National Health Investors (NHI) 8-K NHIReports 18.0% Increase in Third Quarter Normalized FFO

Supplemental Information

September 30, 2010

National Health Investors, Inc.

222 Robert Rose Drive

Murfreesboro, Tennessee 37129

Phone: (615) 890-9100

Fax: (615) 225-3030

www.nhinvestors.com

Email: investor_relations@nhinvestors.com

Table of Contents

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CORPORATE

DISCLAIMER

This Supplemental Information and other materials we have filed or may file with the Securities and Exchange Commission, as well as information included in oral statements made, or to be made, by our senior management contain certain “forward-looking” statements as that term is defined by the Private Securities Litigation Reform Act of 1995.  All statements regarding our expected future financial position, results of operations, cash flows, funds from operations, continued performance improvements, ability to service and refinance our debt obligations, ability to finance growth opportunities, and similar statements including, without limitations, those containing words such as “may”, “will”, “believes”, anticipates”, “expects”, “intends”, “estimates”, “plans”, and other similar expressions are forward-looking stateme nts.

Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected or contemplated in the forward-looking.  Such risks and uncertainties include, among other things, the following risks, which are described in more detail under the heading “Risk Factors” in Item 1A in our Form 10-K for the year ended December 31, 2009:

•

We depend on the operating success of our customers (facility operators) for collection of our revenues during this time of uncertain economic conditions and legislative healthcare reform in the U.S.;

•

We are exposed to risks related to the recently enacted healthcare reform law and the effect that the law’s provisions will have on our tenants’ and mortgagees’ business;

•

We are exposed to risk that our tenants and mortgagors may become subject to bankruptcy or insolvency proceedings;

•

We are exposed to risks related to government regulations and the effect they have on our tenants’ and mortgagors’ business;

•

We are exposed to risk that the cash flows of our tenants and mortgagors will be adversely affected by increased liability claims and general and professional liability insurance costs;

•

We are exposed to risks related to environmental laws and the costs associated with the liability related to hazardous substances;

•

We are exposed to the risk that we may not be indemnified by our lessees and mortgagors against future litigation;

•

We depend on the success of future acquisitions and investments;

•

We depend on the ability to reinvest cash in real estate investments in a timely manner and on acceptable terms;

•

We may incur more debt and intend to replace our current credit facility with longer term debt in the future, which long term debt may be unavailable on terms acceptable to the Company;

•

We are exposed to the risk that the illiquidity of real estate investments could impede our ability to respond to adverse changes in the performance of our properties;

•

We are exposed to the risk that our assets may be subject to impairment charges;

•

We depend on the ability to continue to qualify as a real estate investment trust;

•

We have ownership limits in our charter with respect to our common stock and other classes of capital stock, and

•

We are subject to certain provisions of Maryland law and our charter and bylaws that could hinder, delay or prevent a change in control transaction, even if the transaction involves a premium price for our common stock or our stockholders believe such transaction to be otherwise in their best interests.

In this Supplemental Information we refer to non-GAAP financial measures.  These non-GAAP measures are not prepared in accordance with generally accepted accounting principles.  A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is included in this presentation.

Throughout this presentation, certain abbreviations and acronyms are used to simplify the format.  A list of definitions is provided at the end of this presentation to clarify the meaning of any reference that may be ambiguous.

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ANALYST COVERAGE	INVESTOR RELATIONS CONTACT
Stifel Nicolaus & Company, Inc.	Roger R. Hopkins, CPA
J.J.B. Hilliard, W.L. Lyons, LLC	rhopkins@nhinvestors.com
JMP Securities, LLC	(615) 890-9100 ext. 108
SENIOR MANAGEMENT	BOARD OF DIRECTORS
W. Andrew Adams	W. Andrew Adams	J. Justin Hutchens
Chairman and Chief Executive Officer	Chairman and Chief Executive Officer	President and Chief Operating Officer
	National Health Investors, Inc.	National Health Investors, Inc.
J. Justin Hutchens
President and Chief Operating Officer	Robert A. McCabe, Jr.	Robert T. Webb
	Chairman	President (Retired) and Founder
Roger R. Hopkins, CPA	Pinnacle Financial Partners	Webb's Refreshments, Inc.
Chief Accounting Officer
	Ted H. Welch
Kristin S. Gaines	Ted Welch Investments
Chief Credit Officer

COMPANY PROFILE

NATIONAL HEALTH INVESTORS, INC., a Maryland corporation incorporated in 1991, is a real estate investment trust ("REIT") which invests in income-producing health care properties primarily in the long-term care industry.  Our mission is to invest in health care real estate assets which generate current income that will be distributed to stockholders.  We have pursued this mission by acquiring properties to lease and making mortgage loans nationwide.  These investments involve 120 health care properties in 23 states consisting of 81 skilled nursing facilities, 28 assisted living facilities, 4 medical office buildings, 4 independent living facilities, 1 acute psychiatric hospital, 1 acute care hospital and 1 transitional rehabilitation center.  We have funded these investments in the past through three sources of capital: (1) current cash flow, including principal prepayments from our borrowers, (2) the sale of equity securities, and (3) debt offerings, including the issuance of convertible debt instruments, bank lines of credit, and ordinary term loans.

Investor Snapshot as of		September 30, 2010
Exchange:	NYSE	52 week Low/High:	$29.73	$46.06	Market Capitalization:	$1.22 billion
Symbol:	NHI	Dividend/Yield:	$2.42	5.49%
Closing Price:	$44.06	Shares Outstanding:	27,689,392

Portfolio Revenue Snapshot as of September 30, 2010

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VALUE CREATION

Total Return*
	NHI	S&P 500	NAREIT	S&P 500 – Standard & Poor’s index of 500 large-
1 year	48.44%	10.16%	28.28%	cap common stocks
5 years	18.74%	0.64%	1.14%
10 years	29.32%	-0.43%	9.90%	NAREIT – FTSE NAREIT US Real Estate
15 years	11.61%	6.45%	9.68%	Index Series of all publicly traded REITs
Since inception**	13.25%	7.99%	10.18%
*assumes reinvestment of dividends
**since inception of NHI in Oct. '91

The Board of Directors approves a regular quarterly dividend which is reflective of expected taxable income on a recurring basis.  Company transactions that are infrequent and non-recurring that generate additional taxable income have been distributed to shareholders in the form of special dividends.  Taxable income is determined in accordance with the IRS Code and is different than net income for financial statement purposes determined in accordance with accounting principles generally accepted in the U.S.

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FINANCIAL

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

			September 30,		December 31,
Assets				2010		2009
	Real estate properties:
		Land	$	41,711	$	28,490
		Buildings and improvements		416,490		322,296
				458,201		350,786
		Less accumulated depreciation		(134,491)		(126,925)
		Real estate properties, net		323,710		223,861
	Mortgage notes receivable			73,734		94,588
	Investment in preferred stock, at cost			38,132		38,132
	Cash and cash equivalents			2,451		45,718
	Marketable securities			20,854		21,322
	Accounts receivable, net			4,379		2,189
	Assets held for sale, net			33,420		33,420
	Deferred costs and other assets			493		130
		Total Assets	$	497,173	$	459,360
Liabilities and Stockholders' Equity
	Borrowings under revolving credit facility		$	28,234	$	-
	Earnest money deposit			3,400		150
	Deferred real estate purchase consideration			4,000		3,000
	Accounts payable and accrued expenses			2,835		2,754
	Dividends payable			16,752		17,959
	Deferred income			1,446		885
		Total Liabilities		56,667		24,748
	Commitments and Contingencies
	Stockholders' Equity
	Common stock, $.01 par value; 40,000,000 shares authorized; 27,689,392 and
		27,629,505 shares issued and outstanding, respectively		277		276
	Capital in excess of par value			462,229		459,842
	Cumulative net income			953,077		900,611
	Cumulative dividends			(988,779)		(940,220)
	Unrealized gains on marketable securities			13,702		14,103
		Total Stockholders' Equity		440,506		434,612
		Total Liabilities and Stockholders' Equity	$	497,173	$	459,360

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share amounts)

			Three months ended				Nine months ended
			September 30,				September 30,
				2010		2009		2010		2009
Revenues:
	Rental income		$	18,087	$	15,685	$	54,066	$	40,461
	Mortgage interest income			1,569		2,568		5,166		7,071
				19,656		18,253		59,232		47,532
Expenses:
	Depreciation			2,871		2,034		8,253		5,362
	Legal			85		337		540		1,272
	Franchise, excise and other taxes			64		135		594		549
	General and administrative			1,260		1,194		6,397		4,040
	Loan and realty losses (recoveries)			-		-		(573)		(1,077)
				4,280		3,700		15,211		10,146
Income before non-operating items				15,376		14,553		44,021		37,386
	Non-operating income			1,241		1,856		3,958		5,291
	Interest expense and amortization of loan costs			(471)		(18)		(1,173)		(86)
Income from continuing operations				16,146		16,391		46,806		42,591
	Income from operations - discontinued			1,188		1,082		3,656		5,347
	Net gain on sale of real estate			-		-		2,004		-
	Income from discontinued operations			1,188		1,082		5,660		5,347
Net income			$	17,334	$	17,473	$	52,466	$	47,938
Weighted average common shares outstanding:
	Basic			27,673,703		27,589,161		27,657,236		27,580,568
	Diluted			27,737,802		27,642,237		27,716,105		27,605,504
Earnings per share:
	Basic:
		Income from continuing operations	$	0.58	$	0.59	$	1.69	$	1.55
		Discontinued operations		0.04		0.04		0.20		0.19
		Net income available to common stockholders	$	0.62	$	0.63	$	1.89	$	1.74
	Diluted:
		Income from continuing operations	$	0.58	$	0.59	$	1.69	$	1.55
		Discontinued operations		0.04		0.04		0.20		0.19
		Net income available to common stockholders	$	0.62	$	0.63	$	1.89	$	1.74
Dividends declared per common share			$	0.605	$	0.55	$	1.755	$	1.65

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FUNDS FROM OPERATIONS (FFO)

(in thousands, except share and per share amounts)

			Three months ended				Nine months ended
			September 30,				September 30,
				2010		2009		2010		2009
Net income			$	17,334	$	17,473	$	52,466	$	47,938
	Real estate depreciation in continuing operations			2,693		1,944		7,778		5,232
	Real estate depreciation in discontinued operations			-		278		57		829
	Net gain on sale of real estate			-		-		(2,004)		-
Funds from operations			$	20,027	$	19,695	$	58,297	$	53,999
	Collection and recognition of past due rent			-		(2,654)		(1,520)		(2,654)
	Recoveries of previous write-downs			-		-		(573)		(1,719)
	Recognition of deferred credits			-		-		-		(1,493)
	Settlement payment on terminated lease
	Other one-time items			(2)		(141)		248		(443)
Normalized FFO			$	20,025	$	16,900	$	56,452	$	47,690
Weighted average common shares outstanding:
	Basic			27,673,703		27,589,161		27,657,236		27,580,568
	Diluted			27,737,802		27,642,237		27,716,105		27,605,504
FFO per share:
	Basic		$	0.72	$	0.71	$	2.11	$	1.96
	Diluted		$	0.72	$	0.71	$	2.10	$	1.96
Normalized FFO per share:
	Basic		$	0.72	$	0.61	$	2.04	$	1.73
	Diluted		$	0.72	$	0.61	$	2.04	$	1.73
FFO payout ratio:
	Dividends declared per common share		$	0.605	$	0.55	$	1.755	$	1.65
	FFO per diluted share		$	0.72	$	0.71	$	2.10	$	1.96
		FFO payout ratio		84%		77%		84%		84%

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FUNDS AVAILABLE FOR DISTRIBUTION (FAD)

(in thousands, except share and per share amounts)

			Three months ended				Nine months ended
			September 30,				September 30,
				2010		2009		2010		2009
Net income			$	17,334	$	17,473	$	52,466	$	47,938
	Real estate depreciation in continuing operations			2,693		1,944		7,778		5,232
	Real estate depreciation in discontinued operations			-		278		57		829
	Net gain on sale of real estate			-		-		(2,004)		-
	Straight-line lease revenue, net			(801)		(180)		(2,359)		(274)
	Non-cash stock based compensation			166		75		2,204		776
Funds available for distribution			$	19,392	$	19,590	$	58,142	$	54,501
	Collection and recognition of past due rent			-		(2,654)		(1,520)		(2,654)
	Recoveries of previous write-downs			-		-		(573)		(1,719)
	Recognition of deferred credits			-		-		-		(1,493)
	Settlement payment on terminated lease
	Other one-time items			(2)		(141)		248		(443)
Normalized FAD			$	19,390	$	16,795	$	56,297	$	48,192
Weighted average common shares outstanding:
	Basic			27,673,703		27,589,161		27,657,236		27,580,568
	Diluted			27,737,802		27,642,237		27,716,105		27,605,504
FAD per share:
	Basic		$	0.70	$	0.71	$	2.10	$	1.98
	Diluted		$	0.70	$	0.71	$	2.10	$	1.97
Normalized FAD per share:
	Basic		$	0.70	$	0.61	$	2.04	$	1.75
	Diluted		$	0.70	$	0.61	$	2.03	$	1.75
FAD payout ratio:
	Dividends declared per common share		$	0.605	$	0.55	$	1.755	$	1.65
	FAD per diluted share		$	0.70	$	0.71	$	2.10	$	1.97
		FAD payout ratio		86%		77%		84%		84%

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EBITDA RECONCILIATION ANDINTEREST COVERAGE RATIO

(in thousands)

		Three months ended				Nine months ended
		September 30,				September 30,
			2010		2009		2010		2009
Net income		$	17,334	$	17,473	$	52,466	$	47,938
	Interest expense and amortization of loan costs		471		18		1,173		86
	Franchise, excise and other taxes		64		135		594		549
	Depreciation in continuing operations		2,871		2,034		8,253		5,362
	Depreciation in discontinued operations		-		283		69		848
EBITDA		$	20,740	$	19,943	$	62,555	$	54,783
Interest expense and amortization of loan costs		$	471	$	18	$	1,173	$	86
Interest Coverage Ratio			44		1,108		53		637

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PORTFOLIO

PORTFOLIO SUMMARY as of September 30, 2010

		Properties	Beds/Units/ Sq. Ft.	Investment  (NBV)		YTD Revenue		% of segment
Leases
	Skilled Nursing(1)	51	6,858	$	176,104,000	$	36,167,000	66.89%
	Assisted Living	26	1,585		113,385,000		12,149,000	22.47%
	Acute Care Hospitals	1	55		5,779,000		2,107,000	3.90%
	Acute Psychiatric Hospitals	1	66		12,321,000		1,022,000	1.89%
	Independent Living	4	456		6,913,000		1,389,000	2.57%
	Medical Office Buildings	4	124,427		8,442,000		1,232,000	2.28%
	Total Leases	87		$	322,944,000	$	54,066,000	100.00%
(1)	Skilled Nursing
	NHC facilities*	38	5,274	$	46,542,000	$	25,623,000	47.39%
	All other facilities	13	1,584		129,562,000		10,544,000	19.50%
		51	6,858	$	176,104,000	$	36,167,000	66.89%
	* On October 17, 1991, the NHC facilities were transferred to NHI at their then current book value in a non-taxable exchange.
Mortgages
	Skilled Nursing	30	3,061	$	64,167,000	$	4,647,000	89.96%
	Assisted Living	2	146		4,658,000		382,000	7.39%
	Transitional Rehabilitation	1	70		4,909,000		137,000	2.65%
	Total Mortgages	33	3,277	$	73,734,000	$	5,166,000	100.00%

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GEOGRAPHIC DISTRIBUTION as of September 30, 2010

									YTD
	SNF	ALF	MOB	ILF	ACH	APH	TRC	Total	Revenue
Tennessee	20	3	-	2	-	-	-	25	$	13,634,000
Florida	10	4	1	-	-	-	-	15		11,251,000
Texas	9	-	2	-	-	-	-	11		6,145,000
South Carolina	4	1	-	-	-	-	-	5		5,071,000
Arizona	1	4	-	-	-	-	1	6		4,038,000
Kentucky	2	-	-	-	1	-	-	3		3,271,000
Missouri	8	-	-	1	-	-	-	9		2,223,000
Michigan	-	4	-	-	-	-	-	4		1,835,000
Minnesota	-	5	-	-	-	-	-	5		1,752,000
Alabama	2	-	-	-	-	-	-	2		1,613,000
Virginia	7	-	-	-	-	-	-	7		1,564,000
Georgia	5	-	-	-	-	-	-	5		1,316,000
New Jersey	-	1	-	-	-	-	-	1		1,029,000
California	-	-	-	-	-	1	-	1		1,022,000
Idaho	1	-	-	1	-	-	-	2		688,000
Massachusetts	4	-	-	-	-	-	-	4		662,000
Illinois	-	1	1	-	-	-	-	2		549,000
Kansas	5	-	-	-	-	-	-	5		466,000
New Hampshire	3	-	-	-	-	-	-	3		402,000
Pennsylvania	-	1	-	-	-	-	-	1		302,000
Iowa	-	2	-	-	-	-	-	2		181,000
Indiana	-	1	-	-	-	-	-	1		146,000
Oregon	-	1	-	-	-	-	-	1		72,000
	81	28	4	4	1	1	1	120	$	59,232,000

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LEASE RENEWAL YEARS AND MORTGAGE MATURITIES as of September 30, 2010

		2010		2011		2012		2013		2014		2015 - 2018		2019 - 2022		Thereafter		TOTALS
Leases
Skilled Nursing
Annualized Revenue	$	276,000	$	1,006,000	$	-	$	-	$	6,507,000	$	418,000	$	33,679,000	$	6,684,000	$	48,570,000
Properties		1		1		-		-		6		1		38		4		51
Assisted Living
Annualized Revenue		-		367,000		-		1,380,000		-		2,495,000		406,000		10,840,000		15,488,000
Properties		-		1		-		1		-		3		1		20		26
Medical Office Buildings
Annualized Revenue		-		588,000		-		396,000		-		669,000		-		-		1,653,000
Properties		-		2		-		1		-		1		-		-		4
Independent Living
Annualized Revenue		-		646,000		-		-		-		-		1,193,000		-		1,839,000
Properties		-		1		-		-		-		-		3		-		4
Acute Care Hospitals
Annualized Revenue		-		-		2,828,000		-		-		-		-		-		2,828,000
Properties		-		-		1		-		-		-		-		-		1
Acute Psychiatric Hospitals
Annualized Revenue		-		-		-		-		-		-		-		1,828,000		1,828,000
Properties		-		-		-		-		-		-		-		1		1
Total Annualized Revenues	$	276,000	$	2,607,000	$	2,828,000	$	1,776,000	$	6,507,000	$	3,582,000	$	35,278,000	$	19,352,000	$	72,206,000
Mortgages
Skilled Nursing
Annualized Revenue	$	-	$	1,428,000	$	963,000	$	183,000	$	1,010,000	$	534,000	$	161,000	$	1,370,000	$	5,649,000
Properties		-		7		3		1		8		5		-		6		30
Assisted Living
Annualized Revenue		-		-		-		-		97,000		416,000		-		-		513,000
Properties		-		-		-		-		1		1		-		-		2
Transitional Rehabilitation
Annualized Revenue		-		-		-		-		-		328,000		-		-		328,000
Properties		-		-		-		-		-		1		-		-		1
Total Annualized Revenues	$	-	$	1,428,000	$	963,000	$	183,000	$	1,107,000	$	1,278,000	$	161,000	$	1,370,000	$	6,490,000

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DEFINITIONS

Annualized Revenue

The termAnnualized Revenue refers to the amount of revenue that our portfolio would generate if all leases and mortgages were in effect for the twelve-month calendar year, regardless of the commencement date, maturity date, or renewals.  Therefore, annualized revenue is used for financial analysis purposes, and is not indicative of actual or expected results.

Facility Types

ACH – Acute-care hospital

ALF – Assisted living facility

APH – Acute psychiatric hospital

ILF – Independent living facility

MOB – Medical office building

SNF –Skilled nursing facility

TRC – Transitional rehabilitation center

Funds from operations - FFO

FFO is an important supplemental measure of operating performance for a REIT.  Because the historical cost accounting convention used for real estate assets requires straight-line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time.  Since real estate values instead have historically risen and fallen with market conditions, presentations of operating results for a REIT that uses historical cost accounting for depreciation could be less informative, and should be supplemented with a measure such as FFO.  FFO is defined as net income, computed in accordance with GAAP, excluding gains or losses from sales of property, and adding back real estate depreciation.  The term FFO was designed by the REIT industry to address this issue.  Our measure may not be comparable to similarly titled measures used by other REITs. & nbsp;Consequently, our FFO may not provide a meaningful measure of our performance as compared to that of other REITs.  Since other REITs may not use our definition of FFO, caution should be exercised when comparing our Company’s FFO to that of other REITs.  FFO in and of itself does not represent cash generated from operating activities in accordance with GAAP (FFO does not include changes in operating assets and liabilities) and therefore should not be considered an alternative to net earnings as an indication of operating performance, or to net cash flow from operating activities as determined by GAAP as a measure of liquidity, and is not necessarily indicative of cash available to fund cash needs.

Funds available for distribution - FAD

FAD is usually calculated by subtracting from Funds from Operations (FFO) both normalized recurring expenditures that are capitalized by the REIT and then amortized, but which are necessary to maintain a REIT's properties and its revenue stream (e.g., new carpeting and drapes in apartment units, leasing expenses and tenant improvement allowances) and "straight-lining" of rents.  This calculation is sometimes referred to as Cash Available for Distribution (CAD) or Funds Available for Distribution (FAD).  Our measure may not be comparable to similarly titled measures used by other REITs.  Consequently, our FAD may not provide a meaningful measure of our performance as compared to that of other REITs.  Since other REITs may not use our definition of FAD, caution should be exercised when comparing our Company’s FAD to that of other REITs.  FAD in and of itself does not represent cash generated from operating activities in accordance with GAAP (FAD does not include changes in operating assets and liabilities) and therefore should not be considered an alternative to net earnings as an indication of operating performance, or to net cash flow from operating activities as determined by GAAP as a measure of liquidity, and is not necessarily indicative of cash available to fund cash needs.

Normalized FFO & Normalized FAD

Normalized FFO and Normalized FAD excludes from FFO and FAD, respectively, any material one-time items reflected in GAAP net income.  Excluded items may include, but are not limited to, impairments of assets, gains and losses attributable to the acquisition and disposition of assets and liabilities, asset write-downs and recoveries of previous write-downs.

Investment (NBV)

The termInvestment (NBV) refers to the net carrying value of our real estate and mortgage investments.

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