Chicago Atlantic Real Estate Finance(US:REFI)2025-11-04 12:01Loan Portfolio Composition - As of September 30, 2025, approximately 63.3% of the loan portfolio was comprised of floating rate loans, while 36.7% were fixed rate loans[162]. - The company aims to maintain a diversified portfolio across jurisdictions and verticals, including cultivators, processors, and dispensaries[157]. - As of September 30, 2025, 34.8% of the principal of loans held in the portfolio were backed by personal or corporate guarantees[157]. - The company's loan portfolio included loans to 26 borrowers with a carrying value of approximately $398.1 million as of September 30, 2025[186]. - The total principal of loans held for investment as of September 30, 2025, was approximately $399.9 million, with fixed-rate loans at $146.3 million (36.7%) and floating-rate loans at $251.7 million (63.3%)[189]. - The loan portfolio is diversified across multiple states, including Michigan, Arizona, and Florida[190]. - The company has a significant portion of loans (11.6%) maturing in 2025, indicating potential liquidity events[190]. - The top three borrowers represented approximately 27.5% of principal outstanding as of September 30, 2025, indicating a concentration risk in the loan portfolio[253]. - The company has a diverse loan portfolio across multiple states, with the top five states (Illinois, Ohio, Florida, Pennsylvania, and Michigan) accounting for 66% of the total loans[255]. Financial Performance - Interest income for the three months ended September 30, 2025, decreased by approximately $1.0 million, or 6%, compared to the same period in 2024, primarily due to a decline in the weighted average portfolio yield from 18.2% to 16.5%[185]. - Net interest income for the three months ended September 30, 2025, was $13.7 million, a decrease of 5% from $14.5 million in the same period in 2024[183]. - Distributable Earnings for the three months ended September 30, 2025, were $10,522,142, compared to $11,159,241 for the same period in 2024, representing a decline of about 5.7%[199]. - The book value per share as of September 30, 2025, was approximately $14.71, slightly down from $14.83 as of December 31, 2024[200]. - For the nine months ended September 30, 2025, the Company reported net cash provided by operating activities of approximately $22.3 million, an increase of approximately $0.9 million compared to $21.3 million for the same period in 2024[212]. - Net cash provided by investing activities for the nine months ended September 30, 2025, was approximately $16.0 million, significantly higher than $2.0 million for the same period in 2024[213]. - For the nine months ended September 30, 2025, net cash used in financing activities was approximately $(35.8) million, compared to $(24.4) million for the same period in 2024[216]. Risk Management - The company faces risks related to interest rate volatility, credit losses, and changes in market conditions that could impact its operating results[169]. - The company’s loans are primarily secured by real estate, equipment, receivables, and licenses, with strict loan covenants in place to mitigate credit risk[250]. - The company is exposed to market risks, particularly fluctuations in interest rates, which could affect net interest income and the fair value of loans[241]. - The company expects to utilize historical market loan loss data to estimate future expected loan losses, reflecting the maturing cannabis industry and increasing consumer demand[232]. - The company’s CECL Reserve is impacted by subjective estimates of future loan performance and macroeconomic conditions, which are revised quarterly[233]. - The company faces risks from decreases in property values, which could reduce collateral value and potential loan repayment[257]. Dividend and Tax Strategy - The company is externally managed and elected to be taxed as a REIT, which requires distributing at least 90% of its taxable income to stockholders[166]. - The company intends to pay dividends to stockholders in an amount equal to net taxable income, subject to Board authorization[197]. - The Company anticipates distributing at least 90% of its REIT taxable income to stockholders annually, with total cash dividends declared for the nine months ended September 30, 2025, amounting to $1.41 per share[220]. Loan Management and Strategy - The company intends to grow its portfolio by making loans to leading operators in the cannabis industry, with loans ranging from $5 million to $200 million[156]. - The company intends to capitalize on favorable market conditions in the cannabis sector to expand its portfolio and addressable market[177]. - The company is actively managing its loan portfolio, with options for contractual extensions and amendments as needed[190]. - The company may seek to raise further equity capital and issue debt securities, with a Shelf Registration Statement effective for up to $500 million of securities[209]. Interest Rates and Economic Conditions - The effective Prime Rate as of September 18, 2025, was 7.25%, reflecting changes in interest rates that impact the company's operations[163]. - The company has 16 floating-rate loans, representing approximately 63.3% of the total loan portfolio, and estimates a hypothetical 100 basis points increase in the Prime Rate would increase annual cash interest income by approximately $2.5 million[238]. - The commercial real estate loans are subject to volatility due to various economic factors, which may adversely affect the company's financial performance[257].