Monroe Capital Corporation (MRCC) Q2 2016 Earnings Report, Transcript and Summary

Welcome to the Monroe Capital Corporation Second Quarter 2016 Earnings Conference Call. Before we begin, I would like to take a moment to remind our listeners that remarks made during this call today may contain forward-looking statements, including statements regarding our goals, strategies, beliefs, future potential, operating results or cash flows. Although we believe these statements are reasonable based on management's estimates, assumptions, and projections as of today, August 9, 2016, these statements are not guarantees of future performance. Further, time-sensitive information may no longer be accurate as of the time of any replay or listening. Actual results may differ materially as a result of risks, uncertainties, or other factors including, but not limited to, the factors described from time to time in the Company's filings with the S.E.C. Monroe Capital takes no obligation to update or revise these forward-looking statements. I will now turn the call over to Ted Koenig, Chief Executive Officer of Monroe Capital Corporation.

Thank you to everyone who has joined us on our earnings call today. I'm joined by Aaron Peck, our CFO and Chief Investment Officer. Last evening we issued our second quarter 2016 earnings press release and filed our 10-Q with the SEC. I will first provide an overview of the quarter before turning the call over to Aaron to go through the results in more detail. He will then turn the call back to me to provide some closing remarks. We are very pleased to have announced another very strong quarter of financial results. For the quarter, we generated adjusted net investment income of $0.43 [ph] (should be $0.44), comfortably covering our second-quarter dividend of $0.35 per share. This represents the ninth consecutive quarter we have covered our dividend. Our consistent dividend coverage continues to separate us from the pack of the BDCs that have either cut their dividends or have been unable to generate net investment income in excess of their most recent dividend. Or are covering their dividends artificially by temporarily reducing their management fees. Our book value per share increased again, to $14.50 per share as of June 30, 2016, a $0.05 per share increase from the book value per share at March 31, 2016. The increase in per-share book value is primarily the result of our earnings in excess of dividends paid during the quarter. The second quarter of 2016 appears to be mixed for many in the industry and our BDC peers. Some of our peers have had credit issues resulting in increases in nonaccruals and credit writedowns, while others appear to have relative stability in portfolio health. While some of our troubled credits have experienced some additional mark-to-market fair value declines, the majority of our portfolio saw either improvements in their marks during the quarter or their marks remaining relatively flat to the prior quarter. The net result was a small increase in mark-to-market unrealized losses for the quarter. Despite the small net increase in unrealized losses, we still generated earnings in excess of our dividend, which resulted in an improvement in our per share NAV. Our relative NAV stability is due in part to our position in the capital stack of our borrowers. Our portfolio is heavily concentrated in senior loans; in particular, first lean secured loans. 93% of our portfolio is secured loans and over 74% is first lien secured. BDCs that have a significant amount of their investments in second lien and unsecured mezzanine loans are much more likely to take markdowns in their portfolio and experience losses when the economy takes a negative turn. As previously announced, we were pleased to price an equity offering on July 20th, 2016. Including the exercise of the overallotment option by the underwriters, we were able to raise gross proceeds of over $55 million new dollars. This raise was accretive to our June 30, 2016 per-share book value. As with past offerings, we applied the proceeds to our credit facility and will redraw the capital on that credit facility over time to fund deals both at the BDC parent, as well as in our SBIC subsidiary. As we discussed on our last call, we have secured another $75 million in very attractively priced SBA debentures for our SBIC subsidiary. Net capital, together with proceeds from our recent equity offering of new shares, should allow us to continue to grow profitably and create long-term value for our shareholders. Finally, all in all, I am very pleased with excellent, consistent, and even a little boring performance in the second quarter at a time period when the overall debt markets were at a difficult point in time. I'm now going to turn the call over to Aaron, who is going to discuss the financial results in more detail.

Thank you, Ted. Our investment portfolio remained stable during the quarter. And we have continued to generate high yielding opportunities, which has allowed us to maintain a high level of weighted average yield in the portfolio. As of June 30, 2016, the portfolio was at $343 million at fair value, relatively flat from the prior quarter end. At June 30, 2016, we had total borrowings of $127.2 million under our revolving credit facility and SBA debentures payable of $40 million. As of June 30, 2016, our net asset value was $188.7 million, which increased slightly from the $187.9 million in net asset value as of March 31, 2016, primarily as a result of earnings in excess of dividends paid during the quarter. On a per-share basis, our NAV increased from $14.45 per share at March 31, 2016, to $14.50 per share as of June 30, 2016. Turning to our results for the second quarter, adjusted net investment income, a non-GAAP measure, was $5.7 million, or $0.43 per share, a decrease of $0.04 per share when compared to the prior quarter. At this level, we continue to comfortably cover our quarterly dividend of $0.35 per share. The decrease in per-share adjusted NII from the first quarter was primarily due to a decrease in dividend income during the quarter from our equity stake in Rockdale Blackhawk. Rockdale' s first quarter distributions included some true-ups related to 2015 taxable income, which obviously did not continue in the second quarter. We did, however, receive significant dividend income from Rockdale in Q2. As we have discussed in the past, we expect that we'll continue to receive significant dividend income from Rockdale in successive quarters, as long as we continue to hold the equity and the company performance remains strong. We acknowledge that if this investment were to be sold in the future, we would not be able to easily replace this level of dividend income. If you backed out all of the distributions from Rockdale Blackhawk during the quarter from adjusted NII, our new adjusted NII without Rockdale Blackhawk distributions would still cover our dividend of $0.35 per share in the quarter. Separately, if you were to strip out fee income and paydown gains from adjusted NII, our per-share core net investment income was higher than the prior quarter and comfortably covered the dividend. Additionally, this quarter we generated net income of $5.3 million or approximately $0.41 per share, a decrease from the net income in the prior quarter of $0.61 per share. This decrease is primarily due to the increase in net realized and unrealized losses during the quarter. Looking to our statement of operations, total investment income for the quarter was $11.1 million compared to $11.5 million in the prior quarter. The decrease in investment income is primarily as a result of the decrease in dividend income during the quarter, partially offset by an increase in interest income. Total expenses of $5.4 million included $1.8 million of interest and other debt financing expenses; $1.5 million of base management fees; $1.3 million in incentive fees; and $763,000 in general, administrative, and other expenses. As for our liquidity, as of June 30, 2016, we had approximately $33 million of capacity under our revolving credit facility. We had $40 million in SBIC debentures drawn at the end of the quarter. And $8.1 million of restricted cash available for reinvestment in our SBIC subsidiary due to recent repayments. As we have disclosed in prior calls, MRCC was approved for $75 million in additional SBA debentures which, once drawn, would bring MRCC to a total of $115 million in SBIC debentures. As with prior capital raises, we used the net proceeds of the recent equity offering to pay down our revolving credit facility. We would expect to redraw on that facility to make investments in the next several months, both at the BDC parent company as well as in our SBIC subsidiary. I will now turn the call back to Ted for some closing remarks before we open the line for questions.

Thank you, Aaron. The current pipeline for all of our funds at Monroe continues to be very strong. Our focus on proprietary national lower middle market origination has continued to provide our funds with unique, attractive investment opportunities with high-risk adjusted returns. We have continued to generate solid earnings and cover our dividend with real earnings. We attribute our success to our differentiated origination platform and the depth of the entire Monroe Capital organization, which has supported a high effective yield and very strong credit performance in our portfolio. With our stock trading at a dividend yield around 9%, fully supported by net investment income, and an increased per-share book value, we believe that Monroe Capital Corporation provides one of the most attractive and the most stable investment opportunities for our shareholders and other investors. Thank you all for your time today. And with that, I'm going to ask the operator to open the call for questions.

[Operator Instructions]. Our first question comes from Mickey Schleien with Ladenburg.

Good morning, Ted and Aaron. My first question just relates to a few credits that are marked at levels which may indicate some distress but it may also indicate just a bid out there. So I was wondering if you could give us an update on Collaborative Neuro, Favco, Grace Lock, and Playtime.

Great. Thanks Mickey, this is Aaron. All four of those names are directly originated names that we hold in the portfolio. All of them have had some stress. All of them are working through that stress and we're still in a position today where we feel confident about a full recovery in all of the names. And so I don't want to go into too much detail about any one of them, but in general we still feel very good about all four of those names. There has been some recent performance that has required us to take a mark on some of those names. And most times, when we're taking a mark it's because the valuation from has either increased the discount rate associated with the name or because they've made some assessment of recovery that's based on a fair value that's basically based on a waterfall analysis. But net-net, I'd say all four of those names, we feel very confident about our ability to recognize a full recovery. In all four of those cases they're still accruing.

Aaron, in general, are these names facing operational issues, or is there some early signs of maybe a slowdown in the economy that could be affecting their performance, or more competition? If you could generalize, what would it be?

It's a good question. In fact, I really can't generalize about theses four names. Each one of these names has very specific, name-specific issues that they're facing. Sometimes it's operational, sometimes it's in their very specific market. But I wouldn't take anything away from the stress in these names that's more global in nature about the economy. It's just the nature of what we do, lower middle-market companies go through some stress, they need some hand holding, and that's what we do here. We're very good at it. So all four of these companies are firmly being held in our hands.

Okay. Just one quick follow-up. Given movements in LIBOR, I have been asking managements which LIBOR rate do their floating rates investments usually refer to, whether it be one month or three month or something else.

Most of our borrowers have options, but in reality most of our names are tied to one-month LIBOR.

One month. Those are all my questions. Thank you for your time this morning.

Thanks, Mickey.

Our next question comes from Bob Napoli with William Blair. Your line is open.

Thank you. Good morning. Question on the -- with the capital you raised and the SBIC funds you have a lot of dry powder. And thoughts on being able to put that -- how quickly you will be able to put that capital to work. You didn't use any of the SBIC in the second quarter, any of the new SBIC funds. Is it all available today?

Bob, it's Ted.

Hey, Ted.

How are you doing? Thanks for the call. Overall, we see a very strong pipeline going into the back half of Q3, and we think we're going to see a fair amount of activity in Q4. That said, we're going to continue to be selective and very focused on credit, and as opportunities develop, the nice thing about from a platform standpoint is the BDC here has access to the entire Monroe Capital organization. The BDC accounts for probably about 10% of our total assets. So the BDC is getting a disproportionate benefit throughout the entire Monroe Capital organization by participating, since we have exemptive relief in these transactions. So I can't predict how quickly deals will be booked into the BDC, but I will tell you that our pipeline is very, very strong.

Okay. So it sounds like that by year end you should be pretty far along in having that -- the SBIC and the additional IPO funds, a good chunk of that at work.

That's our plan. But again we're going to be focused on credit.

And just on the competitive front, are you seeing -- are yields coming down, continuing to come down somewhat in the market? Are you seeing more or less competition? Do you think some BDCs have been raise, in addition to yourselves, have been able to raise capital, banks may be getting a little bit more active?

I will tell you that there's -- the market is as competitive as it's ever been. I don't think it's as much from the banks, but there's certainly our new funds that have been raised. There's more money coming into the space. A lot of that money is chasing bought transactions. In other words, we originate an agent, most all of what we do. There's a lot of money coming into the sector that don't have deep origination organizations. So I think you're going to see and continue to see some pricing pressure in the industry because as these new players enter, with the desire to buy pieces of deals and participations in deals, that new money is going to drive down, I think, from a supply standpoint, some of what's out there. And then Q2 was one of the slowest quarters from a demand standpoint. If you look at all the stats, M&A volume was down, middle-market loan volume was down, primary issuance, and liquid loans was down. So I take away our performance even more so, and when you look at the backdrop of what was happening in Q2, that we were able to be successful and continue to generate consistent earnings.

Bob, I will just add, specific to the BDC portfolio as we've said in past calls, you shouldn't assume that we're going use the SBIC leverage to push higher and higher ROE. The assumption that I think people should make is that we're going to use that extra leverage, that extra leverage that doesn't hit our regulatory leverage, to continue to keep the risk profile of our portfolio low. So it's not unreasonable to think that our yields are going to stay here or come down a little, which should not decrease our ROEs because of the excess leverage in the SBIC subsidiary. So our plan is not to take up the return by putting in the excess leverage, but it's to take down the risk and keep a consistent return.

Okay, that's helpful. Last question, on Rockdale Blackhawk, are you seeing something there? You're pointing out, it's obviously a concentration, a good concentration to have had, but are there some thoughts that, that investment will be sold, that the -- ?

We're just cautioning that we don't control the timing of whatever happens to Rockdale Blackhawk. I don't have any information about any pending sale, and I'm not trying to foreshadow that. It's just that we're a minority holder and we don't have control of the decision making there, we're certainly in close touch with management, but we don't control that. So we just like to caution that we don't control that timing, but everything there is going very well, and the company continues to perform nicely, and we don't have any near-term expectations of an exit or anything like that, but we don't control the timing ultimately.

Thanks, Aaron. Thanks, Ted. Nice job on the quarter. Appreciate it.

Our next question comes from Bryce Rowe with Baird. Your line is open.

Thank you. Most of my questions were just asked. I did want to ask about PT. It looks like you added an incremental investment there this past quarter. Just maybe an update on what's happening at TPP. Thanks.

Sure. So TPP is a long and slow turnaround story. We believe that with all the focus we've put on management and trying to change the trajectory of that company, that we've had some good sort of long-term opportunities there. But it's not going to happen overnight. The company is going through a bit of a shift of its business strategy, and we're being very supportive of that shift. But we continue to believe that there's an opportunity here for TPP to see a material improvement in its business and some benefit in its cost structure. And with some of that same firm hand-holding I've talked about in the past, our expectation would be that over time, that company should see a recovery and an improvement in both its performance and its marks. But the time of that, it remains uncertain. And the valuation shift from last quarter to this quarter is not really symptomatic of a major change in the company's financial performance. It's more about looking at the risk of the turnaround in timing, and the valuation firm tends to be a little more conservative when they don't see projections getting hit. So it doesn't really reflect any specific performance issues this period versus last period. It's more about the speed of the recovery and we do think it will be a bit of a slow turnaround, but one that we hope will bear some fruit, and we believe that it will.

All right, thank you.

Thanks, Bryce.

Our next question comes from Chris York with JMP Securities. Your line is open.

Good morning, guys. So I wanted to follow up a little bit on some of the conversation that was already discussed. So given your recent equity raise and what I calculate to be a marginal cost of equity at like 9.5%, could you provide us with the estimated all-in levered yield on new investments that is necessary to cover these dividends?

It's a good question, Chris, and it's frankly not something that we at this moment have modeled, but obviously the yield threshold is really related to whether the money goes into the SBIC sub or at the parent. We also will point out that our effective yields that we announced there, that we published in our 10-Q aren't really the all-in return associated with our investments. It's really more of a coupon yield. So it doesn't really reflect the actual yields we recognize in the portfolio. So when you're trying to sort of back into a yield, you're looking at our current effective yield or the yield of new assets coming on. It probably understates the total return associated with those investments based on past history. Outside of that, I don't think we're really in a position to give any specific guidance other than to say we are clearly very focused on making sure that every asset that we put on the books winds up being accretive to our performance long term.

Got it, makes sense. And then secondly here, so we're aware that the advisor had some successful recent fundraising. Given the growth in the platform, I wanted to take a step back and maybe get an update on the BDC strategy long term. How are you thinking about the BDC's place internally? And then I presume it's been a good marketing tool for fundraising. Secondly, how big would you like the BDC to be in terms of asset size? And then lastly, any thoughts on strategic initiatives that would accompany asset growth?

Lots of questions, Chris. Those are all good ones. What I will do is I will just talk about kind of the BDC and the strategic nature of it first and then hit some of the other points that you made. Monroe is almost a $4 billion organization. So if we aggregated our BDC, together with our other assets, we probably would be one of the fourth or fifth largest BDC today in the market. The BDC is a very, very important part of our overall strategy. We raise money as a firm throughout the world. About a third of our investors today, LP investors, are in Europe. We have investors in the Far East, we have investors in the Middle East, and we have many, many investors throughout the US. We have a CLO platform, we have a private funds management platform. We have pension funds, insurance companies, many universities, endowments, foundations, hospitals, healthcare organizations. The most public part of our business is the BDC. It's like a baseball game where you have the score every inning posted. And that score and that baseball game is one of the most important things to us at Monroe as a firm because it's our calling card. When we go to Helsinki or Copenhagen or Dusseldorf or Cologne or Dubai or South Korea, any of those places, the portfolio managers and the CIOs, have a hard time benchmarking firms because a lot of the information is not as transparent in private funds and commingled funds. The BDC, through the analyst coverage and the SEC filings, is the most public. And when those CIOs and those portfolio managers look at platforms, one of the things that is the most important to us is that we are at the top of the class when it comes to BDC management and our BDC performance. So it's one of the most important things for me that I'm focused on here at the firm. That answers one question. Another question was plans for the future. I think that if you look at what we've done, we took the BDC public in 2012, October of 2012, so roughly four years ago. And we went public with about $75 million, give or take, of assets, and today we're about $345 million, give or take. So that's a 600% increase in total assets over a four-year period of time, and on a CAGR basis, that's a really high number. So I will tell you that we continue to be very focused on growing our BDC, and my foot is on the gas over here at Monroe to grow this vehicle. And we've got lots of happy shareholders, many of the shareholders are friends and family. We went out with the BDC with 15% of our shares in friends and family hands on an IPO. That is highly unusual in the world of BDC and the world of retail placements. Many, many of those shareholders that bought at the IPO are still shareholders, and most of which have increased their share holding positions, and I know this because I get phone calls and e-mails and texts from many of them every day that we release earnings. So I'm happy to say that we've got a very tight knit group of shareholders and lots of people that we do business with in the financial industry community, whether they're accountants, lawyers, private equity, firm managers, bankers. Many of the pension funds and the institutional investors, many of their committees and many of their leaders at those organizations actually own Monroe BDC shares in their personal accounts. And we talk about that when I tour the world speaking to our institutional LP investors. Last point, last question you raised, was strategy. We are of one of the few BDCs that are trading at a level and that have shown a history of continue to generate earnings in NAV increases. If you look at what's happened between 2015 and 2016, I think there's only three or four BDCs that actually showed an increase in NAV over that 12-month period. So we are looking at a variety of opportunities to grow the BDC, not only organically, but inorganically. And we look at proposals, we look at others, we look at other businesses, and we've got several that we're examining today. Whether any of those get to closure or not, it's going to depend on due diligence and our view of the landscape and where we see growth in the future. I will assure that you we are going to use all of the strategic levers that we have at our disposal to grow the BDC as well as through organic levels. I hope I have answered most if not all of your questions.

Ted, you were three for three there, so thank you. Color is very helpful. I wasn't expecting to get a hard and fast number on asset growth for the BDC, but it's a good way to kind of think about it, you said, BDC assets are 10% of assets under management. Is that kind of a good proxy that we could maybe think about for growth? Do you want to keep that consistent with AUMs as a manager?

That's a hard question only because we don't have a set-in-stone number here. Frankly, I would prefer to see the BDC grow at a faster rate overall and be a higher percentage of our overall AUMs. The challenge is, is that we're doing a pretty good job in our CLO business, and we're doing a pretty good job in our private-funds business where we're generating strong double-digit returns over a 16-year period. So we're doing our best to have the BDC keep up with everything else at this point. But long term, I would like to see the BDC be a higher overall percentage of our firm's AUMs.

Chris, I will just point out that as much as that is true, we would love to see the BDC grow, but the benefit for shareholders is unlike some other platforms in which the BDC is the predominance of their assets, we aren't reliant on the BDC growth for our manager platform in order to grow our platform. So we can be very careful about growing our BDC in the best possible way for shareholders. We've seen other BDC managers choose to grow in ways that maybe aren't so good for shareholders, and that's not something we're willing to consider.

That's a very important distinction so thanks for adding that. One other follow-up on Ted's comments. You talked about foreign investors. Given recent changes in the withholding exemption, have you had more conversations with some of these foreign LPs about potentially investing in the BDC?

There's a high degree of interest by non-US-based LPs to invest in US-based yield-driven products. And we're seeing that across the board. Irrespective of what part of the world right now, we're seeing probably -- we're coming to a high point, a high watermark in Europe, where with negative interest rates in many of the countries, and a lot of the unsure nature of what's going on in the UK right now with this latest vote of Brexit, there's a lot of interest in US-based yield, and we're just starting to see the beginnings of it in Asia. So I would be very surprised if two to three years from now, foreign investors did not constitute a larger percentage of loners in these vehicles.

Interesting. That's it for me. Thanks for taking my questions and thanks for all the color.

Thank you. Our next question comes from Christopher Testa with National Securities.

Good morning, Aaron, Ted, Thanks for taking my questions. Just on the unitranche originations have been lighter. I just wanted to see if this is from sponsor financed M&A remaining so low that there's not as much demand for the product or if you're actively looking to shift more away from that into senior secured loans.

It's probably a little bit of a combination. Don't read too much into that, Chris. The second quarter was a light quarter for sponsored finance M&A. Unitranche is still the best product in the market, and it's the best game in town for finance companies. So I would expect as the year goes on, that you will see more unitranche financing from Monroe as probably from some of our competitors as well. As Aaron mentioned, we're very focused on senior secured, top-of-the-capital stack. So a combination of unitranche finance and first-lien finance is what I think you can expect to see from us for the near term. And I would imagine our unitranche product coverage will continue in the lower end of the middle market. As usually happens, Q3 and Q4 tend to pick up in terms of activity each year. So I would expect you'll see a fair amount more activity in the unitranche finance level for us as the year goes on.

Okay, great. And just on the weighted-average coupons on the senior secureds, those have trended down quite a bit since the beginning of 2015. Just wondering, is this something that's a function of flight to quality where were first liens being bid much more than second lien? The second part, I just wanted to know if that's something that you see continuing through the remainder of 2016.

I think you're right. I think it's more of a flight to quality. What happened was, the last couple of years, many of the BDCs had larger concentrations in second-lien positions. And what you're seeing is that the marks against those positions and the negative performance in those assets have created a bias over the last 12 months for the BDCs to rotate into more first lean. So what's happened is, because of that bias, that market has become a little more heated and a little more competitive. You've seen kind of the weighted-average spreads move down a little bit. And I would expect that to continue through the remainder of the year. But the byproduct of that is that the platforms that are able to self-originate, and agents' transactions, should show a bigger differential and create more value in that weighted-average spread calculation, because those platforms that can originate and the agent will get the benefit of the upfronts, and probably a little higher yield because they can speak for more of the transaction. So I think what you've seen, and it's been remarkable, frankly, in last two years, for me to start seeing a disparity finally in the BDC community, where you've got a handful of firms that are trading at what I'll call acceptable levels, and a premium, and then you've got a lot of firms that are not trading at acceptable levels, or they're trading fairly far off of net asset value. And I think that distinction will continue over the next 12 months as yields will be increasingly hard to come by.

I would definitely agree with that. Just shifting gears to retail ABL, I know you guys have had great vertical in that. Just wondering, with the distress in retail, if you're seeing more opportunities and if you expect yields within the retail ABL vertical to pick up as a result of that.

Yes. The answer to both questions are yes. The retail ABL business is a very specific business, and it takes a fair amount of expertise and understanding how the retail space works and how the collateral is impacted by the general economy as well as very specific factors. And what I think you will continue to see is the retail space is under pressure, and what happens, is that generally, when retailers need capital it's in Q3 and Q4. So I would expect to see more transactions in that space, in the coming third quarter and coming fourth quarter.

Okay, great. And just so -- hotels, gaming, and leisure, 10.3% of the portfolio, fair value. Just wondering now first, if you could break out the mix of that, how much is hotels, and just your thoughts on this segment of the portfolio given the lodging industry has been under pretty significant stress.

I'll make a general comment, then I'm going to turn it over to Aaron for more specificity. I will tell you that we are not big hotel lenders. I don't believe we have any hotel exposure, and that's an area that's highly cyclical, and it's not really geared for, in my opinion, a good BDC investment portfolio. So I think where you will see some of our exposure is in kind of the gaming-and-leisure areas, and that has been a very, very high performing area. We think we've aligned ourselves with a couple of companies in that space, that are manager specific, market specific, product specific, where they're generating outsized returns. So from our perspective, I think we're going to cherry pick and dive into specific companies that we think has a real strategic benefit and a strategic advantage in their market. So I'm going to let Aaron comment further. But that's, so you have a perspective, we're not hotel lenders. That's not our business.

Right. And I don't have a lot more to add, Chris, other than to say that the names that fall in that category, one of them is involved in destination marketing for states and countries. One of them is a regional gaming company that's doing very well. And the other is a company in the travel space that's involved with time shares. And not owning them but helping people buy and sell them. So we really don't have any exposure to the entry you referenced.

Great. Thank you for the color. Last one for me, so I know the management fee, the base fee is at 175. Not at all implying you guys have not earned it, you certainly have with your performance. Just wondering if there's been any discussion on the Board possibly lowering that to 150 just to be more in line with the industry trends and assist your valuation even further in terms of the multiples the stock trades at.

I will tell that you annually the Board does a review of all management fees and the management agreement, and to date the board has felt that our management fee is appropriate given where the market is. I think if you look at it, there's lots of management fees that are higher than ours, and there's a few that may be lower. But when you look at the management fee in relation to performance, I think our Board has been satisfied that we are delivering a good market overall return to our shareholders, and I'm sure that will come up every year as the Board continues to review where we sit, vis-a-vis the market and our competitors.

Okay, great. That's all for me. Thanks, Aaron. Thanks, Ted.

Thank you. Our next question comes from Christopher Nolan with FBR.

Hi guys, what do you think about the dividend, given that you're feeding it so well with your EPS?

Hi Chris, it's Aaron, thanks for the question. The Board looks at the dividend every quarter, always considering what should we do about the dividend. I think that we've been very mindful of the fact that some of our income that is in that NIA every quarter is difficult to predict. Some of it is it fee related. Some of it is dividend related to one investment in particular. So we continue to monitor and continue to watch it, and I think all I can really say about the dividend is it's something we think about quarterly. We talk about it very regularly, and we'll always be considering whether it's the right time to make a change in the dividend. To date we have not. We have felt that we're in a good position and we're taking a safe stance with regards to the dividend to make sure we're never in a position to under-earn it, we always want to over-earn it. We'll look at all of our options every quarter. I don't have a lot more to add other than it's something that's a constant source of conversation among the Board members.

And Aaron or Ted, is the current total expenses a good run rate for the rest of the year? I know it came down from the first quarter.

It goes up and down every quarter based on little things on the margin. I would say that it's a reasonable level to look at as an expectation quarter to quarter.

Great. Finally, Ted, your comments talking about the environment in terms of you're seeing more competition come in and for yields to go down and so forth. Given that, and given the SBA, why do the equity raise? Is it sounds like it's more challenging environment in terms of finding quality investments.

I didn't say that. I said that there's more competition of new entrants entering the space because it's been easier to raise money, frankly, in the private-debt space than it has been in the real estate space or the private-equity space or our infrastructure lending. So you look at the big guys and look where Carlisle and KKR and TPG and ARES the rest of those guys are raising money today, and you'll see that most of their capital raising efforts are focused on the debt area as opposed to the equity area. So, what I said is that there's more competition for dollars. I told you that also that our pipeline is as strong as it's ever been. And I anticipate having another record year at Monroe in terms of overall investing. 2015 was a record, and I think that 2016 may even be better for us, depending upon what happens in the overall market in the fourth quarter. So our BDC, in my view, has been a best-in-class vehicle. And we want to make sure that we have the capital ready to deploy as the opportunities exist throughout the Monroe platform so the BDC can continue to share on a pro rata basis with some of our other funds under management and get the benefit of these proprietary unique differentiated yields that we're generating throughout the firm.

Great, that's it for me. Thank you.

Thank you. That concludes today's question-and-answer session. I would like to turn the call back to Ted Koenig for closing remarks.

I just want to thank everyone for being on the call this afternoon. We greatly appreciate your involvement with us and we will continue to strive to be the very best in our space and we look forward to speaking again next quarter. So have a nice day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect. Everyone have a great day.