Chicago Atlantic Real Estate Finance(US:REFI)2025-08-07 11:02Loan Portfolio Composition - As of June 30, 2025, approximately 60.1% of the loan portfolio was comprised of floating rate loans, while 39.9% were fixed rate loans[164]. - As of June 30, 2025, 34.9% of the principal of loans held in the portfolio were backed by personal or corporate guarantees[159]. - The loan portfolio included loans to 29 borrowers with a carrying value of approximately $414.0 million as of June 30, 2025, compared to $402.5 million for 30 borrowers as of December 31, 2024[189]. - As of June 30, 2025, the total principal of loans held for investment was approximately $416.4 million, with fixed-rate loans comprising 39.9% and floating-rate loans 60.1%[191]. - The weighted-average YTM IRR of the loan portfolio held for investment was 16.8% as of June 30, 2025, down from 17.2% as of December 31, 2024[190]. - The company’s loan portfolio is concentrated in Illinois (17%), Ohio (15%), and Florida (11%) as of June 30, 2025[262]. Revenue and Income - The company generates revenue primarily from interest income on loans, with a portion of interest potentially including a paid-in-kind (PIK) component[166]. - Interest income for the quarter ended June 30, 2025, increased by approximately $1.5 million, or 10%, compared to the same period in 2024, primarily driven by fee income of $1.5 million[186]. - Net interest income for the quarter ended June 30, 2025, was $14.4 million, an increase of $1.2 million, or 9%, compared to the same period in 2024[186]. - Net income before income taxes grew by $1.0 million, or 6%, reaching $18.9 million for the six months ended June 30, 2025, compared to $17.9 million in 2024[187]. - Distributable Earnings for the three months ended June 30, 2025, were approximately $10.85 million, compared to $9.93 million for the same period in 2024, representing an increase of about 9.5%[204]. Expenses and Financial Performance - Total expenses for the quarter ended June 30, 2025, increased by approximately $1.7 million, or 43%, compared to the same period in 2024[186]. - Interest expense rose by approximately $0.2 million, or 13%, due to interest on Notes Payable, contributing approximately $1.2 million to the interest expense for the quarter ended June 30, 2025[186]. - Total expenses increased by $0.2 million, or 2%, totaling $8.7 million for the six months ended June 30, 2025, compared to $8.5 million in 2024[187]. Credit Losses and Reserves - Provision for current expected credit losses was approximately $1.1 million for the quarter ended June 30, 2025, compared to a reversal of $275 thousand in the same period in 2024[186]. - The provision for current expected credit losses decreased to approximately $74 thousand in the six months ended June 30, 2025, from $105 thousand in the same period of 2024, a reduction of 29%[187]. - The CECL Reserve increased by approximately $0.1 million during the six months ended June 30, 2025, with a reserve liability of approximately $45 thousand applicable to $16.6 million of unfunded commitments[193]. - The current expected credit loss reserve is $4,421,348, reflecting a conservative approach to potential loan defaults[197]. - The company has had zero realized loan losses since its inception, with a focus on evaluating loans based on historical performance and macroeconomic forecasts[235][238]. Market and Economic Conditions - The company is subject to interest rate risk, with interest rates being sensitive to various economic and political factors[173]. - The company is exposed to market risks primarily related to fluctuations in interest rates, which could impact net interest income and overall financial performance[250]. - Commercial real estate loans are subject to volatility due to various factors including economic conditions and local real estate conditions[264]. - Decreases in property values can reduce collateral value, impacting borrowers' ability to repay loans[264]. - Industry slowdowns and demographic factors may adversely affect commercial real estate performance[264]. Capital and Financing - The company has a distribution requirement to maintain its REIT status, needing to distribute at least 90% of its taxable income[169]. - The Company expects to raise additional equity and/or debt financing to increase liquidity as the demand for capital in the cannabis industry continues to grow[208]. - The Unsecured Notes, totaling $50.0 million, bear a fixed interest rate of 9.00% per annum and have a maturity date of October 18, 2028[212]. - The Company incurred debt issuance costs of approximately $0.9 million related to the Unsecured Notes, which were capitalized and offset against the outstanding face value[213]. Dividend and Shareholder Returns - During the three months ended June 30, 2025, the company declared a cash dividend of $0.47 per share, totaling approximately $9.9 million[184]. - The Company anticipates distributing at least 90% of its REIT taxable income annually to stockholders, with a total cash dividend of $0.94 per share declared for the six months ended June 30, 2025[226][229]. - The book value per share as of June 30, 2025, was approximately $14.71, a slight decrease from $14.83 as of December 31, 2024[205]. Risk Management - The company actively manages risk exposure by monitoring the portfolio and employing various risk management strategies, including due diligence prior to loan origination[252]. - The company maintains a proactive approach to loan modifications, allowing for adjustments in terms to better align with borrower needs[195]. - The average real estate collateral coverage for the portfolio was 1.2x as of June 30, 2025, compared to 1.3x as of June 30, 2024[258]. - Approximately 47% of the loan portfolio had underlying real estate collateral fair value exceeding the amounts outstanding under the loans as of June 30, 2025[242].