Advanced Flower Capital Inc. Reports $4.1 Million Net Income in Q1 2025

Advanced Flower Capital Inc. (AFC) reported its financial results for the first quarter of 2025, revealing a net income of approximately $4.1 million, or $0.18 per share, a significant recovery from a net loss of $1.6 million, or $(0.08) per share, in the same period last year. The company’s interest income decreased by 41% to $8.5 million, down from $14.3 million, primarily due to lower income from loans placed on nonaccrual status and a reduction in loan exits and prepayments. Interest expense rose to $1.8 million, reflecting increased borrowings on the revolving credit facility.

In terms of operational changes, AFC's total assets decreased to $321.7 million as of March 31, 2025, from $402.1 million at the end of 2024. This decline was largely attributed to a significant drop in cash and cash equivalents, which fell to $3.3 million from $103.6 million. The company’s liabilities also decreased to $120.9 million, down from $200.7 million, primarily due to reduced borrowings under its revolving credit facility. The current expected credit loss reserve was adjusted to $29.7 million, reflecting a decrease from $30.4 million, indicating improved credit quality in the loan portfolio.

Strategically, AFC has been active in expanding its loan portfolio, funding approximately $15.8 million in new loans during the quarter. The company reported a total of 17 loans in its portfolio, with an aggregate commitment of $375 million and outstanding principal of $366.3 million. Notably, the company entered into a $14 million senior secured credit facility with a subsidiary of Private Company V, which is expected to enhance its lending capacity. Additionally, AFC's management fees decreased significantly, reflecting the impact of the spin-off of its commercial real estate portfolio into Sunrise Realty Trust, which was completed in July 2024.

The company’s operational metrics indicate a focus on the cannabis industry, with approximately 42% of its loans being floating-rate, which may help mitigate interest rate risks. However, AFC remains exposed to credit risks, particularly with its largest borrower, a subsidiary of Private Company G, which has been placed on nonaccrual status. The company is actively pursuing legal actions to recover funds related to this borrower, highlighting the ongoing challenges in managing its loan portfolio.

Looking ahead, AFC's management expressed optimism about the potential for growth in the cannabis lending market, driven by increasing demand as more states legalize cannabis. The company plans to leverage its existing credit facilities and explore new financing options to support its lending activities. However, management also cautioned that the evolving regulatory landscape and market conditions could impact future performance, emphasizing the need for ongoing monitoring and strategic adjustments.