Chicago Atlantic REFI Q3 Earnings Fall to $0.49 as Merger Looms

Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI) reported distributable earnings of $0.49 per diluted share for the third quarter ended September 30, 2026, the company announced on November 10, 2026. Net income fell to $6.43 million, or $0.25 per share, from $8.93 million, or $0.42 per share, a year earlier, while net interest income eased to $12.47 million from $13.69 million. Regular dividends declared held at $0.47 per share, and total loan principal outstanding climbed to $527.7 million from $453.1 million at June 30.

Context — why REFI's Q3 print matters now

The company's own quarter-over-quarter table shows the pressure clearly. Net interest income slipped from $12.83 million in the second quarter to $12.47 million in the third, extending a slide that began earlier in the year. Diluted distributable earnings per share rose to $0.49 from $0.43 in the prior quarter, but only because the diluted share count jumped to 25.65 million from 21.71 million after the Koach share issuance.

Against the year-ago quarter, the deterioration is sharper. Net income of $6.43 million compares with $8.93 million for the three months ended September 30, 2025, and net interest income is down roughly $1.22 million year over year. Total expenses before credit provisions rose to $4.46 million from $4.19 million.

The credit line item is the swing factor. The company booked a $2.77 million provision for current expected credit losses in the third quarter, versus $551,294 in the second quarter and $557,220 a year earlier. That is roughly a fivefold increase sequentially and the single largest drag on reported net income.

Peter Sack, Co-Chief Executive Officer, said the quarter came "despite a challenging macroeconomic environment and heightened uncertainty across both the regulatory landscape and the mortgage REIT sector." The company said its real estate secured cannabis pipeline decreased to approximately $174 million from roughly $204 million at the prior quarter end.

REFI's pending merger with Chicago Atlantic BDC, Inc. (NASDAQ: LIEN) is the structural backdrop. Announced June 17, 2026, the deal would see REFI merge into LIEN, with LIEN surviving. REFI stockholders are expected to own approximately 50.5% of LIEN after closing, based on March 31, 2026 NAVs and before giving effect to the Koach transaction.

Data — what the numbers show

The portfolio expanded even as per-share earnings compressed. Total loan principal outstanding rose to $527.7 million from $453.1 million at June 30, driven by $88.0 million of principal advances in the quarter, partly offset by $9.58 million of unscheduled repayments. Portfolio companies increased to 28 from 26.

The Koach transaction reshaped the balance sheet. On July 9, 2026, REFI issued 4,306,754 shares of common stock in a private placement in exchange for approximately $62.6 million of second lien promissory notes. As of September 30, the Koach Notes balance stood at roughly $59.1 million, tied to 31 individual notes secured by 31 retail properties.

Metric	Q3 2026	Q2 2026	Q3 2025
Net interest income	$12.47M	$12.83M	$13.69M
Net income	$6.43M	$7.47M	$8.93M
Diluted DE/share	$0.49	$0.43	$0.49
Credit provision	$2.77M	$0.55M	$0.56M

Yield compression is visible. Gross unlevered weighted average yield to maturity fell to 14.8% from 15.8% in the second quarter and 16.5% a year earlier. The share of the portfolio bearing a variable interest rate declined to 56.8% from 62.5%.

Adjusted book value per share (as-paid) slipped to $14.12 from $14.15 sequentially and $14.71 a year ago. Debt/equity rose to 47.5% from 46.6% in the prior quarter and 32.8% a year earlier.

Analysis — what it means for markets and sectors

The use build is the number to watch. Debt/equity at 47.5% is up nearly 15 percentage points year over year, reflecting the $94.35 million drawn on the secured revolving credit facility and $50.0 million of senior unsecured notes due 2028. Total drawn use stood at approximately $144.4 million at quarter end.

Liquidity is tighter than the headline portfolio growth suggests. As of November 10, 2026, the company reported $15.2 million available on its revolver and total liquidity, net of estimated liabilities, of approximately $12.0 million.

The credit provision is the counter-argument to the growth story. A $2.77 million sequential jump in expected credit loss reserves, against a $12.28 million total reserve on the balance sheet, signals the company is marking its cannabis-exposed book more conservatively. That is consistent with the pipeline shrinking from $204 million to $174 million.

The Merger Agreement restricts dividends and other actions during the pendency of the deal. REFI's 2026 outlook assumes standalone operations and does not reflect those restrictions, which the company flagged explicitly.

Positioning is complicated by the deal structure. REFI holders are effectively taking LIEN stock at a NAV-based exchange ratio, so the flow into REFI is increasingly merger-arbitrage driven rather than credit-fundamental driven. Any NAV move between now and closing shifts the ratio.

Outlook — what to watch next

Completion of the Merger requires stockholder approval from both REFI and LIEN, including REFI holders approving REFI's election to be regulated as a business development company under the Investment Company Act of 1940, plus a new investment advisory agreement, regulatory approvals and third-party consents. The company expects the deal to close in 2027, with no assurance on terms or timing.

The registration statement on Form N-14 was filed July 31, 2026, and amended September 22, 2026. It has not yet been declared effective, so the definitive Proxy Statement/Prospectus has not been mailed. That effectiveness date is the next hard catalyst.

REFI expects a full-year dividend payout ratio of approximately 90% to 100% of distributable earnings per diluted share, subject to Board authorization and Merger Agreement terms. The regular quarterly dividend has held at $0.47 per share across all three comparison periods.

Watch the credit provision line and the cannabis pipeline figure in the next quarter. Continued provisioning without pipeline replenishment would pressure distributable earnings coverage.

Frequently Asked Questions

What does the Koach transaction mean for REFI shareholders?

REFI issued 4,306,754 new shares on July 9, 2026 in exchange for roughly $62.6 million of second lien promissory notes. That raised the diluted share count to 25.65 million from 21.71 million, which is why diluted distributable earnings per share of $0.49 did not rise proportionally with the $12.56 million total. The shares issued will also feed into the merger exchange ratio calculation.

Why did REFI's credit loss provision jump so much in Q3?

The provision for current expected credit losses rose to $2.77 million from $551,294 in the second quarter. REFI did not break out which loans drove the increase. The company noted its real estate secured cannabis pipeline fell to roughly $174 million from $204 million, and the gross unlevered weighted average yield to maturity declined to 14.8% from 15.8%, suggesting a more conservative posture on new originations.

What happens to REFI stock if the LIEN merger closes?

REFI stockholders would receive LIEN common stock based on the ratio of REFI's NAV per share to LIEN's NAV per share, each adjusted per the Merger Agreement and determined shortly before closing. Based on March 31, 2026 NAVs, former REFI holders would own about 50.5% of LIEN. The actual percentage will differ because the Koach shares and other NAV changes after March 31 feed into the closing ratio.

Bottom Line

REFI's Q3 distributable earnings held at $0.49 per share, but a fivefold credit provision jump and a shrinking cannabis pipeline flag rising balance-sheet caution ahead of the 2027 LIEN merger.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.