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Horizon Technology Finance Corporation (HRZN)
Q4 2012 Earnings Conference Call
March 13, 2013 9:00 am ET
Robert D. Pomeroy Jr. - Chairman and CEO
Gerald A. Michaud - President
Christopher M. Mathieu - SVP, Chief Financial Officer and Treasurer
Nick Rust - IR, IGB Group
Jonathan Bock - Wells Fargo Securities
Boris Pialloux - National Securities
Robert Dodd - Raymond James
Greg Mason - KBW
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I would now like to turn the call over to Nick Rust of The IGB Group for introductions and the reading of the Safe Harbor statement. Please go ahead, sir.
Thank you, and welcome to the Horizon Technology Finance fourth quarter and full year 2012 conference call. Representing the Company today are Rob Pomeroy, Chairman and Chief Executive Officer; Jerry Michaud, President; and Chris Mathieu, Chief Financial Officer. Before we begin, I would like to point out that Q4 press release is available on the Company's website at www.horizontechnologyfinancecorp.com.
Now, I'll read the following Safe Harbor statement. During this conference call, Horizon Technology Finance will make certain forward-looking statements including statements with regard to the future performance of the Company. Words such as believe, expect, anticipate, intend, or similar expressions are used to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties and predicting future results and conditions. Current factors could cause actual results to differ on material basis from those projected in these forward-looking statements, and some of these factors are detailed in the 'Risk Factor' discussion in the Company's filings with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended December 31, 2012. The company undertakes no obligations to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
At this time, I would like to turn the call over to Rob Pomeroy.
Robert D. Pomeroy Jr.
Good morning, and thank you all for joining us. For today's call, I will discuss our fourth quarter and full year 2012 highlights. Jerry will then provide a market overview. After that, Chris will review our financial results as well as our investment portfolio. Chris, Jerry, and I will then be happy to take your questions.
We are pleased by our performance for the fourth quarter and full year 2012 as management continues to expand Horizon's earning assets while maintaining a high credit quality of our overall portfolio. During the fourth quarter, we utilized our strong market origination capabilities to increase both new loan commitments and gross fundings to record levels. We also achieved strong fee income from prepayments and realized a modest gain from the sale of warrants in support of our financial results.
For the fourth quarter, we earned net investment income of $0.36 per share, covering our monthly dividends to clear for the first quarter of 2013 totaling $0.345 per share. We will discuss our new monthly dividend policy in more detail a little later on the call. In further highlighting our performance, we ended 2012 with an investment portfolio of $228.6 million, an increase of over 28% compared to the end of 2011, despite a high level of prepayment activity in both the fourth quarter and full-year 2012.
As we stated in the past, prepayments are unpredictable and can have a material impact on net investment income. While prepayments serve as a fundamental aspect of the venture lending model, they are best measured over a 12 month period to more accurately assess their impact on NII. To date in the first quarter, we have had no material prepayments. However, as with the timing of new loan fundings, prepayments often occur near the end of the quarter. We are aware of the potential for the prepayment of one or two loans before the end of March. These may or may not happen or may slip into the second quarter.
Net investment income was $3.4 million or $0.36 per share for the fourth quarter and $12 million or $1.41 per share for the full year. In the fourth quarter, many of the new loans are funded near the end of the quarter, which is typical in our industry. Therefore, the positive impact on net investment income from a larger portfolio will be more fully realized in subsequent periods.
Our portfolio yield was 14.7% for the fourth quarter and 14.2% for the full year, and at December 31, our net asset value per share was $15.15 which reflects in part the one-time event of declaring both the third and fourth quarter 2012 dividends during the calendar quarter, calendar fourth quarter. As previously announced, we declared and paid a third quarter dividend in November of 2012. Later that same month, we declared monthly dividends of $0.115 per share for each of January, February, and March 2013. Because these monthly dividends, totaling $0.345, were declared and accrued during the fourth quarter, they reduced our NAV at year-end.
Our dividend strategy is designed to pay monthly dividends that are covered by net investment income over time. With most of our past warrant gains now distributed through regular dividends, we will retain the remaining realized gains as well as future gains as undistributed income or spill-over income for future payout consideration.