Trinity Capital Inc.

Good afternoon. My name is Leo, and I will be your conference operator today. At this time, I'd like to welcome everyone to Trinity Capital's fourth quarter and full year 2021 earnings conference call. Our hosts for today's call are Steve Brown, Chairman and Chief Executive Officer, Kyle Brown, President and Chief Investment Officer, David Lund, Chief Financial Officer, and Sarah Stanton, General Counsel. Jerry Harder, Chief Credit Officer, Michael Testa, Chief Accounting Officer, and Ron Kundage, Senior Managing Director, are also present. Today's call is being recorded and will be available for replay beginning at 8 p.m. Eastern Time. A replay of the webcast is available on Trinity Capital's Investor Relations website. It is now my pleasure to turn the call over to Sarah Stanton. Please go ahead.

Thank you, Leo, and welcome everyone to Trinity Capital's earnings conference call for the fourth quarter and full year of 2021. Trinity's fourth quarter and full year 2021 financial results were released today after market closed and can be accessed from Trinity's investor relations website at ir.trinitycap.com. A replay of the call is available at Trinity's webpage or by using the telephone number provided in today's earnings release. Before we begin, I would like to remind everyone that certain statements that are not based on historical fact made during this call, including any statements relating to financial guidance, may be deemed forward-looking statements under federal securities laws. Because these forward-looking statements involve known and unknown risks and uncertainties, There are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. We encourage you to refer to our most recent SEC filings for information on some of these risk factors. Trinity Capital assumes no obligation or responsibility to update any forward-looking statements. Please note that the information reported on this call speaks only as of today, March 3, 2022. Therefore, you are advised that time-sensitive information may no longer be accurate at the time of any replay listening or transcript reading. With that, allow me to introduce Trinity Capital's Chairman and CEO, Steve Brown.

Thank you, Sarah, and thank you to everyone joining us today. I want to take just a moment at the top of this call and mention that we have been watching as the tragic events in Eastern Europe have unfolded, and our thoughts are with those people who have been affected by these events. While we continue to monitor the events, we're not aware of any of our portfolio companies that are currently affected by this situation. Now turning to Trinity's exciting performance this past year. 2021 was a transformational year for Trinity Capital. Since our IPO early in the year, we have driven exceptional portfolio growth and generated record new commitments. In the fourth quarter, we built upon our already strong performance as we continued to execute successfully against our business strategy, doing what we said we would do and delivering on key financial and operating metrics. Trinity continues to benefit from a favorable VC operating environment as we are seeing a large volume of strong credit opportunities. The deal flow in the growth market has been very active, which has fueled originations and record net portfolio growth for Trinity since entering the public markets. The venture capital ecosystem was exceptional this past year with record funding and strong fundraising activity. Our business model and strategy at Trinity ensures that we are built for any economic cycle. The steps we have taken in 2021 to optimize our capital structure while continuing our rigorous and conservative underwriting process will ensure that we have the right portfolio companies in our book to weather any potential down cycles. We continue to build an industry-leading, unique venture lending and equipment finance platform that sets us apart and meets the evolving needs of our portfolio companies and prospective partners. Our extensive network in both the VC and equipment finance industry combined with our technology and operational expertise solidifies our leading market position. While the team will go into greater detail on the quarter and year-end results, I wanted to share just a few of the key performance highlights. Our growing portfolio contributed to the strong operating performance in Q4, allowing us to declare a dividend of 36 cents per share, an increase of 9.1% above the prior quarter, and in line with our goal of increasing our dividend as we grow our platform. We have now increased our dividend for four straight quarters. We delivered a record year in both commitments and deployments, nearly doubling our 2020 deployments with just under $560 million funded for the year. We also grew the portfolio net of payoffs each quarter with our highest net portfolio gain coming in Q4 at over $150 million. Q4 net investment income was $10.6 million or $0.39 per share, exceeding our declared dividend by $0.03 per share. Our credit quality in the portfolio remained strong with 98.3% of our debt investments at cost performing. A major goal for 2021 was to strengthen our balance sheet and increase our funding capabilities to manage the growth that we are currently experiencing while also positioning the company for continued growth in 2022. To that end, we made several moves in Q4, including issuing $75 million of 4.25% notes due in December 2026, adding our key bank credit facility, and initiating an ATM program. Collectively, these moves will drive our costs of capital down while increasing our capacity to fuel our growth. Additionally, we announced the appointment of two new members to our Board of Directors effective December 7th. Both bring highly relevant experience and will be an immediate value in guiding Trinity as we execute on our strategic plan. With regards to the RIA progress, As we have stated previously, in Q3 2021, we filed an application with the SEC for exemptive release to form a registered investment advisor. If approved, we believe the RIA will provide financial flexibility for synergistic investment opportunities and create additive earnings to our public internally managed BDC. We do not have a set timeline and will continue working with the SEC on our application. Trinity is off to a historic start in 2022. Last month, we announced the sale of our equity investments in Lucid Group and Matterport, where we booked over 50 million in realized gains. To put this number in perspective, our record financial results for 2021 produced 52 million in combined net investment income and net realized gains. These sales bolster our ability to scale our venture lending capacity and are in alignment with our long-term capital structure strategy. These transactions have set the stage for a strong 2022 financial leap for Trinity, and we are equally excited to be able to share this historic gain with our shareholders. As we said in February, our board is evaluating our dividend distribution plan for 2022, and we plan to offer an update on that front later this month. Before I hand the call over to Kyle, I would like to reiterate what a great year it has been for our business, our team, and our portfolio companies. Trinity's unique business model and asset class have established Trinity as a leader in our market. The momentum we have generated will fuel our continued growth as a public company. And finally, most importantly, we pride ourselves on being a people and culture focused organization. As a result, it is clear that Trinity is now a destination for top talent in the space, and we will continue to add the best people in the industry as we scale the platform. We are excited to execute on our strategic objectives for this year, and we will maintain a deliberate and disciplined approach to offering capital solutions to growth stage companies across our industry. With that, I'll now turn the call over to Kyle Brown, our President and Chief Investment Officer, for some further thoughts on our progress and more detail on the market. Kyle?

Thanks, Steve, and good afternoon, everyone. 2021 was an exceptional year in terms of growth and foundational in terms of the path we've laid for the quarters and years to come. I want to dig into some 2021 highlights, which include consecutive quarters of meaningful portfolio growth, enhancements to our operations through team expansion, fortifying our balance sheet through several strategic debt raises and subsequent capital deployment, as well as establishing consistency and maximizing our returns to shareholders through our quarterly dividend. Our impressive performance is largely attributable to our people here at Trinity. Our credible team and their commitment to fostering and maintaining longstanding relationships in the VC space has been a critical driver for our business. Investing in our team continues to be a priority as we make new hires, expanding our team and coverage across the country. Trinity now has boots on the ground in Austin, the Bay Area, and Boston, deepening our relationships in these regions. And as a result, opportunities have subsequently continued to grow, which is a leading indicator for future fundings. Our outstanding results were highlighted by a record $757 million in new commitments for 2021, with $247.9 million in new commitments originated in Q4 alone. In 2021, we funded... Total gross investments of $558 million, an increase of 115% year-over-year. During the quarter, the company originated approximately $197.5 million in gross fundings, leading to net portfolio growth on a cost basis of $159.1 million, and expanding our investment portfolio to $797 million on a cost basis. At year end, our portfolio had a fair value of $873.5 million, an increase of 76.9% year-over-year. The composition of our portfolio remained relatively consistent throughout 2021, with manufacturing once again making up over one quarter of our total portfolio. Professional, scientific, and technical services made up 18.5%, followed by information making up 12.3%. Diving deeper into our portfolio composition, At fair value, approximately 63.2% of our debt portfolio, or $551.9 million, is comprised of secured loans, and 21.1%, or $184.1 million, is invested in equipment financing. Equipment financing remains a growth lever for us, demonstrated by our sequential increase in Q4, up 68.4% on a cost basis compared to Q3 of 21. The balance of our portfolio, approximately $137.5 million, is comprised of equity and warrants. Structurally, gross deployments during the quarter were 197.5 million across 25 portfolio companies. This included 121 million in gross deployments across 11 new portfolio companies and 76.5 million in gross deployments to 14 existing portfolio companies. Gross deployments were partially offset by 41.7 million in principal repayments, of which 24.6 million was from early repayments and 17.1 million was from normal amortization. We received an additional $8.3 million in proceeds from the liquidation of several equity and warrant positions. We finished the year with a backlog of $243 million that provides us with visibility in the potential funding opportunities in 2022. Public listings continue to dominate the VC exit market, and some of our portfolio companies took advantage of this trend. In Q4 and subsequent to quarter end, one portfolio completed a traditional IPO, and four companies entered into definitive agreements to go public via SPAC. On November 10th, Presto, Inc. announced a planned business combination with Ventu, CCM, Acquisition Corp. On November 11th, Backblaze, Inc. completed its initial public offering and began trading its common stock under the NASDAQ under the stock symbol BLZE. On December 13th, Footprint International Holding, Inc. announced a planned business combination with Gores Holding, Inc. On February 3rd, subsequent to the end of the quarter, Greenlight Bioscience announced the completion of its D-SPAC merger with Environmental Impact Acquisition Corp. and began trading on the NASDAQ under the stock symbol GRNA. Finally, on March 2nd, subsequent to the end of the quarter, Rigetti & Co. announced the completion of its D-SPAC merger with Supernova Partners Acquisition Company II and began trading on the NASDAQ under the stock symbol RGTI. In February, we exited our positions in Lucid and Matterport. These positions represented a combined investment at a cost of approximately $9 million. The aggregate net proceeds from these sales were approximately $59.8 million. We are thrilled with this result, as we feel it points to the overall quality of the companies we partner with. Lucid and Matterport represent our ability to find and source investments that are great for our portfolio companies and great for us, while also showing the potential upside that is possible through our warrant portfolios. This capital will fuel our long-term strategy and, most importantly, enhance our ability to maximize returns for shareholders. Trinity thrives in a competitive and fast-paced environment, making the vibrant VC industry the perfect catalyst for our success. 2021 was a record-breaking year for the VC industry, with fundraising topping $100 billion in 2021 for the first time ever and over 17,000 deals closed. While I can't predict what the future will bring, I do know that our team will remain committed to doing what we do best. creating long-term value for our shareholders. Now with that, I'll turn the call over to David Lund, our Chief Financial Officer, to discuss our financial performance in more detail.

David. Thank you, Kyle, and thank you to everyone for joining us today. As Steve and Kyle emphasized, we had a very busy and successful year at Trinity. Not only did we break records quarter after quarter in terms of commitments and fundings, but we've also taken the opportunity to strengthen our team, enhance our balance sheets, and build a strong and resilient venture lending platform as we enter 2022. I will take this opportunity to walk you through our financial results for the fourth quarter of 2021, as well as highlighting certain key operating results for the year. Cal provided an overview of the portfolio earlier, but I wanted to briefly touch on our loan composition. Approximately 74% of our secured loan portfolio is in floating rate securities, as compared to 37% at the end of 2020. Over the course of 2021, we strategically repositioned our secured loan portfolio to focus on floating rate securities, leaving us prepared for the expected rise in interest rates in 2022. As a reminder, our equipment financings are generally structured as fixed-rate loans. Turning to our operating results, during Q4, we recorded total investment income of $23.6 million, an increase of $1.8 million or 8.3% over the $21.8 million of total investment income recorded during the third quarter. The increase was attributable to higher interest income of $2.5 million on a larger loan portfolio and $1 million of higher one-time fees offset by approximately $1.7 million of lower accelerated income as early payoffs were $49 million lower as compared to Q3. Income for early repayments will fluctuate quarter to quarter based on the amount of principal repayments and the vintage of the loans repaid. Our effective yield on the portfolio for Q4 was 15.2%, which was a decrease from Q3 primarily driven by the lower accelerated income from early payoffs. while core yields, which excludes fees and accelerated income from early repayments, increased slightly to 13.2%. Comparing 2021 with 2020, total investment income increased by 49.5% to $82.2 million in 2021, with $55 million in 2020. Our record year of originations helped drive the significant increase while we maintained a consistently high effective yield across the portfolio. We incurred a total of $6.2 million of interest expense and amortization of deferred financing costs on our various debt facilities as compared to $5.1 million in Q3. The increase was attributed to the higher expense from our August 2026 notes, our December 2026 notes, and higher borrowings under our credit facilities. For Q4, our weighted average cost of debt, including interest and fee amortization, was 6.7%, which was a 40 basis point decrease from 7.1% in the previous quarter. The decrease was primarily driven by the lower cost of our debt under our 4.375% August 2026 notes and 4.25% December 2026 notes. Our SG&A expenses were approximately $6.8 million during Q4 as compared to approximately $5.6 million during Q3. The increase of approximately $1.2 million, or 21.4 percent, was primarily driven by a full quarter of expenses related to restricted stock grants and an excise tax expense. As a result of this operating activity, net investment income for the fourth quarter was $10.6 million, or 39 cents basic share. as compared to $11.1 million of 42 cents per basic share in the preceding quarter. For the full year, 2021, we recorded net investment income of $39 million, representing NII of $1.50 per basic share or $1.33 per share on a diluted basis. This compares with $23.4 million in NII for 2020 or NII of $1.29 per share on both a basic and diluted basis. We recorded net unrealized appreciation of $37.1 million, attributed to $36.5 million of unrealized appreciation in our equity and warrant portfolio, and $.6 million in our debt portfolio. We recognized net realized gains of $7.5 million in Q4, split between $2.7 million from our equity portfolio and $4.8 million from our warrant portfolio. We will continue to prudently realize gains from our investments in 2022 as demonstrated by the $50.8 million in net realized gains from the sale of our equity investments in Lucid and Matterport, which Kyle provided color on earlier in this call. Net assets increased by approximately 11.9% to $446.5 million, or an NAV of $16.40 per share. compared to Q3 net assets of $399 million or an NAV of $14.70 per share. The quarter-over-quarter increase of $1.70 per share in NAV was primarily the result of unrealized appreciation as well as net investment income that exceeded our declared dividend by $0.03 per share. Our Q4 2021 NAV per share also compares very favorably to the $13.03 per share reported at the end of 2020. As Steve mentioned, the strong performance of our investment portfolio continued in the fourth quarter with over 98.3 percent of our portfolio performing at cost. We currently have two portfolio companies on non-accrual with a carrying cost of $12.9 million and a fair value of $5.1 million, representing just 0.7 percent of the fair value of the debt investment portfolio. Moving to liquidity, Available liquidity as of December 31, 2021, was approximately $255 million, including approximately $32 million in unrestricted cash and cash equivalents, and a borrowing capacity of approximately $223 million under our credit facilities, subject to existing terms and conditions. Regarding our credit facilities, the credit facility with Credit Suisse matured on January 8, 2022, and certain investments pledged as collateral under that credit facility will be pledged as collateral under the key bank credit facility, effectively increasing available borrowing capacity under the key bank facility. Our leverage increased to approximately 104% from 78% in the prior quarter, driven by our additional borrowings during the fourth quarter. And as a reminder, we were target a long-term leverage ratio ranging between 115 and 135 percent. Finally, regarding our dividend, on December 16, 2021, we declared a cash dividend of 36 cents per share for the fourth quarter of 2021 that was paid on January 14, 2022, and which generated coverage of 108.3 percent for our GAAP NII earnings for the quarter. We anticipate declaring a dividend for the first quarter of 2022 later this month, subject to approval by our board of directors. As we have highlighted throughout this call, 2021 was an exciting year for Trinity Capital. Active capital markets combined with a thoughtful and strategic scaling of our venture lending capacity contributed to the most successful year in our history. We have built a resilient, high yielding portfolio and have a strong balance sheet as we turn our focus to 2022. With that, I will open the call for questions. Operator?

At this time, if you would like to ask a question, press star 1 now on your telephone keypad. To withdraw yourself from the queue, you may press the pound key. Once again, to ask a question, that is star 1 on your telephone keypad. We'll take our first question from Ryan Lynch of KBW. Your line is open.

Hey, good afternoon, and thanks for taking my questions. Congrats on the nice quarter, and more importantly, congrats on the really nice 2021. The first question that I wanted to dig into to make sure that I'm understanding the math correctly on the exit of Matterport and Lucid, if I look at the combined fair value of those two investments as of 1231, I get like a $79 million fair value. You guys talked about your exit price in Q1 of around $60 million. So does that mean that we should expect basically a $19 million decrease in the fair value, you know, upon exit given kind of the sell-off of some of those investments in the first quarter?

Yeah, Ryan, this is Steve. That is correct. And I'll maybe have Jerry sort of just comment on, you know, how we value that, you know, at the end of the, you know, at the end of the quarter and then subsequently what happens. Yeah, sure. No, the 19.1 is correct, Ryan. You know, of course, from an evaluation perspective, so publicly traded securities, you know, marked with a small discount for lack of marketability, but, you know, following standard accounting guidelines there. So you're thinking about it right. It's 19.1 is going to be the difference.

Okay. just wanted to make sure I was accounting for that correctly. Obviously, you know, very, you know, successful investments, you know, upon exit. The one thing, the other thing I wanted to touch on too was just there was very little prepayments, you know, in this quarter. You know, I would have thought just from such an active quarter that we would have seen more prepayments in the quarter. And we've heard other BDCs in the past talk about, you know, when the market is really active like this, if you're not seeing big levels or strong levels of prepayments, that can be a concern for the quality of that portfolio when everything's transacting pretty freely. So what would you say to something like that if people were concerned by the low level of prepayments in a pretty active market in the fourth quarter?

Yeah, Ryan, I think that the prepayments are going to vary quarter to quarter. We actually had a fair amount of prepayments, as you'll recall, in Q3. We were able to outpace that with our originations, and that added to the portfolio. I think it just worked out that in Q4 we didn't have as many, and we also had, you know, obviously large originations and added meaningful amounts to the portfolio on a net basis. So no concerns with the quality and the credit quality of the portfolio right now, and don't think that that one quarter event is indicative of anything negative at all. Yeah, Ryan, this is Jerry. I would agree with that. And, you know, we also talked, Kyle mentioned in his prepared remarks, you know, a small handful of companies that are planning their exit via public offerings. So those things take some time, as you know, you know, to get through the SEC approval and DSPAC process. So prepayments, we have limited visibility. They come and go. I wouldn't read anything negative into it from a credit quality standpoint.

Okay. And then just one last one for me, and I'll hop back into the queue. You know, $20 million of gross fundings, over $250 million of commitments in the fourth quarter. Those are really large numbers, kind of a two-part question. Can you just talk about... kind of the investments and the growth that you've made in the infrastructure of Trinity to be able to, to layer on, you know, 200 million of, of, of gross fundings, you know, in a single quarter. And then I'd love to just hear, uh, there's obviously a lot of, a lot of things that the market's thinking about right now, uh, in terms of interest rates, inflation, geopolitical stuff. I just love to hear if you could provide a little bit of an outlook on, what you guys are seeing in terms of capital deployment in the first quarter.

Kyle, you want to touch on the growth?

So, you know, we built this team to scale, Ryan, and so we continue to hire kind of ahead of the plan. We continue to do that. We've also, you know, our system is built for scale. You know, we've talked about how we differentiate ourselves from our peers, not doing kind of the cradle to grave approach, but having teams and systems where we can really file a lot of opportunities through it. So we've hired in advance and we, this is not a surprise to us. You know, the, the tide has risen a bit with venture activity in general, but this is, this is not a surprise to us. We, we are hiring the best people in the world are executing on the plan and the system was built to handle that type of volume.

And then any comments on the outlet for Q1?

So we had, you know, I mentioned in the remarks, but we had record, you know, opportunities heading into Q1 and with also record commitments of $247.9 million in Q4. These are trends that lead to funding typically, and we expect that to continue.

Okay. Appreciate it. We'll see you this afternoon in the next quarter.

Thanks.

Thanks, Ryan.

We'll take our next question from Finian O'Shea of Wells Fargo.

Hi, guys. Good afternoon. It's actually Jordan Watson on the line for FIN today. I want to ask a question about some new credits this quarter. Looks like you guys put on about $31 million to some cryptocurrency mining companies. It seems like that could be a vertical where you could almost put as much money into it as you wanted to. So we're just really curious about how you guys think about sizing those positions relative to the rest of the portfolio. Thanks.

Yeah, Finn, good question. This is Steve. We've been thinking a lot about that and talking about that for a long time. And, Jerry, you might just touch on sort of how we think about the current portfolio relative to what we funded, more equipment-based, but that's – want to touch on that? Sure, happy to. So, yeah, as Steve mentioned, these are equipment financings. And, you know, the portfolio companies that we've onboarded, You know, they are leaders in their space. They have very strong balance sheets. And most importantly, very strong equipment and excellent relationships with their equipment providers that we feel, you know, is an acceptable credit risk, particularly with our equipment financings, which amortize, you know, straight out of date, as you know. So, you know, as you mentioned, yeah, you could probably deploy about as much money as you wanted in that space. We're being very selective.

All right, cool. Thank you, guys. That's all for me.

Thanks, Jim.

We'll move next to Casey Alexander of CompassPoint.

Hi. I was just wondering, I know you'd like to get the equipment financing as a percentage of the total portfolio up to a little bit higher number, and you did have a successful quarter for deployments there. But we've heard from other folks that are in this business that some of the supply chain restrictions have actually given them a problem getting some money to work in that the actual equipment itself cannot be delivered on a timely basis. Have you seen that you have demand for equipment financing, but you're not actually putting the money out because the equipment can't get to the end destination?

I don't know, Casey, if we've really seen our funding to our equipment financings delayed through supply chain issues. Certainly, some of our portfolio companies in the manufacturing space are facing and working through supply chain challenges, and we've got that reflected accordingly in our portfolio risk assessments. We haven't really seen a slowdown of the funding of equipment, though, to answer your specific question.

Okay. My next question for David is, you know, the team is being built to scale, so you're kind of bringing the guys in ahead of the actual production that you expect them to produce? Or should we expect to see, you know, some of the comp expenses move, you know, ahead of some of the production that we would expect from those folks that are coming on?

Yeah, I think that's a fair assessment, Casey. We will be hiring over the course of the year. We've already started to into this quarter as well. in order to be able to do that. But you will also be using technology to, you know, monitor some of the portfolio and the systems and so on as well. But you can't expect compensation expense to be going up during the course of this year.

Okay, great. I would imagine that you'll give us more detail on that at the analyst day later on this month.

Yes, we will.

All right, great. Thank you very much for taking my questions. And a really nice move in NAV this quarter. Congratulations.

Thank you. We'll take our next question from Sarkiv Sherbetan of B. Reilly Securities.

Hey, good afternoon, and thank you for taking my question here, and congrats on the quarter. My question is going to relate to kind of the dividend strategy and also, you know, with 1Q22 dividend that's kind of subject to approval for later this month. Like, any changes in strategy are you going to, you know, focus on just the recurring kind of regular dividend, boosted with a special? Just help us understand how you're thinking about that, especially given the recent monetization in the equity portfolio.

Good question, Sarkis. Thanks for that. So we're going to continue to think about our dividend strategy, our normal core dividend strategy, the same way we have. We're growing our business. We're scaling our business. We have intended to increase our earnings and our dividend And we plan to continue that. As you know, we typically meet with our board sort of middle of the last month of the quarter, which is coming up here. We'll do the same. And we will consider both our normal dividend strategy and we'll consider this extraordinary gain that we had and talk about what would be an appropriate, you know, level of dividend or distribution and the timing on that. We're excited to consider that. We'll be talking about that with our board and we will, you know, let the market know as soon as we've made that decision sort of middle of the month.

Understood. That's helpful. And we'll wait for that update. And I guess as we kind of step back and look at the current environment, you know, clearly public markets have seen a lot of volatility as we speak with folks on the private side. You know, they're saying that the ball hasn't really creeped in there yet. But I guess as you step back and look at the VC ecosystem, you know, are you seeing venture debt become, I suppose, more so in the conversation as opposed to kind of the equity as in our companies now kind of coming back and saying, gee, you know, at these valuations, I'd rather talk to the venture debt lenders as opposed to kind of raising equity. What are your thoughts or senses around what's happening here real time?

So, you know, I would say the answer would be, yes, we have seen that. There has not been major trends, though, with that theme in mind. I'd say it's been pretty consistent. You know, we are lending we're lending capital to private companies backed by private companies. And, and typically, you know, in that growth stage, the, the valuations are not necessarily directly, you know, correlated to the values of the companies we're funding. So we've not seen that. We've not really seen that yet. Although, you know, it'll come up from time to time. It's not something kind of driving the market right now.

Understood. I'll hop back in the queue for someone else. Thank you. Thanks, Marcus.

And once again, that is star 1 if you would like to ask a question. We'll move next to Christopher Nolan of Leidenberg Thalmann.

Hey, guys. Congratulations on the quarter and congrats on those gains. That's quite impressive. My question turns on capital structure for Trinity. You're already covering the dividend with earnings, and your leverage ratio is somewhat low. What's the appetite right now for taking the leverage higher given your growth prospects?

And this is Dave. Christine, we are targeting to be about 1.25 on our leverage. We're only at one at the end of the year. So, you know, obviously we would like to take advantage because I think we get better returns for our shareholders as we continue to use leverage. So the investors can anticipate that that will be our strategy.

David, do you anticipate reaching that leverage threshold this year?

I would believe we would hit that. Clearly, we have great goals for origination, and if that's the case, we're going to have to fund it through debt and equity. So you can anticipate that we would be approaching that target.

Great. And I guess on the dividend, if you're going to take the leverage up like that, then we should assume that the dividend is going to go up along with it. Is that part of the strategy here?

That would be a forward-looking statement. But yeah, you know, clearly if we, you know, we will target to, you know, distribute 90 to 100% of our earnings. And as we grow the portfolio, as we did in the fourth quarter and hope to do so in the future, we would anticipate that earnings and distributions would go up. That's all subject to the marketplace.

Great, thanks. Thanks, Chris.

And once again, that's star one on your telephone keypad. And we have no further questions at this time. I'd be happy to return the call to our hosts for any concluding remarks.

Thank you. And thanks for everybody joining us today. We really are excited about Trinity the year that we had. and I would just say we're most excited about the people and this team that we're building. It is best in class. We're very excited about where we're headed at Trinity. Thank you for your support, and we'll look forward later this month to give you a great update about things to come. Thanks again.

This does conclude today's program. You may now disconnect your lines, and everyone, have a great day.