AFC Gamma Inc. (Nasdaq: AFCG) reported an interest income of $21 million and a net income of $2.9 million for the fourth quarter ended Dec. 31, 2022.
The company released its financial results for the quarter and year ended Dec. 31, 2022.
AFC Gamma reported $0.14 per basic weighted average common share and distributable earnings of $12.6 million or 62 cents per basic weighted average common share for the fourth quarter of 2022. This beat the Yahoo Finance average analyst estimate for earnings of 58 cents and income of $18.3 million.
For the full year, AFC Gamma delivered GAAP net income of $35.9 million or $1.80 per basic weighted average common share and distributable earnings of $49.9 million or $2.51 per basic weighted average common share for the full year 2022.
Still, AFC reported that the full-year provision for current expected credit losses increased approximately $8.5 million, or 321.9%, as compared to the prior year. Several company loan payments were being deferred.
“AFC Gamma ended the year by delivering strong earnings in a difficult macro environment for cannabis and the broader market,” Chairman and CEO Leonard M. Tannenbaum said. “Looking forward, we are pleased with our liquidity position, which is generally in-line with our cash position as of Dec. 31, 2022. Our liquidity was enhanced by repayments over the course of 2022 and includes our currently undrawn revolving credit facility.
“We believe our focus on credit quality, coupled with our ample liquidity, will prove valuable as we look to deploy capital both in commercial real estate assets and state-compliant cannabis operators over the course of 2023,” he added.
Robyn Tannenbaum, the CEO’s wife, was appointed president of the company as well. She recently served as the company’s managing director, head of originations and investor relations.
Customer Debt Problems
AFC Gamma did disclose in its annual report that it has written off $1.2 million on defaulted debt from a company it would only identify as Public Company A. It also noted that this company filed for bankruptcy protection in Canada.
In January 2023, TRS1 (a wholly owned subsidiary of AFC Gamma) agreed with Private Company I to defer an upcoming principal payment. In March 2023, TRS1 agreed to defer an upcoming principal payment and permit a portion of an upcoming cash interest payment to instead be paid in kind.
In March 2023, AFC said it entered into a forbearance and modification agreement with Private Company B until the earlier of March 31, 2023, or certain refinancing or cash equity contribution events, and any new event of default thereunder. The filing stated, “In connection with such forbearance and modification agreement, the Company also agreed to, subject to certain terms and conditions, waive compliance with certain covenants for one fiscal quarter and defer specified principal payments.”
Since Jan. 1, 2020, AFC said it had 14 active loans in the cannabis pipeline at various stages in the diligence process. The company said it had passed on 666 of 709 sourced loan opportunities due to, among other reasons, lack of collateral, lack of cash flow, stage of the company, state dynamics, and lack of cash flow.