Financial Data and Key Metrics Changes - For the quarter ending March 31, 2021, total interest income declined slightly to $11.9 million, a decrease of $200,000 or 1.6% compared to the prior quarter, primarily due to a small decline in the weighted average yield [18][19] - Net investment income rose to $6.4 million or $0.195 per share, covering 100% of shareholder distributions, an increase of $100,000 compared to the prior quarter [20] - Net assets from operations increased to $21.3 million or $0.65 per share, compared to $12.3 million or $0.38 per share for the quarter ending December 31, 2020 [21] - NAV rose by 6.6% from $7.61 per share at December 31 to $8.11 per share as of March 31, 2021 [24] Business Line Data and Key Metrics Changes - Originations for the quarter totaled $72 million, including three new proprietary investments, while exits totaled $48 million, resulting in net originations of $24 million [7] - The portfolio's weighted average balance increased slightly by $10.7 million or 2.4% to $454.1 million compared to the previous quarter [18] - The asset mix shifted in favor of first lien loans, which rose to 58% of cost, while second lien exposure declined to 32% [15] Market Data and Key Metrics Changes - The company reported no payment defaults in its one non-accrual investment, which represents 1.5% of the portfolio at fair value, indicating a material uptick in business volumes [14] - The weighted average borrowing costs were reported at 4.6% as of March 31, with total liabilities rising to $233 million [22][24] Company Strategy and Development Direction - The company continues to target leverage in the vicinity of one-to-one debt to equity, with a focus on maintaining a low leverage position to capitalize on middle market investment opportunities [17][30] - The strategy includes investing in midsize private businesses supported by private equity funds, which helps facilitate acquisitions and business growth [31] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the portfolio's performance, noting that most investments have moved past COVID-related effects, with broad-based asset appreciation [12] - The company anticipates continued net investment portfolio growth driven by elevated levels of refinancing and recapitalization activity in the market [16] - Management highlighted the importance of maintaining a flexible capital position to navigate potential economic changes [30] Other Important Information - The board declared monthly distributions of $0.065 per common share for April, May, and June, resulting in an annual rate of $0.78 per share [25] - An incentive fee reduction was implemented, increasing the hurdle rate from 7% to 8%, which is expected to enhance net earnings available for shareholder distributions [26] Q&A Session Summary Question: Any questions from participants? - No questions were raised during the Q&A session, and the call concluded without further inquiries [33][34][35]

Financial Data and Key Metrics Changes - Total interest income increased by $147,000 or 1.2% to $12.1 million, primarily due to an increase in the average balance of interest-bearing investments [15] - Net investment income for the quarter was $6.3 million, unchanged compared to the prior quarter, equating to $0.195 per share [18] - Net assets from operations rose to $12.3 million or $0.38 per share, compared to $12.2 million or $0.33 per share in the previous quarter [18] - NAV increased by 2.8% from $7.40 per share at the end of the previous quarter to $7.61 per share as of December 31 [23] Business Line Data and Key Metrics Changes - Originations for the quarter totaled approximately $29 million, including two new proprietary investments, while repayments and proceeds totaled $34 million [7] - Interest income rose slightly over the prior quarter, with the portfolio yield remaining relatively unchanged at 10.8% [7][16] - The asset mix shifted slightly in favor of first lien loans, which rose to 51% at cost, while second lien exposure declined to 41% [11] Market Data and Key Metrics Changes - The portfolio has recovered approximately 70% of the unrealized depreciation reported in the March 31, 2020 quarter due to the onset of the COVID pandemic [19] - The only decliners in the portfolio were related to energy sector exposures, which continue to face soft fundamentals [11] Company Strategy and Development Direction - The company intends to continue managing its leverage around a one-to-one debt to equity ratio while enhancing overall net interest income [13][14] - The focus remains on investing in midsized private businesses with strong management, supported by private equity funds seeking experienced partners [29] Management's Comments on Operating Environment and Future Outlook - Management remains cautious regarding any lasting COVID-related financial impacts on new business opportunities and the sustainability of recent growth [14] - The company is in the final stages of closing several new investments, positioning itself well to absorb expected prepayments and grow its investment portfolio [12] Other Important Information - Total assets as of December 31 were $459 million, consisting of $452 million in investments at fair value and $7 million in cash and other assets [20] - The company declared monthly distributions of $0.065 per common share for January, February, and March, resulting in an annual rate of $0.78 per share [24] - The current distribution rate yields approximately 8.2%, which is considered attractive relative to low market yields [25] Q&A Session Summary - No questions were received during the Q&A session, indicating that all relevant information was effectively communicated during the presentation [31][32]

Investment Activities - The company invested $29.0 million in two new portfolio companies and extended $0.1 million in investments to existing portfolio companies during the three months ended December 31, 2020 [173]. - The company made significant investments in December 2020, including $19.0 million in Effective School Solutions LLC and $10.0 million in Encore Dredging Holdings, LLC [174]. - The company exited three portfolio companies through early payoffs during the three months ended December 31, 2020 [173]. - The company has made 557 different loans to, or investments in, 248 companies for a total of approximately $2.1 billion since its initial public offering in August 2001 [173]. - New investments during the three months ended December 31, 2020, were $29.0 million, down from $38.0 million in the same period of 2019 [209]. Financial Performance - Total investment income for the three months ended December 31, 2020, was $12.882 million, an increase of 5.9% compared to $12.159 million in the same period of 2019 [188]. - Interest income rose by 5.5% to $12.082 million for the three months ended December 31, 2020, driven by a $42 million increase in the weighted average principal balance of the interest-bearing portfolio, which reached $443.4 million [189]. - Net investment income for the three months ended December 31, 2020, was $6.280 million, a slight decrease of 2.1% from $6.417 million in the same period of 2019 [188]. - The company recorded a net realized loss on investments of $2.144 million for the three months ended December 31, 2020, an improvement from a loss of $4.434 million in the prior year [198]. - Net unrealized appreciation of investments was $8.495 million for the three months ended December 31, 2020, significantly up from $139, indicating a strong recovery in certain portfolio companies [200]. Expenses and Cash Flow - Total expenses, net of credits, increased by 15.0% to $6.602 million for the three months ended December 31, 2020, compared to $5.742 million in the same period of 2019 [188]. - For the three months ended December 31, 2020, net cash provided by operating activities was $12.2 million, compared to a net cash used of $24.3 million for the same period in 2019 [207]. - Net cash used in financing activities for the three months ended December 31, 2020, was $13.1 million, primarily due to $111.7 million in net repayments on the Credit Facility [210]. Debt and Equity - The company completed a debt offering of $100.0 million aggregate principal amount of its 5.125% Notes due 2026 in December 2020 [176]. - The company completed a debt offering of $100.0 million in December 2020, with net proceeds of approximately $97.7 million, bearing interest at a rate of 5.125% per year [230]. - The commitment amount of the Credit Facility was increased from $180 million to $205 million on December 9, 2020 [220]. - The company has the ability to issue up to an additional $124.8 million in securities under its shelf registration statement as of December 31, 2020 [216]. - The company redeemed its 2023 Notes with an aggregate principal amount of $57.5 million on January 7, 2021, for a net redemption amount of $58.1 million [232]. Market and Risk Exposure - The primary risk exposure for the company is interest rate risk, which affects net investment income based on the difference between borrowing and investment rates [248]. - As of December 31, 2020, the company's portfolio of debt investments consisted of 79.6% variable-rate and 20.4% fixed-rate investments [249]. - The company’s variable-rate debt investments are generally associated with the current LIBOR or prime rate [249]. - The average risk rating for proprietary loans in the company's portfolio was 6.4 as of December 31, 2020, indicating a moderate level of credit risk [242]. - There have been no material changes in the quantitative and qualitative market risk disclosures for the three months ended December 31, 2020, compared to the Annual Report [249]. Asset and Shareholder Information - As of December 31, 2020, the investment portfolio consisted of approximately 92.0% debt investments and 8.0% equity investments at cost [166]. - The closing market price of the company's common stock on December 31, 2020, was $8.86 per share, representing a 16.4% premium to the NAV per share of $7.61 [178]. - As of December 31, 2020, the company had a net worth of $438.5 million and asset coverage of 213.2% on its senior securities representing indebtedness [229]. - The company declared total distributions of $0.195 per common share for the quarter ending March 31, 2021 [184]. - The company paid monthly cash distributions of $0.065 per common share for the three months ended December 31, 2020, totaling $6.3 million [212].

Financial Data and Key Metrics Changes - Total interest income increased by $300,000 or 2.6% to $11.9 million due to a slight increase in the average balance of interest-bearing investments [24] - Net investment income for the quarter was $6.1 million or $0.195 per share, unchanged from the prior quarter [26] - Net assets from operations were $10.2 million or $0.33 per share for the quarter, compared to $15 million or $0.48 per share for the prior quarter [26] - NAV rose 1.8% from $7.27 per share as of June 30 to $7.40 per share as of September 30 [29] Business Line Data and Key Metrics Changes - Originations for the quarter totaled $22 million, with repayments and proceeds also totaling $22 million, resulting in largely unchanged assets [12] - Total investment income for the quarter increased by $850,000 or 7.2% to $12.6 million, driven by prepayment fees and dividends [25] - The asset mix at the end of the quarter showed first lien loans rose slightly to 49% of cost, while second lien exposure declined to 42% of the portfolio cost [17] Market Data and Key Metrics Changes - The portfolio maintained a low non-performing asset rate of 1.4% despite the impacts of COVID-19 [15] - The company reported that the energy and auto sectors were the most affected by COVID-19, but overall portfolio performance remained strong [16][40] Company Strategy and Development Direction - The company remains optimistic about growth opportunities in the lower middle market and plans to manage leverage around one-to-one debt to equity [20][21] - The focus will continue to be on investing in midsized private businesses with good management, supported by private equity funds [37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that most companies have adapted to COVID-19, with minimal impact outside the energy and auto sectors [40] - The company is cautious about potential lasting financial impacts from COVID-19 but is optimistic about the recovery of unrealized depreciation [19][21] Other Important Information - Total assets as of September 30 were $459 million, with liabilities declining to $225 million [27] - The company declared monthly distributions of $0.065 per share for October, November, and December, resulting in an annual rate of $0.78 per share [30] Q&A Session Summary Question: What percentage of the portfolio has high risk related to COVID? - Management indicated that most companies have adapted to COVID-19, with significant impacts primarily in the auto and energy sectors [40] Question: What accounted for the slight decline in the portfolio's average risk rating? - The decline was attributed to the mix of energy and auto credits, which caused some deterioration in underlying numbers [42] Question: What percentage of the portfolio is in liquid syndicated deals? - Approximately 8% to 9% of the portfolio is in liquid syndicated deals [46] Question: What are the limitations on the credit facility? - The reduction in borrowing base was temporary due to minor amendments to portfolio investments [47] Question: What is the current availability under the credit facility? - Current availability is in excess of $46 million [48] Question: How would you characterize the appetite for issuing additional unsecured debt? - Management is evaluating the potential to pursue additional unsecured debt as credit spreads have contracted [52]

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