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Chicago Atlantic Real Estate Finance, Inc. (REFI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered higher net interest income ($14.42M) and stronger distributable EPS ($0.51), aided by ~$1.5M of non-recurring fee income; GAAP diluted EPS fell to $0.41 due to higher CECL and a loan placed on non-accrual .
  • Management extended the revolver maturity to June 30, 2028 with unchanged economic terms, increasing balance sheet flexibility amid a growing ~$650M pipeline of cannabis lending opportunities .
  • Q2 affirmed the March 12, 2025 outlook (90–100% payout of distributable earnings and potential Q4 special dividend), with liquidity boosted by ~$56.8M of early Q3 prepayments and ~$1.0M prepayment fees recognized .
  • Versus S&P Global consensus, EPS modestly beat in Q2 (+~2%), while “Revenue” (as defined by S&P Global) missed; note S&P’s revenue basis differs from company-reported net interest income and may drive estimate recalibration* [Q2 EPS est 0.403 vs actual 0.41; Q2 Rev est $14.13M vs actual $13.28M]*.

What Went Well and What Went Wrong

What Went Well

  • Pipeline expanded to ~$650M and multiple signed term sheets expected to offset large early-Q3 payoffs, positioning for net portfolio growth in 2025 .
  • Net interest income increased QoQ to $14.42M, driven by ~$1.5M in non-recurring prepayment/make-whole/structuring fees and $16.5M of new deployments .
  • Revolver maturity extended to 2028 with no change to economics, supporting redeployment of repayments and scalable originations .

Management quotes:

  • “We remain the largest capital provider to the industry…pipeline of approximately $650 million” .
  • “We enhanced our ability to support that growth with the recent extension of our credit facility…to 06/30/2028” .

What Went Wrong

  • GAAP diluted EPS declined QoQ to $0.41 (from $0.47 in Q1) as CECL expense rose to $1.15M and one loan (#6) was placed on non-accrual .
  • Book value per share fell to $14.71 (from $14.87 in Q1) and debt/equity increased to 38.8% (from 28.0% in Q1) as leverage rose and CECL increased .
  • S&P Global “Revenue” missed consensus in Q2 (estimate $14.13M vs actual $13.28M), suggesting potential downward revisions to certain sell-side models despite company net interest income growth.

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Interest income ($USD)$15.48M $15.11M $16.50M
Net interest income ($USD)$14.07M $13.04M $14.42M
Diluted EPS ($)$0.39 $0.47 $0.41
Distributable EPS – diluted ($)$0.46 $0.46 $0.51
CECL reserve ($USD)$4.35M $3.27M $4.42M
Book value per share ($)$14.83 $14.87 $14.71

KPIs and Portfolio Metrics

KPIQ4 2024Q1 2025Q2 2025
Total loan principal outstanding ($USD)$410.20M $407.01M $421.92M
Portfolio companies (count)30 30 30
Unfunded commitments ($USD)$20.90M $19.80M $16.60M
Weighted avg yield to maturity (%)17.2% 16.9% 16.8%
Variable-rate share (%)62.1% 58.5% 59.3%
Debt/equity ratio (%)34.0% 28.0% 38.8%
Regular dividend declared ($/share)$0.47 $0.47 $0.47 (Q2 dividend declared Jun 16)

Estimates vs Actuals (S&P Global)

MetricQ4 2024 ConsensusQ4 2024 ActualQ1 2025 ConsensusQ1 2025 ActualQ2 2025 ConsensusQ2 2025 Actual
Primary EPS Consensus Mean ($)0.424*0.39 0.44*0.47 0.403*0.41
Revenue Consensus Mean ($USD)$14.19M*$13.77M*$14.17M*$14.12M*$14.13M*$13.28M*

Values with asterisk (*) retrieved from S&P Global.

Estimate implications:

  • Q2 EPS beat modestly; Q1 EPS beat as well; Q4 was a miss relative to consensus*.
  • S&P “Revenue” was below consensus in Q2 despite company-reported net interest income increase, likely reflecting different revenue definitions across databases; expect selective model adjustments to fee income and CECL cadence*.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend payout ratio (based on Distributable Earnings)FY 2025~90–100% (Mar 12, 2025) Affirmed (Aug 7, 2025) Maintained
Special dividend potentialFY 2025If required to meet taxable income (Q4 timing) Affirmed (Q4 2025 if needed) Maintained
Regular quarterly dividendQ2 2025$0.47/share Declared $0.47/share (payable Jul 15) Maintained
Revolving credit facility maturityFacilityJune 30, 2026 [prior]Extended to June 30, 2028 Raised duration (de-risked)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Pipeline/Originations~$462M pipeline, cautious deployments in Q1 ~$650M pipeline; signed term sheets to offset early-Q3 payoffs Up
Interest-rate positioningIncreased floors; mix to limit impact of rate cuts 70.9% unaffected by 50 bps prime decline; 91.2% by 75 bps; limited cap exposure Neutral/Protective
Prepayments/fees~$1.9M fees in Q4; $0.4M in Q1 ~$1.5M non-recurring fees in Q2; subsequent ~$56.8M prepayments, ~$1.0M fees Elevated
Credit quality/CECLLoan #9 restructured; CECL reversed ~$1.2M in Q1 Loan #6 to non-accrual; CECL reserve up to ~$4.4M Mixed
NY Social Equity programNot highlighted23 dispensaries built; improving ecosystem and competitive legal market Progressing
Regulatory/reschedulingBenefits to FCF and equity; lender entrants would take time Monitoring DEA headlines; maintain disciplined approach Monitoring

Management Commentary

  • Strategic focus: “Deploying capital with consumer and product-focused operators in limited-license jurisdictions at low leverage profiles…strong risk adjusted returns” .
  • Balance sheet flexibility: “Extension of our credit facility…from 06/30/2026 to 06/30/2028” .
  • Risk management and income drivers: “Non-recurring prepayment, make whole, exit and structuring fees…~$1.5M in Q2 vs ~$0.4M in Q1…weighted average borrowings consistent” .
  • Credit reserve and non-accrual: “Placed loan number six on nonaccrual…reserve represents ~1.1% of outstanding principal” .
  • Dividend policy: “Expect to maintain a payout ratio based on basic distributable EPS of 90%–100% for the 2025 tax year…special dividend in Q4 if required” .

Q&A Highlights

  • Pipeline drivers: Increased M&A, ESOP transactions, refinancings; signed term sheets expected to offset early-Q3 payoffs .
  • Prepayments outlook: Early-Q3 prepayments were unusually large; redeployment supported by robust pipeline .
  • New York program update: 23 dispensaries operating; product quality and legal ecosystem improving, aiding competition with illicit market .
  • Demand/supply and competition: Larger public operators may tap bond markets; REFI focuses on strong private MSOs/SSOs; expect “wait and see” given higher cost of capital vs 2026 maturities .
  • Platform advantage: Multiple funding sources (REIT/BDC/private) broaden sourcing and selection, improving portfolio quality .

Estimates Context

  • Q2 EPS beat: Consensus $0.403 vs actual $0.41 (modest beat); Q1 EPS also beat ($0.44 vs $0.47); Q4 missed ($0.424 vs $0.39)*.
  • Q2 Revenue (S&P basis) missed: $14.13M consensus vs $13.28M actual*, while company-reported net interest income increased QoQ to $14.42M, driven by non-recurring fees .
  • Potential revisions: Models may lift fee income assumptions but increase credit cost expectations given higher CECL and a new non-accrual; note definitional differences in “Revenue” may require analyst normalization*.

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Fee-driven upside supported Q2 distributable EPS and net interest income; watch sustainability of non-recurring fees amid elevated prepayment activity .
  • Balance sheet flexibility improved with the revolver maturity extension to 2028; large subsequent prepayments created redeployment capacity ($97.6M revolver availability; ~$94M liquidity) .
  • Credit costs ticked up (CECL, non-accrual #6); the portfolio’s 1.2x real estate coverage and 43.2% LTEV provide downside protection, but ongoing monitoring is warranted .
  • Pipeline conversion is the near-term catalyst: signed term sheets and maturities/refinancings should drive net portfolio growth in 2H 2025 .
  • Dividend framework affirmed (90–100% payout; Q4 special dividend if needed), supporting income visibility even as GAAP EPS fluctuates with CECL and fee timing .
  • Rates: high prime floors and mix limit downside from potential Fed cuts; ~71% of the portfolio insulated against a 50 bps prime decline .
  • Narrative: disciplined underwriting and platform breadth remain core to defending risk-adjusted returns amid regulatory uncertainty and uneven competitive dynamics .