ArrowMark Financial Corp.
Q4 2014 Earnings Call Transcript

Published: 6 Mar 2015

[Operator:]

Welcome to the StoneCastle Financial Corp. First Quarter 2014 Investor Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Now, I would like to turn the conference call over to Rachel Schatten, General Counsel of StoneCastle Financial.

[Rachel Schatten:]

Good afternoon. Before I begin this conference call, we'd like to remind the audience that certain statements made during the call may be considered forward-looking statements based on current management expectations that involve substantial risks and uncertainties. Actual results may differ materially from the results stated in or implied by these forward-looking statements. This would depend on numerous factors such as changes in securities or financial markets or general economic conditions, the volume of sales and purchases of shares of common stock, the continuation of investment advisory, administrative and service contracts and other risks discussed from time to time in the company's filings with the SEC including annual and semiannual reports of the company. StoneCastle Financial has based the forward-looking statements included in this presentation on information available to us as of December 31st, 2014. The company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of today, March 5th, 2015. Thank you. Now, I will turn the call over to StoneCastle Financial's Chairman and Chief Executive Officer, Josh Siegel.

[Joshua Siegel:]

Thank you, Rachel. Good afternoon, everyone, and welcome to StoneCastle Financial's fourth quarter 2014 investor call. In addition to Rachel joining me today are George Shilowitz, President, and Pat Farrell, Chief Financial Officer. On the call today, I will update you on StoneCastle Financial's investment activity, review the current portfolio and highlight the quarterly results. Pat will follow with specific details on our financial results as well as a brief update on our credit facility. This past quarter, I didn’t expect all year, our team focused on steadily our building and executing on investment opportunities while remaining true to prudent credit and investment approach. We managed the portfolio based on a long-term view of investment, assets, with a focus on providing income, and to a lesser extent capital appreciation. Overall, the company made solid progress throughout 2014 towards sustainable net investment income. But we recognize the pace is slower than expected and that we must continue working towards this goal. We continue to build our sourcing relationships and expand the dig of pipeline while leveraging the company's distinct competitive advantages. One advantage is the national footprint of its advisor's 800 existing bank relationships. Our second advantage is that we have permanent capital, allowing StoneCastle to invest along the entire capital structure of a bank, from senior debt through common equity. This is strong differentiator when compared to other capital providers in the market. Our terms and rates remained competitive as they generally are on market. We continue to hear that this type of capital is unique and highly valued in the community banking industry. Through StoneCastle Financial, community banks are able to access an alternative source of capital. This capital provides community banks with the ability to more easily increase their capacity for local lending, fund acquisitions, or repurchase shares still held by the government or to being liquidity to local shareholders. We saw a healthy mix of these uses of capital throughout 2014. In November, we successfully completed a follow-on offering raise in $39.5 million of needed capital. We prioritize this transaction because this additional capital allows StoneCastle to compete for the larger size investment opportunities. Without this raise, StoneCastle would not be permitted by IRS regulation to hold the material number of $7 million to $10 million position sizes, a type typically sort by community banks. Now, let me turn to the investment activity and current portfolio. In the fourth quarter, the company deployed $67.8 million in 14 different investments. Even that we made significant progress during the quarter, the company continued to see the pace of capital deployment and transaction closing extended or delayed due to several factors. These included bank's timeframe to obtain internal approvals and longer than expected approval process from federal and state regulators who must approve all capital transactions such as bank mergers, capital issuances, or capital redemptions prior to closing. Call notices of $18 million in the fourth quarter were another factor slowing our capital deployment. In fact, 44% of the notice that we received during the year occurred in the last three months. In order to maintain the company's investment income, our advisor must make replacement investments that generally match or exceed the size and interest rate of the security's call. Given the unexpected timing and amount of these call notices, paired with the last fourth quarter capital raise, we have little time to fully deploy the available funds to generate additional fourth quarter earnings. Now, let me spend some time on the investment portfolio. At year end, the total investment portfolio was $176.5 million or 96% of our total assets. The three largest categories of investments in the portfolio are preferred securities of approximately 50%, debt securities and senior term loans of 22%, and trust-preferred securities of 14%. The trust-preferred securities held by the company are typically more liquid securities offered by large banking institutions. The company holds these securities as higher yielding short-term positions that we plan to redeploy into higher yielding long-term positions. Let me give you an example of a recent investment. We made a $13.25 million 8.75% senior secured term loan to Citizen Bancshares, the bank holding company for CB&T in Rockport, Missouri. This loan used to refinance an existing facility is secured by 100% of the stock of the underlying bank. We therefore have tangible common equity of over $90 million securing our loan. This is an example of the credit and deal structure we seek and I'm pleased to report that as of yearend, StoneCastle reported zero credit losses, zero impaired assets, and no material deterioration of credit quality within our portfolio. This is a reflection of the company's ongoing focus on credit quality. Moody's Investor Service maintains an A3 rating on the company's revolving credit facility. Now, let me turn to the quarterly results. Our gross investment income for the quarter was approximately $2.95 million, up 7% from Q3 2014. Realized net capital losses due to sales and called securities totaled approximately $237,000. As I mentioned earlier, in the fourth quarter StoneCastle increased its shares outstanding by $1.802 million, including the over-allotment which diluted earnings on a per share basis. As a result, net investment income for the quarter was $0.23 per share. Pat will have more detail about this later on the call. I now want to comment on our quarterly distribution. Today, we declared a $0.50 per share cash distribution payable on March 30th to holders of record on March 20th, maintaining the rate of the previous quarters. As with each and every quarter, the Board sets the distribution rate based upon extensive analysis of several factors, including but not limited to the market investment, expectations of asset deployment and a projection of future earnings. I now want to turn the call over Pat Farrell to discuss the financial results in greater detail.

[Patrick Farrell:]

Thank you, Josh. In my financial review for the fourth quarter, I would like to take some extra time to discuss our quarterly results in detail and specifically discuss the various components of the financials. As Josh noted earlier, because of the follow-on offering November increased share outstanding by 38% from the beginning of the quarter, the per share calculations were formulated using an average of the share outstanding during the quarter as opposed to shares outstanding at the end of the period. This is in accordance with SEC rules regarding per share calculation specific to investment companies. The net asset value at year end was $21.86, the net asset value for StoneCastle Financial is normally affected by four components; net investment income, realized gains and losses, the change in unrealized appreciation or depreciation of the portfolio, and finally, distributions paid during the period. Let me walk through these components. Net investment income is gross income minus operating expenses. Gross income reflects dividends and interest received from our portfolio investments. It includes origination fees earned on deals and income related to due diligence expenses reimbursed to StoneCastle by perspective issuers. Gross income for the fourth quarter was $2.954151 or $0.53 per share. The company's operating expense are comprised of various expenses such as advisory fees, interest expense related to our use of leverage, custody and administration fees, legal fees, ABA fees, and other expenses. The ABA fees are related to our exclusive agreement with the Corporation for American Banking, the marketing subsidiary of the American Banker's Association. Operating expenses for the quarter were $1,690,200 or $0.30 per share. Expenses for the fourth quarter are higher than the previous quarter including increased legal cost as well as due diligence expenses. Gross income less operating expenses resulted in net investment income of $1,263,951 or $0.23 per share for the quarter. It is important to note that the shares outstanding due to the follow-on offering increased shares from 4,699,035 to 6,501,035. This share count increase had the effect of diluting earnings per share for the quarter. Absent the additional shares, net investment income for the quarter would have been approximately $0.27 per share. Secondly, the realized gains and losses reflect securities which have been sold or called during the quarter. For the fourth quarter, this amounted to a loss of $237,395 or approximately $0.04 per share. The third component changes an unrealized appreciation or depreciation of the portfolio, relates to have the value of the entire investment portfolio has changed from the previous quarter end to the current quarter end. Each quarter, the portfolio was valued by market quotations, broker quotes or other valuation sources. For the fourth quarter, the value of the portfolio increased $1,118,716. After adjusting for the effect of the increase in shares during the period, this equates to an increase in the net asset value of $0.22 per share for the quarter. The fourth component affecting the net asset value is distributions. The declared cash distribution for the quarter was $0.50 per share paid on January 2nd, 2015 to shareholders of record on December 12, 2014. In addition to the above, due to the follow-on offering, the company incurred $304,000 in offering expenses, which decreased the net asset value by approximately $0.05 per share. This was comprised on legal, printing, and other expenses. To recap, we began the quarter with a net asset value of $22.08. During the quarter, we generated net income of $0.23, and unrealized appreciation of $0.22. These gains were offset by realized losses of $0.04, and offering cost of $0.05. Using the average share count for the quarter, the calculated distribution acquitted to $0.58 per share. Some of these components resulted in a decrease in net asset value of $0.22 for the quarter, resulting in a period end net asset value of $21.86 per share. Please note that the actual distribution paid to shareholders on record date was $0.50 per share. Because the number of shares on record date is greater than the average share count calculated during the quarter, the average calculated distribution rate is $0.58 per share. This $0.08 is included in our quarterly financial results as part of realized and unrealized gains and losses in accordance with SEC Form N-2 instructions. Now, let me update you on our credit facility syndicate led by Texas Capital Bank. Subsequent to the quarter end, on January 16, 2015, company increased its credit facility by $25 million to $70 million. As of December 31st, 2014, the company had drawn $22.5 million of the facility. In accordance with the regulated -- the current regulated investment company rules; we may only borrow up to 33.3% of our total assets. Our leverage percentage at year end was low at 12%. Now, I would like to turn it back over to Josh.

[Joshua Siegel:]

Thank you, Pat. And thank you to everyone for listening, especially our new investors. Before opening up the phone lines for your questions, I want to comment on my longer term outlook for the business. No one at StoneCastle was pleased with the near-term results we just presented, least of all me. There's nothing more important than meeting our stated objectives, successfully investing the capital entrusted to us and delivering to, our shareholders. With only slightly more than a year of operating history, we're still in the process of ramping up this innovative company and we remained confident in our ability to produce sustainable net investment income with a longer term view. Based on our experience in the first year of operation, we now know that the average time from an initial meeting to deal closing is longer than we originally expected and can vary widely from bank to bank. The slower pace of deployment negatively impacted our financial results. Regardless, we incorporate the reality we're experiencing into our future planning, make course corrections and deliver on our objectives. I can assure you that I have redoubled efforts across the company to accelerate our progress without sacrificing credit quality or our long-term approach to this business. Its natural than expected for shareholders to focus on quarterly results, which are important, but at the same time, quarterly results are not necessarily reflective of the long-term prospects for the business. Sustainable businesses are built on a long-term vision of many quarters. We made substantial progress at the company in 2014, expanding our brand as a capital provider, improving our operations, and building our deal pipeline as we close out the year. With existing strategic initiatives underway, we expect to see meaningful results in 2015. Regulators and legislators in Washington continue to work on ways to help the community banking industry and reduce regulatory burdens, both of which are positive for StoneCastle. I am actively involved in and supportive of this important initiative. In closing, I want to reiterate that we continue to see a sizeable opportunity to provide capital to community banks that we have a unique vehicle in StoneCastle Financial with little competition and that we're well positioned to address the needs in this marketplace. I want to thank you, our shareholders, for your continued patience and support of StoneCastle Financial. Now, operator, I would like to open up the call for questions.

[Operator:]

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is coming from the line of Greg Mason with KBW. Please proceed with your questions.

[Greg Mason:]

Great. Thank you. Good afternoon team. And Josh as we look at your portfolio of $170 million today, if you fully leverage to your match, you can get to like $210 million, so you're essentially kind of 80% invested and we see a $0.23 earnings which isn’t even quite halfway to the $0.50 dividend. So, can you walk us through how you think you can get the long-term earnings up to that general level?

[Joshua Siegel:]

Sure. So, Q4 is unique for a few reasons, one of course, the capital raise is part of it. We're already -- we can't go into the details, but we're already pretty far along into Q1 and we already have a lot better visibility in Q1 that it will significantly higher than Q4. Will it reach the cover to the dividend? That's not likely in this coming quarter, but it is substantially better. The way we get there is a combination of a few things. Its continuing to put assets on it at higher yields, it's continuing to grow the leverage which we're still under leverage and it's not part of the sustainable component, the delay in deals in Q4, which we can talk about for a moment, definitely pushed off upfront fees that we otherwise would have. For better or for worse we actually have quite a few embedded games, so I think we just talk about it on the call. There’s always the question of do we harvest those or not and turn them into realized gains versus unrealized gains, which is always part of the plan. And the -- of course the upside is you are actually building value, the downside is when you have either convertible preferreds or common equity you don’t have a whole lot of dividends. So it will cut the dividends in trade for capital gains. I wish we can do convertible preferreds that paid 10% dividend, but that doesn’t tend to happen. So as I mentioned on the call, I think it’s the right question asked, we do every quarter a very detailed modeling the pipeline of how we can get and converge upon covering the dividend. Right now we still -- I can't go into the strategic details. We do have actually more than one path of how we can get there. Whether we’re going to get there in quarter or two quarters, if its three quarters I can't say. But right now there is still a way to get there and the day that we don’t see that is the day that the Board will have to make a decision to cut or not. But right now we do see visibility that we can get there.

[Greg Mason:]

Okay, great. And how much of your portfolio do you view as kind of more liquid, maybe not placeholder assets, but at least more liquid that you could churn over into kind of the core deals as they start to close.

[Joshua Siegel:]

Great question. So the assets from our balance sheet, what we are tending to do is use two different types of assets that you’re finding there. One are the trust preferreds of the larger banks. We are staying to high credit quality, high liquidity and that was a nice fact an hour ago that we learned that all the big guys passed their stress test, whatever that’s actually worth. But it’s a good fact, not a bad fact. We also have been utilizing PFS which is a about a $10 billion ETS of diversified preferreds as another way for us to very easily move in and out of those types of earning assets and the majority of those are DRD, QDI as well. So those two categories of investments are these shorter term holts that we can very easily within a day or two roll out of into the investments. We have made, as I mentioned, sort of doubling down on our efforts, a much more conscious effort toward the end of Q4 and into Q1 especially with the dollars from the raise, to think about maximizing short term returns while we have the longer term investments being put in place. And while I touched on it -- on the call, it’s probably worth touching on here, one of the issues that also slowed Q4 besides the raise were lack of a better term the regulators. I hate to have to say it. And it’s not the regulatory bodies, but for example, on the number of preferred deals that we talked about on the last call, going into Q4, we expected to have those done by December 31st. We had one gentleman, I will not name his name, from the Fed Reserve who was truly just holding up the process saying, well, we just want to think about whether the preferreds -- structure you are currently using works. We knew it works, we have worked with the fed and it was only actually a few weeks ago we finally got someone more senior to overrule that one gentleman. So we are past that, and now those deals are back into the queue for close. But those are things we can't control.

[Greg Mason:]

And then it looks like you've been buying a couple of stocks about 4% of your portfolios in equities, I see one like Medallion Financial TAXI was done in the quarter. Can you just give us some of your thought process for buying some of these stocks?

[Joshua Siegel:]

Yes. So just the same as with any bank investment. If we think that the ultimate value that we can extract, whether it’s a combination of the capital gains and its undervalued, or something that has a combination of capital gains and high income, that matter is on our list or something to underwrite and take a small position in. We can't again take too much. TAXI is a unique one, because it has a very high dividend rate. But we also think that some of the chatter around the Medallion price in New York was little bit overblown. And from our view if you dig further into the company and the loan to value against those Medallion’s, we don’t really see an embedded risk, definitely not a risk that's going to put any substantial change to the dividend. And it’s also a different business model and that you still have the financing of sort of -- you can call it consumer asset of sorts. I mean, clearly they do more than just to TAXI Medallion and with persistently low interest rates which at least in the short term is benefiting the American consumer, it’s an interesting diversification way to have some potential capital gains and very high current income. On some of the other positions we have, we still in portfolio some of the more private equity positions. As we talked about in the past, we have some visibility that, at least one of those is contemplating a near term IPO so that can bring liquidity and gains there, so it goes well. And other platforms that we think that they are undervalued and that could be because they are dimly traded, could be they are not well tracked. Typically a lot of these companies don’t have analyst coverage, because they are smaller. That to us presents a value that we’d like to invest in sort of smaller amounts.

[Greg Mason:]

Okay. And then one last quick modeling question, on the expense line, tax expense, can you just talk about what is generating that tax expense given the -- obviously tax advantage structure of the rate?

[Patrick J. Farrell:]

Sure. This is Pat Farrell. That refers to our Delaware franchise tax. We are registered in Delaware as a corporation and as a result we need to pay Delaware franchise tax. We are examining that on a go forward basis to see about possibly changing our structure into a newer structure that would be -- that would make that expense go away.

[Joshua Siegel:]

And that would save what about $180,000 a year?

[Patrick J. Farrell:]

Exactly. About $180,000 per year we would save. So we are looking at that very closely right now and I expect we will be able to do something on that in the future.

[Greg Mason:]

Okay, great. Thanks. Thank you all.

[Joshua Siegel:]

Thank you.

[Operator:]

Our next question comes from the line of Devin Ryan with JMP Securities. Please proceed with your question.

[Devin Ryan:]

Hey, great. Thanks. Couple were just asked, but maybe a couple more. So clearly zero credit issues in the portfolio over the course of the year, still great to see. But as you think about making new investments, are there any market dynamics right now and maybe the drop in the oil prices as an example that's driving more caution in certain regions or certain investments or maybe even that could create opportunities where you could put capital to work in more attractive returns. I'm just curious if there is anything that's changed on that front?

[Joshua Siegel:]

That's actually a great question, Devin, probably a few things to mention. As with anything in the market some good, some bad and I appreciate you touching on the credit quality. I do think it gets lost on more of our retail investor, the fact that we are investing in what the rating agencies infer as either low investment grade or very, very high -- high BB type risk, and we are doing that with -- today 0.12 leverage at yearend with a max of 0.33, which we don’t tend to want to go over 0.3. So we are basically using very little leverage on investment grade assets compared to BDCs that are using 0.5 or 0.66 leverage on single B assets. And of course we also tend to get some loss of traction on the fact that we have DRD QDI assets versus ordinary income. So we know that tends to get lost unfortunately on investors and we’re going to keep telling that story until that sinks in. But to your question on opportunity, I always like to start with the negative. One negative is that there is a rating agency, a newer rating agency called Crow which this past year started putting investment grade ratings on banks greater than $1 billion in assets and that created some demand form insurance companies to invest in subordinated debt, not preferreds, but subordinated debt of those entities at I’d have to say surprisingly low rates. So that's a negative which took away maybe a small set of customers that we were not as focused on, because we do more preferred than we tend to do sub-debt, but that's a down side. So that had some pricing pressure on that side. However, deals we’re entering into really haven’t changed quarter-to-quarter, still 8.5, 8.625, 8.75, 9, so we are still generally in the same rate range that we've seen for the last few quarters. On the upside there are some strategic things that I can't go into the details, which I think can increase the pace of issuance. There is definitely chatter around energy related issues in certain parts of the country. We are very cautious there. We really have negligible exposure to credit issues from that. We thought it was really funny; there was some article couple of months ago that we are the most correlated to energy price. So we had a chuckle over that, which is great. Someone should use that for a hedge. But that's not reality. So we are trying to take advantage of banks that need capital or want to shore up capital just in case. I don’t think that's driving a ton of new business, but as our brand gets out there, as we have more state bank associations adding to ABA, and we don’t pay those state bank associations any fixed fee. They are sending business in. In fact, we did have an investment last year in Oklahoma that came from the state bank association. So we are seeing more opportunity come in and now, like, we are past some of these small, at least in the short term the regulatory discussions, I think that will pick up the pace.

[Devin Ryan:]

Okay, got it. Great that’s actually really interesting color, appreciated. And maybe on the repayments on the quarter, I mean, nine investments seems on the high-end and I haven’t had chance to get through all of the details on the investment portfolio movements quarter-to-quarter. But can you just maybe help us understand that dynamic there little bit better. Where you surprised by that level and then do you have any expectations there moving forward?

[Joshua Siegel:]

George and I were absolutely surprised by that level. They are banks that we honestly -- we would have bet a good nickel that they were not going to call anytime soon. Just given their financial profile and the view of the regulatory regime, we would have expected at least a few more years before some of those names called out. So, yeah, paid off earlier than we would have expected. TARP is an ever dwindling part of our portfolio, so I don’t think that pace will continue. And keep in mind, every new issue deal we put on, and Q1 already through March has been very active on new deals. That was there on call five. So new assets we put on cannot be calling out anytime soon. So as we migrate the portfolio to new issue assets, even if the TARP piece is called out, it’s being put into assets that we don’t have to revisit for at least five years from a prepayment risk issue. So, yes, we were surprised that the pace of those. And some of those absolutely caught us by surprise, as the TARP paper doesn’t require a whole lot of notice for redemptions. So we had a few at the end of the year, we did not expect and we've been at a couple at the beginning of this quarter as well. But, again, pace of deployment has been good. So I think we've been netting against that.

[Devin Ryan:]

So there wasn’t really any change in market dynamic. It was just more company specific in terms of the actuarial payment. I'm just trying to make sure there wasn’t some shift where folks said, let’s go ahead with this now and so therefore we could continue to accelerate.

[Joshua Siegel:]

No, it’s company specific. But as we move further into the year there are still other government related programs that had capital into banks and the banking market is thinking ahead of how they can finance ahead of that.

[Devin Ryan:]

Got it. Yeah, understood. Okay. I appreciate it. And then maybe just a little more detail, if possible, around the sizing of the backlog. I know in prior calls you've given little more information and I'm not sure how much you can quantify. But just the amount of situations you are involved in today, how many are closer to finish line. It sounds like the backlog have increased and it seems like you are putting money to work every day here. But just is there any other context you can give us around the backlog, maybe how the overall investment opportunity feels today versus say a year ago.

[Joshua Siegel:]

Okay, some good questions in there. From the standpoint of the pipeline, the pipeline has maintained. So as we've either closed transactions and there was a transaction that we had hoped to get done by yearend that because of the fed delay we did lose, that's unfortunate. We are also still turning away things that don’t have absolute confidence in the credit. I mean, that's one thing that again differentiates us from BDCs or other entities, not good, bad and different, just a very different profile, is we’re really a much more conservative credit portfolio. And while we surely cannot ever promise no credit losses, we don’t have any expectation right now of anything even coming. And it’s just a very conservative portfolio and we’re going to choose carefully. From pipeline issues, we have been closing deals. We are in the process of closing other one now that we expect to have done between really now and just quarter end, which is a few weeks away. So things are still progressing and moving through the closing. Again, we did lose, honestly, two months, thanks credit to the fed or at least an individual at the fed who was younger and did not have the clarity of how Basel III gets implemented and we had to use our relationships elevate that through the fed system to get us a much more senior executive to clarify, which came exactly as we expected in our favor. It just delayed things and it is aggravating. Aggravating to us, aggravating to the banks and I'm sure you are well aware of a lot of active discussion in Congress, at Treasury and amongst the fed for community bank regulatory relief that Fed Reserve has had conferences on it. There was testimony in Congress not more than a few weeks ago, quite actually angry and vicious on the part of some Senators and Congressmen on the topic. So that actually bodes well for us in getting things pushed further ahead. But deals keep coming in. In fact, with some strategic initiatives we are working on, they are coming in faster. And we are hoping we will have some good news to talk to you about in the coming months on that. But we don’t feel any differently than we did six months ago. It’s just -- I have to say prior to the crisis, deals would just be done. A deal would come in, and within three, four, five weeks it would get through the whole process. Today, that could be two, three, four, five months. It just is much longer.

[Devin Ryan:]

Got it. Fantastic. Okay, well, thanks for taking all the time and I’ll talk soon.

[Joshua Siegel:]

Thank you. We will talk to you soon.

[Operator:]

Thank you. [Operator Instructions] The next question is from the line of Bryce Rowe with Robert W. Baird. Please proceed with your question.

[Bryce Rowe:]

Thanks. Good afternoon. Josh, just wanted kind of follow-up on Greg’s line of questioning. Understand that the longer term view you've taken and I appreciate it, with that in mind and with the lack of dividend coverage right now. Could you think it makes more sense to adjust dividend to better match NII, so that you are not getting into NAV on a quarterly basis. Thanks.

[Joshua Siegel:]

That is the question we ask a Board every single quarter. And right now the answer is no, we don’t think it is worth the sort term disruption for really a few tens of cents to cut into we converge on what our final stabilized income will be. There is a clear path where we can be able to cover an 8% dividend on the original 25. You know the basis is less than 25 due to the secondary raise. But if we don’t, I don’t think it’s -- it’s not a question that we’re going to way South of it, it’s just if we don’t make it exactly we can get there. It will still be a very healthy number. We can't predict exactly where it would end. But we don’t think it makes sense to make an adjustment right now given all these strategic initiatives we have in place and Board made the call to maintain our current policy. I mean that other thing of paying out of NAB, I think it’s just worth stating the obvious, is we are generating positive earnings. And, yes, the dividend that we are paying of $0.50 is higher than the earnings. But what are really doing is we’re giving investors some of their capital back. If they don’t want it back, they could reinvest it back into the stock, right. But it’s this question of we could cut the dividend or we can continue as we see visibility towards getting to covering the $0.50 per share. And if at some point we don’t see the visibility getting there, that's the time that we would have to make a decision as a Board. But right now we still more than one path of how we get there.

[Bryce Rowe:]

Okay. Well, appreciate you answering the question. Thanks.

[Operator:]

Thank you. There are no additional questions at this time. I will turn the floor back to management for closing comments.

[Joshua Siegel:]

Great. Well, thank you again for participating in our Q4 call. As with any time please feel free to give us a call. Our phones are always open to answer your questions about StoneCastle Financial or the industry at large. I mean, we do quite a bit in the space on a regular basis and we’d like to be a resource for our investors. So thank you again. Have a good evening. Good luck with the snow for those of you in the Northeast. This winter will end someday, and have a good evening.

[Operator:]

Thank you. This concludes today's teleconference. You may disconnect your lines this time. Thank you for your participation.