Chicago Atlantic Real Estate Finance, Inc. (REFI)·Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 was steady operationally but softer on fees and estimates: net interest income fell 5% QoQ to $13.7M as prepayment/make‑whole fees normalized, and diluted EPS of $0.42 was a slight miss vs $0.43 consensus* while SPGI “revenue” was below the $14.0M consensus* .
• Balance sheet resiliency remained a highlight: 86% of loans are either fixed or floored at ≥ the 7% Prime rate, leaving only ~14% exposed to further rate cuts, and leverage decreased to 32.8% from 38.8% QoQ .
• Originations and pipeline support 2025 net portfolio growth: $39.5M gross originations in Q3 (including participation in a $75M secured revolver with Verano) and a ~$415M near‑term pipeline; management reiterated they are “on track to generate net growth in the loan portfolio for 2025” and affirmed the March 12, 2025 outlook .
• Capital and dividends: the revolver maturity was extended to 2028; $0.47 dividend declared for Q3 and management expects a 90–100% payout of basic distributable EPS for the 2025 tax year with potential for a Q4 special dividend if needed .
• Insider alignment: officers and directors bought 54,000 shares ($673K) in recent weeks, lifting ownership to ~1.77M shares (~8.2% FD) — a potential sentiment catalyst amid a discount to book value .

What Went Well and What Went Wrong

What Went Well

• Rate protection and underwriting discipline: 86% of loans are fixed or floored ≥ Prime (7%); only ~14% of the portfolio is exposed to further rate declines, insulating NII despite late‑September cuts .
• Healthy pipeline and new marquee facility: ~$415M pipeline with diversified opportunities; participation in what management believes is the largest U.S. real estate‑backed revolver to a cannabis operator ($75M, Verano) underscores platform reach .
• Lower leverage, affirmed outlook and dividend visibility: debt/equity eased to 32.8% from 38.8% QoQ; 2025 outlook affirmed; $0.47 Q3 dividend paid with a 90–100% payout framework and potential special dividend if taxable income requires .

Selected quotes:

• “We…remain well‑insulated from potential adjustments in the Prime rate with 86% of our current loans structured with interest rate floors greater than or equal to the prevailing Prime rate.” — Co‑CEO Peter Sack .
• “Only approximately 14% of our total loan portfolio is exposed to any further rate declines based on today's 7% prime rate.” — COO David Kite .
• “We are on track to generate net growth in the loan portfolio for 2025.” — Co‑CEO Peter Sack .

What Went Wrong

• Modest top‑line pressure from fee normalization and rates: NII fell to $13.7M (−5.1% QoQ), driven by lower prepayment/structuring fees ($1.1M vs $1.5M in Q2) and a small hit from the late‑quarter 25 bp rate cut; interest expense also declined with lower average revolver usage .
• Slight misses vs. consensus*: diluted EPS $0.42 vs $0.43 and SPGI revenue $13.13M vs $13.97M, reflecting fee normalization and timing; four estimates for both metrics* (estimates via S&P Global*).
• Credit cost uptick and slower growth than Q2: CECL expense swung to a $0.56M provision (vs. $1.15M provision in Q2 and a $(0.99)M benefit YoY); gross yield to maturity edged down to 16.5% from 16.8% QoQ and 18.2% YoY; portfolio principal declined to ~$400M after $62.7M of unscheduled repayments .

Financial Results

P&L and Per-Share Metrics (USD unless noted)

Estimates vs Actuals (SPGI, Q3 2025)*

Values retrieved from S&P Global.*

Portfolio and Capital KPIs

Notes: Management indicated only ~14% of the portfolio is exposed to incremental rate declines due to floors/fixed structures and reiterated robust collateral coverage (real estate coverage 1.2x; LTEV 43.5% weighted average) .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic positioning: “We…remain well‑insulated from potential adjustments in the Prime rate with 86% of our current loans structured with interest rate floors greater than or equal to the prevailing Prime rate.” — Peter Sack, Co‑CEO .
• Lending discipline and portfolio construction: “Only approximately 14% of our total loan portfolio is exposed to any further rate declines…The remaining 86% is either fixed-rate or protected by primary floors of 7% or higher.” — David Kite, COO .
• Growth and platform reach: “We…funded…a $75 million three-year secured revolver with Verano,” and maintain an “approximately $441 million” pipeline (company materials cite ~$415M near‑term) — Peter Sack .
• Shareholder returns: “We continue to expect to maintain a dividend payout ratio…of 90%–100% for the 2025 tax year. If our taxable income requires additional distributions…we expect to meet that requirement with a special dividend in the fourth quarter.” — Phil Silverman, CFO .

Q&A Highlights

• Pipeline composition and ESOPs: ESOP opportunities remain attractive; pipeline churn is normal with no major exits .
• 2025 maturities: Management expects to retain the vast majority of loans maturing before year‑end via extensions/structures that “maintain the position” .
• Rate floors and exposure: Clarified that the 86% protection is a combination of fixed rate and floor‑protected floating loans .
• Diversification outside cannabis: While REFI has occasionally invested outside cannabis, the sector’s risk/reward remains more attractive; specialization is core to strategy .
• 280E/uncertain tax liabilities: Treated as leverage; covenants limit borrowers’ ability to incur uncertain tax liabilities above set thresholds .
• Competition from regional banks: Banks with cannabis expertise are increasing activity; REFI views them as co‑lenders and ecosystem partners .
• New York Social Equity Fund: Program has paused additional draws; REFI is prepared to support if deployments resume .

Estimates Context

• Q3 2025 diluted EPS was $0.42 vs. $0.43 consensus (miss by $0.01); SPGI revenue was $13.13M vs. $13.97M consensus (miss ~6%); four estimates for both metrics*. The shortfall reflects lower non‑recurring fees QoQ and a small late‑quarter rate impact .
• Consensus target price stood at ~$16.94*, with no consolidated recommendation text available*. Values retrieved from S&P Global.*

Key Takeaways for Investors

• Rate‑cut insulation is a differentiator: With 86% of loans fixed or floored at ≥7% Prime and no caps on floaters, REFI’s NII is better protected than many mortgage REIT peers if rates decline further .
• Fee normalization drove modest QoQ softness; underlying core spread income remained stable, and leverage declined as revolver usage stepped down .
• Pipeline plus relationship lending (e.g., Verano revolver) support net portfolio growth in 2025 despite elevated repayments; management expects most near‑term maturities to be retained via extensions .
• Credit quality remains supported by structure: weighted average 1.2x real estate coverage and 43.5% LTEV; CECL reserve rose to ~$5.0M (~1.25% of loans HFI) reflecting prudent provisioning .
• Dividend visibility is solid (90–100% payout of basic Distributable EPS), with potential for a Q4 special dividend if taxable income requires; $0.47 regular dividend maintained in Q3 .
• Insider buying (~$673K, 54K shares) signals confidence and may help sentiment amid shares trading below book value ($14.71) .
• Watchlist: pace of deployments vs. repayments, further Fed moves, competitive intensity from banks, and any policy developments on rescheduling/280E that could improve borrower cash flows and loan demand .

Citations:

• Q3 2025 8‑K & press release:
• Q3 2025 earnings call transcript:
• Q2 2025 press release:
• Q1 2025 press release:
• Q3 2025 dividend declaration & insider purchases:

Estimates:

• S&P Global consensus and actuals: EPS $0.43* vs $0.42; SPGI revenue $13.97M* vs $13.13M*; 4 estimates each; target price ~$16.94*. Values retrieved from S&P Global.*