Chicago Atlantic tops estimates as third-quarter profit jumps

Chicago Atlantic Real Estate Finance Inc. (Nasdaq: REFI) significantly beat expectations Thursday, as the cannabis-focused lender posted higher third-quarter earnings and continues to beef its lending capacity with new financing.

Net income rose 12.4% to $11.2 million during the period ending Sept. 30, or 56 cents per diluted share. That’s compared to $10 million, or 54 cents, a year earlier, according to its financials. The results handily topped analyst forecasts of 48 cents per share, according to Yahoo Finance estimates. Interest income reached $16.26 million, with net interest income of $14.46 million after interest expenses of $1.8 million.

The strong performance marks a turnaround from second-quarter earnings of 46 cents that missed Wall Street projections. Chicago Atlantic shares hovered $15.61 in early trading Thursday after closing up 2.16% at $15.58 on Wednesday.

“We have managed our portfolio and its maturities very well throughout 2024 with extensions, modifications and refinancings while improving credit quality and loan coverage,” co-CEO Peter Sack said in a statement.

The commercial mortgage REIT recently boosted its lending power, securing a $50 million unsecured term loan in October that earned an investment grade BBB+ rating from Egan-Jones. The four-year facility carries a 9% fixed rate and helped pay down its existing credit line.

Portfolio weighted average yield dipped to 18.3% from 18.7% in the previous quarter as improved borrower performance led to more favorable loan terms. The prime rate decrease also impacted variable-rate loans, which make up about 63% of the $362.3 million portfolio spanning 29 borrowers.

New loan originations reached $32.7 million in the third quarter, with $24 million going to new borrowers. The company has funded an additional $36.5 million since quarter end, including a $25 million credit facility for an Illinois operator.

The results follow the recent launch of Chicago Atlantic’s business development company arm, Chicago Atlantic BDC, Inc (Nasdaq: LIEN) after acquiring Silver Spike Investment’s loan portfolio. The parent platform said it has deployed over $2.2 billion in cannabis industry credit and equity investments to date.

Analysts expect earnings of 47 cents per share on revenue of $15.13 million for the fourth quarter. For the full year 2024, the consensus forecast calls for earnings of $1.92 per share on revenue of $59.1 million.

Sack cited a “strong pipeline” in both existing markets and states newly legalizing adult-use cannabis, though Florida losing its adult-use push has recently sent shivers down stocks’ spines. Chicago Atlantic maintained its quarterly dividend at 47 cents per share, a 12.1% yield based on Wednesday’s closing price. The company reaffirmed full-year guidance first issued in March.