AFC Gamma is looking to finance ‘unburdened’ cannabis borrowers

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Publicly traded cannabis industry lender AFC Gamma reported nearly $16 million in net interest income for its fourth quarter ended Dec. 31, down 18.9% from the same quarter a year before.

Net interest income for the full 2023 fiscal year was 64.2 million, a 14% decrease from 2022 ($74.7 million).

West Palm Beach, Florida-based AFC Gamma posted a quarterly net loss of $9.2 million, compared with net income of $2.9 million for the same quarter in 2022.

The company’s full-year net income in 2023 was nearly $21 million, compared with $35.9 million in 2022.

AFC Gamma paid out a dividend of 48 cents per share during the fourth quarter and will pay the same dividend in the first quarter of 2024.

Chief Financial Officer Brandon Hetzel said during a Thursday earnings call that the difference between AFC Gamma’s distributable earnings and its quarterly net loss “is mainly driven by an increase in our unrealized losses on loans held at fair value … and an increase in our (current expected credit losses) reserve.”

In prepared remarks, AFC Gamma’s new CEO, Daniel Neville, said the lender is “seeing our pipeline expand, mainly driven by what we call cannabis 3.0 players.”

“These are entrepreneurs that have founded businesses in cannabis or other industries, were successful, and are now entering or reentering the cannabis industry,” Neville continued.

“Many of these companies are building through a combination of organic growth and opportunistically acquiring distressed assets.

“We are excited to finance many of these operators that have clean capital stacks and are unburdened with debt, sale-leasebacks or legacy tax liabilities.”

In the meantime, Neville said AFC Gamma has been “reducing our exposure to underperforming assets,” adding that two of its borrowers are currently in receivership.

AFC Gamma reported year-end cash and cash equivalents of $121.6 million, with total assets of $466.6 million and total liabilities of $146.5 million.

The company recently announced it was splitting in two, spinning off its non-cannabis commercial real estate assets to form Sunrise Realty Trust.

Shares of AFC Gamma trade on the Nasdaq exchange as AFCG.