Investors

Our primary objective is to provide our investors with current income and capital appreciation primarily through investment in U.S. community banks


The primary investment objective of StoneCastle Financial Corp. (Nasdaq: BANX) is current income. The secondary objective is capital appreciation.


Philosophy: We are a disciplined investor focused on investing in U.S. community banks. StoneCastle Financial Corp's investment philosophy is to minimize the risk of loss of principal while capitalizing on opportunity in the community banking sector.

As a value investor, we seek to invest in companies that have demonstrated a long history of generating significant free cash flow, and at prices well below long-term intrinsic value. We seek investments where there is a significantly higher probability of upside potential than downside risk.

Preservation of Capital: We expect a significant portion of our investments to be made in the form of income generating preferred stock with warrants or equity conversion rights. We therefore seek to minimize downside risk by investing in banks that exhibit the potential for long-term stability. We focus on minimizing the risk of losses by using StoneCastle Financial Corp's disciplined and proven underwriting process when providing capital to community banks. We target:

    • long-term investments in established companies;

    • disciplined credit underwriting processes and positive regulatory relationships;

    • companies with stable balance sheets, lending in attractive markets with solid fundamentals; and

    • experienced management teams with exceptional track records and ties to their local markets.


Schedule of Investments (unaudited)

As of December 31, 2019

StoneCastle Financial Corp. lists the breakdown of portfolio holdings on a yearly basis as reflected in the Company's public filings with the U.S. Securities and Exchange Commission. More information about StoneCastle Financial can be found in the investor relations portion of our website or by visiting, www.SEC.gov.

This presentation is for informational purposes only.

Company(1)

 

Investment

 

# of
Shares/Par
Amount ($)(2)

 

Fair Value(3)

Term Loans – 14.5%

 

 

 

 

 

 

 

 

Banking – 14.5%

 

 

 

 

 

 

 

 

American Capital Bancorp

 

Subordinated Term Loan,
9.00%, 4/1/2028

$

7,000,000

 

$

7,017,500

Big Poppy Holdings, Inc.

 

Subordinated Term Loan,
6.50%, 7/1/2027

 

$

3,500,000

 

 

3,465,000

F.N.B.C. of La Grange, Inc.

Subordinated Term Loan,
6.38%@, 1/1/2030

$

700,000

 

693,000

TransPecos Financial Corp.

Senior Term Loan,
9.00%, 10/1/2028

$

4,000,000

 

4,010,000

Tulsa Valley Bancshares

Subordinated Term Loan,
6.38%*, 12/31/2028

$

1,700,000

 

1,683,000

Young Partners, L.P.

Secured Term Loan,
10.50%, 11/9/2020

$

4,565,000

3,866,555

 

 

Total Term Loans
(Cost $21,098,838)

 

 

 

 

 

20,735,055

Debt Securities – 9.4%

 

 

 

 

 

 

 

 

Banking – 9.4%

 

 

 

 

 

 

 

 

Deutsche Bank AG

 

Senior Unsecured Debt Obligation,
Floating Rate Notes, Credit Linked to
CRAFT 2018-2A, Current period coupon
11.97%^, 1/20/2026, 144A(4)

 

$

9,959,857

 

 

9,883,116

MMCapS Funding I, Ltd. /
MMCapS Funding I, Inc.

 

Fixed Rate Senior Notes,
6.34%, 6/8/2031, 144A(4)

 

$

2,469,435

 

 

1,818,121

Preferred Term Securities, Ltd. /
Preferred Term Securities, Inc.

 

Fixed Rate Mezzanine Notes,
9.74%, 9/15/2030, 144A(4)

 

$

1,752,817

 

 

1,779,109

 

 

Total Debt Securities
(Cost $13,688,289)

 

 

 

 

 

13,480,346

Trust Preferred Securities – 10.6%

 

 

 

 

 

 

Banking – 10.6%

 

 

 

 

 

 

 

 

Central Trust Company Capital Trust I.

 

Junior Subordinated Debt (Trust
Preferred Security), 10.25%, 7/25/2031

 

$

2,500,000

 

 

2,500,000

First Alliance Capital Trust I

 

Junior Subordinated Debt (Trust
Preferred Security), 10.25%, 7/25/2031

 

$

6,500,000

 

 

6,508,125

M&T TPS LLC

 

Trust Preferred Security, Series 2015-1
9.74%, Note, 9/30/2030, 144A(4)

 

$

2,310,250

 

 

2,321,801

National Bank of Indianapolis TPS LLC

 

Trust Preferred Security, Series 2015-1
9.74%, Note, 9/30/2030, 144A(4)

 

$

3,898,548

 

 

3,898,548

 

 

Total Trust Preferred Securities
(Cost $15,557,211)

 

 

 

 

 

15,228,474

 


Schedule of Investments

Company(1)

 

Investment

 

# of
Shares/Par
Amount ($)(2)

 

Fair Value(3)

Credit Securitizations – 32.4%

 

 

 

 

 

 

Banking – 32.4%

 

 

 

 

 

 

 

 

Community Funding CLO, Ltd.

 

Preferred Shares(5) (Estimated effective
yield 10.37%), 144A(4)

 

$

45,500,000

 

$

44,762,900

U.S. Capital Funding I, Ltd. /
U.S. Capital Funding I, Corp.

 

Subordinate Income Note,
 (Estimated effective
yield 17.94%), 5/1/2034, 144A(4)

 

$

4,700,000

 

 

1,598,000

 

 

Total Credit Securitizations
(Cost $46,642,978)

 

 

46,360,900

Pooled Equity Interest – 14.9%

 

 

 

 

 

 

Banking – 14.9%

 

 

 

 

 

 

 

 

Community Funding 2018, LLC.

 

Preferred Shares(5) (Estimated effective
yield 9.34%), 7/15/2026, 144A(4)

 

$

22,860,000

 

 

21,398,103

 

 

Total Pooled Equity Interest
(Cost $22,365,200)

 

 

21,398,103

Preferred Stocks – 15.4%

 

 

 

 

 

 

 

 

Banking – 15.4%

 

 

 

 

 

 

 

 

Fidelity Federal Bancorp

 

Fixed Rate Cumulative Perpetual
Preferred Stock, Series A, 9%

 

$

4,439,000

 

 

4,439,000

Fidelity Federal Bancorp

 

Fixed Rate Cumulative Perpetual
Preferred Stock, Series B, 9%

 

$

51,000

 

 

51,000

First Marquis Holdings, LLC.

 

Variable Rate Perpetual
Preferred Stock(5)
(Estimated effective yield 13.42%)(6)

 

$

6,550,000

 

 

7,692,975

Marshall Holdings Limited

 

Variable Rate Perpetual
Preferred Stock(5)
(Estimated effective yield 12.34%)(6)

 

$

5,000,000

 

 

4,940,000

The Queensborough Company

 

Fixed Rate Cumulative Perpetual
Preferred Stock, Series A, 9%

 

$

2,670,000

 

 

2,656,650

The Queensborough Company

 

Fixed Rate Cumulative Perpetual
Preferred Stock, Series B, 9%

 

$

94,000

 

 

93,530

TriState Capital Holdings

 

Fixed / Floating Cumulative
Perpetual Preferred Stock, 6.75% (TSCAP)

 

$

80,000

 

 

2,124,000

 

 

Total Preferred Stocks
(Cost $20,810,452)

 

 

 

21,997,155

 


Schedule of Investments


Company(1)

 

Investment

 

# of
Shares/Par
Amount ($)(2)

 

Fair Value(3)

Exchange Traded Fund – 14.0%

 

 

 

 

 

 

 

 

Diversified Financials and Banking – 14.0%

 

 

 

 

 

 

 

 

iShares S&P U.S. Preferred Stock Index Fund

 

iShares U.S. Preferred Stock Index Fund -
Exchange Traded Fund (PFF)

 

 

535,100

 

$

20,114,409

 

 

Total Exchange Traded Fund
(Cost $20,064,987)

 

 

 

 

 

20,114,409

 

 

Total Long Term Investments
(Cost $160,227,955)

 

 

 

 

 

159,314,442

Money Market Fund – 2.1%

 

 

 

 

 

 

 

 

Morgan Stanley Institutional
Liquidity Funds - Treasury Portfolio

 

Institutional Share Class - Money Market
Mutual Fund (MISXX), 1.50%

 

2,950,473

 

2,950,473

 

 

Total Money Market Fund
(Cost $2,950,473)

 

 

 

 

 

2,950,473

Total Investments
 (Cost $163,178,428)(7)† - 113.3%

162,264,915

Other assets and liabilities, net -
 (13.3)%(8)

(19,065,681)

Total Net Assets - 100.0%

$

143,199,234

_______________

 

(1) We do not “control” and are not an “affiliate” of any of our investments, each as defined in the Investment Company Act (the “1940 Act”).

(2) $ represents security position traded in par amount.

(3) Fair Value is determined in good faith in accordance with the Company’s valuation policy and is reviewed and accepted by the Company’s Board of Directors.

(4) Security is exempt from registration under Rule 144A of the Securities Act of 1933.

(5) The preferred shares are considered an equity position. Equity investments are entitled to recurring distributions which are generally equal to the remaining cash flow of the payments made by the underlying company’s securities less contractual payments to debt holders and company expenses. The estimated effective yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon termination. Such projections are periodically reviewed and adjusted as needed. The estimated effective yield may ultimately not be realized.

(6) Investments determined using significant unobservable inputs (Level 3). The value of such securities is $12,632,975 or 8.8% of net assets.

(7) Cost values reflect accretion of original issue discount or market discount, and amortization of premium.

(8) Includes $17,700,000 in bank loans from Texas Capital Bank.

^  Current period coupon of 11.97% is based on the 3 month LIBOR rate plus 1,000 basis points at the time of purchase. Coupon resets on a quarterly basis on January 20, April 20th, July 20th and October 20th.

@ The estimated effective yield including structuring fees paid annually through maturity of 2030 is 9.08%.

*  The estimated effective yield including structuring fees paid annually through maturity of 2028 is 9.60%.

  As of December 31, 2019, the tax cost basis of investment securities was $163,712,389. The gross unrealized appreciation over tax cost was $2,059,086 and gross unrealized depreciation under tax cost was ($3,506,560). Net unrealized depreciation of tax cost under value was ($1,447,474). See Note 5.

 

 


Additional Information

The following is a listing of the underlying unsecured loans, subordinated debentures and notes that were made by Community Funding CLO, Ltd. See Notes to Financial Statements for additional information on StoneCastle Financial Corp’s. investment in Community Funding CLO, Ltd.

 

Bank Name

 

Principal
Amount

 

State

 

Bank Name

 

Principal
Amount

 

State

Progress Financial Corporation

 

$

5,500,000

 

Alabama

 

First State Holding Co.

 

$

9,350,000

 

Nebraska

Cornerstone Community Bancorp

 

 

5,000,000

 

California

 

Lakeland Bancorp, Inc.

 

 

7,500,000

 

New Jersey

Bankwell Financial Group

 

 

7,500,000

 

Connecticut

 

OceanFirst Financial Corp.

 

 

7,500,000

 

New Jersey

Liberty Bank

 

 

7,500,000

 

Connecticut

 

Pathfinder Bancorp, Inc.

 

 

10,000,000

 

New York

Idaho Trust Bancorp

 

 

5,000,000

 

Idaho

 

Quontic Bank Holdings Corporation

 

 

3,000,000

 

New York

Bancorp Financial, Inc.

 

 

12,500,000

 

Illinois

 

MidWest Community Financial Corp.

 

 

7,500,000

 

Oklahoma

Market Street Bancshares, Inc.

 

 

7,500,000

 

Illinois

 

Myers BancShares, Inc.

 

 

10,000,000

 

Oklahoma

First Internet Bancorp

 

 

10,000,000

 

Indiana

 

First Resource Bank

 

 

2,000,000

 

Pennsylvania

Treynor Bancshares, Inc.

 

 

12,500,000

 

Iowa

 

Victory Bancorp, Inc.

 

 

5,000,000

 

Pennsylvania

Freedom Bancshares, Inc.

 

 

2,000,000

 

Kansas

 

Sandhills Holding Company, Inc.

 

 

8,500,000

 

South Carolina

Williams Holding Company, Inc.

 

 

1,000,000

 

Kansas

 

First Citizens Bancshares, Inc.

 

 

10,000,000

 

Texas

CB&T Holding Corp.

 

 

12,500,000

 

Louisiana

 

Happy Bancshares, Inc.

 

 

7,500,000

 

Texas

Delmar Bancorp

 

 

2,000,000

 

Maryland

 

Linden Bancshares, Inc.

 

 

4,000,000

 

Texas

Citizens Bancshares

 

 

12,500,000

 

Missouri

 

First National Corporation

 

 

5,000,000

 

Virginia

First Bancshares, Inc.

 

 

2,500,000

 

Missouri

 

FS Bancorp. Inc.

 

 

10,000,000

 

Washington

Security State Bancshares, Inc.

 

 

12,500,000

 

Missouri

 

Bank First Corporation

 

 

7,000,000

 

Wisconsin

First Citizens Bancshares, Inc. (FCNC)

 

 

7,500,000

 

North Carolina

 

 

 

 

 

 

 

Glacier Bancorp, Inc.

 

 

7,500,000

 

Montana

 

Total

 

$

246,850,000

 

 

 

The following is a listing of the underlying unsecured loans that were made by Community Funding 2018, LLC. See Notes to Financial Statements for additional information on StoneCastle Financial Corp’s. investment in Community Funding 2018, LLC.

 

Bank Name

 

Principal
Amount

 

State

 

Bank Name

 

Principal
Amount

 

State

Big Poppy Holdings, Inc.

 

$

9,000,000

 

California

 

Delmar Bancorp

 

$

4,500,000

 

Maryland

Freeport Bancshares, Inc.

 

 

3,150,000

 

Illinois

 

First Bancshares

 

 

10,000,000

 

Mississippi

Fidelity Federal Bancorp

 

 

8,000,000

 

Indiana

 

MidWest Regional Bank

 

 

5,000,000

 

Missouri

Halbur Bancshares

 

 

3,000,000

 

Iowa

 

Lincoln Park Bancorp

 

 

5,000,000

 

New Jersey

Vintage Bancorp

 

 

3,000,000

 

Kansas

 

MidWest Community

 

 

2,500,000

 

Oklahoma

 

 

 

 

 

 

 

Peoples Bancshares

 

 

4,000,000

 

Virginia

 

 

 

 

 

 

 

Total

 

$

57,150,000

 

 

 

 


Portfolio

Our board of directors provides the overall supervision and review of our affairs. Management of our portfolio will be the responsibility of our advisor's, StoneCastle Asset Management, LLC (our "Advisor"), investment committee. Messrs. Siegel and Shilowitz will be responsible for negotiating, structuring and managing of our investments. Our Advisor's investment professionals have significant experience sourcing, analyzing, investing and managing investments in community banks.

We expect to create and maintain an investment portfolio of securities focused on the bank market, with an emphasis on community banks, through investment in numerous issuers differentiated by asset sizes, business models and geographies to create a more stable, long-term portfolio of assets. Our Advisor will monitor our portfolio companies and market concentrations and may adjust its underwriting criteria based on market conditions and portfolio concentrations. Our Advisor's monitoring operations will include sensitivity analyses to determine the effects of changes in market conditions on our asset portfolio. These analyses may include, among other things, simulations of changes in interest rates, changes in economic activity and other events that would affect the forecasted performance of our assets.

Press Releases

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SEC Filings

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Annual Reports

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Quarterly Results

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2012

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