**Advanced Flower Capital Inc. Reports Fiscal Year 2025 Results, Transitions to BDC**
Advanced Flower Capital Inc. (AFC) reported its financial results for the fiscal year ended December 31, 2025, showcasing a net loss from continuing operations of $(20.7) million, or $(0.95) per basic common share, compared to a net income of $13.9 million, or $0.64 per basic common share, in 2024. Interest income decreased by 39.8% to $31.3 million, primarily due to fewer loan exits, lower fee income, and reduced capital deployment. Interest expense increased slightly by 6.7% to $6.8 million. Management and incentive fees, net of rebates, decreased by 18.5% to $2.9 million, while stock-based compensation increased significantly to $6.8 million due to restricted stock awards. The company also incurred $1.2 million in BDC conversion expenses.
The company's provision for current expected credit losses (CECL) increased substantially to $15.5 million, reflecting a CECL Reserve of $46.1 million, or 18.19% of total loans held at carrying value. As of December 31, 2025, the loan portfolio consisted of 15 loans, with an aggregate commitment of $332.6 million and an outstanding principal of $317.4 million. Three loans were on nonaccrual status, with a carrying value of $88.8 million. The company also reported a gain on extinguishment of debt of $0.4 million due to the repurchase of $13.0 million of its 2027 Senior Notes.
A significant strategic development for AFC was its election to be regulated as a Business Development Company (BDC) effective January 1, 2026, marking a shift from its previous operation as a REIT. This conversion allows AFC to invest in a broader range of assets, including non-real estate related assets and private middle-market companies. In connection with the conversion, AFC entered into an Advisory Agreement with AFC Management, LLC, and an administration agreement. The company also terminated its AFCF Credit Facility and entered into a new $20.0 million credit facility with TCGSL LLC.
Looking ahead, AFC aims to provide attractive risk-adjusted returns through cash distributions and capital appreciation, focusing on lending to lower middle-market companies across various industries. The company's loan origination pipeline as of February 25, 2026, had approximately $1.4 billion of potential commitments under review. AFC's leadership team, including Chairman Leonard M. Tannenbaum and President and Chief Investment Officer Robyn Tannenbaum, collectively own a significant portion of the company's common stock, aligning their interests with those of shareholders.
About Advanced Flower Capital Inc.
Advanced Flower Capital Inc. is a Maryland-based institutional lender specializing in senior secured loans to cannabis operators in states with legalized cannabis. With a focus on providing capital to a capital-constrained market, the company aims to deliver attractive risk-adjusted returns through its loan portfolio. Following a recent spin-off of its commercial real estate assets, AFC is well-positioned to capitalize on the growing demand for financing in the cannabis industry.
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