UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~JUNE 30, ~~2021~~2022
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						46-5212033
(State or Other Jurisdiction of Incorporation or Organization)						(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 Class

Trading Symbol

Name of each exchange on which registered

Common stock, $0.01 par value per share

CHCT

New 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filer

☐

Emerging-growth company

☐

Non-accelerated filer

☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The Registrant had ~~24,982,506~~25,099,256 shares of Common Stock, $0.01 par value per share, outstanding as of ~~October 29, 2021.~~July 27, 2022.

COMMUNITY HEALTHCARE TRUST INCORPORATED

FORM 10-Q

~~September~~June 30, ~~2021~~2022

TABLE OF CONTENTS


		Page
PART I.—FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2322
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3332
Item 4.	Controls and Procedures	3332

PART II.—OTHER INFORMATION		3433
Item 1.	Legal Proceedings	3433
Item 1A.	Risk Factors	3433
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3433
Item 3.	Defaults Upon Senior Securities	3433
Item 4.	Mine Safety Disclosures	3433
Item 5.	Other Information	3433
Item 6.	Exhibits	3433

SIGNATURES		3635

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars and shares in thousands, except per share amounts)


		(Unaudited)					(Unaudited)
		September 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Real estate properties	Real estate properties					Real estate properties
Land and land improvements	Land and land improvements	$	95,514	$	83,714	Land and land improvements	$	101,909	$	97,397
Buildings, improvements, and lease intangibles	Buildings, improvements, and lease intangibles	724,465		651,398		Buildings, improvements, and lease intangibles	764,338		736,465
Personal property	Personal property	222		247		Personal property	234		223
Total real estate properties	Total real estate properties	820,201		735,359		Total real estate properties	866,481		834,085
Less accumulated depreciation	Less accumulated depreciation	(125,243)		(102,899)		Less accumulated depreciation	(149,049)		(133,056)
Total real estate properties, net	Total real estate properties, net	694,958		632,460		Total real estate properties, net	717,432		701,029
Cash and cash equivalents	Cash and cash equivalents	1,641		2,483		Cash and cash equivalents	1,699		2,351
Restricted cash	Restricted cash	456		409		Restricted cash	659		516

Other assets, net	Other assets, net	50,537		33,050		Other assets, net	66,244		50,337
Total assets	Total assets	$	747,592	$	668,402	Total assets	$	786,034	$	754,233

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities	Liabilities					Liabilities
Debt, net	Debt, net	$	257,560	$	212,374	Debt, net	$	291,726	$	265,625
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	6,910		5,743		Accounts payable and accrued liabilities	7,219		7,845
Other liabilities, net	Other liabilities, net	21,451		20,369		Other liabilities, net	14,127		18,651
Total liabilities	Total liabilities	285,921		238,486		Total liabilities	313,072		292,121

Commitments and contingencies	Commitments and contingencies			0		Commitments and contingencies			0

0Stockholders' Equity	0Stockholders' Equity					0Stockholders' 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; 24,982,287 and 23,888,090 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		250		239
Preferred stock, $0.01 par value; 50,000 shares authorized; none issued and outstanding						Preferred stock, $0.01 par value; 50,000 shares authorized; none issued and outstanding	—		—
Common stock, $0.01 par value; 450,000 shares authorized; 25,099 and 24,983 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively						Common stock, $0.01 par value; 450,000 shares authorized; 25,099 and 24,983 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	251		250
Additional paid-in capital	Additional paid-in capital	593,717		550,391		Additional paid-in capital	599,631		595,624
Cumulative net income	Cumulative net income	53,010		36,631		Cumulative net income	70,231		59,123
Accumulated other comprehensive loss		(8,269)		(11,846)
Accumulated other comprehensive income (loss)						Accumulated other comprehensive income (loss)	12,761		(4,980)
Cumulative dividends	Cumulative dividends	(177,037)		(145,499)		Cumulative dividends	(209,912)		(187,905)
Total stockholders’ equity	Total stockholders’ equity	461,671		429,916		Total stockholders’ equity	472,962		462,112
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	747,592	$	668,402	Total liabilities and stockholders' equity	$	786,034	$	754,233

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2021~~2022 AND ~~2020~~2021

(Unaudited; InDollars and shares in thousands, except per share amounts)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
REVENUES	REVENUES									REVENUES
Rental income	Rental income	$	22,447	$	18,939	$	65,233	$	54,197	Rental income	$	23,197	$	22,006	$	45,801	$	42,786

Other operating interest	Other operating interest	807		405		2,104		1,363		Other operating interest	852		682		1,729		1,297
		23,254		19,344		67,337		55,560			24,049		22,688		47,530		44,083

EXPENSES	EXPENSES									EXPENSES
Property operating	Property operating	4,051		3,563		11,623		10,129		Property operating	4,062		3,843		8,153		7,572
General and administrative	General and administrative	3,206		2,191		8,958		6,282		General and administrative	3,610		2,893		6,926		5,752
Depreciation and amortization	Depreciation and amortization	7,812		6,295		22,576		18,473		Depreciation and amortization	8,077		7,539		16,019		14,763

		15,069		12,049		43,157		34,884			15,749		14,275		31,098		28,087

INCOME BEFORE INCOME TAXES AND OTHER ITEMS	INCOME BEFORE INCOME TAXES AND OTHER ITEMS	8,185		7,295		24,180		20,676		INCOME BEFORE INCOME TAXES AND OTHER ITEMS	8,300		8,413		16,432		15,996
Loss on sale of real estate		—		—		—		(313)

Interest expense	Interest expense	(2,788)		(2,064)		(7,753)		(6,496)		Interest expense	(2,755)		(2,736)		(5,381)		(4,966)

Deferred income tax expense		(45)		(20)		(104)		(40)
Interest and other income, net		2		—		56		10
Deferred income tax (expense) benefit										Deferred income tax (expense) benefit	(16)		(20)		1		(59)
Interest and other income										Interest and other income	55		53		56		54

NET INCOME	NET INCOME	$	5,354	$	5,211	$	16,379	$	13,837	NET INCOME	$	5,584	$	5,710	$	11,108	$	11,025

NET INCOME PER COMMON SHARE:	NET INCOME PER COMMON SHARE:									NET INCOME PER COMMON SHARE:
Net income per common share – Basic	Net income per common share – Basic	$	0.20	$	0.22	$	0.63	$	0.59	Net income per common share – Basic	$	0.21	$	0.22	$	0.41	$	0.43
Net income per common share – Diluted	Net income per common share – Diluted	$	0.20	$	0.22	$	0.63	$	0.59	Net income per common share – Diluted	$	0.21	$	0.22	$	0.41	$	0.43
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-BASIC	WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-BASIC	23,472		21,866		23,161		21,290		WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-BASIC	23,578		23,195		23,574		23,003
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-DILUTED	WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-DILUTED	23,472		21,866		23,161		21,290		WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-DILUTED	23,578		23,195		23,574		23,003

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2021~~2022 AND ~~2020~~2021

(Unaudited; Dollars in thousands)


				Three Months Ended September 30,				Nine Months Ended September 30,							Three Months Ended June 30,				Six Months Ended June 30,
				2021		2020		2021		2020					2022		2021		2022		2021

NET INCOME	NET INCOME			$	5,354	$	5,211	$	16,379	$	13,837	NET INCOME			$	5,584	$	5,710	$	11,108	$	11,025
		Other comprehensive income (loss):											Other comprehensive income (loss):
			Increase (decrease) in fair value of cash flow hedges	289		(99)		304		(10,292)				Increase (decrease) in fair value of cash flow hedges	4,584		(2,788)		15,991		15
			Reclassification for amounts recognized as interest expense	1,181		933		3,273		1,965				Reclassification for amounts recognized as interest expense	635		1,160		1,750		2,092
		Total other comprehensive income (loss)		1,470		834		3,577		(8,327)			Total other comprehensive income (loss)		5,219		(1,628)		17,741		2,107
COMPREHENSIVE INCOME	COMPREHENSIVE INCOME			$	6,824	$	6,045	$	19,956	$	5,510	COMPREHENSIVE INCOME			$	10,803	$	4,082	$	28,849	$	13,132

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2021~~2022

(Unaudited; Dollars and shares in thousands, except per share amounts)


		Preferred Stock			Common Stock			Additional Paid in Capital		Cumulative Net Income		Accumulated Other Comprehensive Loss		Cumulative Dividends		Total Stockholders' Equity			Preferred Stock			Common Stock			Additional Paid in Capital		Cumulative Net Income		Accumulated Other Comprehensive Income (Loss)		Cumulative Dividends		Total Stockholders' Equity
		Shares	Amount		Shares	Amount													Shares	Amount		Shares	Amount
Balance at June 30, 2021		—	$	—	24,686,925	$	247	$	585,177	$	47,656	$	(9,739)	$	(166,285)	$	457,056
Balance at March 31, 2022																		Balance at March 31, 2022	—	$	—	25,072	$	251	$	597,548	$	64,647	$	7,542	$	(198,874)	$	471,114
Issuance of common stock, net of issuance costs	Issuance of common stock, net of issuance costs	—	—		139,216	1		6,529		—		—		—		6,530		Issuance of common stock, net of issuance costs	—	—		—	—		(101)		—		—		—		(101)
Stock-based compensation	Stock-based compensation	—	—		156,146	2		2,011		—		—		—		2,013		Stock-based compensation	—	—		27	—		2,184		—		—		—		2,184
Unrecognized gain on cash flow hedges	Unrecognized gain on cash flow hedges	—	—		—	—		—		—		289		—		289		Unrecognized gain on cash flow hedges	—	—		—	—		—		—		4,584		—		4,584
Reclassification adjustment for losses included in net income (interest expense)	Reclassification adjustment for losses included in net income (interest expense)	—	—		—	—		—		—		1,181		—		1,181		Reclassification adjustment for losses included in net income (interest expense)	—	—		—	—		—		—		635		—		635
Net income	Net income	—	—		—	—		—		5,354		—		—		5,354		Net income	—	—		—	—		—		5,584		—		—		5,584
Dividends to common stockholders ($0.4325 per share)		—	—		—	—		—		—		—		(10,752)		(10,752)
Balance at September 30, 2021		—	$	—	24,982,287	$	250	$	593,717	$	53,010	$	(8,269)	$	(177,037)	$	461,671
Dividends to common stockholders ($0.44 per share)																		Dividends to common stockholders ($0.44 per share)	—	—		—	—		—		—		—		(11,038)		(11,038)
Balance at June 30, 2022																		Balance at June 30, 2022	—	$	—	25,099	$	251	$	599,631	$	70,231	$	12,761	$	(209,912)	$	472,962

Balance at December 31, 2020		—	$	—	23,888,090	$	239	$	550,391	$	36,631	$	(11,846)	$	(145,499)	$	429,916
Balance at December 31, 2021																		Balance at December 31, 2021	—	$	—	24,983	$	250	$	595,624	$	59,123	$	(4,980)	$	(187,905)	$	462,112
Issuance of common stock, net of issuance costs	Issuance of common stock, net of issuance costs	—	—		822,452	8		38,161		—		—		—		38,169		Issuance of common stock, net of issuance costs	—	—		—	—		(299)		—		—		—		(299)
Stock-based compensation		—	—		271,745	3		5,165		—		—		—		5,168
Stock-based compensation, net of shares withheld and forfeited																		Stock-based compensation, net of shares withheld and forfeited	—	—		116	1		4,306		—		—		—		4,307
Unrecognized gain on cash flow hedges	Unrecognized gain on cash flow hedges	—	—		—	—		—		—		304		—		304		Unrecognized gain on cash flow hedges	—	—		—	—		—		—		15,991		—		15,991
Reclassification adjustment for losses included in net income (interest expense)	Reclassification adjustment for losses included in net income (interest expense)	—	—		—	—		—		—		3,273		—		3,273		Reclassification adjustment for losses included in net income (interest expense)	—	—		—	—		—		—		1,750		—		1,750
Net income	Net income	—	—		—	—		—		16,379		—		—		16,379		Net income	—	—		—	—		—		11,108		—		—		11,108
Dividends to common stockholders ($1.2900 per share)		—	—		—	—		—		—		—		(31,538)		(31,538)
Balance at September 30, 2021		—	$	—	24,982,287	$	250	$	593,717	$	53,010	$	(8,269)	$	(177,037)	$	461,671
Dividends to common stockholders ($0.8775 per share)																		Dividends to common stockholders ($0.8775 per share)	—	—		—	—		—		—		—		(22,007)		(22,007)
Balance at June 30, 2022																		Balance at June 30, 2022	—	$	—	25,099	$	251	$	599,631	$	70,231	$	12,761	$	(209,912)	$	472,962

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2020~~2021

(Unaudited; Dollars and shares in thousands, except per share amounts)


		Preferred Stock			Common Stock			Additional Paid in Capital		Cumulative Net Income		Accumulated Other Comprehensive (Loss) Income		Cumulative Dividends		Total Stockholders' Equity			Preferred Stock			Common Stock			Additional Paid in Capital		Cumulative Net Income		Accumulated Other Comprehensive (Loss) Income		Cumulative Dividends		Total Stockholders' Equity
		Shares	Amount		Shares	Amount													Shares	Amount		Shares	Amount
Balance at June 30, 2020		—	$	—	22,726,141	$	227	$	500,477	$	26,180	$	(13,969)	$	(125,812)	$	387,103
Balance at March 31, 2021																		Balance at March 31, 2021	—	$	—	24,417	$	244	$	571,781	$	41,946	$	(8,111)	$	(155,774)	$	450,086
Issuance of common stock, net of issuance costs	Issuance of common stock, net of issuance costs	—	—		536,839	5		24,885		—		—		—		24,890		Issuance of common stock, net of issuance costs	—	—		248	2		11,792		—		—		—		11,794
Stock-based compensation	Stock-based compensation	—	—		144,518	2		1,274		—		—		—		1,276		Stock-based compensation	—	—		22	1		1,604		—		—		—		1,605
Unrecognized loss on cash flow hedges	Unrecognized loss on cash flow hedges	—	—		—	—		—		—		(99)		—		(99)		Unrecognized loss on cash flow hedges	—	—		—	—		—		—		(2,788)		—		(2,788)
Reclassification adjustment for losses included in net income (interest expense)	Reclassification adjustment for losses included in net income (interest expense)	—	—		—	—		—		—		933		—		933		Reclassification adjustment for losses included in net income (interest expense)	—	—		—	—		—		—		1,160		—		1,160
Net income	Net income	—	—		—	—		—		5,211		—		—		5,211		Net income	—	—		—	—		—		5,710		—		—		5,710
Dividends to common stockholders ($0.4225 per share)		—	—		—	—		—		—		—		(9,693)		(9,693)
Balance at September 30, 2020		—	$	—	23,407,498	$	234	$	526,636	$	31,391	$	(13,135)	$	(135,505)	$	409,621
Dividends to common stockholders ($0.43 per share)																		Dividends to common stockholders ($0.43 per share)	—	—		—	—		—		—		—		(10,511)		(10,511)
Balance at June 30, 2021																		Balance at June 30, 2021	—	$	—	24,687	$	247	$	585,177	$	47,656	$	(9,739)	$	(166,285)	$	457,056

Balance at December 31, 2019		—	$	—	21,410,578	$	214	$	447,916	$	17,554	$	(4,808)	$	(107,465)	$	353,411
Balance at December 31, 2020																		Balance at December 31, 2020	—	$	—	23,888	$	239	$	550,391	$	36,631	$	(11,846)	$	(145,499)	$	429,916
Issuance of common stock, net of issuance costs	Issuance of common stock, net of issuance costs	—	—		1,726,384	17		75,365		—		—		—		75,382		Issuance of common stock, net of issuance costs	—	—		683	7		31,632		—		—		—		31,639
Stock-based compensation	Stock-based compensation	—	—		270,536	3		3,355		—		—		—		3,358		Stock-based compensation	—	—		116	1		3,154		—		—		—		3,155
Unrecognized loss on cash flow hedges		—	—		—	—		—		—		(10,292)		—		(10,292)
Reclassification adjustment for gain included in net income (interest expense)		—	—		—	—		—		—		1,965		—		1,965
Unrecognized gain on cash flow hedges																		Unrecognized gain on cash flow hedges	—	—		—	—		—		—		15		—		15
Reclassification adjustment for losses included in net income (interest expense)																		Reclassification adjustment for losses included in net income (interest expense)	—	—		—	—		—		—		2,092		—		2,092
Net income	Net income	—	—		—	—		—		13,837		—		—		13,837		Net income	—	—		—	—		—		11,025		—		—		11,025
Dividends to common stockholders ($1.2600 per share)		—	—		—	—		—		—		—		(28,040)		(28,040)
Balance at September 30, 2020		—	$	—	23,407,498	$	234	$	526,636	$	31,391	$	(13,135)	$	(135,505)	$	409,621
Dividends to common stockholders ($0.8575 per share)																		Dividends to common stockholders ($0.8575 per share)	—	—		—	—		—		—		—		(20,786)		(20,786)
Balance at June 30, 2021																		Balance at June 30, 2021	—	$	—	24,687	$	247	$	585,177	$	47,656	$	(9,739)	$	(166,285)	$	457,056

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; Dollars in thousands)

Nine Months Ended
September 30,
2021 2020
OPERATING ACTIVITIES
Net income $ 16,379 $ 13,837
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 22,576 18,473
Other amortization 616 (21)
Stock-based compensation 5,168 3,358
Straight-line rent receivable (2,713) (2,518)
Loss on sale of real estate — 313
Deferred income tax expense 104 40
Changes in operating assets and liabilities:
Other assets (1,455) 137
Accounts payable and accrued liabilities (32) 1,420
Other liabilities 710 764
Net cash provided by operating activities 41,353 35,803
INVESTING ACTIVITIES
Acquisitions of real estate (78,221) (58,945)
Proceeds from sale of real estate — 248
Acquisition and funding of notes receivable (13,350) (1,902)
Proceeds from the repayment of notes receivable 2,978 7,760
Capital expenditures on existing real estate properties (4,538) (4,706)
Net cash used in investing activities (93,131) (57,545)
FINANCING ACTIVITIES
Net repayments on revolving credit facility (29,000) (15,000)
Term loan borrowings 125,000 —
Term loan repayments (50,000) —
Mortgage note repayments (85) (80)
Dividends paid (31,538) (28,040)
Proceeds from issuance of common stock 38,425 75,516
Equity issuance costs (173) (179)
Debt issuance costs (1,646) —
Net cash provided by financing activities 50,983 32,217
(Decrease) increase in cash and cash equivalents and restricted cash (795) 10,475
Cash and cash equivalents and restricted cash, beginning of period 2,892 2,023
Cash and cash equivalents and restricted cash, end of period $ 2,097 $ 12,498
Supplemental Cash Flow Information:
Interest paid $ 7,339 $ 6,223
Invoices accrued for construction, tenant improvement and other capitalized costs $ 1,071 $ 663
Reclassification of registration statement costs incurred in prior year to equity issuance costs $ 256 $ 150
Increase (decrease) in fair value of cash flow hedges $ 304 $ (10,292)
Income taxes paid $ 25 $ 40


	Six Months Ended June 30,
	2022		2021
OPERATING ACTIVITIES
Net income	$	11,108	$	11,025
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	16,019		14,763
Other amortization	419		415
Stock-based compensation	4,307		3,155
Straight-line rent receivable	(1,737)		(1,818)




Deferred income tax (benefit) expense	(1)		59
Changes in operating assets and liabilities:
Other assets	(782)		(393)
Accounts payable and accrued liabilities	263		(108)
Other liabilities	(77)		1,004
Net cash provided by operating activities	29,519		28,102

INVESTING ACTIVITIES
Acquisitions of real estate	(28,671)		(68,921)

Acquisition and funding of notes receivable	(3,000)		(11,520)

Proceeds from the repayment of notes receivable	1,500		1,592
Capital expenditures on existing real estate properties	(3,648)		(3,065)
Net cash used in investing activities	(33,819)		(81,914)

FINANCING ACTIVITIES
Net borrowings (repayments) on revolving credit facility	26,000		(28,000)
Term loan borrowings	—		125,000
Term loan repayments	—		(50,000)
Mortgage note repayments	(69)		(57)
Dividends paid	(22,007)		(20,786)
Proceeds from issuance of common stock	—		31,793
Equity issuance costs	(133)		(130)
Debt issuance costs	—		(1,646)

Net cash provided by financing activities	3,791		56,174
(Decrease) increase in cash and cash equivalents and restricted cash	(509)		2,362
Cash and cash equivalents and restricted cash, beginning of period	2,867		2,892
Cash and cash equivalents and restricted cash, end of period	$	2,358	$	5,254

Supplemental Cash Flow Information:
Interest paid (net of capitalized interest)	$	5,053	$	4,599
Invoices accrued for construction, tenant improvement and other capitalized costs	$	1,395	$	1,240

Reclassification of registration statement costs incurred in prior year to equity issuance costs	$	221	$	163

Increase in fair value of cash flow hedges	$	15,991	$	15
Income taxes paid	$	42	$	25
Capitalized interest	$	364	$	73

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~September~~June 30, ~~2021~~2022

(Unaudited)

~~Note~~NOTE 1. ~~Summary of Significant Accounting Policies~~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. As of ~~September~~June 30, ~~2021,~~2022, the Company had investments of approximately ~~$824.4~~$869.5 million in ~~151~~159 real estate properties (including a 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 (See Note 10))~~million). The properties are located in 3334 states, totaling approximately ~~3.3~~3.4 million square feet in the aggregate and were approximately ~~89.3%~~90.3% leased at ~~September~~June 30, ~~2021~~2022 with a weighted average remaining lease term of approximately ~~8.0~~7.8 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 September 30, 2021, there was approximately $17,000 remaining to be billed and paid during the fourth quarter 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, ~~2020.~~2021. 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, ~~2021.~~2022. All ~~material~~ intercompany accounts and transactions have been eliminated.

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.

~~Reclassifications~~

~~For the three~~Cash and nine months ended September 30, 2020, the Company reclassified $20,000 and $40,000, respectively, of deferred income taxes from General and administrative expense to Deferred income tax expense on the Condensed Consolidated Statements of Income to conform to the current period presentation.

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~Cash,~~ Cash Equivalents and Restricted Cash

Cash and cash equivalents includes short-term investments with original maturities of three months or less when purchased. Restricted cash consists of amounts held by the lender of our mortgage note payable to provide for future real estate tax, insurance expenditures and tenant improvements related to one property. The carrying ~~amount approximates~~amounts approximate fair value due to the short term maturity of these investments. The following table provides a reconciliation of cash and cash equivalents and restricted cash:

Balance as of September 30,
(Dollars in thousands) 2021 2020
Cash and cash equivalents $ 1,641 $ 12,158
Restricted cash 456 340
Cash, cash equivalents and restricted cash $ 2,097 $ 12,498


	Balance as of June 30,
(Dollars in thousands)	2022		2021
Cash and cash equivalents	$	1,699	$	4,787
Restricted cash	659		467
Cash, cash equivalents and restricted cash	$	2,358	$	5,254

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"). The Company and ~~one subsidiary~~two subsidiaries have also elected for ~~that subsidiary~~those subsidiaries to be treated as a taxable REIT ~~subsidiary~~subsidiaries ("~~TRS"~~TRSs"), which isare subject to federal and state income taxes.

Notes to Condensed Consolidated Financial Statements - Continued

No provision has been made for federal income taxes for the REIT; however, the Company has recorded income tax expense or benefit for the ~~TRS~~TRSs 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 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 ~~GAAP)~~generally accepted accounting principles) and meet other requirements to continue to qualify as a 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 continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~Note~~NOTE 2. ~~Real Estate Properties~~REAL ESTATE PROPERTIES

As of ~~September~~June 30, ~~2021,~~2022, we had investments of approximately ~~$824.4~~$869.5 million in ~~151~~159 real estate properties (including a 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 tables:


Property Type	Property Type	# of Properties	Gross Investment (in thousands)		Property Type	# of Properties	Gross Investment (in thousands)
Medical Office Building	Medical Office Building	59	$	278,759	Medical Office Building	65	$	298,680
Acute Inpatient Behavioral	Acute Inpatient Behavioral	5	130,275		Acute Inpatient Behavioral	5	130,410
Inpatient Rehabilitation Facilities	Inpatient Rehabilitation Facilities	6	127,676		Inpatient Rehabilitation Facilities	7	151,234
Specialty Centers	Specialty Centers	34	106,150		Specialty Centers	34	106,193
Physician Clinics	Physician Clinics	28	81,241		Physician Clinics	29	82,213
Surgical Centers and Hospitals	Surgical Centers and Hospitals	10	54,351		Surgical Centers and Hospitals	10	54,851
Behavioral Specialty Facilities	Behavioral Specialty Facilities	8	30,971		Behavioral Specialty Facilities	8	30,978
Long-term Acute Care Hospitals	Long-term Acute Care Hospitals	1	14,937		Long-term Acute Care Hospitals	1	14,937
Total	Total	151	$	824,360	Total	159	$	869,496

State # of Properties Gross Investment
(in thousands)
Texas 15 $ 135,519
Illinois 16 119,733
Ohio 19 68,051
Florida 14 65,662
Massachusetts 2 35,298
All Others 85 400,097
Total 151 $ 824,360

Primary Tenant # of Properties Gross Investment
(in thousands)
US Healthvest 3 $ 77,963
Everest Rehabilitation 3 57,100
Genesis Care 9 33,190
All Others 136 656,107
Total 151 $ 824,360


State	# of Properties	Gross Investment (in thousands)
Texas	15	$	137,523
Illinois	16	120,339
Ohio	23	101,144
Florida	14	66,265
Massachusetts	2	35,298
All Others	89	408,927
Total	159	$	869,496

1110

Notes to Condensed Consolidated Financial Statements - Continued


Primary Tenant	# of Properties	Gross Investment (in thousands)
Everest Rehabilitation	4	$	80,658
US Healthvest	3	77,964
All Others	152	710,874
Total	159	$	869,496

~~Note~~NOTE 3. ~~Real Estate Leases~~REAL ESTATE LEASES

Lessor Accounting

The Company’s properties are generally leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 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 taxes), insurance, maintenance and other operating costs associated with the leased property.

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~~June 30, ~~2021,~~2022, are as follows (in thousands):


2021 (three months ending December 31)		$	18,931
2022		73,837
2022 (six months ending December 31)				2022 (six months ending December 31)	$	39,823
2023	2023	69,353		2023	76,469
2024	2024	64,759		2024	71,470
2025	2025	59,505		2025	66,222
2026 and thereafter		380,747
2026				2026	59,091
2027 and thereafter				2027 and thereafter	375,290
		$	667,132		$	688,365

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 $0.9 million and ~~$0.9~~$1.0 million, respectively, for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, and was approximately ~~$2.7~~$1.7 million and ~~$2.5~~$1.8 million, respectively, for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021.

Purchase Option Provisions

Certain of the Company's leases provide the lessee with a purchase option or a right of first refusal to purchase the leased property. The purchase option provisions generally allow the lessee to purchase the leased property at fair value or at an amount greater than the Company's gross investment in the leased property at the time of the purchase.

At June 30, 2022, the Company had an aggregate gross investment of approximately $28.1 million in 5 real estate properties with purchase options exercisable at June 30, 2022 that had not been exercised.

Notes to Condensed Consolidated Financial Statements - Continued

Sales-type Lease

The Company has a portion of 1 property accounted for as a sales-type lease with a gross amount totaling approximately $3.0 million included in other assets, net on the Company's Condensed Consolidated Balance Sheets. Future lease payments due to the Company under this lease for the years ending December 31, as of June 30, 2022, are as follows (in thousands):


2022 (six months ended December 31)	$	165
2023	336
2024	346
2025	356
2026	367
2027 and thereafter	5,587
Total undiscounted lease receivable	7,157
Discount	(4,124)
Lease receivable	$	3,033

The Company recognized interest income of approximately $0.1 million and $0.1 million, respectively, during the three months ended June 30, 2022 and 2021 and ~~2020.~~recognized approximately $0.2 million and $0.2 million, respectively, of interest income during the six months ended June 30, 2022 and 2021 related to this lease which is included in other operating interest on the Company's Consolidated Income Statements.

Lessee Accounting

At ~~September~~June 30, ~~2021,~~2022, the Company was obligated, as the lessee, under 54 non-prepaid ground leases accounted for as operating leases with expiration dates, including renewal options, through ~~2085.~~2076, and 1 non-prepaid ground lease accounted for as a financing lease with an expiration date through 2085, including renewal options. Any rental increases related to the Company's ground leases are generally either stated or based on the Consumer Price Index. The Company's future lease payments under these non-prepaid ground leases were as ~~follows:~~follows (in thousands):

(in thousands) Operating Financing
2021 (three months ending December 31) $ 6 $ 31
2022 42 125
2023 43 125
2024 44 138
2025 44 138
2026 and thereafter 1,250 5,621
Total undiscounted lease payments 1,429 6,178
Discount (633) (3,205)
Lease liabilities $ 796 $ 2,973


	Operating		Financing
2022 (six months ended December 31)	$	21	$	63
2023	42		125
2024	43		138
2025	44		138
2026	44		138
2027 and thereafter	1,193		5,483
Total undiscounted lease payments	1,387		6,085
Discount	(596)		(3,114)
Lease liabilities	$	791	$	2,971

Notes to Condensed Consolidated Financial Statements - Continued

~~Note 4. Real Estate Acquisitions and Dispositions~~The following table discloses other information regarding the ground leases.


	June 30,
	2022		2021
Operating leases:
Weighted-average remaining lease term in years (including renewal options)	36.43		37.63
Weighted-average discount rate	4.0	%	4.0	%

Financing leases:
Weighted-average remaining lease term in years (including renewal options)	36.5		35.5
Weighted-average discount rate	4.1	%	4.1	%

~~2021 Real Estate Acquisitions~~

NOTE 4. REAL ESTATE ACQUISITIONS

During the ~~third~~second quarter of ~~2021,~~2022, the Company acquired 1 real estate property. Upon acquisition, the property was 100% leased with a lease expiration in 2037. Amounts reflected in revenues and net income for this property for the three months ended June 30, 2022 were approximately $0.4 million and $0.3 million, respectively, and transaction costs totaling approximately $0.1 million were capitalized relating to the property acquisition.

During the first quarter of 2022, the Company acquired 2 real estate properties. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations through ~~2026. Amounts~~2028. Amounts reflected in revenues and net income for these properties for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 were approximately ~~$0.2~~$0.3 million and ~~$45,000,~~$43,000, respectively, and transaction costs totaling approximately ~~$0.2~~$0.1 million were capitalized relating to these property acquisitions.

During the second quarter of 2021, the Company acquired 2 real estate properties. Upon acquisition, the properties were approximately 89.6% leased in the aggregate with lease expirations through 2028. Amounts reflected in revenues and net income for these properties for the nine months ended September 30, 2021 were approximately $0.6 million and $11,000, respectively, and transaction costs totaling approximately $0.2 million were capitalized relating to these property acquisitions. The Company assumed a ground lease on the medical office building in Pittsburgh, PA. The ground lease will be accounted for as a financing lease, and the Company recorded a $1.9 million right-of-use asset, included in Other assets, net, and a $3.0 million lease liability, included in Other liabilities, net on the Condensed Consolidated Balance Sheet. Payments due under the ground lease are reimbursable by the tenants. The ground lease expires on December 31, 2085, including 3 renewal options.

During the first quarter of 2021, the Company acquired 6 real estate properties. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations through 2036. Amounts reflected in revenues and net income for these properties for the nine months ended September 30, 2021 were approximately $4.0 million and $2.6 million, respectively, and transaction costs totaling approximately $0.3 million were capitalized relating to these property acquisitions. Concurrent with the acquisitions, the Company entered into term and revolver loans with the tenant on two of these properties. See Note 10 for more details on these loans.

Location
Property
Type (1)
Date
Acquired Purchase
Price Cash
Consideration Real Estate Other Square Footage
(000's) (000's) (000's) (000's)
Brenham, TX PC 01/19/21 $ 5,029 $ 5,034 $ 5,072 $ (38) 37,354
Lexington, VA PC 01/25/21 3,101 3,142 3,164 (22) 15,820
Toledo, OH BSF 02/05/21 4,825 4,893 4,893 — 13,290
Hudson, OH BSF 02/05/21 4,825 4,892 4,892 — 13,290
Oklahoma City, OK IRF 03/01/21 21,000 21,025 21,025 — 39,637
Keller, TX IRF 03/01/21 21,000 21,021 21,021 — 39,761
Cincinnati, OH MOB 04/14/21 4,167 3,494 4,336 (842) 43,599
Pittsburgh, PA MOB 06/10/21 5,347 5,420 6,556 (1,136) 34,077
Houston, TX MOB 07/21/21 3,737 3,732 3,755 (23) 14,360
Belcamp, MD MOB 08/31/21 5,538 5,568 5,698 (130) 23,388
$ 78,569 $ 78,221 $ 80,412 $ (2,191) 274,576
(1) PC - Physician Clinic; BSF - Behavioral Specialty Facility; IRF - Inpatient Rehabilitation Facility; MOB - Medical Office Building


Location	Property Type (1)	Date Acquired	Purchase Price		Cash Consideration		Real Estate		Other		Square Footage
			(000's)		(000's)		(000's)		(000's)
Toledo, OH	MOB	03/09/22	$	2,606	$	2,621	$	2,735	$	(114)	17,465
Fremont, NE	MOB	03/09/22	3,232		3,224		3,443		(219)		12,850
Cincinnati, OH	IRF	05/12/22	23,500		22,826		23,558		(732)		37,720
			$	29,338	$	28,671	$	29,736	$	(1,065)	68,035

(1) MOB - Medical Office Building; IRF - Inpatient Rehabilitation Facility

Notes to Condensed Consolidated Financial Statements - Continued

The following table summarizes the relative fair values of the assets acquired and liabilities assumed in the property acquisitions for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022.

Relative
Fair Value Estimated
Useful Life
(in thousands) (in years)
Land and land improvements $ 11,431 12.3
Building and building improvements 62,350 42.2
Intangibles:
At-market lease intangibles 6,631 4.1
Above-market lease intangibles 69 4.0
Below-market lease intangibles (156) 4.5
Total intangibles 6,544
Accounts receivable and other assets acquired 51
Financing right-of-use lease asset assumed 1,898
Financing lease liability assumed (2,971)
Accounts payable, accrued liabilities and other liabilities assumed (872)
Prorated rent, interest and operating expense reimbursement amounts collected (210)
Total cash consideration $ 78,221

~~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 September 30, 2021.


			Relative Fair Value		Estimated Useful Life
			(in thousands)		(in years)
Land and land improvements			$	4,258	12.7
Building and building improvements			24,290		45.3
Intangibles:
	At-market lease intangibles		1,187		4.5

	Below-market lease intangibles		(194)		6.1
		Total intangibles	993



Accounts payable, accrued liabilities and other liabilities assumed			(97)
Prorated rent, interest and operating expense reimbursement amounts collected			(773)
	Total cash consideration		$	28,671

~~Note~~NOTE 5. ~~Debt, net~~DEBT, NET

The table below details the Company's debt as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.


		Balance as of						Balance as of
(Dollars in thousands)	(Dollars in thousands)	September 30, 2021		December 31, 2020		Maturity Dates	(Dollars in thousands)	June 30, 2022		December 31, 2021		Maturity Dates

Credit Facility:							Credit Facility:
Revolving Credit Facility	Revolving Credit Facility	$	4,000	$	33,000	3/26	Revolving Credit Facility	$	38,000	$	12,000	3/26
A-1 Term Loan, net		—		49,908		n/a
A-2 Term Loan, net	A-2 Term Loan, net	49,791		49,828		3/24	A-2 Term Loan, net	49,855		49,813		3/24
A-3 Term Loan, net	A-3 Term Loan, net	74,457		74,524		3/26	A-3 Term Loan, net	74,548		74,487		3/26
A-4 Term Loan, net	A-4 Term Loan, net	124,267		—		3/28	A-4 Term Loan, net	124,352		124,296		3/28
Mortgage Note Payable, net	Mortgage Note Payable, net	5,045		5,114		5/24	Mortgage Note Payable, net	4,971		5,029		5/24
		$	257,560	$	212,374			$	291,726	$	265,625

On March 19, 2021, Community Healthcare Trust Incorporated, as borrower, entered into a third amended and restated credit agreement (the “Third Amended and Restated Credit Agreement”) with a syndicate of lenders, under which Truist Bank serves as administrative agent. The Third Amended and Restated Credit Agreement amends and restates the Second Amended and Restated Credit Agreement dated as of March 29, 2017,facility by and among ~~the Company’s operating partnership,~~ Community Healthcare ~~OP, LP,~~Trust Incorporated, as borrower, the several banks and financial institutions party

~~Notes to Condensed Consolidated Financial Statements - Continued~~

thereto as lenders, ~~(collectively, the “Lenders”),~~ and ~~SunTrust~~Truist Bank, as administrative agent (the ~~predecessor in interest to Truist Bank), as the administrative agent.~~ "Credit Facility").

The ~~Third Amended and Restated~~ Credit ~~Agreement~~Facility allows the Company 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 Agreement 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 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 modified 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 $600.0 million including the ability to add and fund additional term loans. The~~ Revolving Credit Facility matures on March 19, 2026 and includes 1 12-month option to extend the maturity date, ~~of the Revolving Credit Facility,~~ subject to the satisfaction of certain conditions. The Term Loans include a seven-year term loan facility in the aggregate principal amount of $50.0 million (the "A-2 Term Loan"), which matures on March 29, 2024, a seven-year term loan facility in the aggregate principal amount of $75.0 million (the "A-3 Term Loan"), which matures on March 29, 2026, and ~~the A-4 Term Loan~~a 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.

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 1.25% to 1.90% or (ii) a base rate plus 0.25% to 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 0.20% 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 0.25% 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. The Company had ~~$4.0~~$38.0 million outstanding under the Revolving Credit Facility with a weighted average interest rate of 2.9% and ~~had~~ a borrowing capacity remaining of ~~$146.0~~$112.0 million at ~~September~~June 30, ~~2021.~~2022.

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 1.45% to 2.30% or (ii) a base rate plus 0.45% to 1.30%, in each case, depending upon the Company’s leverage ratio. The Company has entered into interest rate swaps to fix the interest rates on the Term Loans. See Note 6 – Derivative Financial Instruments for more details on the interest rate swaps. At ~~September~~June 30, ~~2021,~~2022, the Company had $250.0 million outstanding under the Term Loans which had a fixed weighted average interest rate under the swaps of approximately ~~3.95%~~3.79%.

~~Note~~NOTE 6. ~~Derivative Financial Instruments~~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

~~Notes to Condensed Consolidated Financial Statements - Continued~~

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.

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 these objectives, the Company primarily uses interest rate swaps 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.

As of ~~September~~June 30, ~~2021,~~2022, the Company had 1412 outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk for notional amounts totaling $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.~~million.

Notes to Condensed Consolidated Financial Statements - Continued

Tabular Disclosure of Fair Value of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Asset Derivatives Fair Value at

Liability Derivatives Fair Value at

Asset Derivatives Fair Value at

Liability Derivatives Fair Value at

(Dollars in thousands)

September 30, 2021

December 31, 2020

Balance Sheet Classification

September 30, 2021

December 31, 2020

Balance Sheet Classification

(Dollars in thousands)

June 30, 2022

December 31, 2021

Balance Sheet Classification

June 30, 2022

December 31, 2021

Balance Sheet Classification

Interest rate swaps

—

Other assets, net

8,269

11,846

Other liabilities, net

Interest rate swaps

12,761

343

Other assets, net

—

5,324

Other liabilities, net

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

Amounts reported in AOCI 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 ~~$4.3~~$3.3 million will be reclassified from AOCI as ~~an increase~~a decrease to interest expense.

Tabular Disclosure of the Effect of ~~Fair Value and~~ Cash Flow Hedge Accounting on Accumulated Other Comprehensive ~~Loss~~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~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		2021		2020		(Dollars in thousands)	2022		2021		2022		2021
Amount of unrealized gain (loss) recognized in OCI on derivatives	Amount of unrealized gain (loss) recognized in OCI on derivatives	$	289	$	(99)	$	304	$	(10,292)	Amount of unrealized gain (loss) recognized in OCI on derivatives	$	4,584	$	(2,788)	$	15,991	$	15
Amount of loss reclassified from AOCI into interest expense	Amount of loss reclassified from AOCI into interest expense	$	1,181	$	933	$	3,273	$	1,965	Amount of loss reclassified from AOCI into interest expense	$	635	$	1,160	$	1,750	$	2,092
Total interest expense presented in the Condensed Consolidated Statements of Income in which the effects of the cash flow hedges are recorded	Total interest expense presented in the Condensed Consolidated Statements of Income in which the effects of the cash flow hedges are recorded	$	2,788	$	2,064	$	7,753	$	6,496	Total interest expense presented in the Condensed Consolidated Statements of Income in which the effects of the cash flow hedges are recorded	$	2,755	$	2,736	$	5,381	$	4,966

~~Notes to Condensed Consolidated Financial Statements - Continued~~

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 ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. 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.


Offsetting of Derivative Assets (as of June 30, 2022)
							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Condensed Consolidated Balance Sheet		Net Amounts of Assets in the Condensed Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	12,761	$	—	$	12,761	$	—	$	—	$	12,761

Notes to Condensed Consolidated Financial Statements - Continued

Offsetting of Derivative ~~Assets~~Liabilities (as of ~~September~~June 30, ~~2021)~~2022)

Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets

(inIn thousands)

Gross Amounts of Recognized ~~Assets~~Liabilities

Gross Amounts Offset in the Condensed Consolidated Balance Sheet

Net Amounts of ~~Assets~~Liabilities in the Condensed Consolidated Balance Sheets

Financial Instruments

Cash Collateral Received

Net Amount

Derivatives

—

Offsetting of Derivative Liabilities (as of September 30, 2021)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(in thousands) Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Condensed Consolidated Balance Sheet Net Amounts of Liabilities in the Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Received Net Amount
Derivatives $ (8,269) $ — $ (8,269) $ — $ — $ (8,269)


Offsetting of Derivative Assets (as of December 31, 2021)
							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Condensed Consolidated Balance Sheet		Net Amounts of Assets in the Condensed Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	343	$	—	$	343	$	(247)	$	—	$	96

~~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 Assets~~

~~Gross Amounts Offset in the Condensed Consolidated Balance Sheet~~

~~Net Amounts of Assets in the Condensed Consolidated Balance Sheets~~

~~Financial Instruments~~

~~Cash Collateral Received~~

~~Net Amount~~

~~Derivatives~~

—


Offsetting of Derivative Liabilities (as of December 31, 2021)
							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Condensed Consolidated Balance Sheet		Net Amounts of Liabilities in the Condensed Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	(5,324)	$	—	$	(5,324)	$	247	$	—	$	(5,077)

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 Liabilities Gross Amounts Offset in the Condensed Consolidated Balance Sheet Net Amounts of Liabilities in the Condensed Consolidated Balance Sheets Financial Instruments Cash Collateral Received Net Amount
Derivatives $ (11,846) $ — $ (11,846) $ — $ — $ (11,846)

Credit-risk-related Contingent ~~Feature~~sFeatures

As of ~~September~~June 30, ~~2021,~~2022, the ~~fair value of~~Company did not have any derivatives in a net liability ~~position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $8.5 million.~~position. As of ~~September~~June 30, ~~2021,~~2022, the Company ~~has~~had not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company ~~had~~terminated these interest rate swaps or breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination ~~value of approximately $8.5 million at September 30, 2021.~~value.

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~Note~~NOTE 7. ~~Stockholders’ Equity~~STOCKHOLDERS' EQUITY

Common Stock

The following table provides a reconciliation of the beginning and ending common stock balances for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and for the year ended December 31, ~~2020:~~2021:


		Nine Months Ended September 30, 2021	Year Ended December 31, 2020
(In thousands)				(In thousands)	Six Months Ended June 30, 2022	Year Ended December 31, 2021
Balance, beginning of period	Balance, beginning of period	23,888,090	21,410,578	Balance, beginning of period	24,983	23,888
Issuance of common stock	Issuance of common stock	822,452	2,206,976	Issuance of common stock	—	823
Restricted stock-based awards		273,106	270,536
Restricted stock forfeited		(1,361)	—
Restricted stock issued				Restricted stock issued	119	273
Restricted stock withheld and forfeited				Restricted stock withheld and forfeited	(3)	(1)
Balance, end of period	Balance, end of period	24,982,287	23,888,090	Balance, end of period	25,099	24,983

ATM Program

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

Notes to Condensed Consolidated Financial Statements - Continued

Company may issue and sell shares of its common stock, having an aggregate gross sales price of up to $360.0 million. The shares of common stock may be sold from time to time through or to one or more of the Agents, as may be determined by the Company in its sole discretion, subject to the terms and conditions of the agreement and applicable law.

The ~~Company's activity~~Company elected not to issue any shares under the ATM Program ~~for~~during the ~~three and nine~~six months ended ~~September~~June 30, ~~2021 is detailed in the table below.~~2022. As of ~~September~~June 30, ~~2021,~~2022, the Company had approximately $101.0 million remaining that may be issued under the ATM Program.

Three Months Ended
September 30, 2021 Nine Months Ended
September 30, 2021
Shares issued 139,216 822,452
Net proceeds received (in millions)
$ 6.6 $ 38.4
Average gross sales price per share $ 48.63 $ 47.68

~~Notes to Condensed Consolidated Financial Statements - Continued~~

~~Note~~NOTE 8. ~~Net Income Per Common Share~~NET INCOME PER COMMON SHARE

The following table sets forth the computation of basic and diluted net income per common share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(In thousands, except per share data)	(In thousands, except per share data)	2021		2020		2021		2020		(In thousands, except per share data)	2022		2021		2022		2021
Net income	Net income	$	5,354	$	5,211	$	16,379	$	13,837	Net income	$	5,584	$	5,710	$	11,108	$	11,025
Participating securities' share in earnings	Participating securities' share in earnings	(612)		(491)		(1,697)		(1,346)		Participating securities' share in earnings	(668)		(547)		(1,327)		(1,085)
Net income, less participating securities' share in earnings	Net income, less participating securities' share in earnings	$	4,742	$	4,720	$	14,682	$	12,491	Net income, less participating securities' share in earnings	$	4,916	$	5,163	$	9,781	$	9,940

Weighted average Common Shares outstanding	Weighted average Common Shares outstanding									Weighted average Common Shares outstanding
Weighted average Common Shares outstanding	Weighted average Common Shares outstanding	24,826		22,965		24,448		22,330		Weighted average Common Shares outstanding	25,087		24,457		25,074		24,256
Unvested restricted shares	Unvested restricted shares	(1,354)		(1,099)		(1,287)		(1,040)		Unvested restricted shares	(1,509)		(1,262)		(1,500)		(1,253)
Weighted average Common Shares outstanding–Basic	Weighted average Common Shares outstanding–Basic	23,472		21,866		23,161		21,290		Weighted average Common Shares outstanding–Basic	23,578		23,195		23,574		23,003

Dilutive potential common shares	Dilutive potential common shares	—		—		—		—		Dilutive potential common shares	—		—		—		—
Weighted average Common Shares outstanding –Diluted	Weighted average Common Shares outstanding –Diluted	23,472		21,866		23,161		21,290		Weighted average Common Shares outstanding –Diluted	23,578		23,195		23,574		23,003

Basic Net Income per Common Share	Basic Net Income per Common Share	$	0.20	$	0.22	$	0.63	$	0.59	Basic Net Income per Common Share	$	0.21	$	0.22	$	0.41	$	0.43

Diluted Net Income per Common Share	Diluted Net Income per Common Share	$	0.20	$	0.22	$	0.63	$	0.59	Diluted Net Income per Common Share	$	0.21	$	0.22	$	0.41	$	0.43

~~Note~~NOTE 9. ~~Incentive Plan~~STOCK INCENTIVE PLAN

A summary of the activity under the Company's 2014 Incentive Plan, as amended, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 is included in the table below, as well as compensation expense recognized from the amortization of the value of shares over the applicable vesting periods.


			Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)			2021		2020		2021		2020
(Dollars and shares in thousands)											(Dollars and shares in thousands)		2022		2021		2022		2021
Stock-based awards, beginning of period	Stock-based awards, beginning of period		1,259,841		1,020,000		1,164,518		909,892		Stock-based awards, beginning of period		1,502		1,258		1,416		1,165
		Stock in lieu of compensation	45,966		36,349		96,021		92,104			Stock in lieu of compensation	8		6		52		50
		Stock awards	111,541		108,169		177,085		178,432			Stock awards	19		16		67		65
		Total stock granted	157,507		144,518		273,106		270,536			Total stock granted	27		22		119		115
		Vested shares	(130)		—		(20,406)		(15,910)			Vested shares	(17)		(20)		(22)		(20)
		Forfeited shares	(1,361)		—		(1,361)		—			Forfeited shares	—		—		(1)		—
Stock-based awards, end of period	Stock-based awards, end of period		1,415,857		1,164,518		1,415,857		1,164,518		Stock-based awards, end of period		1,512		1,260		1,512		1,260
Amortization expense	Amortization expense		$	2,004	$	1,284	$	5,168	$	3,373	Amortization expense		$	2,184	$	1,606	$	4,307	$	3,164

1918

Notes to Condensed Consolidated Financial Statements - Continued

~~Note~~NOTE 10. ~~Other Assets, net~~OTHER ASSETS, NET

Other assets, net on the Company's Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 are detailed in the table below.


		Balance as of					Balance as of
(Dollars in thousands)	(Dollars in thousands)	September 30, 2021		December 31, 2020		(Dollars in thousands)	June 30, 2022		December 31, 2021
Notes receivable	Notes receivable	$	26,000	$	15,010	Notes receivable	$	27,500	$	26,000

Accounts and interest receivable	Accounts and interest receivable	2,148		1,675		Accounts and interest receivable	2,463		2,116
Straight-line rent receivable	Straight-line rent receivable	11,116		8,682		Straight-line rent receivable	13,723		11,968

Prepaid assets	Prepaid assets	878		600		Prepaid assets	728		701
Deferred financing costs, net	Deferred financing costs, net	949		479		Deferred financing costs, net	790		896
Leasing commissions, net	Leasing commissions, net	1,250		1,134		Leasing commissions, net	1,389		1,239
Deferred tax assets, net	Deferred tax assets, net	410		515		Deferred tax assets, net	349		348
Fair value of interest rate swaps						Fair value of interest rate swaps	12,761		343
Above-market lease intangible assets, net						Above-market lease intangible assets, net	517		611
Sales-type lease receivable						Sales-type lease receivable	3,033		3,031
Financing right-of-use asset						Financing right-of-use asset	1,844		1,870

Above-market lease intangible assets, net		575		617
Sales-type lessor receivable		3,028		3,016
Financing right-of-use asset		1,882		—
Assets held for sale		1,023		—
Operating lease right-of-use assets	Operating lease right-of-use assets	817		821		Operating lease right-of-use assets	774		788
Other	Other	461		501		Other	373		426
		$	50,537	$	33,050		$	66,244	$	50,337

The Company's notes receivable mainly included:

•At ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, notes receivable included a ~~$13.0~~$10.5 million and ~~$15.0~~$12.0 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 ~~September~~June 30, 2022 and December 31, 2021, notes receivable included a $6.0 million and $6.0 million, respectively, term loan and a ~~$7.0~~$11.0 million and $8.0 million, respectively, 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~~initially and then equal monthly installments of principal payments due beginning June 30, ~~2022.~~2023. 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. These notes were amended during the second and third quarters of 2021 which resulted in increasing the revolving credit facility commitment from $4.0 million to $7.0 million and then reducing the commitment to $4.0 million by July 1, 2022, extending the first installment payment on the term loan by one quarter, and adding additional fees due on the loans upon repayment. In addition, the Company has committed to fund, at the Company’s discretion, additional amounts, up to $5.0 million with interest at 9% per annum on any amount funded, that may be used by the borrower to pay existing liabilities of co-borrowers. The term loan, the revolving credit facility and the additional commitment all include a 3% non-cash interest charge that is due and payable upon the earlier of the repayment or maturity of each note.

Notes to Condensed Consolidated Financial Statements - Continued

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~~decision-making rights or control of the ~~activities~~entities that impact the borrowers' economic performance. We are not obligated to provide support beyond our stated commitment to the borrowers, and accordingly our maximum

~~Notes to Condensed Consolidated Financial Statements - Continued~~

exposure to loss as a result of this relationship is limited to the amount of our outstanding notes receivable. The VIEs that we have identified at ~~September~~June 30, ~~2021~~2022 are summarized in the table below.

Classification
Carrying Amount
(in thousands)
Maximum Exposure to Loss
(in thousands)
Note receivable $ 13,000 $ 13,000
Note receivable $ 7,000 $ 7,000
Note receivable $ 6,000 $ 6,000


Classification	Carrying Amount (in thousands)		Maximum Exposure to Loss (in thousands)
Note receivable (term loan)	$	10,500	$	10,500
Note receivable (revolving credit facility)	$	11,000	$	11,000
Note receivable (term loan)	$	6,000	$	6,000

~~Note~~NOTE 11. ~~Other Liabilities, net~~OTHER LIABILITIES, NET

Other liabilities, net on the Company's Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 are detailed in the table below.


		Balance as of					Balance as of
(Dollars in thousands)	(Dollars in thousands)	September 30, 2021		December 31, 2020		(Dollars in thousands)	June 30, 2022		December 31, 2021
Prepaid rent	Prepaid rent	$	3,745	$	2,596	Prepaid rent	$	3,967	$	3,791
Security deposits	Security deposits	4,413		4,141		Security deposits	5,224		4,640
Below-market lease intangibles, net	Below-market lease intangibles, net	639		613		Below-market lease intangibles, net	720		616
Fair value of derivatives	Fair value of derivatives	8,269		11,846		Fair value of derivatives	—		5,324
Financing lease liability	Financing lease liability	2,973		—		Financing lease liability	2,971		2,973
Operating lease liability	Operating lease liability	796		793		Operating lease liability	791		795
Liabilities held for sale		35		—

Other	Other	581		380		Other	454		512
		$	21,451	$	20,369		$	14,127	$	18,651

~~Note~~NOTE 12. ~~Fair Value of Financial Instruments~~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.

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 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.

Notes to Condensed Consolidated Financial Statements - Continued

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.

~~Notes to Condensed Consolidated Financial Statements - Continued~~

The table below details the fair values and carrying values for our notes receivable, interest rate swaps, and mortgage note payable at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, using level 2 inputs.


		September 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value		(Dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value

Notes receivable	Notes receivable	$	26,000	$	26,208	$	15,010	$	15,010	Notes receivable	$	27,500	$	26,641	$	26,000	$	25,869

Interest rate swap asset										Interest rate swap asset	$	12,761	$	12,761	$	343	$	343
Interest rate swap liability	Interest rate swap liability	$	8,269	$	8,269	$	11,846	$	11,846	Interest rate swap liability	$	—	$	—	$	5,324	$	5,324
Mortgage note payable		$	5,096	$	5,278	$	5,180	$	5,432
Mortgage note payable (principal amount)										Mortgage note payable (principal amount)	$	5,007	$	4,886	$	5,076	$	5,129

~~Note~~NOTE 13. ~~Subsequent Events~~SUBSEQUENT EVENTS

Dividend Declared

On ~~October~~July 28, ~~2021,~~2022, the Company’s Board of Directors declared a quarterly common stock dividend in the amount of ~~$0.4350~~$0.4425 per share. The dividend is payable on ~~November~~August 26, ~~2021~~2022 to stockholders of record on ~~November~~August 12, ~~2021.~~2022.

~~Real Estate Acquisition~~Restricted Stock Issuances

~~Subsequent to September 30, 2021,~~On July 29, 2022, the Company ~~acquired a 27,000 square foot medical office building for a purchase price and cash consideration~~issued 72,431 shares of ~~approximately $3.5 million. The property was 83.4% leased with lease expirations through 2030 at acquisition and was funded with cash on hand and proceeds from~~restricted stock to its executive officers under the Company's ~~Revolving Credit Facility.~~2014 Incentive Plan with an 8-year vesting period.

2221

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, 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, ~~2020,~~2021, 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.

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.

Trends and Matters Impacting Operating Results

Management monitors 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.

2322

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

Real ~~estate acquisitions~~Estate Acquisitions

During the first ~~nine~~six months of ~~2021,~~2022, the Company acquired ~~ten~~three real estate properties totaling approximately ~~275,000~~68,035 square feet for an aggregate purchase price of approximately ~~$78.6~~$29.3 million and cash consideration of approximately ~~$78.2~~$28.7 million. Upon acquisition, the properties were ~~approximately 98.8%~~100% leased in the aggregate with lease expirations through ~~2036. The Company also entered into a term loan and a revolver loan with balances at September 30, 2021 of $6.0 million and $7.0 million, respectively, with the tenant on two of these properties.~~ 2037. These acquisitions were funded with cash on hand, proceeds from the Company's ATM Program, and proceeds from the Company's Revolving Credit Facility. See Note 4 to the Condensed Consolidated Financial Statements for more details on these acquisitions.

Subsequent to September 30, 2021, the Company acquired a 27,000 square foot medical office building for a purchase price and cash consideration of approximately $3.5 million. The property was 83.4% leased with lease expirations through 2030 at acquisition and was funded with cash on hand and proceeds from the Company's Revolving Credit Facility. See Note 4 – Real Estate Acquisitions to the Condensed Consolidated Financial Statements for more details on these acquisitions.

Acquisition Pipeline

The Company has three properties under definitive purchase agreements for an aggregate expected ~~aggregate~~ purchase price of approximately ~~$12.2~~$23.4 million. The Company's expected returns on these investments range from 9.0% to 9.72%. The Company expects to close on these properties ~~during~~in the ~~fourth quarter~~second half of ~~2021;~~2022; 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, or proceeds from the Company's Revolving Credit Facility.

The Company also has ~~four~~five properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately ~~$94.0~~$117.5 million. The Company's expected ~~returns~~return on these investments ~~are approximately~~will approximate 10.25%. The Company anticipates closing on these properties from the ~~first~~fourth quarter of 2022 through the ~~second~~fourth quarter of 2023; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close.

~~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 fourth 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 September 30, 2021.

Leased ~~square footage~~Square Footage

As of ~~September~~June 30, ~~2021,~~2022, our real estate portfolio was approximately ~~89.3%~~90.3% leased. During the first ~~nine~~six months of ~~2021,~~2022, we had expiring or terminated leases related to approximately ~~143,000~~239,000 square feet, and we leased or renewed leases relating to approximately ~~248,000~~247,000 square feet.

~~COVID-19 pandemic~~Purchase Option Provisions

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.

~~During 2020, as a result~~Certain of the ~~pandemic,~~Company's leases provide the ~~Company entered into deferral agreements~~lessee with ~~18 tenants, with deferrals representing less~~a purchase option or a right of first refusal to purchase the leased property. The purchase option provisions generally allow the lessee to purchase the leased property at fair value or at an amount greater than ~~one percent of our annualized rent~~the Company's gross investment in the ~~aggregate. Amounts due under~~leased property at the ~~deferral agreements were generally repaid during 2020, however, at September��30, 2021, there was approximately $17,000 remaining to be billed and paid during~~time of the ~~fourth quarter of 2021.~~purchase.

~~Management's Discussion and Analysis~~At June 30, 2022, the Company had an aggregate gross investment of ~~Financial Condition and Results of Operations - Continued~~approximately $28.1 million in five real estate properties with purchase options exercisable at June 30, 2022 that had not been exercised.

Seasonality

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

New Accounting Pronouncements

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

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

Results of Operations

The Company's results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the same periods in ~~2020 have most significantly been~~2021 were impacted by ~~its~~ real estate ~~acquisitions. As~~acquisitions, capital market activity, the amortization of ~~September 30, 2021 and 2020, the Company had investments~~non-cash compensation, as well as other items discussed in real estate properties totaling approximately $824.4 million (including a portion of one property accounted for as a financing lease with a gross amount totaling approximately $3.0 million and one property classified as held for sale with a gross amount totaling approximately $1.1 million) and $667.3 million, respectively.more detail below.

Three Months Ended ~~September~~June 30, ~~2021~~2022 Compared to Three Months Ended ~~September~~June 30, ~~2020~~2021

The table below shows our results of operations for the three months ended ~~September~~June 30, ~~2021~~2022 compared to the same period in ~~2020~~2021 and the effect of changes in those results from period to period on our net income.

Three Months Ended September 30, Increase (decrease) to
Net income
(dollars in thousands) 2021 2020 $ %
REVENUES
Rental income $ 22,447 $ 18,939 $ 3,508 18.5 %
Other operating interest 807 405 402 99.3 %
23,254 19,344 3,910 20.2 %
EXPENSES
Property operating 4,051 3,563 (488) (13.7) %
General and administrative 3,206 2,191 (1,015) (46.3) %
Depreciation and amortization 7,812 6,295 (1,517) (24.1) %
15,069 12,049 (3,020) (25.1) %
INCOME BEFORE INCOME TAXES AND OTHER ITEMS 8,185 7,295 890 12.2 %
Interest expense (2,788) (2,064) (724) (35.1) %
Deferred income tax expense (45) (20) (25) 125.0 %
Interest and other income 2 — 2 n/m
NET INCOME $ 5,354 $ 5,211 $ 143 2.7 %

~~n/m-not meaningful~~


	Three Months Ended June 30,				Increase (Decrease) to Net income
(Dollars in thousands)	2022		2021		$		%
REVENUES
Rental income	$	23,197	$	22,006	$	1,191	5.4	%

Other operating interest	852		682		170		24.9	%
	24,049		22,688		1,361		6.0	%
EXPENSES
Property operating	4,062		3,843		(219)		(5.7)	%
General and administrative	3,610		2,893		(717)		(24.8)	%
Depreciation and amortization	8,077		7,539		(538)		(7.1)	%
	15,749		14,275		(1,474)		(10.3)	%

INCOME BEFORE INCOME TAXES AND OTHER ITEMS	8,300		8,413		(113)		(1.3)	%

Interest expense	(2,755)		(2,736)		(19)		(0.7)	%
Deferred income tax expense	(16)		(20)		4		20.0	%
Interest and other income	55		53		2		3.8	%

NET INCOME	$	5,584	$	5,710	$	(126)	(2.2)	%

Revenues

Rental income increased approximately $1.2 million, or 5.4%, for the three months ended June 30, 2022 compared to the same period in 2021 due mainly to acquisitions of real estate in 2022 and 2021.

Other operating interest increased $0.2 million, or 24.9%, for the three months ended June 30, 2022 compared to the same period in 2021. This increase in interest was due to additional amounts funded under existing notes receivable.

Expenses

Property operating expenses increased approximately $0.2 million, or 5.7%, for the three months ended June 30, 2022 compared to the same period in 2021 mainly due to acquisitions of real estate in 2022 and 2021.

General and administrative expenses increased approximately $0.7 million, or 24.8%, for the three months ended June 30, 2022 compared to the same period in 2021 due mainly to the non-cash amortization of non-vested restricted common shares granted in 2022 and 2021.

Depreciation and amortization expense increased approximately $0.5 million, or 7.1%, for the three months ended June 30, 2022 compared to the same period in 2021. This increase was comprised mainly of the following:

•Acquisitions of real estate in 2022 and 2021 resulted in an increase of approximately $0.7 million;

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

•Tenant improvements and other capital expenditures resulted in an increase of approximately $0.2 million; and

•Fully amortized real estate lease intangibles which generally have a shorter depreciable life than a building resulted in a decrease of approximately $0.4 million.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

The table below shows our results of operations for the six months ended June 30, 2022 compared to the same period in 2021 and the effect of changes in those results from period to period on our net income.


	Six Months Ended June 30,				Increase (Decrease) to Net income
(Dollars in thousands)	2022		2021		$		%
REVENUES
Rental income	$	45,801	$	42,786	$	3,015	7.0	%

Other operating interest	1,729		1,297		432		33.3	%
	47,530		44,083		3,447		7.8	%
EXPENSES
Property operating	8,153		7,572		(581)		(7.7)	%
General and administrative	6,926		5,752		(1,174)		(20.4)	%
Depreciation and amortization	16,019		14,763		(1,256)		(8.5)	%
	31,098		28,087		(3,011)		(10.7)	%

INCOME BEFORE INCOME TAXES AND OTHER ITEMS	16,432		15,996		436		2.7	%

Interest expense	(5,381)		(4,966)		(415)		(8.4)	%
Deferred income tax benefit (expense)	1		(59)		60		101.7	%
Interest and other income	56		54		2		3.7	%

NET INCOME	$	11,108	$	11,025	$	83	0.8	%

Revenues

Revenues increased approximately ~~$3.9~~$3.0 million, or ~~20.2%~~7.0%, for the ~~three~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the same period in ~~2020~~2021 due mainly ~~due~~ to acquisitions of real estate in 2022 and 2021.

Other operating interest onincreased $0.4 million, or 33.3%, for the ~~issuance of new~~six months ended June 30, 2022 compared to the same period in 2021. This increase in interest was due to additional amounts funded under existing notes receivable.

Ex~~penses~~Expenses

Property operating expenses increased approximately ~~$0.5~~$0.6 million, or ~~13.7%~~7.7%, for the ~~three~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the same period in ~~2020~~2021. This increase was due mainly ~~due to acquisitions~~to:

•Acquisitions of real ~~estate.~~estate in 2022 and 2021 contributed to an increase of approximately $0.7 million; offset partially by

•Operating expenses on the existing portfolio decreasing by approximately $0.1 million.

General and administrative expenses increased approximately $1.2 million, or 20.4%, for the six months ended June 30, 2022 compared to the same period in 2021 due mainly to the non-cash amortization of non-vested restricted common shares granted in 2022 and 2021.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

~~General~~Depreciation and ~~administrative expenses~~amortization expense increased approximately ~~$1.0~~$1.3 million, or ~~46.3%~~8.5%, for the ~~three~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the same period in ~~2020 due~~2021. The increase was comprised mainly ~~to compensation-related expenses related to new employees and annual salary increases and stock issuances totaling approximately $0.9 million, including~~of the non-cash amortization of non-vested restricted common shares of approximately $0.7 million which includes $0.2 million of accelerated amortization due to the elimination of a position and employee terminations in the third quarter of 2021.following:

~~Depreciation~~•Acquisitions of real estate in 2022 and ~~amortization expense increased approximately $1.5 million, or 24.1%, for the three months ended September 30,~~ 2021 ~~compared to the same period~~resulted in ~~2020. Acquisitions accounted for~~ an increase of approximately $1.6 ~~million, offset by a decrease~~million;

•Tenant improvements and other capital expenditures resulted in an increase of approximately ~~$0.3 million in amortization due to fully~~$0.4 million; and

•Fully amortized real estate lease intangibles which generally have a shorter depreciable life than a ~~building. The remaining increase is generally due to the depreciation~~building resulted in a decrease of ~~building and tenant improvements.~~approximately $0.7 million.

Interest expense

Interest expense increased approximately ~~$0.7~~$0.4 million, or ~~35.1%~~8.4%, for the ~~three~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the same period in ~~2020 due~~2021. This increase relates mainly ~~to the refinancing of the Credit Facility in March 2021 as discussed in Note 5 to the Condensed Consolidated Financial Statements.~~to:

~~Nine Months Ended September 30,~~•The Company's Credit Facility, refinanced in March 2021, ~~Compared to Nine Months Ended September 30, 2020~~

~~The table below shows our results of operations for the nine months ended September 30, 2021 compared to the same period~~resulted in ~~2020 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) 2021 2020 $ %
REVENUES
Rental income $ 65,233 $ 54,197 $ 11,036 20.4 %
Other operating interest 2,104 1,363 741 54.4 %
67,337 55,560 11,777 21.2 %
EXPENSES
Property operating 11,623 10,129 (1,494) (14.7) %
General and administrative 8,958 6,282 (2,676) (42.6) %
Depreciation and amortization 22,576 18,473 (4,103) (22.2) %
43,157 34,884 (8,273) (23.7) %
INCOME BEFORE INCOME TAXES AND OTHER ITEMS 24,180 20,676 3,504 16.9 %
Loss on sale of real estate — (313) 313 100.0 %
Interest expense (7,753) (6,496) (1,257) (19.4) %
Deferred income tax expense (104) (40) (64) (160.0) %
Interest and other income 56 10 46 (460.0) %
NET INCOME $ 16,379 $ 13,837 $ 2,542 18.4 %

~~Revenues~~

Revenues increased approximately $11.8 million, or 21.2%, for the nine months ended September 30, 2021 compared to the same period in 2020 mainly due to acquisitions of real estate and interest on the issuance of new notes receivable.

~~Expenses~~

~~Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued~~

~~Property operating expenses increased approximately $1.5 million, or 14.7%, for the nine months ended September 30, 2021 compared to the same period in 2020 mainly due to acquisitions of real estate.~~

General and administrative expenses increased approximately $2.7 million, or 42.6%, for the nine months ended September 30, 2021 compared to the same period in 2020 due mainly to compensation-related expenses related to new employees and annual salary increases and stock issuances totaling approximately $2.5 million, including the non-cash amortization of non-vested restricted common shares of approximately $1.8 million which includes $0.2 million of accelerated amortization due to the elimination of a position and employee terminations in the third quarter of 2021.

~~Depreciation and amortization expense increased approximately $4.1 million, or 22.2%, for the nine months ended September 30, 2021 compared to the same period in 2020. Acquisitions accounted for~~ an increase of approximately ~~$4.8 million, offset by~~$0.7 million; and

•Interest capitalized on construction projects resulted in a decrease of approximately $1.1 million in amortization due to fully amortized real estate lease intangibles which generally have a shorter depreciable life than a building. The remaining increase is generally due to the depreciation of building and tenant improvements.

~~Loss on sale of real estate~~

~~During the second quarter of 2020, the Company sold a land parcel related to one of its properties for approximately~~

~~$0.3 million and recognized a loss on sale of approximately~~ $0.3 million.

~~Interest expense~~

~~Interest expense increased approximately $1.3 million, or 19.4%,~~ ~~for the nine months ended September 30, 2021 compared to the same period in~~ ~~2020 due to the refinancing of the Credit Facility in March 2021 as discussed in Note 5 to the Condensed Consolidated Financial Statements.~~

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 Company'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 most 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 Company's business and useful to investors, as well as reconciliations of those measures to the most directly comparable GAAP financial measure.

The non-GAAP financial measures and key performance indicators presented herein are not necessarily identical to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. These measures should not be considered as alternatives to net income, as indicators of the Company's financial performance, or as alternatives to cash flow from operating activities as measures of the Company's liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of the Company's needs. Management believes that in order to facilitate a clear understanding of the Company's historical consolidated operating results, these measures should be examined in conjunction with net income and cash flows from operations as presented in the Condensed Consolidated Financial Statements and other financial data included elsewhere in this Quarterly Report on Form 10-Q.

Funds from Operations ("FFO") and Adjusted Funds from 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 net income (calculated in accordance with GAAP), excluding gains or

~~Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued~~

losses from the sale of 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

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

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, AFFO, FFO per share and 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 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 AFFO per share can facilitate comparisons of operating performance between periods.

The table below reconciles net income to FFO and AFFO for the three months ended ~~September~~June 30, ~~2021~~2022 compared to the same period in ~~2020.~~2021.


		Three Months Ended September 30,					Three Months Ended June 30,
(In thousands, excepts per share amounts)		2021		2020
(In thousands, except per share amounts)						(In thousands, except per share amounts)	2022		2021
Net income	Net income	$	5,354	$	5,211	Net income	$	5,584	$	5,710
Real estate depreciation and amortization	Real estate depreciation and amortization	7,871		6,387		Real estate depreciation and amortization	8,141		7,593

FFO	FFO	$	13,225	$	11,598	FFO	$	13,725	$	13,303
Straight-line rent	Straight-line rent	(895)		(914)		Straight-line rent	(917)		(981)
Stock-based compensation	Stock-based compensation	2,004		1,284		Stock-based compensation	2,184		1,606
AFFO	AFFO	$	14,334	$	11,968	AFFO	$	14,992	$	13,928

FFO per diluted common share	FFO per diluted common share	$	0.55	$	0.52	FFO per diluted common share	$	0.57	$	0.56

AFFO per diluted common share	AFFO per diluted common share	$	0.59	$	0.53	AFFO per diluted common share	$	0.62	$	0.58
Weighted average common shares outstanding - diluted (1)	Weighted average common shares outstanding - diluted (1)	24,220		22,468		Weighted average common shares outstanding - diluted (1)	24,247		23,908

___________________

(1) Diluted weighted average common shares outstanding for FFO and AFFO are calculated based on the treasury method, rather than the 2-class method used to calculate earnings per share.

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 other 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 associated with management of the properties. The Company's use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing NOI.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

The table below reconciles net income to NOI for the three months ended ~~September~~June 30, ~~2021~~2022 compared to the same period in ~~2020.~~2021.


			Three Months Ended September 30,						Three Months Ended June 30,
(In thousands)	(In thousands)		2021		2020		(In thousands)		2022		2021
Net income	Net income		$	5,354	$	5,211	Net income		$	5,584	$	5,710
		General and administrative	3,206		2,191			General and administrative	3,610		2,893
		Depreciation and amortization	7,812		6,295			Depreciation and amortization	8,077		7,539

		Interest expense	2,788		2,064			Interest expense	2,755		2,736
		Deferred income tax expense	45		20			Deferred income expense	16		20
								Interest and other income	(55)		(53)
NOI	NOI		$	19,205	$	15,781	NOI		$	19,987	$	18,845

EBITDArree and 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, 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 expense.

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 ~~September~~June 30, ~~2021~~2022 compared to the same period in ~~2020.~~2021.


			Three Months Ended September 30,						Three Months Ended June 30,
(In thousands)	(In thousands)		2021		2020		(In thousands)		2022		2021
Net income	Net income		$	5,354	$	5,211	Net income		$	5,584	$	5,710
		Interest expense	2,788		2,064			Interest expense	2,755		2,736
		Depreciation and amortization	7,812		6,295			Depreciation and amortization	8,077		7,539
		Deferred income tax expense	45		20			Deferred income tax expense	16		20

EBITDAre	EBITDAre		$	15,999	$	13,590	EBITDAre		$	16,432	$	16,005
		Non-cash stock-based compensation expense	2,004		1,284			Non-cash stock-based compensation expense	2,184		1,606
Adjusted EBITDAre	Adjusted EBITDAre		$	18,003	$	14,874	Adjusted EBITDAre		$	18,616	$	17,611

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

2928

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

•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 properties. Our rental income represents 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. 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.

Credit Facility

The Company's ~~Credit Facility, as~~third amended and restated credit facility (the "Credit Facility") provides for a $150.0 million Revolving Credit Facility that matures on March 19, 2026 and includes one 12-month option to extend the maturity date, and $250.0 million in Term Loans, as well as an accordion feature which allows borrowings up to a total of $600.0 million, including the ability to add and fund additional term loans. Note 5 – Debt, net to the Condensed Consolidated Financial Statements provides more details on the Company's Credit Facility. At ~~September~~June 30, ~~2021,~~2022, the Company had borrowing capacity remaining under the Revolving Credit Facility of approximately ~~$146.0~~$112.0 million.

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 current financing policy prohibits aggregate debt (secured or unsecured) in excess of 40% of the Company's total capitalization, except for short-term, transitory periods. At ~~September~~June 30, ~~2021,~~2022, our debt to total capitalization ratio (debt plus stockholders' equity plus accumulated depreciation) was approximately ~~30.5%~~31.9%. The Company was in compliance with its financial covenants under its Credit Facility as of ~~September~~June 30, ~~2021.~~2022.

Mortgage Note Payable

The Company also had outstanding at ~~September~~June 30, ~~2021,~~2022, a ~~$5.1~~$5.0 million mortgage note payable, secured by one of its ~~properties, with a maturity date in 2024 and~~properties. The mortgage note amortizes monthly at a fixed interest rate of 4.98%.

~~Subsequent Acquisitions~~

~~Subsequent to September 30, 2021, the Company acquired~~ with a 27,000 square foot medical office building for a purchase price and cash consideration of approximately $3.5 million. The property was 83.4% leased with lease expirations through 2030 at acquisition and was funded with cashballoon payment due upon maturity on ~~hand and proceeds from the Company's Revolving Credit Facility.~~May 1, 2024.

Acquisition Pipeline

3029

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

~~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 fourth 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 September 30, 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 ~~$7.7~~$9.4 million as of ~~September~~June 30, ~~2021.~~2022.

The Company has also entered into contracts regarding certain capital expenditures with remaining commitments totaling approximately ~~$1.8~~$4.3 million as of ~~September~~June 30, ~~2021.~~2022. Reimbursement of these expenditures by our tenants will be determined by each tenant's lease.

The Company has ground lease obligations relating to five properties, with total obligations of approximately ~~$7.6~~$7.5 million with maturities through 2085, including renewals.

The Company expects to fund these obligations with cash on hand, proceeds from the Company's ATM Program, proceeds from the Company's Revolving Credit Facility, or other debt or equity offerings.

Automatic Shelf Registration Statement

On November 5, 2019, the Company filed an automatic shelf registration statement on Form S-3 with 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 and sell from time to time various types of securities, including common stock, preferred stock, depository shares, rights, debt securities, warrants and units.

Operating Activities

Cash flows provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 were approximately ~~$41.4~~$29.5 million and ~~$35.8~~$28.1 million, respectively. Cash flows provided by operating activities were generally provided by contractual rents and interest on our notes receivable, net of property operating expenses ~~on our real estate property portfolio.~~not reimbursed by the tenants and general and administrative expenses.

Investing Activities

Cash flows used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 were approximately ~~$93.1~~$33.8 million and ~~$57.5~~$81.9 million, respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company invested in 10three properties for an aggregate cash consideration of approximately ~~$78.2~~$28.7 million and funded notes totaling approximately ~~$13.4~~$3.0 million. Also, during the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company received payments on its notes totaling ~~$3.0~~$1.5 million and funded capital expenditures on its existing portfolio totaling approximately ~~$4.5~~$3.6 million.

During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company invested in 138 properties for an aggregate cash consideration of approximately ~~$58.9~~$68.9 million and ~~acquired a $2.5 million note~~funded notes receivable ~~for $1.9~~totaling approximately $11.5 million. Also, during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company received payments on its notes receivable totaling ~~$7.8~~$1.6 million and funded capital expenditures on its existing portfolio totaling approximately ~~$4.7~~$3.1 million.

Financing Activities

Cash flows provide by financing activities for the six months ended June 30, 2022 and 2021 were approximately $3.8 million and $56.2 million, respectively. During the six months ended June 30, 2022, the Company borrowed $26.0 million under its Revolving Credit Facility and paid dividends totaling approximately $22.0 million.

3130

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

~~Financing Activities~~

~~Cash flows provided by financing activities for~~During the ~~nine~~six months ended ~~September 30, 2021 and 2020 were approximately $51.0 million and $32.2 million, respectively. During the nine months ended September~~June 30, 2021, the Company repaid ~~$29.0~~$28.0 million under its Revolving Credit Facility, entered into an amended and restated credit facility in which the Company entered into a 7-year term loan facility totaling $125.0 million, 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 ~~$38.4~~$31.8 million, and paid dividends totaling ~~$31.5 million.~~

~~During the nine months ended September 30, 2020, the Company repaid $15.0 million under its Credit Facility, sold shares under its ATM Program and received proceeds of~~ approximately ~~$75.5 million, and paid dividends totaling $28.0~~$20.8 million.

Security Deposits

As of ~~September~~June 30, ~~2021,~~2022, the Company held approximately ~~$4.4~~$5.3 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.

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

Corporate Responsibility

The Company is committed to conducting its business according to the highest ethical standards and upholding its corporate responsibilities as a public company operating for the benefit of its stockholders. The Company's Environmental, Social, and Governance (“ESG”) Committee charter is included on the Company’s website at www.chct.reit. Among other duties, the ESG Committee meets at least annually to review and recommend to the Board the general strategy and initiatives regarding ESG matters, including the Company’s internal and external communications and disclosures.

The Company’s ~~Board of Directors has adopted a revised~~ Code of Ethics and Business Conduct ~~that~~ not only applies to ~~its~~the Company's directors, officers, and other employees but also extends the Company's expectations that its vendors, service providers, contractors, and consultants will embrace the Company's commitment to integrity and personal responsibility by complying with this Code at all times. The Code of Ethics and Business Conduct includes the Company’s commitment to promote high standards of integrity by conducting its affairs honestly and ethically and to include in its periodic reports or other publicly available documents information and metrics related to internal monitoring, whistleblower, or reporting systems.

The Company’s whistleblower policy prohibits the Company and its affiliates and their officers, employees and agents from discharging, demoting, suspending, threatening, harassing or in any other manner discriminating against any employee for raising a concern. If an employee desires to raise a concern in a confidential or anonymous manner, the concern may be directed to the whistleblower officer at the Company’s whistleblower hotline. During the quarter ~~and nine months~~ ended ~~September~~June 30, ~~2021,~~2022, the whistleblower officer received no whistleblower complaints.

The Company’s Information Technology infrastructure is cloud-based, utilizing Software as a Service (“SaaS”) applications for substantially all of its software requirements. The Company's IT Committee consists of the Chief Executive Officer, Chief Financial Officer, and the Vice President of Information Technology. The IT Committee reviews and discusses information security matters and cyber security risks. The committee meets at least twice a year and reports to the Board of Directors as needed or at least annually. The Company has adopted the Center of Internet Security (CIS) v8 IG1 cyber security controls including adopting an information security training program for its employees. Since the Company’s inception, the Company has not had a security breach resulting in expenses, penalties or settlements.

ITEM 3. ~~Quantitative and Qualitative Disclosures about Market Risk~~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. During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, there were no material changes in the quantitative and qualitative disclosures about market risks presented in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

ITEM 4. ~~Controls and Procedures~~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(e) and 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 Chief 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.

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~~June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3332

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 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, ~~2020~~2021 and other reports that may be filed by the Company.

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

During the three months ended September 30, 2021, the Company canceled shares of Company common stock to satisfy employee tax withholding obligations payable upon the vesting of non-vested shares, as follows:

Period Total Number of Shares Purchased Average Price Paid per share Total Number of Shares purchased as part of publicly announced plans or programs Maximum Number of Shares that may yet be purchased under the plans or programs
July 1 - July 31 — $ — — —
August 1 - August 31 — $ — — —
September 1 - September 30 42 $ 49.15 — —
Total 42
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-K which are filed with this report are listed in the Exhibit Index and are hereby incorporated in by reference.

3433

EXHIBIT INDEX


Exhibit No.						Description
3.1						Corporate Charter of Community Healthcare Trust Incorporated, as amended (1)
3.2						Amended and Restated Bylaws of Community Healthcare Trust Incorporated (2)
10.1 * †						~~Employment Agreement between Community Healthcare Trust Incorporated~~Second Amended and ~~Timothy L. Meyer~~Restated Alignment of Interest Program (3)
31.1 *						Certification of the Chief Executive Officer of Community Healthcare Trust Incorporated pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Rule 302 of the Sarbanes-Oxley Act of 2002
31.2 *						Certification of the Chief Financial Officer of Community Healthcare Trust Incorporated pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Rule 302 of the Sarbanes-Oxley Act of 2002
32.1 **						Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						Inline XBRL Instance Document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Labels Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover 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 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 May 5, 2022 (File No. 001-37401) and incorporated herein by reference.

* Filed herewith.

** Furnished herewith.

† Denotes executive compensation plan or arrangement.

3534

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~November~~August 2, ~~2021~~2022


			COMMUNITY HEALTHCARE TRUST INCORPORATED

			By:			/s/ Timothy G. Wallace
						Timothy G. Wallace
						Chief Executive Officer and President

			By:			/s/ David H. Dupuy
						David H. Dupuy
						Executive Vice President and Chief Financial Officer

3635


	Balance as of September 30,
(Dollars in thousands)	2021		2020
Cash and cash equivalents	$	1,641	$	12,158
Restricted cash	456		340
Cash, cash equivalents and restricted cash	$	2,097	$	12,498


	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Shares issued	139,216		822,452
Net proceeds received (in millions)	$	6.6	$	38.4
Average gross sales price per share	$	48.63	$	47.68


	Three Months Ended September 30,				Increase (decrease) to Net income
(dollars in thousands)	2021		2020		$		%
REVENUES
Rental income	$	22,447	$	18,939	$	3,508	18.5	%

Other operating interest	807		405		402		99.3	%
	23,254		19,344		3,910		20.2	%
EXPENSES
Property operating	4,051		3,563		(488)		(13.7)	%
General and administrative	3,206		2,191		(1,015)		(46.3)	%
Depreciation and amortization	7,812		6,295		(1,517)		(24.1)	%
	15,069		12,049		(3,020)		(25.1)	%

INCOME BEFORE INCOME TAXES AND OTHER ITEMS	8,185		7,295		890		12.2	%

Interest expense	(2,788)		(2,064)		(724)		(35.1)	%
Deferred income tax expense	(45)		(20)		(25)		125.0	%
Interest and other income	2		—		2		n/m

NET INCOME	$	5,354	$	5,211	$	143	2.7	%


	Nine Months Ended September 30,				Increase (decrease) to Net income
(dollars in thousands)	2021		2020		$		%
REVENUES
Rental income	$	65,233	$	54,197	$	11,036	20.4	%

Other operating interest	2,104		1,363		741		54.4	%
	67,337		55,560		11,777		21.2	%
EXPENSES
Property operating	11,623		10,129		(1,494)		(14.7)	%
General and administrative	8,958		6,282		(2,676)		(42.6)	%
Depreciation and amortization	22,576		18,473		(4,103)		(22.2)	%
	43,157		34,884		(8,273)		(23.7)	%

INCOME BEFORE INCOME TAXES AND OTHER ITEMS	24,180		20,676		3,504		16.9	%
Loss on sale of real estate	—		(313)		313		100.0	%
Interest expense	(7,753)		(6,496)		(1,257)		(19.4)	%
Deferred income tax expense	(104)		(40)		(64)		(160.0)	%
Interest and other income	56		10		46		(460.0)	%

NET INCOME	$	16,379	$	13,837	$	2,542	18.4	%


Period	Total Number of Shares Purchased	Average Price Paid per share		Total Number of Shares purchased as part of publicly announced plans or programs	Maximum Number of Shares that may yet be purchased under the plans or programs

July 1 - July 31	—	$	—	—	—
August 1 - August 31	—	$	—	—	—
September 1 - September 30	42	$	49.15	—	—
Total	42