Advanced Flower Capital Inc. (formerly AFC Gamma, Inc.) reported significant financial changes in its latest 10-Q filing for the quarter ending September 30, 2024. The company, which specializes in institutional lending to the cannabis industry, experienced a notable decline in both revenue and profitability compared to the same period in 2023.

For the three months ended September 30, 2024, interest income decreased to $10.5 million, down 37.8% from $16.8 million in the prior year. Net interest income also fell to $8.9 million from $15.3 million. The decline in interest income was attributed to lower earnings from loans on nonaccrual status, particularly from Private Company A and Private Company K, which collectively accounted for a significant portion of the decrease. Total expenses for the quarter were reduced to $2.5 million from $5.2 million, contributing to a net income from continuing operations of $1.2 million, a sharp decline from $8.0 million in the previous year. Basic earnings per share from continuing operations dropped to $0.05 from $0.39.

For the nine months ended September 30, 2024, net income was reported at $17.8 million, down from $30.1 million in 2023. The company funded approximately $62.9 million in new loans during this period, while loan repayments totaled $45.2 million. The total loans held at carrying value decreased to $234.3 million from $301.3 million at the end of 2023.

A significant strategic development was the completion of a spin-off on July 9, 2024, which separated the company’s commercial real estate loan portfolio into a new entity, Sunrise Realty Trust, Inc. (SUNS). This move resulted in a reduction of additional paid-in capital by approximately $114.8 million. Following the spin-off, the company’s total assets decreased to $366.6 million from $466.6 million at the end of 2023, and total shareholders’ equity fell to $206.1 million from $320.1 million.

Cash and cash equivalents increased to $122.2 million as of September 30, 2024, compared to $90.4 million at the end of 2023. The company also reported a net cash provided by operating activities of approximately $19.3 million for the nine months ended September 30, 2024, an increase from $15.0 million in the prior year.

The company’s current expected credit loss (CECL) reserve stood at approximately $25.3 million, representing 10.7% of total loans held at carrying value. This was an increase from $14.4 million, or 4.7%, a year earlier. The company continues to face challenges due to the inherent risks associated with lending in the cannabis sector, including federal illegality and potential loss of licenses.