REFI Posts Stable Dividend Amid Credit Concerns, Eyes Cannabis Rescheduling Windfall

CHICAGO, IL – May 07, 2026 – Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI) presented a complex financial picture in its first-quarter 2026 earnings report, balancing a steady dividend and optimistic forward outlook against a significant drop in net income driven by rising credit concerns.

The commercial mortgage REIT, a key lender to the state-licensed cannabis industry, reported stable distributable earnings of $0.46 per diluted share, nearly covering its consistent quarterly dividend of $0.47 per share. However, this non-GAAP stability was overshadowed by a sharp decline in GAAP net income, which fell to $4.84 million, or $0.23 per share, a steep drop from $10.04 million, or $0.47 per share, in the same quarter last year. The result fell significantly short of analyst consensus estimates, which hovered around $0.45 per share.

Despite the mixed results, the company's leadership pointed to a landmark federal policy shift as a powerful tailwind for its business. “The rescheduling of medical cannabis from Schedule I to Schedule III by an order of the Federal government last month marks the most significant federal policy for the industry in its history,” noted Peter Sack, Co-Chief Executive Officer. “We expect this order, when implemented, to strengthen operator balance sheets and improve cash flows which would improve the credit profiles of our borrowers.”

A Tale of Two Metrics: Stable Payouts vs. Rising Provisions

The significant divergence between Chicago Atlantic’s distributable earnings and its GAAP net income stems primarily from a substantial increase in its provision for expected credit losses. The company set aside $3.84 million for potential loan defaults in the first quarter, a stark reversal from the prior-year period when it recorded a benefit of $1.07 million. This move suggests that while the company's core interest income remains robust, management is taking a more cautious stance on the credit health of some borrowers within its portfolio amid what Sack described as an “unstable macro environment.”

For many REIT investors, distributable earnings—a non-GAAP metric that excludes non-cash items like credit loss provisions and stock-based compensation—is a more direct indicator of the cash flow available to pay dividends. On this front, Chicago Atlantic delivered consistency, with distributable earnings of $9.83 million, slightly up from $9.73 million a year ago. This allowed the board to declare its regular $0.47 quarterly dividend, a cornerstone of its appeal to income-focused investors.

The company reaffirmed its commitment to shareholder returns, stating it expects to maintain a dividend payout ratio of approximately 90% to 100% of its distributable earnings for the full 2026 fiscal year. This signals management's confidence that its earnings power, adjusted for non-cash charges, will continue to support its dividend policy throughout the year.

The Rescheduling Lifeline

The most significant source of optimism for Chicago Atlantic and its investors is the monumental shift in federal cannabis policy. The move to reclassify medical cannabis to Schedule III is expected to be a game-changer for the REIT’s borrowers. The primary benefit comes from the potential elimination of Internal Revenue Code Section 280E for these businesses.

Under Schedule I, cannabis operators were barred from deducting ordinary business expenses from their federal taxes, resulting in exceptionally high effective tax rates that severely constrained cash flow and profitability. With rescheduling, these operators would be able to deduct expenses like rent, payroll, and marketing, dramatically improving their financial health overnight. This newfound cash flow can be used to pay down debt, invest in expansion, and build stronger, more resilient businesses—all of which directly benefits Chicago Atlantic by de-risking its loan portfolio.

This regulatory relief could also improve banking access and attract more traditional capital to the sector, further stabilizing the industry and creating new, potentially lower-risk lending opportunities for specialized financiers like Chicago Atlantic.

A Closer Look at the Loan Book

Chicago Atlantic’s strategy has been to insulate itself from market volatility by focusing on a specialized niche with high barriers to entry. It originates senior secured loans, often with real estate as collateral, and structures them with a mix of fixed and floating rates. The company reported that 100% of its floating-rate loans have floors at or above the current Prime rate, protecting its portfolio yield from further declines in a falling-rate environment.

While the company's total loan principal outstanding grew modestly to $413.6 million, a detailed look at its portfolio reveals the impact of the challenging economic climate. The gross unlevered weighted average yield to maturity dipped slightly to 15.8% from 16.3% in the prior quarter. More notably, while the percentage of the portfolio on non-accrual status improved significantly from 11.1% to 4.8% quarter-over-quarter, the portion of loans with a higher risk rating (rated 4 or 5) increased from 4.8% to 10.7%.

This suggests that while one major troubled loan was resolved, other pressures are emerging within the portfolio, justifying the increased provision for credit losses. The company also increased its leverage, with its debt-to-equity ratio climbing to 38.4% from 32.0% in the previous quarter, as it drew more on its revolving credit facility. This combination of rising credit provisions and increased leverage underscores the delicate balance the firm is striking between navigating current headwinds and positioning for future growth.

By maintaining its dividend and highlighting the transformative potential of cannabis rescheduling, Chicago Atlantic is signaling to investors that the long-term tailwinds for its niche industry may be powerful enough to overcome the near-term turbulence reflected in its first-quarter GAAP results.