ArrowMark Financial Corp. Q4 FY2021 earnings call

• Name change: Transitioned from StoneCastle Financial Corp. to ArrowMark Financial Corp. effective February 24.
• Geopolitical events: Conflict between Russia and Ukraine impacted global markets, but investment portfolio in banks is insulated due to diversification.
• Bank earnings: Q4 earnings flat to slightly ahead, loan balances growing modestly, expected to continue.
• Credit markets: Interest rate increases factored in, positive for banking sector and portfolio as 70% of investments are floating rate.
• Origination pipeline: Community banking markets aggressively priced, regulatory capital release securities more attractive.
• Quarterly results: Net investment income Q4 2021 was ~$2.9 million or $0.41 per share. Net realized and unrealized loss on investments ~$644,000 or $0.09 per share. NAV $21.70, down $0.16 from prior quarter. Dividends: total annual distributions $1.52, ~7.5% yield on Dec 31, 2021.
• Portfolio review: Invested $22.5 million in 5 regulatory capital transactions, weighted average coupon 10%, yield to maturity ~10.2%. Sold $14.1 million in proceeds, reduced PFF position to 2.4% of portfolio. Effective yield increased to 9.48% as of Dec 31. Total assets up 16% to $218.7 million, invested portfolio up 21% to $215.4 million.

The company's net investment income for the fourth quarter of 2021 was approximately $2.9 million or $0.41 per share. Net realized and unrealized loss on investments was approximately $644,000 or $0.09 per share. Net asset value at the end of the quarter was $21.70, down $0.16 from the prior quarter. Investors received a total of $1.52 in annual distributions in 2021, representing a nearly 7.5% dividend yield on December 31, 2021. Total assets of the portfolio were $218.7 million, up 16% from the prior year, and the value of the invested portfolio was $215.4 million, up 21% from the prior year. The company invested $22.5 million in 5 regulatory capital transactions with a weighted average coupon of 10% and yield to maturity of ~10.2%. PFF was reduced to 2.4% of the portfolio, and estimated annualized effective yield increased to 9.48% as of December 31.

• Geopolitical events impacting global markets.
• Dependence on securities issued by money center and community banks, which could be affected by economic conditions.