEM 1.    LEGAL PROCEEDINGS


The Company may, from time to time, be involved in litigation arising in the ordinary course of business or which may be expected to be covered by insurance. The Company is not aware of any pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.



ITEM 1A.    RISK FACTORS


In addition to the other information set forth in this quarterly report,Quarterly Report on Form 10-Q, an investor should consider the risk factors included in its Annual Report on Form 10-K for the year ended December 31, 2016, its Quarterly Reports on Form 10-Q for the three months ended June 30, 2017 and March 31, 2017,2020 and other reports that may be filed by the Company.



ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


None.



ITEM 3.   DEFAULTS UPON SENIOR SECURITIES


None.


ITEM 4.   MINE SAFETY DISCLOSURES


None.


ITEM 5.   OTHER INFORMATION


None.

ITEM 6.    EXHIBITS
The exhibits required by Item 601 of Regulation S-XS-K which are filed with this report are listed in the Exhibit Index and are hereby incorporated in by reference.





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EXHIBIT INDEX
Exhibit
Number
No.
Description
3.1
3.2
10.1
10.2
10.3
10.4
10.5
31.1 *
31.2 *
32.1 **
101.INSInline XBRL Instance Document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.LABInline XBRL Taxonomy Extension Labels Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(1)
Filed as Exhibit 3.1 to Amendment No. 2 to the Registration Statement on Form S-11 of the Company filed with the Securities and Exchange Commission on May 6, 2015 (Registration No. 333-203210)and incorporated herein by reference.
(2)
Filed as Exhibit 3.2 to the Registration Statement on Form S-11 of the Company filed with the Securities and Exchange Commission on April 2, 2015 (Registration No. 333-203210)and incorporated herein by reference.
(3)Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on July 17, 2017.
(4)Filed as Exhibit 10.2 to the Form 8-K of the Company filed with the Securities and Exchange Commission on July 17, 2017.
(5)Filed as Exhibit 1.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on July 26, 2017.
_________
*Filed herewith.
**Furnished herewith.

(1)Filed as Exhibit 3.1 to Amendment No. 2 to the Registration Statement on Form S-11 of the Company filed with the Securities and Exchange Commission on May 6, 2015 (Registration No. 333-203210)and incorporated herein by reference.

(2)Filed as Exhibit 3.2 to the Quarterly Report on Form 10-Q of the Company filed with the Securities and Exchange Commission on November 3, 2020 (File No. 001-37401) and incorporated herein by reference.

(3)Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 4, 2021 (File No. 001-37401) and incorporated herein by reference.

(4)Filed as Exhibit 10.2 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 4, 2021 (File No. 001-37401) and incorporated herein by reference.
(5)Filed as Exhibit 10.3 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 4, 2021 (File No. 001-37401) and incorporated herein by reference.
(6)Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on February 16, 2021 (File No. 001-37401) and incorporated herein by reference.
(7)Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on March 19, 2021 (File No. 001-37401) and incorporated herein by reference.
*    Filed herewith.
**    Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 7, 2017
May 4, 2021
COMMUNITY HEALTHCARE TRUST INCORPORATED
COMMUNITY HEALTHCARE TRUST INCORPORATED
By:
By:/s/ Timothy G. Wallace
Timothy G. Wallace
Chief Executive Officer and President
By:/s/ W. Page BarnesDavid H. Dupuy
W. Page BarnesDavid H. Dupuy
Executive Vice President and Chief Financial Officer

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