Logan Ridge Finance Corporation

Thank you, good morning, and welcome to Logan Ridge Finance Corporation's second quarter and the June 30, 2023 earnings conference call. An earnings press release was distributed yesterday after the close of the market. A copy of the release along with the supplemental earnings presentation is available on the company's website at www.LoganRidgeFinance.com in the investor resources section. and should be reviewed in conjunction with the company's Form 10-Q filed with the SEC. As a reminder, this conference call is being recorded for replay purposes. Please note that today's conference call may contain forward-looking statements which are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the company's filings with the SEC. Speaking on today's call will be Ted Goldthorpe, Chief Executive Officer, President, and Director of Logan Ridge Finance Corporation, Jason Roos, Chief Financial Officer, and Patrick Schaefer, Chief Investment Officer. With that, I would now like to turn the call over to Ted Koltor, Chief Executive Officer of Logan Ridge Finance Corporation. Please go ahead, Ted.

Good morning, and welcome to our second quarter 2023 earnings call. I am joined today by our Chief Financial Officer, Jason Ruse, and our Chief Investment Officer, Patrick Schaefer. Following my opening remarks, Patrick will provide additional detail on our investment activity to date and Jason will walk through the financials. I'd like to start by highlighting that the second quarter of 2023 was Logan Ridge's strongest quarter to date since we took over managing the company just two years ago, and largely a continuation of the performance trajectory Logan has been on since the middle of 2022. As the company's exposure to the legacy equity portfolio has continued to decline and its exposure to credits originated by BC Partners' credit platform has increased, The benefit to shareholders has been clear and has been reflected through Logan's financial results. With that in mind, I will keep my prepared remarks brief today and limit it to a few key highlights, which Patrick and Jason will provide more detail on shortly. First and foremost, as a result of the company's strong financial performance, the Board of Directors approved an 18% increase in the quarterly distribution, bringing it to $0.26 per share compared to $0.22 per share last quarter. Since we've turned the quarterly dividend back on in early 2023, we've increased it each quarter. Our net asset value was up 3% this quarter, or $1.05 per share, as compared to the prior quarter. We reported our fourth straight quarter of positive net investment income, which amounted to $1 million, or $0.38 per share, for this quarter. This trend illustrates the enhanced earnings power of our portfolio driven by the reworked capital structure we refinanced in 2022 and the success we've had monetizing the non-yielding legacy portfolio and redeploying that into income-generating names. Deployment for the quarter remained positive with $4.8 million in new investments and $4.4 million in repayments and sales, leaving us with net deployment of approximately $0.4 million. As of quarter end, the portfolio consisted of investments in 62 different companies. Finally, during the quarter, we continued repurchasing shares under our share repurchase program that was established in late March. As of June 30th, we had repurchased approximately 14,000 shares for an aggregate cost of approximately $290,000, which was accretive to NAV by approximately 8 cents per share.

Looking ahead,

We remain cautiously optimistic for the second half of 2023, and we continue to believe that 2023 will prove to be a very attractive private credit vintage. With that, I will turn the call over to Patrick Schaefer, our Chief Investment Officer.

Thanks, Ted. As of June 30, 2023, the fair value of Logan's portfolio was approximately $206.6 million, with exposure to 62 portfolio companies. This compares to 59 portfolio companies. with a fair value of approximately $203.3 million in the prior quarter. During the second quarter, we continued to judiciously deploy capital. Specifically, the company made approximately $4.8 million of investments and had approximately $4.4 million in repayments and sales, resulting in net deployment of approximately $0.4 million for the quarter. Compared to a year ago, Logan's portfolio growth and increased diversification is even more impressive, as the company had just 44 portfolio companies with a fair value of $175.9 million. As of June 30, 2023, more than half of the company's investment portfolio at fair value was invested in assets originated by the BC Partners credit platform. As we have consistently demonstrated since we were appointed to serve as the company's investment advisor, we've been extremely thoughtful with your capital. Initially, laser-focused on de-risking the portfolio and now ensuring underwriting remains prudent and disciplined as we look to selectively take advantage of this lender-friendly market. Moving on to our portfolio composition, at quarter end, our debt investment portfolio represented 82.2% of the total portfolio at fair value, with a weighted average annualized yield of approximately 10.8%, excluding income from non-accruals and collateralized loan obligations. This compares to a debt investment portfolio which represented 83.2% of our total portfolio at fair value, with a weighted average annualized yield of approximately 10.7%, excluded income from non-accruals and collateralized loan obligations as of the prior quarter. This decrease in our debt portfolio relative to the prior quarter was largely driven by the strong performance of our equity portfolio during the quarter. As of June 30, 2023, 83.2% of our debt investment portfolio at fair value was bearing interest at a floating rate compared to 83.4% as of March 31, 2023. Further, as of June 30, 2023, first lien debt represented 66.1% and 66.8% of our portfolio on a cost and fair value basis, respectively. This compares to first lien debt representing 65.4% and 67.7% of our total portfolio on a cost and fair value basis, respectively, as of March 31, 2023, and 55.7% and 55.4%. of our total portfolio on a cost and fair value basis respectively as of June 30th, 2022. The non-yielding equity portfolio represented 16.5% and 16.4% of the portfolio on a cost and fair value basis respectively as of June 30th, 2023. This compares to 16.4% and 14.6% of the portfolio on a cost and fair value basis as of March 31st, 2023. Again, the increase in our equity portfolio relative to the prior quarter was largely driven by the strong performance of our equity book during the quarter. Moving on to non-accrual status. During the three months ended June 30th, 2023, there were no new portfolio companies added to non-accrual status. However, we did add an additional security to non-accrual status, Logan's first lien term loan to Lucky Bucks LLC. As of June 30th, 2023, we had two portfolio companies on non-accrual with an aggregate amortized cost and fair value of $17.1 million and $11.1 million, respectively, worth 7.8% and 5.3% of the investment portfolio at cost and fair value, respectively. This compares to two portfolio companies on non-accrual status as of the prior quarter, with a cost and fair value of $14.2 million and $10.0 million, respectively, representing 6.4% and 4.9% of the investment portfolio's cost and fair value, respectively. And I'll turn the call over to Jason.

Thanks, Patrick. Turning to our financial results for the quarter ended June 30, 2023. For the second quarter of 2023, Logan generated $5.3 million of investment income, which was flat compared to the prior quarter and increased by $1.9 million compared to the same quarter in the prior year. The increase was primarily driven by redeploying proceeds received from exiting the non-yielding equity portfolio into interest-earning assets originated by the BC Partners credit platform, as well as an increase in base rates. Total operating expenses for the second quarter of 2023 slightly increased by approximately $122,000 to $4.3 million as compared to $4.2 million in the first quarter of 2023. primarily due to higher interest and financing expenses as a result of higher average outstanding borrowings on our credit facility during the period. Compared to the second quarter of 2022, expenses were higher by approximately $73,000, again driven by higher interest and financing expenses but also administrative service fees partially offset by lower management fees in general and administrative expenses in the current period. Our net investment income for the quarter was $1 million, or $0.38 per share, marking the fourth consecutive quarter of positive net investment income and a complete turnaround compared to the second quarter of 2022, for which the company reported a net investment loss of $929,000. Our net asset value as of June 30, 2023 was $96.2 million, representing a $2.4 million increase, or 2.6%, as compared to the prior quarter net asset value of $93.8 million. On a per-share basis, net asset value was $35.68 per share as of June 30, 2023, representing a $1.05 per share increase, or 3%, as compared to $34.63 per share at the end of the first quarter of 2023. I'd like to highlight that the difference between the 2.6% increase in net asset value compared to the 3% increase in net asset value per share is the accretive effect of our share buyback program. The increase in net asset value quarter over quarter was driven by the net investment income in excess of the May 31, 2023 dividend payment, net realized and unrealized gains on the portfolio during the quarter, and the accretive effect on a per share basis of our share repurchase program. Compared to the company's prior year net asset value of $95 million, net asset value increased by $1.2 million, or 1.3%. On a per share basis, net asset value per share increased by $0.64 per share, or 1.8%, from $35.04 as of December 31, 2022. Again, the difference between the 1.3% and the 1.8% is the accretive effect Logan shareholders receive from the buyback program. The increase in net asset value relative to the prior year was driven by the company out-earning its dividend, net realized and unrealized gains on the portfolio during the quarter, and the accretive effect on a per-share basis of our share repurchase program. Finally, as of quarter end, the company had $6.3 million in cash and cash equivalents, as well as $18.6 million of unused borrowing capacity available for deployment and investments originated by the BC Partners credit platform. With that, I will turn the call back over to Ted.

Thank you, Jason. Why don't we open up the call for Q&A, but before that, we're very proud of the continued progress we've made during the second quarter of 2023 and look forward to increasing shareholder value through the back half of the year. Shareholders, thank you for your continued support, and I'll now turn the call over to the operator for any questions.

The floor is now open for your questions. Now to ask a question, this time please press star and then number one on your telephone keypad. We will now pause for just a moment to compile the Q&A roster. Your first questions come from the line of Christopher Nolan with Lattenberg Thalmann. Your line is now open.

Hey, guys. What was the driver for the increase in dilute share count, Q of Q?

Increase in diluted? Well, we had the share buyback program, so it should have had an anti-dilution effect for the quarter. Oh, got it. So if you're referring to the diluted EPS is related to the debt that we issued last year that had a conversion feature to it.

Gotcha. And then what was the driver for the appreciation of equity fair values? Was there a particular driver?

Yeah, the largest driver was was one portfolio company called Nth Degree. The company continues to form very, very well, and they completed a relatively accretive acquisition during the quarter. But it's mostly driven in one company, and it's just continued very strong performance.

Great. And then the final question is, pardon me if I missed this, but was there a particular driver for the realized loss of as well as the unrealized appreciation?

Yeah, so this portfolio had some CLO equity in it, and as a result of markdowns on that portfolio this quarter, we took some impairment on those CLOs.

Gotcha.

So that realized loss is predominantly CLO. Did it flip from unrealized to realized? Only a portion of it was a flip. About $400,000 was a flip, but... but all of that realized was related to CLO impairment.

Yeah, and you know, it looks like you guys are starting to hit your stride on this. Strategically, any ideas in terms of possibly taking on some SBA debt or anything like that?

Yeah, it's a good question.

I mean, we've explored it. I think it's really difficult for, our understanding is it's really hard for BDCs to get new SBIC licenses, and obviously we don't have one So it is something we always think about, but I think it's unlikely that we'll be able to get one.

Gotcha. Okay, that's it for me. Thanks. Thanks. Our next question comes from the line of Steve Martin with Slater.

Your line is now open.

Hi again, guys. Hi, Steve. This is the first quarter – well, the NAV increase was great. The buyback was great. But this is the first quarter where sequentially, as opposed to year over year, the NII didn't really go up. If you look at slide – what is that? Slide four – um yep investment income was sort of flat and expenses were up a little and you've had a great progression of increasing investment income so i was wondering what the driver of that was and what we should expect yeah the um but it's a couple things uh steve which is particularly for the current quarter or two things which is

Q1 had some kind of non-recurring fees in it. So when you actually kind of strip that out, and I know we specifically called it out last quarter as well, but I think there's something in the area of $200,000 of non-recurring fee income. But when you kind of strip out the fee income, there is a more material increase quarter over quarter in terms of the investment income. So that obviously, again, it's a higher quality revenue stream. And then secondly, we also, as mentioned, we did put an incremental security on non-accrual. So again, if you were to quote-unquote normalize for that, organically we are still kind of growing our income base. So those are the two biggest factors in what appears to be flat sequentially.

So the prospects for the third quarter, if you had normalized Q1 and Q2, that ramp is occurring and we should expect, absent something, one of these unusual items you're talking about, that that should continue to grow.

Yeah, that's right, Steve. The core earnings are solid. You'll see that growth projection or that growth trend over the last few quarters once you strip out these one-time items.

Okay. And, Ted, or Patrick, the question I asked earlier, What does the third quarter look like for deployments, repayments? Any chance any more of those equity securities got monetized and can be rolled into something producing?

Yeah, honestly, I forget exactly where we noted it, but I think it might have been in our process, our earnings deck. But we did monetize a relatively large position subsequent to quarter and Jurassic Quest That was something in the area of $6.5 million, $7 million of debt, as well as an equity position there. I think it was about – I think we had it marked at quarter end at about $650,000 or so. So not meaningful, but between that and – I think that was a relatively under-yielding investment as well relative to what our new money is being put out at. But that's like – again, call it like $7.5-ish million between – debt and equity that we would expect to sort of redeploy in the quarter. And I'd say in general, we would expect to be a net deployer of capital as opposed to a net receiver, though obviously kind of timing depended on when we receive paydowns. Again, just as talked about in Portman as well, our pipeline, just private credit is a little bit longer gestation period for pipeline. So just depending on when that stuff would come back to us. but we would think of this vehicle still as a net deployer of capital.

Yeah, sorry for missing that. It's been a little crazy this morning, and I got on your call a couple minutes late. All right, and can you talk about dividend policy on Logan Ridge as opposed to Portman? I'm sure it's slightly different.

Yeah, I mean, obviously, with every passing quarter, we're chopping more wood on the NII side and feeling more and more comfortable around dividend coverage. So obviously, we increase the dividend in a pretty healthy way, but there's obviously room to continue to increase the dividend. So barring any kind of negative surprises, we expect the dividend yield to continue to rise.

All right. Thanks a lot. Thank you. Since there are no further questions at this time, Mr. Ted Goldthorpe, I turn the call back over to you.

Great. Thank you. Thank you, everyone, for joining us today. And we look forward to speaking to you again in November when we announce our third quarter results. And I want to wish everybody a very happy end to summer. Thank you very much. Thank you. you Thank you.

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Thank you, good morning, and welcome to Logan Ridge Finance Corporation's second quarter and the June 30, 2023 earnings conference call. An earnings press release was distributed yesterday after the close of the market. A copy of the release along with the supplemental earnings presentation is available on the company's website at www.loganridgefinance.com in the Investor Resources section and should be reviewed in conjunction with the company's Form 10-Q filed with the SEC. As a reminder, this conference call is being recorded for replay purposes. Please note that today's conference call may contain forward-looking statements which are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the company's filings with the SEC. Speaking on today's call will be Ted Goldthorpe, Chief Executive Officer, President, and Director of Logan Ridge Finance Corporation, Jason Roos, Chief Financial Officer, and Patrick Schaefer, Chief Investment Officer. With that, I would now like to turn the call over to Ted Koltor, Chief Executive Officer of Logan Ridge Finance Corporation. Please go ahead, Ted.

Good morning, and welcome to our second quarter 2023 earnings call. I'm joined today by our Chief Financial Officer, Jason Roos, and our Chief Investment Officer, Patrick Schaefer. Following my opening remarks, Patrick will provide additional detail on our investment activity to date, and Jason will walk through the financials. I'd like to start by highlighting that the second quarter of 2023 was Logan Ridge's strongest quarter to date since we took over managing the company just two years ago, and largely a continuation of the performance trajectory Logan has been on since the middle of 2022. As the company's exposure to the legacy equity portfolio has continued to decline and its exposure to credits originated by BC Partners' credit platform has increased, the benefit to shareholders has been clear and has been reflected through Logan's financial results. With that in mind, I will keep my prepared remarks brief today and limit it to a few key highlights, which Patrick and Jason will provide more detail on shortly. First and foremost, as a result of the company's strong financial performance, the Board of Directors approved an 18% increase in the quarterly distribution, bringing it to $0.26 per share compared to $0.22 per share last quarter. Since we've turned the quarterly dividend back on in early 2023, we've increased it each quarter. Our net asset value was up 3% this quarter, or $1.05 per share, as compared to the prior quarter. We reported our fourth straight quarter of positive net investment income, which amounted to $1 million or 38 cents per share for this quarter. This trend illustrates the enhanced earnings power of our portfolio driven by the reworked capital structure we refinanced in 2022 and the success we've had monetizing the non yielding legacy portfolio and redeploying that into income generating names. Deployment for the quarter remained positive, with $4.8 million in new investments and $4.4 million in repayments and sales, leaving us with net deployment of approximately $0.4 million. As of quarter end, the portfolio consisted of investments in 62 different companies. Finally, during the quarter, we continued repurchasing shares under our share repurchase program that was established in late March. As of June 30th, we had repurchased approximately 14,000 shares for an aggregate cost of approximately $290,000, which was accretive to NAV by approximately $0.08 per share. Looking ahead, we remain cautiously optimistic for the second half of 2023, and we continue to believe that 2023 will prove to be a very attractive private credit vintage. With that, I will turn the call over to Patrick Schaefer, our Chief Investment Officer.

Thanks, Ted. As of June 30, 2023, the fair value of Logan's portfolio was approximately $206.6 million with exposure to 62 portfolio companies. This compares to 59 portfolio companies with a fair value of approximately $203.3 million in the prior quarter. During the second quarter, we continued to judiciously deploy capital. Specifically, the company made approximately $4.8 million of investments and approximately $4.4 million in repayments and sales, resulting in net deployment of approximately $0.4 million for the quarter. Compared to a year ago, Logan's portfolio growth and increased diversification is even more impressive, as the company had just 44 portfolio companies with a fair value of $175.9 million. As of June 30, 2023, more than half of the company's investment portfolio at fair value was invested in assets originated by the BC Partners credit platform, As we have consistently demonstrated since we were appointed to serve as a company's investment advisor, we've been extremely thoughtful with your capital. Initially, laser-focused on de-risking the portfolio and now ensuring underwriting remains prudent and disciplined as we look to selectively take advantage of this lender-friendly market. Moving on to our portfolio composition, at quarter end, our debt investment portfolio represented 82.2% of the total portfolio at fair value. with a weighted average annualized yield of approximately 10.8%, excluding income from non-accruals and collateralized loan obligations. This compares to a debt investment portfolio, which represented 83.2% of our total portfolio at fair value, with a weighted average annualized yield of approximately 10.7%, excluding income from non-accruals and collateralized loan obligations, as of the prior quarter. This decrease in our debt portfolio relative to the prior quarter was largely driven by the strong performance of our equity portfolio during the quarter. As of June 30, 2023, 83.2% of our debt investment portfolio at fair value was bearing interest at a floating rate compared to 83.4% as of March 31, 2023. Further, as of June 30, 2023, First lien debt represented 66.1% and 66.8% of our portfolio on a cost and fair value basis respectively. This compares to first lien debt representing 65.4% and 67.7% of our total portfolio on a cost and fair value basis respectively as of March 31st, 2023, and 55.7% and 55.4% of our total portfolio on a cost and fair value basis respectively. as of June 30th, 2022. The non-yielding equity portfolio represented 16.5% and 16.4% of the portfolio on a cost and fair value basis respectively as of June 30th, 2023. This compares to 16.4% and 14.6% of the portfolio on a cost and fair value basis as of March 31st, 2023. Again, the increase in our equity portfolio relative to the prior quarter was largely driven by the strong performance of our equity book during the quarter. Moving on to non-accrual status. During the three months ended June 30th, 2023, there were no new portfolio companies added to non-accrual status. However, we did add an additional security to non-accrual status, Logan's first lien term loan to Lucky Bucks LLC. As of June 30th, 2023, we had two portfolio companies on non-accrual with an aggregate amortized cost and fair value. of $17.1 million and $11.1 million, respectively, worth 7.8% and 5.3% of the investment portfolio at cost and fair value, respectively. This compares to two portfolio companies on non-accrual status as of the prior quarter, with a cost and fair value of $14.2 million and $10.0 million, respectively, representing 6.4% and 4.9% of the investment portfolio's cost and fair value, respectively. And I'll turn the call over to Jason.

Thanks, Patrick. Turning to our financial results for the quarter ended June 30th, 2023. For the second quarter of 2023, Logan generated $5.3 million of investment income, which was flat compared to the prior quarter and increased by $1.9 million compared to the same quarter in the prior year. The increase was primarily driven by redeploying proceeds received from exiting the non-yielding equity portfolio into interest-earning assets originated by the BC Partners credit platform as well as an increase in base rates. Total operating expenses for the second quarter of 2023 slightly increased by approximately $122,000 to $4.3 million as compared to $4.2 million in the first quarter of 2023, primarily due to higher interest and financing expenses as a result of higher average outstanding borrowings on our credit facility during the period. Compared to the second quarter of 2022, expenses were higher by approximately $73,000 Again, driven by higher interest and financing expenses, but also administrative service fees, partially offset by lower management fees in general and administrative expenses in the current period. Our net investment income for the quarter was $1 million, or 38 cents per share, marking the fourth consecutive quarter of positive net investment income and a complete turnaround compared to the second quarter of 2022, for which the company reported a net investment loss of $929,000. Our net asset value as of June 30, 2023 was $96.2 million, representing a $2.4 million increase, or 2.6%, as compared to the prior quarter net asset value of $93.8 million. On a per share basis, net asset value was $35.68 per share as of June 30, 2023, representing a $1.05 per share increase, or 3%, as compared to $34.63 per share at the end of the first quarter of 2023. I'd like to highlight that the difference between the 2.6% increase in net asset value compared to the 3% increase in net asset value per share is the accretive effect of our share buyback program. The increase in net asset value quarter over quarter was driven by the net investment income in excess of the May 31, 2023 dividend payment, net realized and unrealized gains on the portfolio during the quarter, and the accretive effect on a per share basis of our share repurchase program. Compared to the company's prior year net asset value of $95 million, net asset value increased by $1.2 million, or 1.3%. On a per share basis, net asset value per share increased by $0.64 per share, or 1.8%, from $35.04 as of December 31, 2022. Again, the difference between the 1.3% and the 1.8% is the accretive effect Logan shareholders receive from the buyback program. The increase in net asset value relative to the prior year was driven by the company out-earning its dividend, net realized and unrealized gains on the portfolio during the quarter, and the accretive effect on a per-share basis of our share repurchase program. Finally, as of quarter end, the company had $6.3 million in cash and cash equivalents, as well as $18.6 million of unused borrowing capacity available for deployment and investments originated by the BC Partners credit platform. With that, I will turn the call back over to Ted.

Thank you, Jason. Why don't we open up the call for Q&A? But before that, we're very proud of the continued progress we've made during the second quarter of 2023 and look forward to increasing shareholder value through the back half of the year. Shareholders, thank you for your continued support, and I'll now turn the call over to the operator for any questions.

The floor is now open for your questions. Now to ask a question, this time please press star and then number one on your telephone keypad. We will now pause for just a moment to compile the Q&A roster. Your first questions come from the line of Christopher Nolan with Lattenburg-Talman. Your line is now open.

Hey, guys. What was the driver for the increase in dilute share count, Q of Q?

Increase in diluted? Well, we had the share buyback program, so you should have had an anti-dilution effect for the quarter. Oh, got it. So if you're referring to the diluted EPS is related to the debt that we issued last year that had a conversion feature to it.

Gotcha. And then what was the driver for the appreciation of equity fair values? Was there a particular driver?

Yeah, the largest driver was was one portfolio company called Nth Degree. The company continues to form very, very well, and they completed a relatively accretive acquisition during the quarter. But it's mostly driven in one company, and it's just continued very strong performance.

Great. And then the final question is – pardon me if I missed this, but was there a particular driver for the realized loss – as well as the unrealized appreciation?

Yeah, so this portfolio had some CLO equity in it, and as a result of markdowns on that portfolio this quarter, we took some impairment on those CLOs.

Gotcha.

So that realized loss is predominantly CLO. Did it flip from unrealized to realized? Only a portion of it was a flip. About $400,000 was a flip, but... but all of that realized was related to CLO impairment.

Yeah, and you know, it looks like you guys are starting to hit your stride on this. Strategically, any ideas in terms of possibly taking on some SBA debt or anything like that?

Yeah, it's a good question.

I mean, we've explored it. I think it's really difficult for, our understanding is it's really hard for BDCs to get new SBIC licenses, and obviously we don't have one So it is something we always think about, but I think it's unlikely that we'll be able to get one.

Gotcha. Okay, that's it for me. Thanks. Thanks. Our next question comes from the line of Steve Morden with Slater.

Your line is now open.

Hi again, guys. Hi, Steve. This is the first quarter – well, the NAV increase was great. The buyback was great. But this is the first quarter where sequentially, as opposed to year over year, the NII didn't really go up. If you look at slide – what is that? Slide 4 – um yep investment income was sort of flat and expenses were up a little and you've had a great progression of increasing investment income so i was wondering what the driver of that was and what we should expect yeah the um but it's a couple things uh steve which is particularly for the current quarter or two things which is

Q1 had some kind of non-recurring fees in it. So when you actually kind of strip that out, and I know we specifically called it out last quarter as well, but I think there's something in the area of $200,000 of non-recurring fee income. But when you kind of strip out the fee income, there is a more material increase quarter over quarter in terms of the investment income. So that obviously, again, it's a higher quality revenue stream. And then secondly, we also, as mentioned, we did put an incremental security on non-accrual. So again, if you were to quote-unquote normalize for that, organically we are still kind of growing our income base. So those are the two biggest factors in what appears to be flat sequentially.

So the prospects for the third quarter, if you had normalized Q1 and Q2, That ramp is occurring, and we should expect, absent something, one of these unusual items you're talking about, that that should continue to grow.

Yeah, that's right, Steve. The core earnings are solid. You'll see that growth projection or that growth trend over the last few quarters once you strip out these one-time items.

Okay. And, Ted, or Patrick, the question I asked earlier is, What does the third quarter look like for deployments, repayments? Any chance any more of those equity securities got monetized and can be rolled into something producing?

Yeah, honestly, I forget exactly where we noted it, but I think it might have been in our process, our earnings deck. But we did monetize a relatively large position subsequent to quarter and Jurassic Quest That was something in the area of $6.5 million, $7 million of debt, as well as an equity position there. I think it was about – I think we had it marked at quarter end at about $650,000 or so. So not meaningful, but between that and – I think that was a relatively under-yielding investment as well relative to what our new money is being put out at. But that's like – again, call it like $7.5-ish million between – debt and equity that we would expect to sort of redeploy in the quarter. And I'd say in general we would expect to be a net deployer of capital as opposed to a net receiver, though obviously kind of timing depended on, you know, when we receive paydowns. Again, just as talked about in Portman as well, you know, our pipeline, you know, just private credit is a little bit longer gestation period for pipeline. So just depending on when that stuff would come back to us. but we would think of this vehicle still as a net deployer of capital.

Yeah, sorry for missing that. It's been a little crazy this morning, and I got on your call a couple minutes late. All right, and can you talk about dividend policy on Logan Ridge as opposed to Portman? I'm sure it's slightly different.

Yeah, I mean, obviously, with every passing quarter, we're chopping more wood on the NII side and feeling more and more comfortable around dividend coverage. So obviously, we increase the dividend in a pretty healthy way, but there's obviously room to continue to increase the dividend. So barring any kind of negative surprises, we expect the dividend yield to continue to rise.

All right. Thanks a lot. Thank you. Since there are no further questions at this time, Mr. Ted Goldthorpe, I turn the call back over to you.

Great. Thank you. Thank you, everyone, for joining us today. And we look forward to speaking to you again in November when we announce our third quarter results. And I want to wish everybody a very happy end to summer. Thank you very much.