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Chicago Atlantic Real Estate Finance, Inc. (REFI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered stable earnings and improved credit metrics: diluted EPS $0.47 vs $0.39 in Q4 2024 and $0.56 in Q3 2024; net interest income was $13.0M vs $14.1M in Q4 and $14.5M in Q3 as fee income normalized and prime rate cuts flowed through .
  • The company reversed ~$1.2M of CECL related to Loan #9 after restructuring and operational restart, reducing reserves to ~$3.3M (~0.8% of loans HFI) and supporting the EPS sequential increase .
  • Portfolio and balance sheet positioned defensively: $407.0M principal across 30 companies, weighted average yield to maturity ~16.9%, fixed/floored loans now 71.2%, leverage at ~28% debt-to-book equity with ~$65M total liquidity .
  • Management affirmed 2025 dividend payout ratio target of 90–100% of distributable earnings; Q1 dividend $0.47 paid, and Q2 dividend $0.47 declared, anchoring the yield narrative .
  • Near-term catalysts: potential originations acceleration in Q2–Q3, progress on rescheduling/280E relief, and continued loan #9 remediation; management reiterated disciplined deployment given industry volatility .

What Went Well and What Went Wrong

What Went Well

  • CECL reserve improved: ~$1.2M reversal tied to Loan #9 restructuring; reserves fell to ~$3.3M (~83 bps of loans HFI), strengthening credit metrics and supporting EPS sequentially .
  • Funding mix and rate protection: 71.2% of loans are fixed or floating with floors ≥ prime, limiting downside from rate cuts while retaining upside if rates rise .
  • Shareholder returns consistency: Distributable earnings per share of $0.47 (basic) and $0.46 (diluted) supported the $0.47 quarterly dividend; book value per share ticked up to $14.87 .

Management quote: “We seek to provide our investors downside protected returns and consistent yield regardless of fleeting sentiment and related equity volatility… we believe Chicago Atlantic is a constant that borrowers and investors can count on.” — Peter Sack, Co-CEO .

What Went Wrong

  • Originations slowed: Gross fundings were ~$4.4M, offset by ~$9.2M repayments, reflecting management and borrower caution amid depressed cannabis equity valuations and macro uncertainty .
  • Fee income normalized: Prepayment/other fee income was ~$0.4M vs $1.5M in Q4 2024, contributing to the sequential net interest income decline .
  • Yield moderation: Weighted average portfolio YTM dipped to ~16.9% from ~17.2% in Q4 2024, partly from Loan #9 restructuring and rate moves .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Interest Income ($USD)$16,258,744 $15,479,250 $15,107,315
Net Interest Income ($USD)$14,459,393 $14,068,376 $13,041,933
Net Income ($USD)$11,211,636 $7,919,692 $10,041,312
Diluted EPS ($)$0.56 $0.39 $0.47
Distributable Earnings ($USD)$11,159,241 $9,214,434 $9,727,657
Distributable EPS (Basic/Diluted) ($)$0.57 / $0.56 $0.47 / $0.46 $0.47 / $0.46
Estimates vs Actuals (S&P Global)Q3 2024Q4 2024Q1 2025
EPS Consensus Mean ($)0.478*0.424*0.44*
EPS Actual ($)0.56 0.39 0.47
Revenue Consensus Mean ($)14,193,490*14,188,030*14,166,370*
Revenue Actual ($)15,448,990*13,766,885*14,115,209*

Values with asterisks retrieved from S&P Global.

Segment/KPI snapshot

KPIQ4 2024Q1 2025
Loan Principal Outstanding ($USD)$410.2M $407.0M
Portfolio Companies (#)30 30
Weighted Avg YTM (%)17.2% 16.9%
Fixed vs Floating Mix (%)37.9% fixed; 62.1% floating 41.5% fixed; 58.5% floating
Fixed + Floored ≥ Prime (%)37.9% 71.2% (fixed + floored floating)
CECL Reserve ($USD)$4.3M $3.3M
Leverage (Debt / Book Equity)~34% ~28%
Liquidity ($USD)~$71.5M available on revolver; ~$67M total liquidity (3/12/25) ~$67.2M available on revolver; ~$65M total liquidity (5/7/25)

Highlights vs estimates

  • EPS beat: Q1 2025 $0.47 vs $0.44 consensus — significant positive surprise driven by CECL reserve reversal and disciplined OpEx, despite lower fee income and prime-rate impact .
  • Revenue (S&P-defined) slightly below consensus: Q1 2025 $14.12M actual vs $14.17M consensus; note company-reported net interest income was $13.04M and interest income $15.11M, suggesting definitional differences in S&P revenue classification . Values with asterisks retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (Mar 12, 2025)Current Guidance (May 7, 2025)Change
Dividend payout ratio (based on Distributable EPS)FY 2025~90%–100% Affirmed ~90%–100% Maintained
Special dividend (if required by taxable income)FY 2025Expect to meet requirement with special dividend in Q4 if needed Affirmed expectation Maintained
Quarterly dividend per shareQ1 2025—$0.47 paid Apr 15, 2025 Implemented
Quarterly dividend per shareQ2 2025—$0.47 declared; payable Jul 15, 2025 Implemented

No quantitative guidance on originations, revenue, margins, or OpEx. Management reiterated disciplined deployment and potential acceleration in Q2–Q3 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Pipeline & originations$32.7M Q3 originations; subsequent $36.5M funded; increased revolver capacity ~$90.7M Q4 originations; pipeline ~$500M; unsecured notes added Pipeline ~$462M; Q1 fundings ~$4.4M; expect deployment to accelerate in Q2–Q3 Pause then re-accelerate
Rates & mix managementShift to fixed/floored loans to hedge prime cuts Fixed/floored share rose; prime cuts reduced YTM 71.2% fixed/floored ≥ prime; positioned for rate volatility More rate protection
Regulatory/macroAdult-use expansions and liquidity underpin pipeline Platform resilience; total return ranking Rescheduling/280E relief would boost FCF and demand; lenders’ entry likely slow Constructive optionality
Credit quality (Loan #9)Non-accrual and foreclosure milestones Loan #9 on non-accrual end-2024 Restructured; operations restarted; ~$1.2M CECL reversal; aiming to restore accrual Improving
Capital allocation & leverageRevolver upsized; liquidity ~$80M Added $50M unsecured notes at 9%; leverage ~34% Leverage ~28%; ATM raised ~$1M; liquidity ~$65M More capacity, lower leverage

Management Commentary

  • Strategic posture: “We place credit and collateral first… underwritten our portfolio assuming the regulatory environment at the federal level does not improve… disciplined and patient” — Peter Sack .
  • Deployment outlook: “Pipeline is generally related to CapEx. We expect deployments to accelerate in Q2 and Q3” — Peter Sack .
  • Pricing discipline by state: “We’ve significantly but gradually reduced our exposure to Massachusetts as pricing pressure emerged… short-duration loans allow us to accept maturity and redeploy elsewhere” — Peter Sack .
  • Credit update (Loan #9): “Foreclosure milestones completed; three dispensaries reopened; acquired new senior secured loans ~$16.5M at 9% fixed; reversed ~$1.2M CECL; aim to restore accrual status this year” — David Kite .
  • Financial drivers: “Net interest income decreased primarily due to lower non-recurring fees and full-quarter effect of prime rate cuts; G&A and professional fees declined ~$300k q/q” — Phillip Silverman .

Q&A Highlights

  • Originations cadence: Expect Q2–Q3 acceleration; Q1 caution reflected both lender selectivity and operators delaying growth decisions amid low equity valuations .
  • Portfolio growth outlook: Aim for net portfolio growth in 2025 by competing to refinance maturities and extend borrower relationships .
  • Rescheduling impact: Elimination of 280E would materially increase borrower after-tax FCF, support more leverage and M&A; new lender participation likely gradual even if rescheduled .
  • Loan #9 precedent: Each case is unique; restructuring demonstrated ability to execute downside protections in cannabis without bankruptcy access .
  • Unfunded commitments: ~$19.8M, tied to construction milestones and lender discretion; timing uncertain .

Estimates Context

  • EPS: Q1 2025 diluted EPS $0.47 vs S&P Global consensus $0.44 — bold beat driven by CECL reserve reversal and cost control despite lower fee income and prime cuts .
  • Revenue: S&P-defined revenue actual $14.12M vs $14.17M consensus — slight miss; note company-reported net interest income of $13.04M and interest income of $15.11M indicate definitional differences vs S&P revenue taxonomy .
  • FY 2025 consensus: EPS ~$1.73*; revenue ~$56.6M* — trajectory implies modest growth with stable dividend coverage; potential special dividend if taxable income requires .

Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • Credit quality tailwind: CECL reserve decline and Loan #9 reset underpin EPS resilience; watch for accrual restoration in 2H 2025 .
  • Deployment re-acceleration: Management expects originations to pick up in Q2–Q3; pipeline ~$462M suggests capacity to grow NII as fee income normalizes .
  • Rate hedging in place: 71.2% fixed/floored loans mitigate downside from rate cuts while preserving upside in rising-rate scenarios .
  • Dividend durability: Distributable EPS of $0.47 supports the $0.47 quarterly dividend; payout ratio target 90–100% affirmed; Q2 dividend declared .
  • Regulatory optionality: Rescheduling/280E relief could expand borrowers’ FCF and deal flow; lender competition likely gradual, preserving REFI’s spread advantage near term .
  • Balance sheet flexibility: Leverage reduced to ~28% and liquidity ~$65M provide capacity to fund attractive originations and support special dividend if required .
  • Trading implications: Near-term catalyst path includes Q2–Q3 originations prints, CECL progress, and any regulatory headlines; dividend visibility and #3 total-return ranking among mortgage REITs support defensiveness in volatile markets .
Note: All company figures and quotes cited from the Q1 2025 8-K press release, earnings supplemental, and earnings call; prior-quarter data from Q3/Q4 2024 8-Ks. Where estimates are shown, values were retrieved from S&P Global.

Citations:

  • Q1 2025 8-K and press release, financials, supplemental:
  • Q1 2025 earnings call transcript:
  • Q4 2024 8-K and press release:
  • Q3 2024 8-K and press release:
  • Q2 2025 dividend declaration press release: