Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI) announced its results for the second quarter ended June 30, 2024. The company reported that its net interest income was approximately $13.2 million, which was consistent with the first quarter. Before expenses, revenues were $15 million.
Interest expenses decreased by approximately $0.3 million due to lower weighted average borrowings. Total expenses increased to $4.3 million before the provision for current expected credit losses. The company attributed the increase to stock-based compensation expenses.
Chicago Atlantic also reported net income of approximately $9.2 million, or $0.46 per weighted average diluted common share, representing a sequential decrease of 2.1% on a per-share basis. This missed the Yahoo Finance average analyst estimate of $0.51.
John Mazarakis, Executive Chairman of Chicago Atlantic, said, “The pace and direction of federal and state regulations are creating a tailwind in the cannabis industry. The comment period closed on DEA rescheduling with an overwhelmingly positive response – nearly 90% were in favor. The Ohio adult-use rollout is happening as we speak, and Florida adult-use is on the ballot in November. We have already seen a positive impact to our originations pipeline from both new and existing operators in these states as well as operators with growth opportunities in recent states such as Maryland, Minnesota, and Missouri.”
Distributions drop
The company also told investors that the distributable earnings of approximately $9.8 million, or $0.50 per weighted average diluted common share fell sequentially by 3.8% on a per-share basis. This is the lowest payout since the second quarter of 2022.
Chicago Atlantic noted that its total reserves for the expected credit losses decreased sequentially by $0.3 million to $5.1 million, amounting to approximately 1.3% of the portfolio principal balance of $383.3 million as of June 30, 2024. Two loans have been placed in a non-accrual status and $16 million in the portfolio was over 90 days past due.
During the second quarter, Chicago Atlantic had total gross originations of $20.9 million, of which $11.2 million and $9.7 million were funded to new and existing borrowers, respectively.
Peter Sack, Co-Chief Executive Officer, added, “We have continued to grow the portfolio in a measured fashion while maintaining a substantial spread above our cost of capital. Our loan underwriting has always assumed that regulatory reform at the federal level does not occur, resulting in a very conservative posture with relatively low loan-to-value and loan-to-enterprise value across the portfolio. We raised more than $6 million of capital through the ATM program during the quarter and increased the size of the revolving credit facility to $105 million in total. With the additional capital and capacity, we expect originations to be increasingly active in the second half of the year.”
Chicago Atlantic affirmed its 2024 outlook from March 2024 when the company stated its intention to maintain a dividend payout ratio based on distributable earnings per share of approximately 90% to 100%. The company also said at the time that it was thinking about giving out an extra dividend at the end of the year to meet legal requirements for distributing income.
