UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported) August 11, 2016

 

StoneCastle Financial Corp.

(Exact Name of Registrant as Specified in Charter)

 

Delaware   333-189307   90-0934878
(State or other jurisdiction   (Commission   (IRS Employer
of incorporation)   File Number)   Identification No.)
         
152 West 57th Street, 35th floor, New York, NY   10019
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code (212) 354-6500

 

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Item 2.02 Results of Operations and Financial Condition.

 

On August 11, 2016 the registrant issued a press release announcing its financial results for the second quarter ended June 30, 2016. The text of the press release is included as Exhibit 99.1 to this Form 8-K.

 

The information disclosed under this item 2.02 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, except as expressly set forth by specific reference in such filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits:

 

Exhibit Number   Description
     
99.1   Press Release, dated August 11, 2016
 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  STONECASTLE FINANCIAL CORP.
     
Date: August 11, 2016    
     
  By: /s/ Patrick J. Farrell
  Name: Patrick J. Farrell
  Title: Chief Financial Officer
 

Exhibit Index

 

Exhibit Number   Description
     
99.1   Press Release, Dated August 11, 2016

 

Section 2: EX-99.1 (EX-99.1)

 

Exhibit 99.1

 

 

 

StoneCastle Financial Corp. Reports Second Quarter 2016 Results

 

NEW YORK, August 11, 2016 – StoneCastle Financial Corp. (Nasdaq: BANX) (“StoneCastle Financial” or the “Company”), an investment company registered with the Securities and Exchange Commission (“SEC”), today announced results for the second fiscal quarter ended June 30, 2016.

 

Second Quarter 2016 Investment Highlights:

 

  · Invested $22.6 million in 8 investments
     
  · Received partial repayment of $2.5 million from 1 investment
     
  · Received sales proceeds of $6.4 million from 4 investments

 

Investment Activity in the Second Quarter 2016 Included:

 

  · $8.5 million in Severn Bancorp Inc., Fixed Rate Cumulative Perpetual Preferred Stock, Series A,  9.00%
     
  · $5.0 million in Lincoln Park Bancorp, Subordinated Term Loan, due January 1, 2026, 8.25%
     
  · $3.5 million in BankGuam Holding Company, Subordinated Term Loan, due July 1, 2019, 7.99%
     
  · $3.1 million in Preferred Term Securities, Ltd., Fixed Rate Mezzanine Notes, due September 15, 2030, 9.74%, 144A

 

A complete listing of investments as of the end of the quarter can be found in the Schedule of Investments on the Company’s website at www.StoneCastle-Financial.com.

 

The estimated annualized yield generated by the invested portfolio as of June 30, 2016 (excluding cash and cash equivalents) was approximately 8.97%.

 

Second Quarter 2016 Financial Results

 

Net investment income was $2,549,219 or $.39 per share, comprised of $4,260,158 in gross income and $1,710,939 of expenses. Realized capital losses were ($139,372) or ($.02) per share.

 

Net Assets at quarter end were $138,380,529 and the Company’s Net Asset Value was $21.21 per share, up $0.12 from the previous quarter.

 

In the second quarter, the Company paid a cash distribution of $0.37 per share, up $0.02 from the prior quarter. The distribution was paid on June 29, 2016 to shareholders of record at the close of business on June 20, 2016.

 

The Company had drawn $60.75 million on its $70 million credit facility at quarter end, which represents 30.2% of total assets. According to regulated investment company rules, the Company may borrow only up to 33.3% of its total assets. The Company seeks a target leverage rate of 30%.

 

Portfolio and Investment Summary

 

As of the close of business on June 30, 2016, the Company had total assets of $201,304,543 consisting of total investments of $192,399,854, cash of $4,023,433 and other assets of $4,881,256.  Other assets include interest and dividends receivable of $4,141,279, and prepaid assets of $739,977.

 

During the quarter, the Company deployed $22.6 million in 8 investments. The Company purchased $10.0 million of preferred securities, $8.5 million of term loans and $4.1 million of debt and income notes. The Company received a partial repayment totaling $2.5 million from 1 investment and sold 4 investments for proceeds of $6.4 million.

 

Quarterly Conference Call

 

StoneCastle Financial will host a webcast and conference call on August 11, 2016 at 5:00 pm Eastern time.

 

The conference call can be accessed by dialing 1-877-407-9039 for domestic callers or 1-201-689-8470 for international callers. Participants may also access the call via live webcast by visiting StoneCastle Financial’s investor relations website at www.stonecastle-financial.com. To listen to a live broadcast, go to the website at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. A replay will be available shortly after the call and be available through midnight (Eastern Time) on August 25, 2016. The replay can be accessed by dialing 1-877-870-5176 for domestic callers or 1-858-384-5517 for international callers. The passcode for the replay is 13639291. The archive of the webcast will be available on the Company’s website for a limited time.

 

About StoneCastle Financial Corp.

 

StoneCastle Financial is an SEC registered non-diversified, closed-end management investment company listed on the NASDAQ Global Select Market under the symbol “BANX.” StoneCastle Financial intends to make long-term, passive, non-control investments in community banks seeking capital for organic growth, acquisitions, share repurchases and other refinancing activities. Its investment objective is to provide current income and, to a lesser extent, capital appreciation. StoneCastle Financial is managed by StoneCastle Asset Management LLC.

 

Disclaimer and Risk Factors:

 

There is no assurance that StoneCastle Financial will achieve its investment objective. StoneCastle Financial is subject to numerous risks, including investment and market risks, management risk, income and interest rate risks, banking industry risks, preferred stock risk, convertible securities risk, debt securities risk, liquidity risk, valuation risk, leverage risk, non-diversification risk, credit and counterparty risks, market at a discount from net asset value risk and market disruption risk. Shares of closed-end investment companies may trade above (a premium) or below (a discount) their net asset value. Shares of StoneCastle Financial may not be appropriate for all investors. Investors should review and consider carefully StoneCastle Financial’s investment objective, risks, charges and expenses. Past performance does not guarantee future results. Learn more at www.stonecastle-financial.com.

 

The Annual Report, Semi-Annual Report and other regulatory filings of the Company with the SEC are accessible on the SEC’s website at www.sec.gov and on the Company’s website at www.stonecastle-financial.com, and may discuss these or other factors that affect the Company.

 

CONTACT: Investor Contact:

 

Julie Muraco

 

347-887-0324

 

STONECASTLE FINANCIAL CORP.

Statement of Assets and Liabilities (unaudited)

 

   June 30, 2016   March 31, 2016 
Assets          
Investments in securities, at fair value (cost: $195,854,563 and $185,785,040 respectively)  $192,399,854   $181,536,543 
Cash (1)   4,023,433    3,992,946 
Interest and dividends receivable   4,141,279    2,993,712 
Prepaid assets   739,977    756,985 
Total assets   201,304,543    189,280,186 
           
Liabilities          
Loan payable   60,750,000    50,500,000 
Payable for securities purchased   968,200     
Dividends payable       70,983 
Investment advisory fee payable    875,895    822,358 
Loan interest payable   36,705    128,528 
Directors fee payable   15,576    15,811 
Accrued expenses payable   277,638    301,323 
Total liabilities   62,924,014    51,839,003 
Net Assets  $138,380,529   $137,441,183 
           
Net Assets consist of:          
Common stock at par ($0.001 per share)  $6,524   $6,515 
Paid-in-capital   144,514,314    144,366,375 
Accumulated net investment loss   (1,829,127)   (1,966,109)
Accumulated net realized loss on investments   (856,473)   (717,101)
Net unrealized depreciation on investments   (3,454,709)   (4,248,497)
Net Assets  $138,380,529   $137,441,183 
               
Net Asset Value Per Share:           
Common Stock Shares Outstanding    6,524,012    6,515,388 
Net asset value per common share   $21.21   $21.09 
Market price per share   $18.34   $17.31 
Market price discount to net asset value per share    -13.53%   -17.92%

 

(1) Includes $3,500,000 of restricted cash held in a segregated account at Texas Capital Bank to cover collateral requirements.

 

STONECASTLE FINANCIAL CORP.

Statement of Operations (unaudited)

 

   For The Six
Months Ended
June 30,  2016
   For the Three
Months Ended
June 30, 2016
 
Investment Income          
Interest  $5,165,315   $2,690,459 
Dividends   3,195,723    1,481,474 
Origination fee income   64,990    10,725 
Other Income   150,000    77,500 
Total Investment Income   8,576,028    4,260,158 
           
Expenses          
Investment advisory fees   1,699,470    875,894 
Interest expense   831,044    415,709 
ABA marketing and licensing fees   126,865    60,899 
Professional fees   145,355    75,563 
Transfer agent, custodian fees and administrator fees   137,727    68,407 
Bank fees   104,668    52,287 
Directors’ fees   85,076    40,516 
Investor relations fees   61,299    31,428 
Insurance expense   44,718    22,395 
Valuation fees   31,333    10,467 
Miscellaneous fees (proxy, printing, rating agency, etc.)   166,143    57,374 
Total expenses   3,433,698    1,710,939 
Net Investment Income   5,142,330    2,549,219 
           
Realized and Unrealized Gain / (Loss) on Investments          
Net realized gain / (loss) on investments   151,408    (139,372)
Net change in unrealized  appreciation / (depreciation) on investments   (3,209,734)   793,787 
Net realized and unrealized gain / (loss) on investments   (3,058,326)   654,415 
Net Increase in Net Assets Resulting From Operations  $2,084,004   $3,203,634 
 

STONECASTLE FINANCIAL CORP.

Financial Highlights (unaudited)

 

   For The Three
Months Ended
June 30, 2016
 
Per Share Operating Performance     
Net Asset Value, beginning of period  $21.09 
Net investment income(1)   0.39 
Net realized and unrealized gain on investments(1)   0.10 
Total from investment operations   0.49 
      
Less distributions to shareholders     
From net investment income   (0.37)
Total distributions   (0.37)
      
Net asset value, end of period  $21.21 
Per share market value, end of period  $18.34 
Total investment return based on market value (2)   8.22%
      
Ratios and Supplemental Data     
Net assets, end of period (in millions)  $138.4 
Ratios (as a percentage to average net assets):     
Expenses(3)(4)   4.99%
Net investment income(5)*   7.43%
Portfolio turnover rate **   5%
      
Revolving Credit Agreement     
Total revolving credit agreement outstanding (000’s)  $60,750 
Asset coverage per $1,000 for revolving credit agreement(6)   3,278 

 

 
(1) Based on the average shares outstanding during quarter.
(2) Based on share market price and reinvestment of distributions at the price obtained under the Dividend Reinvestment Plan. Total return does not include sales load and offering expenses.
(3) Excluding interest expense, the ratio would have been 3.78%.
(4) Ratio of expenses to average managed assets equals 3.52%.
(5) Ratio of net investment income to average managed assets equals 5.25%.
(6) Calculated by subtracting the Company’s total liabilities (excluding the loan) from the Company’s total assets and dividing the amount by the loan outstanding in 000’s.
* Annualized
** Not-annualized