Advanced Flower Capital Inc. (Nasdaq: AFCG) reported financial results for the first quarter of 2025, showcasing a GAAP net income of $4.1 million, equivalent to $0.18 per basic share. The company also announced distributable earnings of $4.5 million, or $0.21 per share. On April 15, 2025, Advanced Flower Capital paid a quarterly cash dividend of $0.23 per common share.
CEO Dan Neville highlighted the company’s strategy of minimizing exposure to underperforming credits while maintaining a disciplined approach to providing debt capital to successful cannabis operators. As a leading commercial mortgage real estate investment trust (REIT), Advanced Flower Capital lends between $10 million and over $100 million to state-compliant cannabis businesses, securing loans against real estate assets, license values, and cash flows.
The reported net income marks a recovery compared to a loss in the same quarter last year. However, distributable earnings have decreased significantly from $9.97 million, or $0.49 per share, in Q1 2024 to $4.5 million in Q1 2025. This trend raises concerns as the payout ratio for the dividend stands at 91%, indicating limited room for future dividend increases if performance does not improve.
Despite the decline in distributable earnings, Advanced Flower Capital recorded a reduction in provisions for expected credit losses by $699,424, suggesting an improvement in the quality of its loan portfolio. The unrealized losses also decreased from $3.6 million in Q1 2024 to $685,478 in Q1 2025, indicating stabilization in the market value of loans.
Management’s focus on reducing exposure to underperforming loans appears effective, as the company seeks to invest in quality credits that offer solid risk-adjusted returns. The cannabis market remains sensitive to regulatory developments, which continue to influence investor sentiment. Neville expressed confidence in capitalizing on market dislocations to strengthen the company’s loan offerings.
Advanced Flower Capital plans to provide further financial insights during its conference call at 10:00 AM Eastern Time on May 14, 2025. Investors interested in learning more can access the live audio webcast on the company’s website. Advanced Flower Capital’s commitment to transparency and regular updates reflects its efforts to keep stakeholders informed about the company’s performance and strategic direction.
As a cannabis-focused REIT, Advanced Flower Capital operates in a highly regulated environment, which presents unique risks and opportunities. The company’s disciplined lending practices, combined with its extensive industry expertise, position it to navigate the complexities of the cannabis finance market effectively. With a strong emphasis on risk management and quality investments, Advanced Flower Capital aims to sustain its growth trajectory amidst evolving market conditions.
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