NATIONAL HEALTHCARE CORP

Interim Condensed Consolidated Statements of Operations

Interim Condensed Consolidated Statements of Comprehensive Income

(unaudited–* in thousands)*

Interim Condensed Consolidated Balance Sheets

(in thousands)

Interim Condensed Consolidated Balance Sheets (continued)

Interim Condensed Consolidated Statements of Cash Flows

(unaudited–* in thousands)*

Interim Condensed Consolidated Statements of Stockholders’** Equity**

For the nine months ended September 30, 2025:

For the nine months ended September 30, 2024:

Notes to Interim Condensed Consolidated Financial Statements

September 30, 2025

Note1 – Description of Business

National HealthCare Corporation (“NHC” or the “Company”) is a leading provider of senior health care services. As of* September 30, 2025,we operate or manage, through certain affiliates,80 skilled nursing facilities with a total of 10,329 licensed beds,26 assisted living facilities with1,413* units, nine independent living facilities, three behavioral health hospitals,34 homecare agencies, and 33 hospice agencies. We operate specialized care units within certain of our healthcare centers such as Alzheimer's disease care units and sub-acute nursing units. In addition, we provide insurance services, management and accounting services, and we lease properties to operators of skilled nursing and assisted living facilities. We operate in 9 states and are located primarily in the southeastern United States.

Note2 – Summary of Significant Accounting Policies

The listing below isnot intended to be a comprehensive list of all our significant accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. generally accepted accounting principles (“GAAP”), with limited need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative wouldnot produce a materially different result. See our audited* December 31, 2024consolidated financial statements and notes thereto which contain accounting policies and other disclosures required by U.S. GAAP. Our audited December 31, 2024*consolidated financial statements are available at our web site: www.nhccare.com.

Basis of Presentation

The unaudited interim condensed consolidated financial statements to which these notes are attached include all normal, recurring adjustments which are necessary to fairly present the financial position, results of operations and cash flows of NHC. All significant intercompany transactions and balances have been eliminated in consolidation. The consolidated financial statements include the accounts of all entities controlled by NHC. The Company presents noncontrolling interest within the equity section of its consolidated balance sheets. The Company presents the amount of consolidated net income that is attributable to NHC and the noncontrolling interest in its consolidated statements of operations.

We assume that users of these interim financial statements have read or have access to the audited* December 31, 2024consolidated financial statements and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, maybe determined in that context. Accordingly, footnotes and other disclosures which would substantially duplicate the disclosure contained in our most recent annual report to stockholders have been omitted. This interim financial information isnot* necessarily indicative of the results that* may*be expected for a full year for a variety of reasons.

Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and could cause our reported net income to vary significantly from period to period.

Net Patient Revenues and Accounts Receivable

Net patient revenues are derived from services rendered to patients for skilled and intermediate nursing, rehabilitation therapy, assisted living and independent living, home health care services, hospice services, and behavioral health services. Net patient revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient services. These amounts are due from patients, governmental programs, and otherthird-party payors, and include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations.

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The Company recognizes revenue as its performance obligations are completed. Routine services are treated as a single performance obligation satisfied over time as services are rendered. These routine services represent a bundle of services that arenot capable of being distinct. The performance obligations are satisfied over time as the patient simultaneously receives and consumes the benefits of the healthcare services provided. Additionally, there* maybe ancillary services which arenot* included in the daily rates for routine services, but instead are treated as separate performance obligations satisfied at a point in time when those services are rendered.

We determine the transaction price based on contractually agreed-upon amounts or rates, adjusted for estimates of variable consideration, such as implicit price concessions. We utilize the expected value method to determine the amount of variable consideration that should be included to arrive at the transaction price, using contractual agreements and historical reimbursement experience within each payor type. We constrain the transaction price, such that net revenues are recorded only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized willnot occur in the future. If actual amounts of consideration ultimately received differ from our estimates, we adjust these estimates, which would affect net revenue in the period such variances become known.

Other Revenues

Other revenues include revenues from the provision of insurance services to other healthcare providers, management and accounting services to other healthcare providers, and rental income. Our insurance revenues consist of premiums that are generally paid in advance and then amortized into income over the policy period. We charge for management services based on a percentage of net revenues. We charge for accounting services based on a monthly fee or a fixed fee per bed of the healthcare center under contract. We record other revenues as the performance obligations are satisfied based on the terms of our contractual arrangements.

We recognize rental income based on the terms of our operating leases. Under certain of our leases, we receive variable rent, which is based on the increase in revenues of a lessee over a base year. We recognize variable rent annually or monthly, as applicable, when, based on the actual revenue of the lessee is earned.

Government Grants

We account for government grants in accordance with International Accounting Standards ("IAS")20, Accounting for Government Grants and Disclosure of Government Assistance, and as such, we recognize grant income on a systematic basis in line with the recognition of specific expenses and lost revenues for which the grants are intended to compensate.

For thenine months ended* September 30, 2024,all conditions related to the Employee Retention Credit ("ERC") were met and the credit was recognized as government stimulus income. The ERC was established by the CARES Act and intended to help businesses retain their workforce and avoid layoffs during the pandemic. The ERC provided a per employee credit to eligible businesses based on a percentage of qualified wages and health insurance benefits paid to employees. The qualified wages and health insurance benefits paid by the Company were related to the second,third andfourth* quarters of2020.

Segment Reporting

In accordance with the provisions of Accounting Standards Codification ("ASC")280, Segment Reporting, the Company is required to report financial and descriptive information about its reportable operating segments. The Company hastwo reportable operating segments: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals, and (2) homecare and hospice services. The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office. See Note6 for further disclosure of the Company’s operating segments.

Other Operating Expenses

Other operating expenses include the costs of care and services that we provide to the residents of our facilities and the costs of maintaining our facilities. Our primary patient care costs include drugs, medical supplies, purchased professional services, food, and professional liability insurance and licensing fees. The primary facility costs include utilities and property insurance.

In2025, we contributed land to a newly-formed limited liability company resulting in an equity interest in the new entity. The fair value of the land contributed to the new entity was $5,625,000. The related cost basis of the contributed land was $2,019,000, which resulted in a gain of $3,606,000. The gain has been included in the interim condensed consolidated statements of operations as a reduction of "other operating expenses."

General and Administrative Costs

With the Company being a healthcare provider, the majority of our expenses are "cost of revenue" items. Costs that could be classified as "general and administrative" by the Company would include its corporate office costs, excluding stock-based compensation and incentive compensation, which were $6,250,000 and $19,909,000 for thethree andnine months ended* September 30, 2025,respectively. General and administrative costs were $6,288,000 and $19,678,000 for thethree* andnine months ended* September 30, 2024,*respectively.

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Long-Term Leases

The Company’s lease portfolio primarily consists of operating real estate leases for certain skilled nursing facilities, assisted and independent living facilities, homecare and hospice offices, regional offices, and pharmacy warehouses. The original terms of the leases typically range fromtwo tofifteen years. Several of the real estate leases include renewal options which vary in length and* may**not* include specific rent renewal amounts. We determine if an arrangement is a lease at inception of a contract. We determine the lease term by assuming exercise of renewal options that are reasonably certain.

The Company records right-of-use assets and liabilities for non-cancelable real estate operating leases with original or remaining lease terms in excess ofone year. Leases with a lease term of12 months or less at inception arenot recorded and are expensed on a straight-line basis over the lease term. We recognize lease components and non-lease components together andnot as separate parts of a lease for real estate leases.

Operating lease right-of-use assets and liabilities are recorded at the present value of the lease payments over the lease term. The present value of the lease payments are discounted using the incremental borrowing rate associated with each lease. The variable components of the lease payment that fluctuate with the operations of a health facility arenot included in determining the right-of-use assets and lease liabilities. Rather, these variable components are expensed as incurred.

Property and Equipment

Property and equipment are recorded at cost or fair value, if acquired. Depreciation is provided by the straight-line method over the expected useful lives of the assets estimated as follows: buildings and improvements,20-40 years and equipment and furniture,3-15 years. Leasehold improvements are amortized over periods that donot exceed the non-cancelable respective lease terms using the straight-line method.

Investments in Unconsolidated Companies

We use the equity method to account for our investments in joint ventures in which we have the ability to exercise significant influence. Original investments in these entities are recorded at cost and subsequently adjusted by our share of equity in income or losses. As of* September 30, 2025,*the majority of our investments in unconsolidated companies relates to a multi-family development that is under construction in Franklin, Tennessee, in which we own a 55% non-controlling interest.

Business Combinations

We account for transactions that represent business combinations using the acquisition method of accounting in accordance with ASC805, *Business Combinations.*Acquisitions are accounted for as purchases and are included in our consolidated financial statements from their respective acquisition dates. Assets acquired and liabilities assumed, if any, are measured at fair value on the acquisition date using the appropriate valuation method. Goodwill generated from acquisitions is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed. In determining the fair value of identifiable assets, we use various valuation techniques. These valuation methods require us to make estimates and assumptions surrounding projected revenues and costs, future growth, and discount rates.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. Goodwill isnot amortized but is subject to an annual impairment test. We perform our annual goodwill impairment assessment on thefirst day of thefourth quarter. Tests are performed more frequently if events occur, or circumstances change that would more likely thannot reduce the fair value of the reporting unit below its carrying amount.

The Company’s indefinite-lived intangible assets consist of trade names and certificates of need and licenses. The Company reviews indefinite-lived intangible assets for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the carrying amount of the intangible asset is below its carrying amount.

We are self–insured for risks related to workers’ compensation and general and professional liability insurance. We havetwo wholly–owned limited purpose insurance companies that insure these risks. The accrued risk reserves include a liability for reported claims and estimates for incurred but unreported claims. Our policy is to engage an external, independent actuary to assist in estimating our exposure for claims obligations (for both asserted and unasserted claims). We reassess our accrued risk reserves on a quarterly basis.

Professional liability remains an area of particular concern to us. The long-term care industry has seen an increase in personal injury/wrongful death claims based on alleged negligence by skilled nursing facilities and their employees in providing care to residents. The Company has been, and continues to be, subject to claims and legal actions that arise in the ordinary course of business, including potential claims related to patient care and treatment. A significant increase in the number of these claims, or an increase in the amounts due as a result of these claims could have a material adverse effect on our consolidated financial position, results of operations and cash flows. It is also possible that future events could cause us to make significant adjustments or revisions to these reserve estimates and cause our reported net income to vary significantly from period to period.

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We are principally self-insured for incidents occurring in all centers owned or leased by us. The coverage includes both primary policies and excess policies. In all years, settlements, if any, in excess of available insurance policy limits and our own reserves would be expensed by us.

Continuing Care Contracts

We have continuing care retirement centers (“CCRC”) within our operations. Residents at these retirement centers* may*enter into continuing care contracts with us.

Non-refundable fees are included as a component of the transaction price and are amortized into revenue over the actuarily determined remaining life of the resident, which is the expected period of occupancy by the resident. We pay the refundable portion of our entry fees to residents when they relocate from our community and the apartment is re-occupied. Refundable entrance fees arenot included as part of the transaction price and are classified as noncurrent liabilities in our consolidated balance sheets.

We also annually estimate the present value of the cost of future services and the use of facilities to be provided to the current CCRC residents and compare that amount with the balance of non-refundable deferred revenue from entrance fees received. If the present value of the cost of future services exceeds the related anticipated revenues, a liability is recorded with a corresponding charge to income. As of* September 30, 2025and December 31, 2024,*we have recorded a future service obligation liability in the amount of $1,474,000. This obligation is reflected within other noncurrent liabilities in the interim condensed consolidated balance sheets.

Other Noncurrent Liabilities

Other noncurrent liabilities include reserves primarily related to various uncertain income tax positions, deferred revenue, and obligations to provide future services to our CCRC residents. Deferred revenue includes the deferred gain on the sale of assets to National Health Corporation (“National”) and the non-refundable portion of CCRC entrance fees being amortized over the remaining life expectancies of the residents.

Noncontrolling Interest

The noncontrolling interest in a subsidiary is presented within total equity in the Company's interim condensed consolidated balance sheets. The Company presents the noncontrolling interest and the amount of consolidated net income attributable to NHC in its interim condensed consolidated statements of operations. The Company’s earnings per share is calculated based on net income attributable to NHC’s stockholders. The carrying amount of the noncontrolling interest is adjusted based on an allocation of the subsidiary earnings, contributions, and distributions.

Recently Adopted Accounting Guidance

In* December 2023,the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")2023-09 "Income Taxes (Topic740): Improvements to Income Tax Disclosures,"* which requires companies to disclose disaggregated jurisdictional and categorical information for the tax rate reconciliation, income taxes paid and other income tax related amounts. ASU2023-09 is effective for annual periods beginning with the Company's fiscal year2025. The Company has adopted the ASU and will include the required disclosures in our annual report.

Recent Accounting GuidanceNot* Yet Adopted*

In* October**2023,* the FASB issued ASU2023-06, "Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative," which amends U.S. GAAP to include certain disclosure requirements that are currently required under SEC Regulation S-X or Regulation S-K. Each amendment will be effective on the date on which the SEC removes the related disclosure requirement from SEC Regulation S-X or Regulation S-K. The adoption isnot expected to have a material impact on the Company's financial statements as these requirements were previously incorporated under the SEC Regulations.

In* November 2024,the FASB issued ASU2024*-03 "Disaggregation of Income Statement Expenses," which requires the Company to disaggregate key expense categories such as employee compensation and depreciation within its financial statements. ASU2024-03 is effective for annual periods beginning with the Company's fiscal year2027, and interim periods with the Company's fiscal year2028, with early adoption permitted. We are currently evaluating the impact this ASU will have on the company's financial statements and related disclosures.

Reclassifications

Certain accounts in the prior-year financial statements have been reclassified for the comparative purposes to confirm to the presentation in the current-year financial statements.

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Note3 – Net Patient Revenues

The Company disaggregates revenue from contracts with customers by service type and by payor.

Revenue by Service Type

The Company’s net patient services can generally be classified into the followingtwo categories: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals, and (2) homecare and hospice services*(in thousands)*.

For inpatient and hospice services, revenue is recognized on a daily basis as each day represents a separate contract and performance obligation. For homecare, revenue is recognized when services are provided based on the number of days of service rendered in the period of care or on a per-visit basis. Typically, patients andthird-party payors are billed monthly after services are performed or the patient is discharged, and payments are due based on contract terms.

As our performance obligations relate to contracts with a duration ofone year or less, the Company isnot required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The Company has minimal unsatisfied performance obligations at the end of the reporting period as our patients are typically underno obligation to remain admitted in our facilities or under our care. As the period between the time of service and time of payment is typicallyone year or less, the Company didnot adjust for the effects of a significant financing component.

Revenue by Payor

Certain groups of patients receive funds to pay the cost of their care from a common source. The following table sets forth sources of net patient revenues for the periods indicated:

Medicare covers skilled nursing services for beneficiaries who require nursing care and/or rehabilitation services following a hospitalization of at leastthree consecutive days. For each eligible day a Medicare beneficiary is in a skilled nursing facility, Medicare pays the facility a daily payment, subject to adjustment for certain factors such as a wage index in the geographic area. The payment covers all services provided by the skilled nursing facility for the beneficiary that day, including room and board, nursing, therapy and drugs, as well as an estimate of capital–related costs to deliver those services.

For homecare services, Medicare pays based on the acuity level of the patient and based on periods of care. A period of care is defined as a length of care up to30 days with multiple continuous periods allowed. The services covered by the payment include all disciplines of care, in addition to medical supplies, within the scope of the home health benefit.

For hospice services, Medicare pays a daily rate to cover the hospice’s costs for providing services included in the patient care plan. Medicare makes daily payments based on1 of4 levels of hospice care. All hospice care and services offered to patients and their families must follow an individualized written plan of care that meets the patient’s needs.

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Our hospice service revenue is subject to certain limitations on payments from Medicare. We are subject to an inpatient cap limit and an overall Medicare payment cap for each provider number. We monitor these caps on a provider-by-provider basis and estimate amounts due back to Medicare if we estimate a cap has been exceeded. If applicable, we record these cap adjustments as a reduction to revenue.

Medicaid is operated by individual states with the financial participation of the federal government. The states in which we operate currently use prospective cost–based reimbursement systems. Under cost–based reimbursement systems, the skilled nursing facility is reimbursed for the reasonable direct and indirect allowable costs it incurred in a base year in providing routine resident care services as defined by the program.

Private pay, managed care, and other payment sources include commercial insurance, individual patient funds, managed care plans and the Veterans Administration. Private paying patients, private insurance carriers and the Veterans Administration generally pay based on the healthcare center's charges or specifically negotiated contracts. For private pay patients in skilled nursing, assisted living and independent living facilities, the Company bills for room and board charges, with the remittance being due on receipt of the statement and generally by the10th day of the month the services are performed.

Certain managed care payors for homecare services pay on a per-visit basis. This revenue is recorded on an accrual basis based upon the date of services at amounts equal to its established or estimated per-visit rates.

State Relief Supplemental Funding

The Company received supplemental Medicaid payments from various states. The funding generally incorporates specific use requirements primarily for direct patient care including labor related expenses or various patient care related expenses. We have recorded $1,838,000 and $5,267,000 in net patient revenues for these supplemental Medicaid payments for thethree months ended* September 30, 2025and2024,* respectively. We have recorded $5,522,000 and $11,314,000 in net patient revenues for these supplemental Medicaid payments for thenine months ended* September 30, 2025and2024,* respectively.

Third Party Payors

Laws and regulations governing Medicare and Medicaid programs are complex and subject to interpretation. Noncompliance with such laws and regulations can be subject to regulatory actions including fines, penalties, and exclusion from the Medicare and Medicaid programs. We believe that we are following all applicable laws and regulations.

Medicare and Medicaid program revenues, as well as certain Managed Care program revenues, are subject to audit and retroactive adjustment by government representatives or their agents. Settlements withthird-party payors for retroactive adjustments due to audits, reviews or investigations are considered variable consideration and are included in the determination of the estimated transaction price for providing patient care. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and the Company’s historical settlement activity, including an assessment to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized willnot occur when the uncertainty associated with the retroactive adjustment is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known, or as years are settled or areno longer subject to such audits, reviews, and investigations. We believe that any differences between the net revenues recorded, and final determination willnot materially affect the consolidated financial statements. We have made provisions of approximately $15,060,000 and $15,351,000 as of* September 30, 2025and December 31, 2024,*respectively, for various Medicare, Medicaid, and Managed Care claims reviews and current and prior year cost reports.

Note4 – Other Revenues

Other revenues are outlined in the table below. Revenues from rental income include health care real estate properties owned by us and leased tothird party operators. Revenues from management and accounting services include fees provided to manage and provide accounting services to other healthcare operators. Revenues from insurance services include premiums for workers’ compensation and professional liability insurance policies that our wholly owned insurance subsidiaries have written for certain healthcare operators to which we provide management or accounting services. "Other" revenues include miscellaneous health care related earnings*(in thousands)*.

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Rental Income

The Company leases real estate assets consisting of skilled nursing facilities and assisted living facilities tothird party operators. Additionally, we sublease four Florida skilled nursing facilities included in our lease from National Health Investors (“NHI”) as noted in Note7 – Long Term Leases. NHI is a publicly-traded real estate investment trust. Mr. Robert G. Adams, non-executive Chairman of the NHC Board, also serves on the Board of Directors of NHI.

Management Fees from National Health Corporation

We manage five skilled nursing facilities owned by National Health Corporation (“National”). We recognized management fees and interest on management fees from these facilities of $1,377,000 and $1,348,000 for thethree months ended* September 30, 2025and2024,* respectively. We recognized management fees and interest on management fees of $4,161,000 and $4,014,000 from these facilities for thenine months ended* September 30, 2025and2024,* respectively.

Insurance Services

For workers’ compensation insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for thethree months ended* September 30, 2025and2024* were $677,000 and $529,000, respectively. The premium revenues reflected in the interim condensed consolidated statements of operations for thenine months ended* September 30, 2025and2024* were $1,743,000 and $1,638,000, respectively. Associated losses and expenses including those for self-insurance are included in the interim condensed consolidated statements of operations as "Salaries, wages and benefits."

For professional liability insurance services, the premium revenues reflected in the interim condensed consolidated statements of operations for thethree months ended* September 30, 2025and2024* were $289,000. The premium revenues reflected in the interim condensed consolidated statements of operations for thenine months ended* September 30, 2025and2024* were $868,000. Associated losses and expenses including those for self–insurance are included in the interim condensed consolidated statements of operations as "Other operating costs and expenses".

Note5 – Non–Operating Income

Non–operating income is comprised of the following*(in thousands)*:

Gain on sale of unconsolidated company

In* January 2024,*the Company sold its 50% joint venture ownership interest in a homecare agency located in Nashville, Tennessee. The total consideration paid to the Company was $2,100,000, which resulted in a gain of $1,024,000.

Note6 – Business Segments

The Company hastwo reportable operating segments: (1) inpatient services, which includes the operation of skilled nursing facilities, assisted and independent living facilities, and behavioral health hospitals; and (2) homecare and hospice services. These reportable operating segments are consistent with information used by the Company’s Chief Executive Officer, as chief operating decision maker (“CODM”), to assess performance and allocate resources. The Company also reports an “all other” category that includes revenues from rental income, management and accounting services fees, insurance services, and costs of the corporate office.

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The Company’s CODM evaluates performance including pretax earnings and allocates capital resources to each segment based on an operating model that is designed to improve the quality of patient care and profitability of the Company while enhancing long-term shareholder value. The CODM doesnot review assets by segment in his resource allocation and therefore, assets by segment arenot disclosed below.

The following table sets forth the Company’s unaudited interim condensed consolidated statements of operations by business segment*(in thousands*):

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Note7 – Long-Term Leases

Operating Leases

At* September 30, 2025,we lease from NHI the real property of 32 skilled nursing facilities andthree independent living centers underone* lease agreement. As part of the lease agreement, we sublease four Florida skilled nursing facilities to athird-party operator. We havetwo remaining contractual options to renew the lease for 5-year periods commencing* January 1, 2027and January 1, 2032,with a base rent for each renewal term equal to the fair rental value of the leased property as negotiated between the parties, without including any value attributable to improvements to the leased property voluntarily made by us at our expense. See Note16* - Contingencies and Commitments and Note17 - Subsequent Events for further discussion of the lease and our notice of exercise of the next renewal option.

The percentage rent is based on a quarterly calculation of revenue increases and is payable on a quarterly basis. Total facility rent expense to NHI was $9,911,000 and $10,085,000 for thethree months ended* September 30, 2025and2024,* respectively. Total facility rent expense to NHI was $29,725,000 and $29,371,000 for thenine months ended* September 30, 2025and2024,* respectively.

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Minimum Lease Payments

The following table summarizes the maturity of our operating lease liabilities as of* September 30, 2025 (*in thousands):

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Note8 – Earnings per Share

Basic net income per share is computed based on the weighted average number of common shares outstanding for each period presented. Diluted net income per share reflects the potential dilution that would have occurred if securities to issue common stock were exercised, converted, or resulted in the issuance of common stock that would have then shared in our earnings.

The following table summarizes the earnings and the weighted average number of common shares used in the calculation of basic and diluted earnings per share (in thousands, except for share and per share amounts):

For thethree andnine months ended* September 30, 2025,6,450 stock options were excluded from the calculation of diluted weighted average shares of common stock outstanding because the inclusion of these securities would have an anti-dilutive impact. For thethree* andnine months ended* September 30 2024,*we didnot exclude any stock options from the calculation of diluted weighted average shares of common stock outstanding because the inclusion of these securities would have an anti-dilutive effect.

Note9 – Investments in Marketable Securities

Our investments in marketable equity securities are carried at fair value with the changes in unrealized gains and losses recognized in our results of operations at each measurement date. Our investments in marketable debt securities are classified as available for sale securities and carried at fair value with the unrealized gains and losses recognized through accumulated other comprehensive income at each measurement date. Any credit-related decline in fair market values below the amortized cost of our available for sale debt securities are recorded in our results of operations through an allowance for credit losses. Realized gains and losses from securities sales are recognized in results of operations upon disposition of the securities using the specific identification method on a trade date basis. Refer to Note10 for a description of the Company's methodology for determining the fair value of marketable securities.

Marketable securities consist of the following*(in thousands)*:

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Included in the marketable equity securities are the following*(in thousands, except share amounts):*

The amortized cost and estimated fair value of debt securities classified as available for sale, by contractual maturity, are as follows*(in thousands)*:

Gross unrealized gains related to marketable equity securities are $141,687,000 and $115,259,000 as of* September 30, 2025and December 31, 2024,respectively. Gross unrealized losses related to marketable equity securities are $394,000 and $715,000 as of September 30, 2025and December 31, 2024,respectively. For thethree* months ended* September 30, 2025and2024,* the Company recognized net unrealized gains of $20,827,000 and $32,767,000, respectively, for the changes in fair market value of the marketable equity securities in the interim condensed consolidated statements of operations. For thenine months ended* September 30, 2025and2024,* the Company recognized net unrealized gains of $26,748,000 and $56,290,000, respectively, for the changes in fair market value of the marketable equity securities in the interim condensed consolidated statements of operations.

Gross unrealized gains related to available for sale marketable debt securities are $1,445,000 and $135,000 as of* September 30, 2025and December 31, 2024,respectively. Gross unrealized losses related to available for sale marketable debt securities are $2,554,000 and $5,449,000 as of September 30, 2025and December 31, 2024,*respectively.

The Company’s unrealized losses in our available for sale marketable debt securities were determined to be non-credit related. The Company hasnot recognized any credit related impairments for thenine months ended* September 30, 2025and2024.*

For the marketable debt securities in gross unrealized loss positions, (a) it is more likely thannot that the Company willnot be required to sell the investment securities before recovery of the unrealized losses, and (b) the Company expects that the contractual principal and interest will be received on the investment securities.

Proceeds from the sale of available for sale marketable securities during thenine months ended* September 30, 2025and2024* were $64,689,000 and $39,776,000, respectively. Investment gains of $872,000 and $331,000 were realized on these sales during thenine months ended* September 30, 2025and2024,* respectively.

Note10 – Fair Value Measurements

The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. This accounting standard establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available. The following summarizes thethree levels of inputs that* may*be used to measure fair value:

Level 1 – The valuation is based on quoted prices in active markets for identical instruments.

Level 2 – The valuation is based on observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that arenot active, and model–based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – The valuation is based on unobservable inputs that are supported by minimal orno market activity and that are significant to the fair value of the instrument. Level3 valuations are typically performed using pricing models, discounted cash flow methodologies, or similar techniques that incorporate management’s own estimates of assumptions that market participants would use in pricing the instrument, or valuations that require significant management judgment or estimation.

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A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following table summarizes fair value measurements by level at* September 30, 2025and December 31, 2024for assets and liabilities measured at fair value on a recurring basis(in thousands)*:

Note11 – Goodwill and Other Intangible Assets

At* September 30, 2025,we evaluated potential triggering events that might be indicators that our goodwill and indefinite lived intangibles were impaired. As a result of the review, there wereno impairment indicators regarding the Company’s goodwill that required a quantitative test to be performed. However, our accounting estimates could materially change from period to period due to changing market factors. We will continue to monitor future events, changes in circumstances, and the potential impact thereof. If actual results arenot* consistent with our assumptions and estimates, we* may*be exposed to future goodwill impairment losses.

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At* September 30, 2025,*the following table represents the activity related to our goodwill by segment (in thousands):

Indefinite-lived intangible assets consist of the following*(in thousands)*:

Note12 - Stock Repurchase Program

During thenine months ended* September 30, 2025,the Company repurchased 88,738 shares of its common stock for a total cost of $9,566,000. During thenine* months ended* September 30, 2024,*the Company repurchased 133,151 shares of its common stock for a total cost of $13,502,000. The shares were funded from cash on hand and were cancelled and returned to the status of authorized but unissued.

Note13 – Stock–Based Compensation

NHC recognizes stock–based compensation expense for all stock options granted over the requisite service period using the fair value at the date of grant using the Black–Scholes pricing model. Stock–based compensation totaled $1,239,000 and $1,093,000 for thethree months ended* September 30, 2025and2024,* respectively. Stock-based compensation totaled $3,499,000 and $3,062,000 for thenine months ended* September 30, 2025and2024,* respectively. Stock–based compensation is included in “Salaries, wages and benefits” in the interim condensed consolidated statements of operations.

At* September 30, 2025,*the Company had $7,185,000 of unrecognized compensation cost related to unvested stock–based compensation awards. This unrecognized compensation cost will be amortized over an approximatetwo-year period.

Stock Options

The following table summarizes the significant assumptions used to value the options granted for thenine months ended* September 30, 2025and for the year ended December 31, 2024.*

The following table summarizes our outstanding stock options for thenine months ended* September 30, 2025and for the year ended December 31, 2024.*

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Note14 – Income Taxes

The Company's income tax provision as a percentage of our income before income taxes was 24.6% and 26.4% for thethree months ended* September 30, 2025and2024,* respectively.

The Company's income tax provision as a percentage of our income before income taxes was 25.2% and 26.3% for thenine months ended* September 30, 2025and2024,* respectively.

Typically, these percentages vary from the U.S. federal statutory income tax rate of 21% primarily due to state income taxes, excess tax benefits from stock-based compensation, benefits resulting from the lapsing of statute of limitations of items in our tax contingency reserve, and non-deductible expenses.

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Our quarterly income tax provision, and our estimate of our annual effective income tax rate, is subject to variation due to several factors, including volatility based on the amount of pre-tax income or loss.

The Company isno longer subject to U.S. federal and state examinations by tax authorities for years before2021 (with certain state exceptions).

On* July 4, 2025,President Donald Trump signed into law the One Big Beautiful Bill Act (“OBBBA”). The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including100%* bonus depreciation, domestic research cost expensing, and the business interest expense limitation. ASC740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, as of the date of enactment, and during the year ended* December 31, 2025,the Company continues to evaluate all deferred tax balances under the newly enacted tax law and identify any changes required to its financial statements as a result of the OBBBA. The Company is still evaluating the impact of the OBBBA, and the results of such evaluations will be reflected on the Company’s Form10*-K for the year ended* December 31, 2025.*

Note15 – Long-Term Debt

Long–term debt consists of the following (dollars in thousands):

On* August 1, 2024,the Company entered into a $200,000,000 senior credit facility with afive-year term consisting of a $150,000,000 term facility and a $50,000,000 revolving line of credit (the “Credit Facility”). The Credit Facility is for general corporate purposes, including working capital and acquisitions. The loans bear interest at either (i) Term Secured Overnight Financing Rate (“SOFR”) for interest periods of one,three orsix* months, plus the applicable margin or, at NHC’s option, (ii) the Base Rate plus the applicable margin. The applicable margin is an interest rate per annum between 1.30% and 1.65% for Term SOFR loans and between.30% and.65% for Base Rate loans, depending upon the Company meeting certain conditions. The revolving line of credit contains a commitment fee equal to 0.25% of the unused borrowing capacity. There areno amounts outstanding on the revolving line of credit at* September 30, 2025.*

NHC’s obligations under the Credit Facility are unsecured. The Credit Facility contains customary representations and warranties, financial covenants, and other customary affirmative and negative covenants. The Credit Facility also contains customary events of default. As of* September 30, 2025,the Company is compliant with all financial covenants. Based on level2* inputs, the carrying value of the Company's long-term debt is considered to approximate the fair value of such debt based upon the interest rates that the Company believes it can currently obtain for similar debt.

The aggregate maturities of long–term debt for thefive years subsequent to* September 30, 2025are as follows(in thousands)*:

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Note16 – Contingencies, Commitments and Other Matters

National Health Investors, Inc. Lease

As discussed in Note7 - Long-Term Leases, our wholly-owned subsidiary, NHC/OP, L.P. ("the tenant"), is the tenant under a Master Agreement to Lease with NHI dated* October 17, 1991,as amended (the "Master Lease"), for 32 skilled nursing facilities andthree independent living centers (collectively, the "Leased Property"). On July 29, 2025,the Tenant received a letter from NHI notifying the Tenant of allegations it wasnot* in compliance withfour non-monetary provisions of the Master Lease and requesting compliance by* August 29, 2025.*

The Tenant's legal counsel sent NHI's legal counsel a letter dated* August 15, 2025*stating the Tenant's belief that the Tenant was in compliance with the Master Lease and requesting clarifying information so that it could expeditiously and adequately address any alleged potential non-compliance with the Master Lease.

NHI’s counsel’sfirst substantive response to the* August 15, 2025letter was a letter dated September 8, 2025formally alleging the Tenant is in default under the Master Lease as a result of the Tenant’s non-compliance with the samefour* non-monetary provisions of the Master Lease, stating that the cure period under the Master Lease (discussed below) was commencing, and stating that failure to cure the alleged defaults withinthirty (30) days would result in an “Event of Default” under the Master Lease, entitling the Landlord to pursue any and all remedies under the Master Lease. The* September 8, 2025letter also included limited clarification on the allegations made in the July 29, 2025*letter.

Under the Master Lease, an “Event of Default” occurs with respect to the areas of alleged non-monetary non-compliance, if such non-compliance continues for a period ofthirty (30) days after written notice is given to the Tenant by NHI; or, if by reason of the nature of such non-compliance, it cannot be remedied withinthirty (30) days, the Tenant fails to proceed with reasonable diligence (satisfactory to NHI) after receipt of the notice to cure the alleged non-compliance.

The Tenant continues to dispute that the alleged areas of non-monetary non-compliance represent a default under the Master Lease and believes that any areas that do represent non-compliance are subject only to the obligation to proceed with reasonable diligence to cure the alleged non-compliance, and that the Tenant has so proceeded. The Tenant continues to review the allegations and has been and intends to continue to remain in communication with NHI and NHI’s counsel concerning NHI’s allegations.

Prior to the Landlord’s initial* July 29, 2025letter, the Tenant began negotiations with the Landlord concerning the Master Lease and intends to continue these negotiations while addressing the non-monetary matters alleged in the September 8, 2025letter. Any termination of the Master Lease that deprives the Tenant of the benefit of the continuing right to occupy the Leased Property through the renewal terms of the Master Lease could have a material adverse impact on our results of operations, cash flows and financial position. Based on our present knowledge of the facts, we donot* believe a material loss is probable.

We have wholly–owned limited purpose insurance companies that insure risks related to workers’ compensation and general and professional liability insurance claims both for our owned and leased entities and certain of the entities to which we provide management or accounting services. The liability we have recognized for reported claims and estimates for incurred but unreported claims totals $114,032,000 and $103,616,000 at* September 30, 2025and December 31, 2024,*respectively. The liability is included in accrued risk reserves in the interim condensed consolidated balance sheets and is subject to adjustment for actual claims incurred. It is possible that these claims plus unasserted claims could exceed our insurance coverages and our reserves, which could have a material adverse effect on our consolidated financial position, results of operations and cash flows.

As a result of the terms of our insurance policies and our use of wholly owned limited purpose insurance companies, we have retained significant insurance risk with respect to workers’ compensation and general and professional liability. We consider the professional services of independent actuaries to assist us in estimating our exposures for claims obligations (for both asserted and unasserted claims) related to deductibles and exposures in excess of coverage limits, and we maintain reserves for these obligations. Such estimates are based on many variables including historical and statistical information and other factors.

Workers’* Compensation*

For workers’ compensation, we utilize a wholly–owned Tennessee domiciled property/casualty insurance company to write coverage for NHC affiliates and for third–party customers. Policies are written for a duration oftwelve months and cover only risks related to workers’ compensation losses. All customers are companies which operate in the senior care industry. Business is written on a direct basis.

General and Professional Liability Insurance and Lawsuits

The senior care industry has experienced significant increases in both the number of personal injury/wrongful death claims and in the severity of awards based upon alleged negligence by skilled nursing facilities and their employees in providing care to residents. The Company has been, and continues to be, subject to claims and legal actions that arise in the ordinary course of business, including potential claims related to patient care and treatment. The defense of these lawsuits* mayresult in significant legal costs, regardless of the outcome, and can result in large settlement amounts or damage awards. Additional insurance is purchased throughthird* party providers that serve to supplement the coverage provided through our wholly owned captive insurance company.

There is certain additional litigation incidental to our business,none of which, based upon information available to date, would be material to our financial position, results of operations, or cash flows. In addition, the long–term care industry is continuously subject to scrutiny by governmental regulators, which could result in litigation or claims related to regulatory compliance matters.

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Civil Investigative Demand / Qui Tam Complaint

On or about* May 21, 2024,Caris Healthcare, L.P. (“Caris”) received a Civil Investigative Demand (“CID”) from the U.S. Attorney’s Office for the Eastern District of Tennessee. The CID requested the production of certain medical records for patients at Caris’ Nashville office and other documents related to the billing for hospice services for the period of January 1, 2019,*through the date of the CID. The Company cooperated with respect to the requests.

On* June 23, 2025,a Notice of Election to Decline Intervention (the “Notice of Declination”) was filed by the United States of America, the State of Tennessee, the Commonwealth of Virginia, and the State of Georgia, in a case styledU.S. ex rel. Marshall v. Caris HealthCare, L.P.,CaseNo.* 3:23-CV-00330, in the U.S. District Court for the Eastern District of Tennessee (the “Qui Tam Case”). Subsequent to the Notice of Declination filing, an underlyingqui tamcomplaint, originally filed on* September 12, 2023,was unsealed. Following the Notice of Declination, the relators filed a Notice of Voluntary Dismissal on September 25, 2025,*which concluded the matter.

Governmental Regulations

Laws and regulations governing Medicare, Medicaid and other federal healthcare programs are complex and subject to interpretation. Management believes that it is following all applicable laws and regulations in all material respects. However, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusions from the Medicare, Medicaid and other federal healthcare programs.

Indemnities

From time to time, the Company enters into certain types of contracts that contingently require it to indemnify parties againstthird-party claims. These contracts primarily include (i) certain real estate leases, under which the Company* maybe required to indemnify property owners or prior facility operators for post-transfer liabilities and other claims arising from the Company’s use of the applicable premises, (ii) operations transfer agreements, in which the Company agrees to indemnify past operators of facilities against certain liabilities arising from the transfer of the operation and/or the operation thereof after the transfer to the Company or its subsidiary, (iii) certain lending agreements, under which the Company maybe required to indemnify the lender against various claims and liabilities, (iv) certain agreements by and between the Company and/or its subsidiaries or affiliates, and (v) certain agreements with the Company officers, directors and others, under which the Company maybe required to indemnify such persons for liabilities arising out of the nature of their relationship to the Company and/or its subsidiaries and affiliates. The terms of such obligations vary by contract and, in most instances, donot* expressly state or include a specific or maximum dollar amount. Generally, amounts under these contracts cannot be reasonably estimated until a specific claim is asserted.

Note17 – Subsequent Events

In* October 2025,we sent NHI a notice of our exercise of our option to renew the Master Lease foronefive*-year term commencing* January 1, 2027.See Note7* - Long-Term Leases and Note16 - Contingencies and Commitments for further discussion concerning the Master Lease.