ArrowMark Financial Corp. Q1 FY2022 earnings call

• Market environment is volatile due to reversal of near zero interest rates and macro factors like Ukraine crisis and supply chain issues. - Investment portfolio consists of securities from money center banks and U.S. community banks, with 70% floating rate assets providing inflation hedge. - Investment portfolio is diversified across money center and community banks, with risk mitigation through contact with issuers and stress testing. - Credit markets: Rise in base rates beneficial to portfolio as ~70% of investments are floating rate, which will increase effective coupons. - First quarter results: Net investment income increased, dividend increased, NAV relatively stable. - Portfolio activity: Invested $6 million in regulatory capital transaction in Q1, offset by proceeds from other investments and partial paydowns; year-to-date net investments increased $6.2 million. - Valuations: Vast majority of portfolio is independently marked, with ~80% of portfolio prices reflecting minimum two quotations or actual closing exchange prices.

Net investment income for the first quarter of 2022 was approximately $3 million or $0.42 per share, up 2.5% from the prior quarter. The company's net asset value at the end of the quarter was $21.44, down $0.26 per share from the prior quarter. Total assets of the portfolio were reported at $211 million at quarter end, up 15.6% from the prior year. The investment portfolio was $200 million, up 4.4% from the prior year. Approximately 70% of the company's total investments are in floating rate assets. The company's estimated annual yield of the portfolio investments as of March 31 was 9.5%, up 5 basis points over last quarter. The dividend yield was approximately 7.3% at quarter end and over 8% as of today.

• The anticipated increases in rates will provide ArrowMark Financial the ability to increase earnings potential, with an estimate that every 25 basis point increase in Fed funds rate could translate to an additional $0.05 to $0.01 per share per quarter in net income. - No new specific forward-looking guidance beyond discussion of market impact on earnings potential.

• Market volatility risk due to reversal of near zero interest rates and macro factors. - Uncertainty from macro factors like Ukraine crisis and supply chain issues affecting credit markets. - Credit market波动 may impact the value of the investment portfolio.

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