Part I [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) For the first quarter of 2022, National Health Investors, Inc. reported a significant decrease in net income to $8.4 million from $35.3 million in the prior-year period, primarily driven by $24.5 million in loan and realty losses and lower rental income, with total assets slightly decreasing to $2.80 billion and cash flow from operations declining to $38.7 million from $56.9 million year-over-year as the company managed its portfolio through dispositions and addressed tenant challenges Condensed Consolidated Statements of Income (Q1 2022 vs Q1 2021, in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | **Total Revenues** | $71,327 | $80,885 | | **Total Expenses** | $66,208 | $44,242 | | **Net Income** | $8,246 | $35,384 | | **Net Income Attributable to Common Stockholders** | $8,399 | $35,332 | | **Diluted EPS** | $0.18 | $0.78 | Condensed Consolidated Balance Sheets (As of March 31, 2022, in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | $2,802,503 | $2,838,876 | | Real estate properties, net | $2,201,084 | $2,317,880 | | Assets held for sale, net | $131,988 | $66,398 | | **Total Liabilities** | $1,313,706 | $1,321,893 | | Debt | $1,249,044 | $1,242,883 | | **Total Equity** | $1,488,797 | $1,516,983 | Condensed Consolidated Statements of Cash Flows (Q1 2022 vs Q1 2021, in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $38,680 | $56,912 | | **Net cash used in investing activities** | ($2,060) | ($9,133) | | **Net cash (used in) provided by financing activities** | ($36,177) | $22,106 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's portfolio composition, significant accounting policies, and key financial events during the quarter, including real estate dispositions generating $13.2 million in proceeds, recognition of $24.6 million in impairment charges, and ongoing rent concessions related to the COVID-19 pandemic totaling $7.8 million, alongside the settlement of litigation with Welltower and restructuring of master lease agreements with Bickford Senior Living, and the establishment of a new $700 million unsecured revolving credit facility - As of March 31, 2022, the company's portfolio consisted of investments in 186 healthcare properties (120 senior housing, 65 skilled nursing, 1 hospital) and 15 mortgages, with a total investment value of approximately **$2.8 billion**[24](index=24&type=chunk) - Completed real estate dispositions of a medical office building and a senior living community for net proceeds of **$13.2 million**, resulting in a net gain of **$3.0 million**[42](index=42&type=chunk) - Recognized impairment charges of **$24.6 million**, included in "Loan and realty losses (gains)". **20 properties** with a net balance of **$132.0 million** were classified as assets held for sale[39](index=39&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) - Provided **$7.8 million** in lease concessions related to the COVID-19 pandemic during Q1 2022, accounted for as variable lease payments[41](index=41&type=chunk)[106](index=106&type=chunk) - Settled litigation with Welltower, Inc. regarding the Holiday portfolio, involving applying an **$8.8 million** lease deposit to past due rents and transitioning the properties to new operators and joint ventures effective April 1, 2022[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - Entered into a new **$700 million** unsecured revolving credit agreement, replacing the previous **$550 million** facility, with the new agreement maturing in March 2026[85](index=85&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management attributes the 13.6% decrease in quarterly rental income primarily to increased rent concessions and property dispositions, with the period marked by significant portfolio management activities including the settlement with Welltower over the Holiday portfolio and a lease restructuring with Bickford Senior Living, alongside a $24.6 million impairment charge on real estate assets, while maintaining a strong balance sheet with $615 million available on its new credit facility and a consolidated net debt to Annualized Adjusted EBITDA ratio of 4.9x, and announcing a $240 million stock repurchase plan [Portfolio and Tenant Analysis](index=31&type=section&id=MD%26A%20-%20Portfolio%20and%20Tenant%20Analysis) As of Q1 2022, the portfolio comprised 201 facilities, with 72% of total revenues concentrated among nine operators, including key tenants Senior Living Communities, Holiday, NHC, and Bickford each accounting for over 10% of revenues, as the company actively managed tenant relationships through the transition of 15 Holiday properties into new SHOP joint ventures and a lease restructure with Bickford to set rent at approximately $28 million annually until April 2024, despite declining portfolio coverage ratios with total portfolio EBITDARM coverage dropping from 1.78x to 1.54x due to occupancy and expense pressures Top Tenant Revenue Concentration (Q1 2022, in thousands) | Tenant | Revenue (in thousands) | % of Total Revenue | | :--- | :--- | :--- | | Senior Living Communities | $12,751 | 18% | | Holiday Retirement | $9,797 | 14% | | National HealthCare Corporation (NHC) | $9,189 | 13% | | Bickford Senior Living | $7,038 | 10% | - Effective April 1, 2022, **15 former Holiday properties** were transitioned into two new Senior Housing Operating Portfolio (SHOP) joint ventures where NHI holds majority interests[138](index=138&type=chunk)[166](index=166&type=chunk) - Bickford's four master leases were restructured effective April 1, 2022, setting annual rent at approximately **$28.0 million** through April 1, 2024, with lease extensions[169](index=169&type=chunk) Total Portfolio EBITDARM Coverage Ratio (Trailing 12-Months) | Period | Coverage Ratio | | :--- | :--- | | 4Q20 | 1.78x | | 4Q21 | 1.54x | [Results of Operations](index=42&type=section&id=MD%26A%20-%20Results%20of%20Operations) For Q1 2022 compared to Q1 2021, total revenues decreased by 11.8% to $71.3 million, while total expenses increased by 49.6% to $66.2 million, driven by a $10.2 million drop in rental income due to rent concessions and property dispositions, and a $24.6 million charge for loan and realty losses (impairments) and a $1.7 million increase in legal costs, leading to a 76.7% decrease in net income to $8.2 million - Rental income decreased by **$10.2 million** (**13.6%**), mainly from **$3.6 million** in additional rent concessions and **$6.3 million** from properties disposed of since April 1, 2021[190](index=190&type=chunk) - Loan and realty losses increased by **$24.6 million** due to impairment charges on three real estate properties during the quarter[190](index=190&type=chunk) - Interest expense decreased by **$2.8 million** (**21.4%**) following the expiration of interest rate swap agreements and repayment of debt[190](index=190&type=chunk) - A gain on sale of real estate of **$3.0 million** was recognized, primarily from the disposition of a medical office building[190](index=190&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=MD%26A%20-%20Liquidity%20and%20Capital%20Resources) As of March 31, 2022, the company had strong liquidity with $36.1 million in cash and $615.0 million available on its new $700.0 million revolving credit facility, with total debt at $1.2 billion and a consolidated net debt to Annualized Adjusted EBITDA ratio of 4.9x, following key financing activities including entering the new credit facility and repaying a $75.0 million term loan, and expects cash from operations to be adequate to fund dividends at the current rate - Primary sources of liquidity include **$36.1 million** in cash and cash equivalents and **$615.0 million** available on the revolving credit facility[191](index=191&type=chunk) - On March 31, 2022, the company entered into a new **$700.0 million** unsecured revolving credit facility maturing in March 2026, replacing its previous **$550.0 million** facility[197](index=197&type=chunk) - The consolidated net debt to Annualized Adjusted EBITDA ratio was **4.9x** for the three months ended March 31, 2022[207](index=207&type=chunk) - On April 15, 2022, the Board approved a new stock repurchase plan for up to **$240 million** of common stock over one year[215](index=215&type=chunk) [Funds From Operations (FFO) & Funds Available for Distribution (FAD)](index=53&type=section&id=MD%26A%20-%20FFO%20%26%20FAD) For Q1 2022, Normalized FFO per diluted share decreased 11.3% to $1.10 from $1.24 in Q1 2021, attributed to the impacts of the COVID-19 pandemic and increased legal fees, partially offset by the recognition of the Holiday lease deposit and lower interest expense, while Normalized FAD for the quarter was $52.7 million, a decrease of 11.5% from $59.6 million in the prior-year period FFO & FAD Reconciliation Summary (Q1 2022 vs Q1 2021, in thousands) | Metric (in thousands) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net income attributable to common stockholders | $8,399 | $35,332 | | NAREIT FFO attributable to common stockholders | $48,084 | $55,928 | | Normalized FFO attributable to common stockholders | $50,374 | $56,379 | | Normalized FAD attributable to common stockholders | $52,669 | $59,551 | | **Normalized FFO per diluted share** | **$1.10** | **$1.24** | [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) The company's primary market risk is interest rate risk on its $385.0 million of variable-rate debt and the unused portion of its $700 million revolving credit facility, where a hypothetical 50 basis-point (0.50%) change in interest rates would result in an approximate $1.9 million annual change in net interest expense, following the maturity of its interest rate swap agreements on December 31, 2021 - As of March 31, 2022, the company had **$385.0 million** of variable-rate debt outstanding, representing approximately **30.5%** of its total debt[243](index=243&type=chunk)[246](index=246&type=chunk) - A **50 basis-point** increase or decrease in interest rates on variable-rate debt would change annual net interest expense by approximately **$1.9 million**[244](index=244&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures.) Based on an evaluation as of March 31, 2022, the company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective, with no significant changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[249](index=249&type=chunk) - No changes in internal control over financial reporting were identified during the quarter that have materially affected or are reasonably likely to materially affect internal controls[251](index=251&type=chunk) Part II. Other Information [Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The company was involved in litigation with Welltower, Inc. regarding a master lease for 17 senior living facilities formerly operated by Holiday, with NHI filing suit in December 2021 alleging default and fraudulent inducement, which was settled effective April 1, 2022, resulting in NHI receiving escrowed funds and the properties being transitioned to new operators or sold - NHI filed suit against Welltower, Inc. and its subsidiaries on December 20, 2021, in the Delaware Court of Chancery for failure to pay rent and other obligations related to the Holiday portfolio[256](index=256&type=chunk) - A settlement agreement was reached on March 31, 2022, applying an **$8.8 million** lease deposit to past due rents, and releasing **$6.9 million** in escrowed funds to NHI[257](index=257&type=chunk)[259](index=259&type=chunk) - Effective April 1, 2022, the master lease was terminated, the lawsuit was dismissed, and the properties were transitioned into new SHOP ventures, leased to another operator, or sold[258](index=258&type=chunk)[259](index=259&type=chunk) [Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) There were no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes to risk factors were reported for the three months ended March 31, 2022[260](index=260&type=chunk) [Other Information](index=52&type=section&id=Item%205.%20Other%20Information) On May 6, 2022, the Compensation Committee of the Board of Directors approved an adjusted annual salary of $275,000 for David L. Travis, the company's Senior Vice President/Chief Accounting Officer - The company's Chief Accounting Officer, David L. Travis, received an adjusted annual salary of **$275,000**, effective May 6, 2022[261](index=261&type=chunk) [Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the new Credit Agreement, the Settlement Agreement with Welltower, and various officer certifications

Financial Data and Key Metrics Changes - For Q4 2021, net income per diluted common share was $0.14, down from $0.83 in Q4 2020. For the full year, it was $2.44 compared to $4.14 in 2020, primarily due to $51.8 million in impairment charges and $28 million in rent concessions [16][19] - Funds from Operations (FFO) per diluted common share decreased to $1.07 from $1.28 year-over-year, while normalized FFO decreased to $1.06 from $1.37 [17] - Normalized Funds Available for Distribution (FAD) declined by $13.1 million year-over-year to $45.9 million [18] Business Line Data and Key Metrics Changes - The skilled nursing and Continuing Care Retirement Communities (CCRC) portfolios, which account for nearly two-thirds of cash revenue, are performing well despite challenges [13] - The needs-driven senior housing portfolio, accounting for approximately 29% of annualized cash revenue, experienced occupancy gains but slowed towards the end of the quarter due to seasonality and COVID-19 [25] - Independent living communities, representing only 2% of annualized cash revenue, did not pay rent during the quarter, with significant declines in NOI margins [29] Market Data and Key Metrics Changes - The average occupancy for senior living communities was 81.7%, up 130 basis points from the previous quarter, remaining above pre-pandemic levels [24] - EBITDARM coverage for non-SLC properties improved to 1.75 times from 1.66 times year-over-year [24] - The skilled nursing portfolio's same-store EBITDARM coverage was 2.85 times, with NHC and Ensign Group contributing significantly to cash revenue [30] Company Strategy and Development Direction - The company is focused on transforming into a stronger healthcare REIT by selling underperforming assets and venturing into new revenue streams [7] - The board has approved the sale of additional underperforming properties, targeting 16 housing property dispositions with estimated net proceeds of $125 million [9] - The company aims to complete its portfolio optimization efforts in the next couple of quarters, expecting steady progress towards growth [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the restructuring efforts with Bickford, despite the slow pace due to Omicron-related challenges [10] - The company believes it is at an earnings trough and anticipates better days ahead as the pandemic's effects wane [14] - Management did not provide guidance due to uncertainties surrounding the Welltower litigation and holiday portfolio [19] Other Important Information - The company reduced debt by over $250 million during 2021 and maintained leverage within its target range [13] - The fourth quarter dividend of $0.90 per share was declared, representing a payout ratio of 84.8% for normalized FFO [20] - The company has unfunded commitments totaling approximately $109 million with an average yield of 8.5% expected to be funded during 2022 [20] Q&A Session Summary Question: Lack of guidance and its implications - Management indicated that the uncertainty surrounding the holiday portfolio makes it difficult to provide guidance [39][40] Question: Investment activity outlook - Management expects to fulfill over $100 million in commitments and aims to return to growth, viewing last year's $121 million as a lower watermark [48][49] Question: Bickford's performance and future - Management considers Bickford a partner and is working to lessen exposure while helping them stabilize [51][52] Question: Transition timeline for legacy holiday assets - Management hopes to transition assets within 30 days of a favorable hearing outcome [78] Question: Potential outcomes of the hearing - A positive outcome would allow control over the transition of buildings, while a negative outcome would prolong the process [60][67]

Portfolio Overview - NHI's portfolio consists of 213 properties across 31 states [14] - Senior Housing Need-Driven accounts for 29%, Senior Housing Discretionary 32%, and Medical 36% of the portfolio [15] - Annualized cash revenue was $236.1 million as of December 31, 2021 [16] Financial Performance - Total revenue for Q4 2021 was $69.668 million, with rental revenue at $60.907 million [38] - Cash NOI for Q4 2021 was $63.290 million [38] - Adjusted EBITDA for Q4 2021 was $61.733 million [38] - Consolidated Net Debt to Adjusted EBITDA was 4.9x [76] Capital Structure - Total debt outstanding was $1.242 billion as of December 31, 2021 [38] - Secured debt accounted for 6% and unsecured debt 92% of the capital structure [43] - The company has $550 million available under its revolving credit facility [42] Investments and Dispositions - Recent lease activity includes $40.25 million investment in Vizion Health (HOSP) and $6.6 million in Navion Senior Solutions (SHO) in Q2 2021 [36] - Total dispositions of senior housing properties amounted to $195.448 million, and hospital & MOB dispositions totaled $48.280 million [80]

Part I. [Forward Looking Statements](index=4&type=section&id=Forward%20Looking%20Statements.) This section outlines forward-looking statements, noting that actual results may differ due to various risks and uncertainties, advising investors to consider these factors - Forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from projections[14](index=14&type=chunk)[15](index=15&type=chunk) - Key risk factors include the material adverse effect of the COVID-19 pandemic, dependence on tenant/borrower operating success, exposure to bankruptcy/insolvency, significant tenant concentration, governmental regulations and payor changes (Medicare/Medicaid), increased liability claims and insurance costs, and risks related to property damage from disasters and climate change[15](index=15&type=chunk)[17](index=17&type=chunk) [Item 1. Business](index=6&type=section&id=Item%201.%20Business.) NHI is a self-managed REIT investing in senior housing and medical facilities, with a portfolio of 212 facilities totaling approximately **$3.2 billion** as of December 31, 2021 - NHI is a self-managed REIT established in 1991, specializing in sale-leaseback, joint venture, mortgage, and mezzanine financing for senior housing and medical facilities[19](index=19&type=chunk) Portfolio Summary as of December 31, 2021 | Investment Type | Number of Facilities | Investment Value (approximately) | | :-------------- | :------------------- | :------------------------------- | | Real Estate | 198 | $2.9 billion | | Mortgage & Notes| 14 | $305.2 million | | **Total** | **212** | **$3.2 billion** | [General](index=6&type=section&id=General) NHI primarily funds its real estate investments through operating cash flow, debt offerings, and equity sales - NHI funds its real estate investments primarily through operating cash flow, debt offerings (bank lines of credit, term debt), and the sale of equity securities[19](index=19&type=chunk) [COVID-19 Pandemic](index=6&type=section&id=COVID-19%20Pandemic) This section refers to a detailed discussion of the COVID-19 pandemic's impact on the company's operations and financial condition - Refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - COVID-19 Pandemic for detailed information[22](index=22&type=chunk) [Sources of Revenues](index=6&type=section&id=Sources%20of%20Revenues) NHI's revenue is primarily derived from rental income and interest income, with total revenue decreasing by **10.2%** in 2021 Revenue Breakdown (2021) | Revenue Type | Amount ($ millions) | Percentage of Total Revenue | | :-------------- | :------------------ | :-------------------------- | | Rental Income | $271.0 million | 90.7% | | Interest Income | $27.7 million | 9.3% | | Total Revenue | $298.7 million | 100% | - Total revenue decreased by **10.2%** from 2020 to 2021[23](index=23&type=chunk) - Revenues depend on tenant/borrower operating success, influenced by licensed capacity, occupancy rates, service utilization, patient mix (private pay, Medicare, Medicaid), and payor rates[23](index=23&type=chunk) [Classification of Properties in our Portfolio](index=6&type=section&id=Classification%20of%20Properties%20in%20our%20Portfolio) NHI classifies its portfolio properties into senior housing (need-driven or discretionary) and medical properties, detailing the number of facilities in each category - Properties are classified as senior housing (need-driven or discretionary) or medical properties[24](index=24&type=chunk) - Need-driven senior housing includes Assisted Living Facilities (ALF) and Senior Living Campuses (SLC); Discretionary senior housing includes Independent Living Facilities (ILF) and Entrance-Fee Communities (EFC)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) - Medical properties include Skilled Nursing Facilities (SNF) and Hospitals (HOSP)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - As of December 31, 2021, the portfolio included **81 ALFs, 11 SLCs, 22 ILFs, 11 EFCs, 72 SNFs, and 1 hospital**[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) [Nature of Investments](index=8&type=section&id=Nature%20of%20Investments) NHI structures investments through purchase-leasebacks, acquisitions, and various loans, utilizing triple net leases and exploring RIDEA and SHOP structures for operational value - Investments are typically structured as purchase-leaseback transactions, acquisitions from other real estate investors, or loans (mortgage, mezzanine, construction)[34](index=34&type=chunk) - Leases are generally 'triple net leases' with initial terms of **10-15 years**, annual escalators, and tenant responsibility for all property-related expenses[34](index=34&type=chunk)[35](index=35&type=chunk) - Mortgage, construction, and mezzanine loans had annual interest rates ranging from **6.5% to 9.5%** during 2021[34](index=34&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - The company utilizes a RIDEA structure for some investments, allowing a Taxable REIT Subsidiary (TRS) to capture additional value from operating company performance[43](index=43&type=chunk) - NHI is transitioning 15 former Holiday properties into a proposed Senior Housing Operating Portfolio (SHOP) structure, which will expose NHI to direct operational risks and benefits[44](index=44&type=chunk) [Operator Composition](index=10&type=section&id=Operator%20Composition) NHI's portfolio revenue is diversified across publicly owned, regional, privately owned national chains, and smaller operators Portfolio Revenue by Operator Type (2021) | Operator Type | Percentage of Portfolio Revenue | | :------------------------ | :------------------------------ | | Publicly Owned Operators | 24% | | Regional Operators | 59% | | Privately Owned National Chains | 14% | | Smaller Operators | 3% | [Tenant Concentration](index=10&type=section&id=Tenant%20Concentration) NHI's revenue is significantly concentrated among its top three tenants, with notable investment concentration in South Carolina and Texas Tenant Concentration (2021) | Tenant | Revenue Contribution (2021) | | :-------------- | :-------------------------- | | Senior Living | **17%** | | NHC | **12%** | | Bickford | **12%** | | All others, net | 55% | - As of December 31, 2021, investment concentration by state was **South Carolina (11.6%)** and **Texas (10.3%)**[47](index=47&type=chunk) - Holiday Retirement's revenue contribution is listed as N/A for 2021 due to non-payment of rent and ongoing litigation[47](index=47&type=chunk) [Commitments and Contingencies](index=12&type=section&id=Commitments%20and%20Contingencies) NHI has various outstanding commitments for working capital, construction loans, development, and contingent lease inducements as of December 31, 2021 Commitments as of December 31, 2021 | Commitment Type | Total Committed ($ millions) | Funded ($ millions) | Remaining ($ millions) | | :-------------------------- | :--------------------------- | :------------------ | :--------------------- | | Working Capital & Construction Loans | $274.7 million | $199.4 million | $75.3 million | | Development Commitments | $31.3 million | $23.5 million | $7.8 million | | Contingent Lease Inducements| $33.9 million | $1.5 million | $32.4 million | [Competition and Market Conditions](index=12&type=section&id=Competition%20and%20Market%20Conditions) NHI faces competition from various financial entities for real estate acquisitions and financing, while its facility operators compete locally based on quality, reputation, and price - NHI competes with other REITs, private equity funds, banks, and insurance companies for healthcare real estate acquisitions, leasing, and financing[67](index=67&type=chunk) - Operators of NHI's facilities compete locally and regionally based on quality of care, reputation, location, services, and price, often against larger entities[68](index=68&type=chunk) - Senior housing properties, relying on private-pay residents, are vulnerable to economic downturns and local market competition[69](index=69&type=chunk) [Environmental Matters](index=13&type=section&id=Environmental%20Matters) NHI integrates environmental and sustainability initiatives into its business, while being subject to environmental risks and regulations with tenant indemnification - NHI integrates environmental and sustainability initiatives into its business objectives, including capital improvement allowances for energy-efficient upgrades, funding for new state-of-the-art properties, and due diligence for environmental contamination[70](index=70&type=chunk)[74](index=74&type=chunk) - The company is subject to environmental risks and regulations, with tenants generally responsible for compliance and indemnification[71](index=71&type=chunk) [Human Capital](index=13&type=section&id=Human%20Capital) NHI maintains a small workforce, offering competitive compensation and benefits, and implemented COVID-19 safety protocols - As of December 31, 2021, NHI had **19 full-time and one part-time employee**, with no change from 2020[73](index=73&type=chunk) - The company offers competitive compensation, 401(k),

Financial Data and Key Metrics Changes - Net Income per diluted common share for Q3 2021 was $0.67, down from $0.95 in Q3 2020 [17] - NAREIT FFO decreased to $1.16 from $1.42 year-over-year, and normalized FFO decreased to $1.15 from $1.42 [18] - Normalized FAD declined to $51.2 million, down $9.1 million year-over-year and $1.7 million sequentially [19] - The net debt annualized EBITDA leverage ratio improved to 4.8 times from 5.1 times sequentially [20] Business Line Data and Key Metrics Changes - Bickford's occupancy increased by 280 basis points from Q2 to Q3, and 520 basis points from Q1, outperforming the industry growth rate of 210 basis points [8] - The Legacy Holiday portfolio saw the disposal of 9 underperforming properties, with margins on these properties being over 1,500 basis points below the remaining portfolio [9] - The entrance fee communities, accounting for 27% of annualized cash revenue, continued to outperform other senior housing asset classes [27] Market Data and Key Metrics Changes - The skilled nursing portfolio, representing 32% of annualized cash revenue, had EBITDARM coverage of 2.8 times for the trailing 12 months [28] - Average occupancy for senior living communities was 80.4%, up 190 basis points from Q2 and higher than pre-pandemic levels [27] Company Strategy and Development Direction - The company is transitioning to a stronger position by optimizing its portfolio through dispositions and tenant transitions, expecting to conclude these efforts by Q1 2022 [7] - New joint ventures with Merrill Gardens and Discovery Senior Living are expected to enhance growth in the senior housing business [10][11] - The company aims to transform into a high-coverage, high-quality portfolio, referred to as a "jewel box" [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of senior housing fundamentals, driven by easing labor pressures and improving occupancy rates [30] - The company anticipates strong long-term organic growth, with deferral balances expected to start repaying in 2022 [31] - Management highlighted the importance of maintaining solid lease coverage and the potential for future dividend growth [69] Other Important Information - The company completed the disposition of 16 underperforming senior housing assets for approximately $173 million, with a cap rate of 3.1% [12] - The company has $74 million in cash and no amounts outstanding under its $550 million revolver as of October 31 [21] Q&A Session Summary Question: Inquiry about Bickford rent cuts - Management explained that the rent cut for Bickford was based on current cash flow and projected occupancy improvements, with a new rent structure set to begin next year [33][34] Question: Clarification on Holiday structure and deferred rents - Management clarified that the Holiday joint ventures will not have a lease structure like Bickford, and they are focused on recovering deferred rents [55][60] Question: Confidence in achieving deferred rent payments - Management expressed confidence in Bickford's ability to service the new rent rates and deferred amounts based on current performance and expected improvements [94]

Part I. Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The financial statements for Q3 2021 reflect decreased total assets, revenues, and net income, primarily due to asset sales, rent concessions, and increased loan and realty losses [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) - Total assets decreased by approximately **$208.3 million**, primarily driven by a reduction in net real estate properties. Total liabilities decreased by **$234.6 million**, largely due to a reduction in debt[9](index=9&type=chunk) Condensed Consolidated Balance Sheet Summary (in thousands) | Account | September 30, 2021 (unaudited) | December 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$2,912,177** | **$3,120,489** | | Real estate properties, net | $2,428,449 | $2,667,432 | | Mortgage and other notes receivable, net | $284,608 | $292,427 | | Cash and cash equivalents | $48,393 | $43,344 | | **Total Liabilities** | **$1,362,971** | **$1,597,544** | | Debt | $1,285,287 | $1,499,285 | | **Total Equity** | **$1,549,206** | **$1,522,945** | | **Total Liabilities and Stockholders' Equity** | **$2,912,177** | **$3,120,489** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) - For the nine months ended September 30, 2021, total revenues decreased by **9.0%** YoY, and net income attributable to common stockholders decreased by **28.8%** YoY. The decline was significantly impacted by a **$22.6 million** increase in loan and realty losses[11](index=11&type=chunk) Condensed Consolidated Statements of Income Summary (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$73,833** | **$84,301** | **$229,048** | **$251,572** | | Rental income | $67,043 | $77,821 | $210,143 | $232,266 | | **Total Expenses** | **$62,368** | **$40,912** | **$147,287** | **$122,413** | | Loan and realty losses (gains) | $22,425 | $(193) | $23,596 | $1,002 | | **Net income attributable to common stockholders** | **$30,814** | **$42,595** | **$105,327** | **$147,986** | | **Diluted EPS** | **$0.67** | **$0.95** | **$2.31** | **$3.31** | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) - Cash from operations decreased by **$19.0 million** YoY. Investing activities generated **$163.4 million** in cash, a significant shift from the prior year's use of **$83.4 million**, primarily due to **$203.1 million** in proceeds from real estate sales. Financing activities used significantly more cash (**$317.0 million** vs. **$57.7 million**) due to net repayments on the revolving credit facility and term loans[16](index=16&type=chunk) Condensed Consolidated Statements of Cash Flows Summary (in thousands) | Cash Flow Category | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $157,501 | $176,527 | | Net cash provided by (used in) investing activities | $163,358 | $(83,418) | | Net cash used in financing activities | $(317,007) | $(57,664) | | **Increase in cash and cash equivalents** | **$3,852** | **$35,445** | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's healthcare REIT business, significant acquisitions, dispositions, debt restructuring, COVID-19 lease concessions, and dividend reduction - The company is a self-managed REIT specializing in senior housing and medical facility investments, with a portfolio of approximately **$3.0 billion** in **208 properties** across **34 states** as of September 30, 2021[27](index=27&type=chunk) - Due to the COVID-19 pandemic, the company provided **$19.9 million** in lease concessions during the first nine months of 2021, accounting for them as variable lease payments[45](index=45&type=chunk)[119](index=119&type=chunk) - During Q3 2021, the company reclassified **three properties** to assets held for sale and recorded impairment charges of approximately **$16.6 million**. Additional impairments of **$5.9 million** were recognized on **two other properties** sold during the quarter[59](index=59&type=chunk)[60](index=60&type=chunk) - On April 1, 2021, the company's **3.25%** senior unsecured convertible notes matured and were retired for **$67.1 million**, including a **$6.1 million** conversion premium[93](index=93&type=chunk) - On January 26, 2021, the company issued **$400.0 million** of **3.00%** senior notes due **2031**, using the net proceeds of **$392.3 million** to repay a term loan and reduce borrowings on its revolving credit facility[100](index=100&type=chunk) - The quarterly dividend was reduced from **$1.1025** to **$0.90 per share** starting with the dividend declared on June 3, 2021[126](index=126&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses COVID-19's impact on tenant operations, portfolio management through dispositions and investments, declining financial performance, and strategic actions to maintain liquidity and strengthen the balance sheet [Portfolio and COVID-19 Impact](index=36&type=section&id=Portfolio%20and%20COVID-19%20Impact) - As of September 30, 2021, NHI's portfolio consisted of **222 facilities** across **34 states**, including **144 senior housing properties** and **75 skilled nursing facilities**, with a total investment cost of approximately **$3.3 billion**[148](index=148&type=chunk)[153](index=153&type=chunk) - The COVID-19 pandemic continues to significantly impact tenant operations through reduced occupancy and increased costs. This has led NHI to provide rent concessions to tenants[157](index=157&type=chunk) Cumulative Rent Concessions Since Pandemic Began (in thousands) | Tenant | Deferrals | Abatements | Collections | | :--- | :--- | :--- | :--- | | Bickford | $17,500 | $2,100 | $— | | Holiday | $1,800 | $— | $— | | All Others | $5,555 | $50 | $44 | | **Total** | **$24,855** | **$2,150** | **$44** | - The company has agreed to further rent deferrals with Bickford for **Q4 2021 ($4.5 million)** and potentially **Q1 2022 (up to $4.0 million)**[159](index=159&type=chunk) [Investment and Disposition Activity](index=39&type=section&id=Investment%20and%20Disposition%20Activity) 2021 Investment Highlights (in thousands) | Investment | Asset Class | Amount | | :--- | :--- | :--- | | Vizion Health (Real Estate) | HOSP | $40,250 | | Navion (Real Estate) | SHO | $6,600 | | Montecito Medical (Note) | MOB | $50,000 | | Vizion Health-Brookhaven (Note) | HOSP | $20,000 | | Navion Senior Solutions (Note) | SHO | $3,600 | | **Total** | | **$120,450** | - During the nine months ended September 30, 2021, the company completed real estate dispositions with net proceeds of **$216.0 million**, resulting in a net gain of **$20.5 million** after accounting for impairments[170](index=170&type=chunk) - In Q3 2021, **three transition properties** were reclassified to assets held for sale, resulting in impairment charges of **$16.6 million**. An additional **$5.9 million** in impairments were recognized on **two other properties** that were sold[171](index=171&type=chunk)[172](index=172&type=chunk) [Tenant Performance and Monitoring](index=41&type=section&id=Tenant%20Performance%20and%20Monitoring) - **Four tenants**—Senior Living Communities, NHC, Bickford Senior Living, and Holiday Retirement—each accounted for **10% or more** of total revenues for the nine months ended September 30, 2021[179](index=179&type=chunk) - Following the acquisition of its management services by Atria Senior Living, Holiday Retirement has not paid contractual rent since July 30, 2021. NHI has placed the tenant on a cash basis, with **$4.8 million** in rent due but unrecognized for August and September 2021[180](index=180&type=chunk) EBITDARM Coverage Ratio (Trailing 12-Months as of June 30) | Asset Type | 2Q21 | 2Q20 | | :--- | :--- | :--- | | SHO | 1.06x | 1.17x | | SNF | 2.80x | 2.90x | | **TOTAL** | **1.64x** | **1.74x** | - The senior housing (SHO) portfolio coverage declined, primarily due to softening occupancy and rising expenses, exacerbated by the COVID-19 pandemic. Bickford's coverage fell to **0.97x** and Holiday's to **0.94x**[188](index=188&type=chunk)[189](index=189&type=chunk) [Results of Operations Analysis](index=45&type=section&id=Results%20of%20Operations%20Analysis) - For Q3 2021 vs Q3 2020, rental income decreased by **$10.8 million (13.8%)**, primarily due to **$5.8 million** in rent concessions, Holiday's nonpayment of **$4.8 million**, and property dispositions[196](index=196&type=chunk)[198](index=198&type=chunk) - For the nine months ended Sep 30, 2021 vs 2020, rental income decreased by **$22.1 million (9.5%)**, driven by **$17.2 million** in rent concessions, Holiday's nonpayment, and dispositions[199](index=199&type=chunk)[200](index=200&type=chunk) - Loan and realty losses increased by **$22.6 million** for both the three and nine-month periods, primarily from **$22.5 million** in impairment charges on **five properties** in Q3 2021[198](index=198&type=chunk)[200](index=200&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2021, the company had **$48.4 million** in unrestricted cash and **$550.0 million** available on its revolving credit facility[201](index=201&type=chunk) - In January 2021, the company issued **$400 million** in **3.00%** senior notes due **2031** and used the proceeds to repay a **$100 million** term loan and reduce borrowings on its credit facility[213](index=213&type=chunk) - The company's Consolidated Net Debt to Annualized Adjusted EBITDA ratio was approximately **4.8x** for the three months ended September 30, 2021[221](index=221&type=chunk) - During the first nine months of 2021, the company sold **661,951 common shares** through its ATM program, generating net proceeds of approximately **$47.9 million**[230](index=230&type=chunk) [FFO & FAD](index=57&type=section&id=FFO%20%26%20FAD) - Normalized FFO per diluted share for the nine months ended September 30, 2021, decreased by **16.1%** to **$3.55** from **$4.23** in the prior year, primarily due to the effects of the COVID-19 pandemic[247](index=247&type=chunk)[253](index=253&type=chunk) FFO & FAD Reconciliation Summary (in thousands, except per share) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net income attributable to common stockholders | $105,327 | $147,986 | | NAREIT FFO attributable to common stockholders | $162,233 | $188,538 | | Normalized FFO attributable to common stockholders | $162,043 | $188,918 | | Normalized FAD attributable to common stockholders | $163,561 | $180,738 | | **Normalized FFO per diluted share** | **$3.55** | **$4.23** | [Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) The company manages interest rate risk on variable-rate debt through swaps, with no unhedged exposure as of Q3 2021, while stock price volatility impacts compensation expense - As of September 30, 2021, the company had **no outstanding variable rate debt** exposed to interest rate risk, as its **$400 million** in variable-rate bank term loans are hedged through interest-rate swaps that expire in **December 2021**[257](index=257&type=chunk)[258](index=258&type=chunk) - A **50 basis-point** increase in market rates would decrease the estimated fair value of the company's mortgage and other loans by approximately **$7.2 million**[263](index=263&type=chunk) - Elevated stock price volatility since the start of the COVID-19 pandemic has increased the fair value of stock option grants, resulting in higher stock-based compensation expense. The fair value of options granted in February 2021 was **$14.54 per share**, **$9.00 higher** than grants in Q1 2020[265](index=265&type=chunk)[266](index=266&type=chunk) [Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal controls during the quarter - Based on an evaluation as of September 30, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were **effective**[267](index=267&type=chunk) - There were no changes in internal control over financial reporting during the nine months ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls[269](index=269&type=chunk) Part II. Other Information [Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to ordinary course legal claims, with a specific lawsuit settled in September 2021 entitling NHI to **$0.4 million** - A lawsuit filed by East Lake Capital Management LLC in June 2018 was settled on September 22, 2021. Under the agreement, NHI is entitled to receive **$0.4 million** in Q4 2021 to settle all claims[272](index=272&type=chunk) [Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors were reported during the nine months ended September 30, 2021 - There were no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020, during the nine months ended September 30, 2021[273](index=273&type=chunk) [Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including key corporate documents, debt indentures, and CEO/CFO certifications - The exhibits filed include amendments to master leases, indentures related to the January 2021 senior notes offering, and CEO/CFO certifications[275](index=275&type=chunk)

Financial Data and Key Metrics Changes - Net income per diluted common share for Q2 2021 was $0.85, down from $0.99 in Q2 2020, primarily due to $9.9 million in deferrals, partially offset by $6.5 million in gains on real estate sales [15] - NAREIT normalized FFO decreased by $0.30 to $1.16 from $1.46 year-over-year [15] - Normalized FAD declined by $8.1 million year-over-year to $52.8 million, driven by higher deferrals [15] Business Line Data and Key Metrics Changes - Collection rate for Q2 was approximately 87%, down from 94% in Q1, impacted by increased deferrals [10] - The entrance fee, skilled nursing, and hospital segments, representing close to 60% of annualized cash revenue, performed well, while assisted living and memory care segments faced occupancy and margin pressure due to staffing shortages [10] - Bickford, the largest assisted living operator, improved occupancy by 240 basis points from Q1 to Q2, reaching 79.6% in July [22] Market Data and Key Metrics Changes - The skilled nursing portfolio, representing 30% of annualized cash revenue, had an EBITDARM coverage of 2.86x, supported by strong tenants [28] - Senior living communities had an average occupancy of 78.5% in Q2, up 80 basis points from Q1, and further improved to 79.9% in July [24] Company Strategy and Development Direction - The company is focused on optimizing relationships with operators and has completed or announced nearly $220 million in dispositions year-to-date, aiming for a total of $250 million to $400 million by year-end [6][8] - The strategy includes selling low-yielding assets and reinvesting in higher-yielding opportunities to return to historic NOI growth profiles [9][29] - The company is considering various options for remaining assets, including retenanting and lease restructuring [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the senior housing industry, despite near-term challenges, and noted steady occupancy growth since March [12] - The company is cautious about providing guidance due to ongoing restructuring but expects to return to growth and dividend increases as occupancy and margins improve [11][17] Other Important Information - The company reduced its quarterly dividend by 18% to maintain balance sheet strength while supporting operators through recovery [11] - The company ended Q2 with approximately $1.4 billion in total debt, with 93% being unsecured, and a weighted average cost of debt of 3.28% [19] Q&A Session Summary Question: Impact of Holiday sales on decision-making - Management indicated that the Atria and Welltower transaction influenced their decision to sell Holiday assets, which had been under consideration for some time [34][36] Question: Disposition guidance and remaining assets - Management confirmed they are running towards the higher end of the $250 million to $400 million disposition guidance, with various options for remaining Holiday assets [42] Question: Coverage ratios and rent deferrals - Coverage ratios do not reflect rent deferrals; they are based on scheduled rents [38] Question: Future of skilled nursing and capital redeployment - Management expressed a desire to increase exposure to skilled nursing but noted challenges in finding suitable properties due to increased market attention on government support [60] Question: Timing of deferral recapturing - Management expects to start recapturing deferrals in early 2022, with a process extending into 2023 [79]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) Commission File Number 001-10822 National Health Investors Inc (Exact name of registrant as specified in its charter) Maryland 62-1470956 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 222 Robert Rose Drive Murfreesboro Tennessee 37129 (Address of principal executive offices) (Zip Code) (615) 890-9100 (Registrant's telephone number, including area code) Securities ...

Financial Data and Key Metrics Changes - The net income per diluted common share for Q1 2021 was $0.78, down from $1.37 in Q1 2020, primarily due to a $21 million gain on the sale of real estate assets in the previous year, $4.2 million in rent deferrals, and a $3.6 million increase in non-cash stock-based compensation expense [21][22][23] - NAREIT FFO decreased by $0.12 to $1.23 from $1.35, and normalized FFO decreased by $0.12 or 9% to $1.24 [23][25] - Normalized FAD was essentially flat year-over-year at $59.6 million, up $550,000 sequentially from the fourth quarter [25] Business Line Data and Key Metrics Changes - The entrance fee in skilled nursing segments, which represent over 50% of cash revenue, performed well, while freestanding assisted living, memory care, and independent living segments experienced significant occupancy and margin declines [12][13] - Bickford, the largest assisted living operator, saw a 410 basis point sequential decline in average occupancy in Q1, but occupancy improved by 180 basis points in April [35][36] - Senior living communities had an average occupancy of 77.9% in Q1, up 60 basis points from the fourth quarter, while Holiday Retirement's average occupancy was 74.1%, down 310 basis points sequentially [38][39] Market Data and Key Metrics Changes - Active resident cases in the senior housing portfolio declined by 93% and by 97% in the skilled nursing portfolio since peaking in December [33] - The skilled nursing portfolio, representing 27% of annualized cash revenue, is anchored by strong tenants contributing 13% and 8% of annualized cash revenue respectively [41] Company Strategy and Development Direction - The company plans to restructure leases, sell underperforming assets, and change operators to achieve a portfolio of stronger assets and healthier EBITDARM coverage ratios [18] - A $50 million mezzanine loan with Montecito Medical was announced, aimed at investing primarily in medical office buildings, viewed as a chance to deploy capital at favorable risk-adjusted returns [16][44] - The company is focused on maintaining its investment-grade rating while exploring various levers, including capital recycling and potential changes to its dividend approach [19] Management's Comments on Operating Environment and Future Outlook - Management expects 2021 to be a difficult year as they help tenants bridge the gap to full occupancy and margin recovery, but they are optimistic about emerging stronger from the pandemic [10][11] - The company is cautious about the recovery trajectory, noting that robust pent-up demand is not yet evident in senior housing [30][46] Other Important Information - The company declared a first-quarter dividend of $1.1025, with payout ratios at 89.7% for normalized FFO and 84.9% for FAD [26] - Approximately $7.3 million in concessions for the second quarter were announced, with ongoing discussions for additional rent deferrals [27][28] Q&A Session Summary Question: Can you size the need for portfolio transformation through lease restructurings? - Management indicated that this is the year to address portfolio adjustments, estimating potential dispositions of $250 million to $400 million over the next eight months [50] Question: How big would a rent concession need to be for Holiday? - Management stated that the security deposit could cover rent for a period, but they prefer not to use it and are in ongoing discussions [55] Question: What are the repayment terms for rent concessions? - Management indicated that repayment could take between 12 to 24 months, depending on tenant cash flows [60] Question: Is Holiday current on its rent? - As of the latest update, Holiday is current on its rent, but discussions are ongoing [94] Question: What is the rationale behind the Montecito transaction? - The company is acting as a mezzanine lender, providing capital in a structure that allows for a blended cost of capital while participating in potential upside from asset sales [76][80] Question: How are rent deferrals treated in accounting? - Rent deferrals are not recognized as receivables and impact both FFO and FAD, flowing through the income statement [82]

Q1 2021 NATIONAL HEALTH INVESTORS Q1 2021 SUPPLEMENTAL TABLE OF CONTENTS 1 Q1 2021 National Health Investors | --- | --- | |-------------------------------------|-------| | COMPANY | | | COMPANY INFORMATION & LEADERSHIP | 02 | | PORTFOLIO | | | PORTFOLIO OVERVIEW | 03 | | PORTFOLIO SUMMARY | 04 | | OPERATING PARTNERS | 05 | | EBITDARM LEASE COVERAGE | 06 | | PURCHASE OPTIONS & LEASE MATURITIES | 07 | | INVESTMENTS | | | INVESTMENT RATIONALE | 08 | | RECENT INVESTMENTS | 09 | | CAPITALIZATION | | | CAPITALIZ ...