Thank you for standing by. At this time, I would like to welcome everyone to Stellus Capital Investment Corporation's Conference Call to report financial results for its third fiscal quarter ended September 30, 2024. Participants are currently on a listen-only mode, and we will have a question-and-answer session following the presentation. If you require operator assistance during the call, please press star zero on your telephone keypad. This conference is being recorded today, November 8th, 2024. It is now my pleasure to turn the call over to Mr. Robert Ladd, Chief Executive Officer of Stellus Capital Investment Corporation. Mr. Ladd, you may begin your conference.
Thank you, Ali. And good morning, everyone, and thank you for joining the call. Welcome to our conference call covering the quarter ended September 30th of this year. Joining me this morning is Todd Huskinson, our Chief Financial Officer, who will cover important information about forward-looking statements as well as an overview of our financial information.
Thank you, Rob. I'd like to remind everyone that today's call is being recorded. Please note that this call is the property of Stellus Capital Investment Corporation and that any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by using the telephone number and PIN provided in our press release announcing this call. I'd also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Today's conference call may also include forward-looking statements and projections, and we ask that you refer to our most recent filing with the SEC for important factors that could cause actual results to differ materially from these projections. We will not update any forward-looking statements unless required by law.
To obtain copies of our latest SEC filings, please visit our website at www.stelluscapital.com under the public investors link or call us at 713-292-5400. Now I'll cover our operating results for the quarter, but I would like to start with our life-to-date activity. Since our IPO in November 2012, we've invested approximately $2.5 billion in over 195 companies and received approximately $1.6 billion of repayments while maintaining stable asset quality. We've paid over $273 million of dividends to our investors, which represents $16.28 per share to an investor in our IPO in November 2012, which was offered at $15 per share. Turning now to operating results, in the third quarter, we generated $0.39 per share of GAAP net investment income, and core net investment income was $0.40 per share, which excludes estimated excise taxes.
Net asset value per share increased $0.19 during the quarter due to unrealized appreciation on our investment portfolio, primarily related to one equity investment. Our ATM program was also active during the quarter, and we issued $14.6 million in shares at an average gross price of $13.79. All issuances were above net asset value. With respect to portfolio and asset quality, we ended the quarter with an investment portfolio at fair value of $908.7 million across 99 portfolio companies, up from $899.7 million across 100 companies as of June 30th, 2024. During the third quarter, we invested $9.4 million in one new portfolio company and had $8.4 million in other investment activity at par. We also received one full repayment totaling $8.4 million and received $5.5 million of other repayments, both at par.
We also received one equity realization that generated proceeds of $2.6 million and a realized gain of $2.2 million. At September 30th, 98% of our loans were secured and 95% were priced at floating rates. The average loan per company is $9.5 million, and the largest overall investment is $19.6 million, both at fair value. All but one of our portfolio companies are backed by a private equity firm. Overall, our asset quality is slightly better than planned. At fair value, 26% of our portfolio is rated a one or ahead of plan, and 18% of the portfolio is marked in an investment category of three or below, meaning not meeting plan or expectations. Currently, we have loans to six portfolio companies that are non-accrual, which comprise 4.7% of the fair value of the total loan portfolio.
With that, I'll turn it back over to Rob to discuss the overall outlook.
Okay. Thank you, Todd. As we look ahead to the fourth quarter, I'll cover portfolio growth, equity realizations, capital management, and dividends. Based on an active pipeline, we expect to end the fourth quarter with a portfolio between $930 million and $950 million. We do expect some loan repayments, approximately $29 million in the quarter, and equity realization proceeds to total about $5.3 million, which will result in realized gains of $4.3 million, one which is disclosed in our subsequent events for $1.07 million of proceeds and a realized gain of over $600,000. As Todd noted earlier, we had a good third quarter for equity issuance under our ATM program. After quarter end, we increased our bank facility by $55 million from $260 to 315 millioon and have a meaningful amount of capacity.
Given our current capitalization, we have the ability to grow the portfolio to $1 billion plus, and finally, regarding dividends, we did declare the dividend for the fourth quarter at a rate of $0.40 per quarter payable monthly, and of which the record date for November and December are forthcoming, and with that, I'll open it up for questions, and Ali, if you'll please begin the question and answer session, please.
Thank you. Ladies and gentlemen, at this time, we will be conducting our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue, and you may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. Our first question is coming from Paul Johnson with KBW. Your line is live.
Yeah. Good morning, Paul.
Good afternoon. Good morning. Thanks for taking my question. With just NII, a little light of our expectations and slightly below the dividend this quarter, the activity was fairly light. Was there any kind of, I mean, was there any sort of temporary drivers there with NII being below the dividend this quarter with the incentive fee waiver and the timing of investments or anything like that?
Yes. I'd say nothing unusual. We certainly had a lower SOFR rate for the quarter. We did have a little bit of tick up in non-accrual, but nothing unusual. And as I recall, in last quarter, we had a little bit more in other income. So this would have driven last quarter to be a little bit higher. But again, I think a reasonable quarter in terms of expectation given the current interest rates. But as you noted, Paul, too, that our investment activity was lighter than expected, which again, as I mentioned, we expect to pick up in the fourth quarter. So that would have been impacted a little bit too. We thought we'd end the third quarter at 930 and ended it closer to 900.
Got it. So the kind of range that we're in, the $0.39, low $0.40s, I mean, if there's nothing unusual in there, is that a pretty good run rate going forward?
So we'll have to see how other income comes in the quarter and the fourth quarter. But just as a reminder that SOFR did drop, again, our loans would have repriced, most of them repriced again at 930. And that drove the yield you'll see nominally from 11.7 in the prior quarter to 11 even for the fourth quarter.
Got it. Okay. So it's mainly the base rates that make sense are driving the.
Correct. Yeah. Declining SOFR curve. Yeah.
Okay. And then can you again just walk through maybe kind of what drove the write-up in the portfolio this quarter, sort of the unrealized gains?
Yes. So there are a number of 99 companies, so a number of movements up and down. We did have one portfolio company that had some meaningful appreciation that's tied to a potential transaction, but just increased value in one of our equity co-investments.
Got it. So it was just the one company that kind of drove most of the appreciation this quarter then?
That's correct, Paul.
Okay. Okay. That's all the questions for me. Thank you.
Okay. Yeah. Thank you, Paul.
Thank you. Our next question is coming from Christopher Nolan with Ladenburg Thalmann. Your line is live.
Hey, just a follow-up on Paul's questions on the EPS run rate. So given the recent Fed action on lowering rates, that'd be a downward bias on EPS together with the higher non-accruals. Just want a little clarification.
Yes, that's right. It should have a little bit of impact. Again, as we move down in the quarter, interestingly it looked like the Fed's announcement yesterday hadn't changed the forward curve. But again, we did have a lower SOFR in the fourth quarter, or we will have a lower SOFR in the fourth quarter versus the third.
Got it. And then the lack of a fee waiver, should we expect the fee waiver to be a recurring item or just serve as a one-timer?
Go ahead, Todd.
Yeah. So Chris, thanks for the question. So it kind of depends on what happens in the quarter, of course, which we can't predict. But with respect to gains and losses, at the moment, we don't expect one this quarter, but we do, if nothing else changes, would expect to see a waiver maybe in the second quarter of 2025, so in the future. And then nothing after that. But that's if nothing changes. So if there's a change up or down, that could affect the waiver.
Yeah, and as you know, Chris, all just a function of the 12-quarter test.
Right. Exactly.
Absolutely. And then I guess final question, what's the spillover income?
It stands at $42 million right now.
Okay. Thanks, guys.
Thank you, Chris.
Apologies, ladies and gentlemen. I pressed the wrong button by mistake. Our next question.
No worries.
Apologies. Our next question is coming from Robert Dodd with Raymond James. Your line is live.
Hi, guys. I think you'd probably prefer to hear them visit from me. But on the appreciation, you mentioned it's tied to a potential transaction. Is that one of the ones that you think might occur in Q4, or is it a longer-term?
No, it would.
It's expected.
Yeah. It's a good question. It's expected to occur in Q4.
Got it. I just got that spillover income talk. That $42 million, does that include the prospective of realized gains that are going to come in Q4, or is that just as of the end of Q3?
It's as of the end of Q3, but the realized gains expected in Q4 are regular way, if you will, and we'll be able to distribute them. There will not be a tax impact.
Okay. Got it. Thank you. Sorry, just scribbling some things down. So on the yield level, I mean, as you said, most of it's base rates. There does look like there has been, versus a year ago, a little bit of spread compression, which obviously is industry-wide thematic. What's your opinion? Has that leveled out in terms of where new onboarding spreads are today as it's stabilized, or are we going to continue to see a little bit of that flow through as we go into Q4 through early next year?
Yeah. Good question. We're certainly seeing spreads come down from what were in the sixes to now in the fives. The impact of that is rolling through. You're not seeing if everything repriced, that would be a different number. We're seeing that in the fourth quarter. Newer opportunities are coming on in the fives versus the sixes, whereas the average yield currently is probably in the sixes, average spread in the sixes. It'd just be a question if that continues. We certainly have seen it stabilize, certainly not seeing it go down further. One thing that we've seen historically is when you get lower what used to be LIBOR or SOFR, you can see spreads actually stop compressing because I think people are also solving for an absolute yield.
But in any event, the baked into the quarter would be things that are being booked more in the fives than the sixes.
Got it. Got it. Thank you. And then, on just the obviously, Q3 came in a little in terms of portfolio. Overall size came in a little bit below where you were thinking a quarter ago. So how confident would you say you are in that 930 to 950 by year-end? I mean, it sounds like some things during the quarter might have slipped, but what's the risk of that happening again?
Yeah. No, that's a good question based on last quarter. So if it's helpful, we have 10 to 15 active deals, and we would be pretty confident to get to the $9.30 and could be higher. So if it's helpful, our activity has picked up quite meaningfully.
Got it. Thank you.
Thank you. As we have no further questions in the queue at this time, I would like to hand it back to Mr. Ladd for his closing remarks.
Okay. Thank you, Ali. And thank everyone for being on and your support of our company. And we look forward to speaking with you in the spring as we report on the whole year. Take care now.
Thank you, ladies and gentlemen. This does conclude today's call, and you may disconnect your lines at this time, and we thank you for your participation.