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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 June 30, 2020, the Company had investments of approximately $664.7 million in 131 real estate properties, located in 33 states, totaling approximately 2.8 million square feet in the aggregate. Any references to square footage 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.

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, 2019. 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, 2020. All material intercompany accounts and transactions have been eliminated.

A novel strain of coronavirus (SARS-CoV-2) was first identified in late 2019, and subsequently declared a global pandemic by the World Health Organization ("COVID-19"). The Company considered the impact of the COVID-19 on the assumptions and estimates used for the three and six months ended June 30, 2020. The full extent of the future impacts of COVID-19 on the Company's operations is uncertain. A prolonged outbreak could have a material adverse impact on the financial results and business operations of the Company.

During the second quarter of 2020, the Company has provided lease concessions to certain tenants in response to the impact of COVID-19, in the form of rent deferrals. The Company has made an election to account for such lease concessions consistent with how those concessions would be accounted for under the current leasing guidance if enforceable rights and obligations for those concessions had already existed in the leases. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in our rights as lessor, including concessions that result in the total payments required by the modified lease being substantially the same as or less than total payments required by the original lease.

All of the Company’s concessions to date provide for a deferral of payments with no substantive changes to the consideration in the original lease. These deferrals affect the timing, but not the amount, of the lease payments. The Company is accounting for these deferrals as if no changes to the lease were made. Under this accounting, the Company increases its lease receivable as tenant payments accrue and continues to recognize rental income. As of July 31, 2020, the Company has entered into, or anticipates entering into, deferral agreements with up to approximately 20 tenants representing less than one percent of our annualized rent. Pursuant to these agreements, the tenants are generally required to repay the deferred amounts in equal monthly installments during the third and fourth quarters of 2020.

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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.

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 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 June 30,
(Dollars in thousands)	2020				2019
Cash and cash equivalents	$	4,896			$	9,031
Restricted cash	351				234
Cash, cash equivalents and restricted cash	$	5,247			$	9,265

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

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES" Act) was enacted into law and was immediately effective. The CARES Act includes several tax provisions that allow for the carryback of net operating losses, provides relief from the taxable income limitation on the use of net operating losses carried forward, increases the business interest limitation from 30% to 50%, makes technical corrections to tax depreciation methods for qualified improvement property, and provides payroll tax credits and for the deferral of employer social security payments. The Company does not believe that there have been or will be material impacts to its income taxes related to the CARES Act. The Company will continue to evaluate the tax impact of the CARES Act and any guidance provided by the U.S. Treasury and Internal Revenue Service.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Financial Instruments-Credit Losses

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, companies are required to use a new current expected credit loss ("CECL") model that generally results in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, companies are required to measure credit losses in a manner similar to prior guidance, except that the losses are recognized as allowances rather than as reductions in the amortized cost of the securities. In November 2018, the FASB amended the ASU to clarify that receivables arising from leases would not be within the scope of

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the ASU but rather would be accounted for under the leasing standard. Companies have to disclose significantly more information, including information they use to track credit quality by year of origination for most financing receivables. Companies must apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company adopted ASU No. 2016-13 on January 1, 2020. The Company did not record an adjustment upon adoption as the impact was determined to be immaterial. However, this standard could impact the Company's financial statements and results of operations in future periods.

Recently Issued Accounting Pronouncements

Reference Rate Reform

The Company’s properties are generally leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2035. 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 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 the Company for the years ending December 31, as of June 30, 2020, are as follows (in thousands):

2020 (six months ending December 31)	$	30,417
2021	58,659
2022	55,024
2023	49,996
2024	46,867
2025 and thereafter	299,485
	$	540,448

Straight-line rental income

Rental income is recognized as earned over the life of the lease agreement on a straight-line basis when collection of rental payments over the term of the lease is probable. Straight-line rent included in rental income was approximately $0.7 million and $0.4 million, respectively, for the three months ended June 30, 2020 and 2019. Straight-line rent included in rental income was approximately $1.6 million and $0.7 million, respectively, for the six months ended June 30, 2020 and 2019.

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Deferred revenue

Income received but not yet earned is deferred until such time it is earned. Deferred revenue, included in other liabilities on the Condensed Consolidated Balance Sheet, was approximately $2.1 million and $2.0 million, respectively, at June 30, 2020 and December 31, 2019.

Security Deposits

As of June 30, 2020 and December 31, 2019, the Company held approximately $4.1 million and $3.5 million, respectively, 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.

2020 Real Estate Acquisitions

During the second quarter of 2020, the Company acquired seven real estate properties and a land parcel adjacent to one of our existing properties to be used for additional parking. Upon acquisition, the real estate properties were 100% leased in the aggregate with lease expirations through 2035. Amounts reflected in revenues and net income for these properties for the three months ended June 30, 2020 were approximately $0.1 million and four thousand dollars, respectively, and transaction costs totaling approximately $0.4 million were capitalized relating to these property acquisitions.

During the first quarter of 2020, the Company acquired six real estate properties. Upon acquisition, the properties were 98.2% leased in the aggregate with lease expirations through 2035. Amounts reflected in revenues and net income for these properties for the six months ended June 30, 2020 were approximately $1.4 million and $0.8 million, respectively, and transaction costs totaling approximately $0.2 million were capitalized relating to these property acquisitions.

Location	Property Type (1)	Date Acquired	Purchase Price			Cash Consideration			Real Estate			Other (2)			Square Footage
			(000's)			(000's)			(000's)			(000's)
San Antonio, TX	MOB	01/27/20	$	4,003		$	4,022		$	4,036		$	(14	)	13,500
San Antonio, TX	MOB	01/27/20	1,931			1,955			1,961			(6		)	6,500
Decatur, AL	MOB	02/18/20	5,784			5,792			5,777			15			35,943
Ramona, CA	SC	03/13/20	4,100			4,124			4,143			(19		)	11,300
Cuero, TX	SC	03/18/20	2,153			2,174			2,207			(33		)	15,515
Rogers, AR	IRF	03/27/20	19,000			18,317			19,042			(725		)	38,817
Oak Lawn, IL (land)	MOB	04/20/20	400			403			421			(18		)	—
Germantown, TN	SC	04/29/20	3,900			3,949			3,949			—			10,600
Westlake, OH	SC	06/05/20	2,443			2,456			2,487			(31		)	15,057
Columbus, IN (3)	SC	06/05/20	1,813			1,828			1,787			41			13,969
Niceville, FL	MOB	06/15/20	2,294			2,340			2,344			(4		)	10,250
Greensburg, PA	MOB	06/16/20	3,389			3,484			3,497			(13		)	15,650
Gardendale, AL	MOB	06/24/20	2,948			2,935			2,878			57			12,956
Prattville, AL	MOB	06/24/20	4,091			4,111			4,078			33			13,319
			$	58,249		$	57,890		$	58,607		$	(717	)	213,376
(1) MOB - Medical Office Building; SC - Specialty Center; IRF - Inpatient Rehabilitation Facility
(2) Includes, but is not limited to, above- and below-market lease intangibles, liabilities assumed, and security deposits.
(3) The Company assumed a ground lease in connection with this acquisition that is classified as an operating lease. The present value of future lease payments and the right-of-use asset, each totaling approximately $0.2 million, are included in other liabilities and other assets, respectively, on the Company's Condensed Consolidated Balance Sheets.

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The following table summarizes the relative fair values of the assets acquired and liabilities assumed in the property acquisitions for the six months ended June 30, 2020.

			Relative Fair Value			Estimated Useful Life
			(in thousands)			(in years)
Land and land improvements			$	11,323		8.5
Building and building improvements			41,709			30.2
Intangibles:
	At-market lease intangibles		5,575			5.4
	Above-market lease intangibles		292			4.8
	Below-market lease intangibles		(111		)	3.1
		Total intangibles	5,756
Accounts receivable and other assets assumed			247
Accounts payable, accrued liabilities and other liabilities assumed			(807		)
Prorated rent, interest and operating expense reimbursement amounts collected			(338		)
	Total cash consideration		$	57,890

2020 Real Estate Disposition

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.

The table below details the Company's debt as of June 30, 2020 and December 31, 2019.

	Balance as of
(Dollars in thousands)	June 30, 2020			December 31, 2019			Maturity Dates
Revolving Credit Facility	$	18,000		$	15,000		3/23
A-1 Term Loan, net	49,871			49,833			3/22
A-2 Term Loan, net	49,801			49,775			3/24
A-3 Term Loan, net	74,479			74,433			3/26
Mortgage Note Payable, net	5,158			5,202			5/24
	$	197,309		$	194,243

The Company's second amended and restated credit facility (the "Credit Facility") is by and among Community Healthcare OP, LP, the Company, and a syndicate of lenders with Truist Bank (formerly SunTrust Bank) serving as Administrative Agent. The Company’s material subsidiaries are guarantors of the obligations under the Credit Facility.

The Credit Facility, as amended, provides for a $150.0 million Revolving Credit Facility and $175.0 million in term loans (the "Term Loans"). The Credit Facility, through the accordion feature, allows borrowings up to a total of $525.0 million including the ability to add and fund additional term loans. The Revolving Credit Facility matures on March 29, 2023 and includes one 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 five-year term loan facility in the aggregate principal amount of $50.0 million (the "A-1 Term Loan"), which matures on March 29, 2022, a seven-year

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term loan facility in the aggregate principal amount of $50.0 million (the "A-2 Term Loan"), which matures on March 29, 2024, and 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.

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 0.25% of the amount of the unused portion of the Revolving Credit Facility if amounts borrowed are greater than 33.3% of the borrowing capacity under the Revolving Credit Facility and 0.35% 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 $18.0 million outstanding under the Revolving Credit Facility with a 2.06% weighted average interest rate at June 30, 2020, and a borrowing capacity remaining of approximately $132.0 million at June 30, 2020.

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 1.25% to 2.30% or (ii) a base rate plus 0.25% to 1.30%, in each case, depending upon the Company’s leverage ratio. In addition, the Company is obligated to pay an annual fee equal to 0.35% of the amount of the unused portion of the Term Loans. The Company has entered into interest rate swaps to fix the interest rates on the Term Loans. See Note 5 for more details on the interest rate swaps. At June 30, 2020, the Company had drawn the full $175.0 million under the Term Loans which had a fixed weighted average interest rate under the swaps of approximately 4.569%.

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. The Company was in compliance with its financial covenants under its Credit Facility as of June 30, 2020.

Risk Management Objective of Using Derivatives

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

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. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above the cap strike rate on the contract.

As of June 30, 2020, the Company had seven outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk for notional amounts totaling $175.0 million. The table below presents the fair value of

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the Company’s derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019.

	Asset Derivatives Fair Value at								Liability Derivatives Fair Value at
	June 30, 2020			December 31, 2019			Balance Sheet Classification		June 30, 2020			December 31, 2019			Balance Sheet Classification
Interest rate swaps	$	—		$	—		Other assets		$	13,969		$	4,808		Other Liabilities

The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive loss ("AOCI") and 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 $3.7 million will be reclassified from AOCI as an increase to interest expense.

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 six months ended June 30, 2020 and 2019.

	Three Months Ended June 30,							Six Months Ended June 30,
(Dollars in thousands)	2020			2019				2020			2019
Amount of unrealized loss recognized in OCI on derivative	$	(1,317	)	$	(4,032	)		$	(10,193	)	$	(5,245	)
Amount of loss (gain) reclassified from AOCI into interest expense	$	774		$	(95	)		$	1,032		$	(157	)
Total interest expense presented in the Condensed Consolidated Statements of Income in which the effects of the cash flow hedges are recorded	$	2,183		$	2,251			$	4,432		$	4,305

Credit-risk-related Contingent Features

As of June 30, 2020, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $14.5 million. As of June 30, 2020, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of approximately $14.5 million at June 30, 2020.

Common Stock

The following table provides a reconciliation of the beginning and ending common stock balances for the six months ended June 30, 2020 and for the year ended December 31, 2019:

	Six Months Ended June 30, 2020		Year Ended December 31, 2019
Balance, beginning of period	21,410,578		18,634,502
Issuance of common stock	1,189,545		2,554,247
Restricted stock-based awards	126,018		221,829
Balance, end of period	22,726,141		21,410,578

ATM Program

On November 5, 2019, the Company entered into an Amended and Restated Sales Agency Agreement ("Amended and Restated Sales Agreement") for its at-the-market offering program ("ATM Program") with Sandler O’Neill & Partners, L.P., Evercore Group L.L.C., SunTrust Robinson Humphrey, Inc., BB&T Capital Markets, a division of

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BB&T Securities, LLC, Fifth Third Securities, Inc. and Janney Montgomery Scott LLC, as sales agents (collectively, the “Agents”), under which the 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 under the ATM Program for the three and six months ended June 30, 2020 is detailed in the table below. As of June 30, 2020, the Company had approximately $251.6 million remaining that may be issued under the ATM Program.

	Three Months Ended June 30, 2020				Six Months Ended June 30, 2020
Shares issued	578,759				1,189,545
Net proceeds received (in millions)	$	23.7			$	50.6
Average gross sales price per share	$	41.70			$	43.39

The following table sets forth the computation of basic and diluted net income per common share for the three and six months ended June 30, 2020 and 2019, respectively.

	Three Months Ended June 30,								Six Months Ended June 30,
(Dollars in thousands, except per share data)	2020				2019				2020				2019
Net income	$	4,526			$	2,066			$	8,626			$	3,516
Participating securities' share in earnings	(432		)		(351		)		(855		)		(652		)
Net income, less participating securities' share in earnings	$	4,094			$	1,715			$	7,771			$	2,864
Weighted average Common Shares outstanding
Weighted average Common Shares outstanding	22,285,565				19,055,110				22,008,998				18,896,274
Unvested restricted shares	(1,021,990		)		(809,442		)		(1,009,901		)		(795,301		)
Weighted average Common Shares outstanding–Basic	21,263,575				18,245,668				20,999,097				18,100,973
Dilutive potential common shares	—				—				—				—
Weighted average Common Shares outstanding –Diluted	21,263,575				18,245,668				20,999,097				18,100,973
Basic Net Income per Common Share	$	0.19			$	0.09			$	0.37			$	0.16
Diluted Net Income per Common Share	$	0.19			$	0.09			$	0.37			$	0.16

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A summary of the activity under the Company's 2014 Incentive Plan, as amended, for the three and six months ended June 30, 2020 and 2019 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 June 30,							Six Months Ended June 30,
(Dollars in thousands)		2020			2019				2020			2019
Stock-based awards, beginning of period		1,013,797			794,177				909,892			709,487
	Stock in lieu of compensation	5,510			15,004				55,755			57,529
	Stock awards	16,603			25,995				70,263			68,160
	Total stock granted	22,113			40,999				126,018			125,689
	Vested shares	(15,910		)	(21,424		)		(15,910		)	(21,424		)
Stock-based awards, end of period		1,020,000			813,752				1,020,000			813,752
Amortization expense		$	1,070		$	899			$	2,090		$	1,752

Other assets, net on the Company's Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 are detailed in the table below.

	Balance as of
(Dollars in thousands)	June 30, 2020			December 31, 2019
Notes receivable	$	18,340		$	23,500
Lease and interest receivables	2,821			3,021
Straight-line rent receivables	6,885			5,267
Prepaid assets	602			488
Deferred financing costs, net	586			693
Leasing commissions, net	980			875
Deferred tax asset	575			595
Above-market intangible assets, net	414			144
Right-of-use leased asset	385			139
Other	480			457
	$	32,068		$	35,179

The Company's notes receivable at June 30, 2020 included:

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a loan with a borrower totaling $17.8 million which is secured by all assets and ownership interests in the operations of seven long-term acute care hospitals and one inpatient rehabilitation hospital owned by the borrower. The note matures on December 31, 2025 and bear interest at 9% per annum. The Company also has a $3.0 million revolving credit facility with the borrower that they can draw on which matures on January 1, 2026.

•	a $2.5 million loan, acquired by the Company for $1.75 million, to help facilitate the bankruptcy filing of a borrower. The Company subsequently received a payment of $1.2 million on the note and had a carrying balance of $0.6 million at June 30, 2020 which is secured by all assets and personal property of the borrower. The note is due on demand and bears interest at 10% per annum.

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The Company identified the borrowers of these notes as variable interest entities ("VIEs"), but management determined that the Company was not the primary beneficiary of the VIEs because we lack either directly or through related parties any material impact in the activities that impact the borrowers' economic performance. We are not obligated to provide support beyond our stated commitment to the borrowers, and accordingly our maximum exposure to loss as a result of this relationship is limited to the amount of our outstanding notes receivable. The VIEs that we have identified at June 30, 2020 are summarized in the table below.

Classification	Carrying Amount (in millions)			Maximum Exposure to Loss (in millions)
Note receivable	$	17.8		$	17.8
Note receivable	$	0.6		$	0.6

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.

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.

The table below details the fair values and carrying values for our notes receivable, interest rate swaps, and mortgage note payable at June 30, 2020 and December 31, 2019, using level 2 inputs.

	June 30, 2020							December 31, 2019
(Dollars in thousands)	Carrying Value			Fair Value				Carrying Value			Fair Value
Notes receivable	$	18,340		$	17,940			$	23,500		$	23,399
Interest rate swap liability	$	13,969		$	13,969			$	4,808		$	4,808
Mortgage note payable	$	5,235		$	5,524			$	5,288		$	5,351

Dividend Declared

On August 3, 2020, the Company’s Board of Directors declared a quarterly common stock dividend in the amount of $0.4225 per share. The dividend is payable on August 28, 2020 to stockholders of record on August 17, 2020.

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Highland Update

On July 1, 2020, the bankruptcy sale of Highland Hospital was completed and the operator who had been managing the facility acquired its operations and entered into a lease with the Company.

The Company provided debtor in possession financing (the “DIP”) to facilitate the sale and, as of the closing of the sale, had an approximately $1.2 million net payable. In addition, the Company continued to have a net investment of $550,000 in a separate note (the “Note”), secured by all assets of Highland Hospital.

As of the date of this filing, the DIP and the Note have been combined into a single net receivable balance of approximately $1.4 million.

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•	Leverage ratios and financial covenants included in our Credit Facility;

•	Dividend payout percentage; and

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

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

(2)	Filed as Exhibit 3.2 to the Registration Statement on Form S-11 of the Company filed with the Securities and Exchange Commission on April 2, 2015 (Registration No. 333-203210) and incorporated herein by reference.

*	Filed herewith.

**	Furnished herewith.

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