REFI · Chicago Atlantic Real Estate Finance, Inc.

Chicago Atlantic’s Q1 2026 results reflect stable core operations offset by a significant year-over-year swing in the provision for credit losses — a $3.84M provision in Q1 2026 versus a $1.07M benefit in Q1 2025 — which drove the 52% decline in GAAP net income. This reversal is not evidence of portfolio stress; rather, it reflects CECL methodology dynamics following prior-period reserve releases and updated forward-looking economic assumptions. Core profitability metrics remain resilient: distributable earnings were flat YoY at $9.83M ($0.46 diluted), supported by steady net interest income ($13.12M vs. $13.04M) and disciplined expense management. The portfolio yield compression — gross unlevered weighted average yield fell to 15.8% from 16.9% YoY — aligns with management’s commentary on sourcing shorter-duration loans in a competitive environment and may reflect refinancing activity or mix shifts toward lower-yielding, higher-quality borrowers. Leverage increased meaningfully, with the debt/equity ratio rising to 38.4% (from 28.0% YoY), driven by $17.95M in additional revolver draws and sustained use of senior unsecured notes. Management emphasized two strategic tailwinds: first, the federal rescheduling of medical cannabis to Schedule III — described as the most significant federal policy shift in the industry’s history — expected to improve borrower cash flows and credit quality upon implementation; second, continued portfolio insulation via operator diversification, geographic spread, and real estate collateral coverage (cited as 1.2x in supplemental materials). The reaffirmed 90%–100% dividend payout ratio guidance, coupled with the explicit contingency for a Q4 special dividend, underscores management’s commitment to meeting REIT distribution requirements while preserving capital flexibility. Investor focus should center on execution against the $482M near-term pipeline and how rapidly the federal policy change translates into improved underwriting outcomes.