Good day ladies and gentlemen and welcome to the Hercules Technology Growth Capital Second Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder this conference call is being recorded. I would like to now introduce your host for today’s conference Senior Director of Investor Relations, Mike Hara. Mr. Hara you may begin your conference.

Thank you Candice, good afternoon everyone and welcome to Hercules conference call for the second quarter 2015. With us on the call today from Hercules are Manuel Henriquez, Founder, Chairman and CEO; Mark Harris, Chief Financial Officer, and Andrew Olson, Vice President of Finance and Senior Controller. Hercules second quarter 2015 financial results were released just after today’s market close and can be accessed from Hercules Investor Relations section at www.htgc.com. We’ve arranged for a replay of the call at Hercules webpage or by using the telephone number and pass code provided in today’s earnings release. During the course of this call, we may make forward-looking statements based on current expectations. Actual financial results filed with the Securities and Exchange Commission may differ from those contained herein due to timing delays between the date of this release and in the confirmation and final audit results. In addition, the statements contained in this release that are - and purely historical are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements, including without limitation the risks and uncertainties, including the uncertainties surrounding the current market turbulence and other factors we that are identified from time-to-time in our filings with the Securities and Exchange Commission. Although, we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate and as a result, the forward-looking statements based on those assumptions also can be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements contained in this release are made as of the date hereof, and Hercules assumes no obligation to update the forward-looking statements or subsequent events. To obtain copies of related SEC filings, please visit sec.gov or visit our website, htgc.com. And with that, I’ll turn the call over to Manuel Henriquez, Hercules’ Founder, Chairman and CEO.

Thank you, Michael. Good afternoon everyone and thank you all for joining us on the call today. I will first start off the call by welcoming our new CFO, Mark Harris, who I believe represents an outstanding addition to our senior management team, gives an extensive experience and background in distressed lending, Asian capital markets and also as a former CFO. Welcome Mark and we look forward to working with you and growing the organization. Let me now turn my attention to Q2. Q2 was a very solid quarter for Hercules. On many fronts, we achieved growing NII of $0.23 per share, expanding our investment portfolio, expanding both our core and effective yields as well as expanding our senior management team and Board of Directors. In Q2, 2015 Hercules reached another significant milestone of achieving just under $5.5 billion of capital commitments to venture growth stage companies since inceptions of December 2003 representing over 325 companies who have chosen Hercules as a financial partner. I cannot emphasize the significance and importance of that distinction and I’m deeply grateful for the selection of all those companies and choosing Hercules as their partner along with the venture capitalist and entrepreneurs. So thank you very much for that. We are deeply grateful for the continuation of the vision and support of this entrepreneur and venture capital community that has led to the following financial performance that we will discuss on this call. We executed all fronts, working on growing our DNOI and NII back to historical levels of $0.31 per share. We expect to accomplish this over the next three to four quarters subject of course to market conditions and remaining cadence of originations and expected yields to increase during that period of time, both of which will lead to closing on the…

Thank you, Manuel and good afternoon, ladies and gentlemen. I’ll briefly discuss our financial results for the second quarter of 2015 and add some context to the reported numbers. Investment income increased to $38.1 million in the second quarter versus $32.5 million in the first quarter of 2015, an increase of 17% quarter-on-quarter. Our loan portfolio grew on a cost basis to $1.170 billion in the second compared to $1.085 billion in the first or an increase of approximately 8%. Further, our weighted average loans outstanding during the quarter grew by $101.7 million in the second quarter compared to $80.9 million in the first quarter. Core yields which exclude the effect of fee accelerations that occurred from early payoffs and one time events increased to 13.2% in the second quarter compared to 12.8% in the first quarter, an increase of approximately 3%. This increase is mainly attributable to the expiration of commitments in the second quarter. We expect our core yield to stabilize at a range of 12.7% to 13.2% on a going forward basis. The GAAP effective yields increased to 13.8% in the second quarter from 12.9% in the first quarter, an increase of approximately 85 basis points. This increase is primarily related to the acceleration of interest and fees pertaining to early loan pay downs and payoffs which were $47.3 million in the second quarter compared to $46.5 million in the first quarter of 2015. We expect the second half of 2015 to pick up, as our loan portfolio ages which we’ll discuss shortly. But most of this will take place in the fourth quarter. Interest expenses excluding fees fell by 4% to $7.6 million in the second quarter compared to $7.9 million in the first quarter of 2015, a decrease of approximately $300,000. This was largely due…

[Operator Instructions] Our first question comes from John Hecht from Jefferies. Sir you may begin.

Thanks very much and congratulations on a good quarter and thanks for taking my questions. Real quickly, we're aware that you guys are very sensitive on an asset-sensitivity level. But I'm wondering, and forgive me if you commented on this, Mark, but what happens if rates, as rates go up toward that 100 basis point increase? For instance, what happens when rates are up 50 basis points? Are you guys still accretive in that zone?

Yes the answer as I said in my previous remarks, if it goes up 50 basis points it would be approximately $5 million accretion overall. We talked about I mean while it was 100 basis points, remember as interest rates go up, obviously it impacts anything that is variable. While on our own debt side we are pretty fixed, so that don’t really go into impact that as I said 90 plus percent is fixed rate loans. But almost all 97% are variable rate loans in terms of the investments that we give therefore any interest rate movement on the upside definitely would be accretive to the overall P&L.

Okay. I did catch that. Thanks for reminding me and clarifying that. You have one new NPA. Which one is it or which company is it and what's the NPA as a percentage of cost now?

Our overall non-performing assets or non-accruals are limited to I think three companies right now and Andrew can you give that number please.

On non-accrual compared to total loans is 3.9% and as $46.1 million…

In aggregate.

Okay. That's very helpful. And then, Manuel, you talked about your biggest competitor now is equity and you've been talking for a couple quarters about some markets being a little bit bubbly or frothy. With that in mind, are there any sectors you're keeping away from simply because of valuation?

Well look at, it remains a very lofty market, the SaaS, some SaaS models, software as a service models remain pretty well priced out there. I think we have seen a little bit of a run up in valuations at some of the life sciences portfolio companies, we have seen a life sciences give up a little bit of reselling, which we think is an appropriate kind of pressure relief on that sector, so I think that factor still has good growth opportunities there. But we tend to avoid where a lot of people call the unicorns, we tend to focus on high quality, high duration sustained companies in value not just momentum investments. So I think that the overall venture capital marketplace although is seeing some pretty hefty valuation, I don’t think that valuation necessarily know please yet, so I think that there is still some room for growth out there and we certainly welcome some of these valuation increase that are happening, some of the portfolio companies are benefited from that and also benefiting for the ability to raise, equity capital higher valuations that serve to amortize our debt. So the ecosystem is quite healthy and we like that.

Great. Thanks very much, guys.

Okay. And our next question comes from Chris York from JMP Securities. Sir, you may being.

Good afternoon, guys, and thanks for taking my questions. So, Manuel, could you help me understand the guidance a little bit in regards to timing for covering the dividend? Because, given your comments on the yields potentially expanding to 14% in Q4 and then commitments still on pace for record levels at year end and then in addition to your expenses flattening out, it seems like the timing could be conservative by potentially a quarter or two.

That’s exactly right. I mean it’s available in the head. I don’t want to come out and be overly aggressive to say the dividend we covered in three quarters. There is a possibility that could happen, but there is a lot of - there has to be perfect alignment of the planet and I don’t feel that, that level of aggressiveness is prudent or wanted so I would rather differ to a window that’s happening in three or four quarter, but there is not question with the same portfolio growth, and any spike and effect of yields, you actually close the gaps, you are absolutely right.

Okay. And then switching gears a little bit; could you comment on how you are viewing the SECs consideration of treating unfunded commitments as debt for BDCs?

Sure. We’ve found a great and continued positive dialogue with the SEC. I would say that the staff of the SEC has been very willing to engage and what I consider to be very good substantive discussions, I think that the SEC is prudently and frankly appropriately reviewing the unfunded commitment category, I think there are some potential players that may have been a little more abusive of that practice if you will. However, one of the most important things to do unlike lower than our market lending is that venture capital lending specifically has earmarks of very hardened and stead fast mile stones, that these companies must achieve. Not only that and is often the case not withstanding that even a cheaper milestone that we have in discretion to evaluate in due diligence and decide whether or not we want to fund into that situation as well. So discursion remains very much in our capabilities and that’s something that we worked really diligent with the SEC staff to kind of help orientate them and understand our particular asset class in this area. I think that the staff is hopefully provide some open public outcome or outlook on this issue in Q3, but at this point we’ve had what I consider to be very constructive and very meaningful conversation of the SEC staff on this front. We are also proactively taking steps to adjust how we ourselves underwrite and historically have used un-funded commitments to also when negate that and whittle that number down fairly quickly here between now and year-end, where the un-funded commitment situation will be, I don’t want to say necessarily insignificant but will be dramatically lower than it is today. And we’ve made conscious efforts and continue to make conscious efforts to make changes to our own business model to accommodate those potential changes, you actually see many mandates down the road.

Great. Yes, that's all very helpful. I did notice that unfunded commitments did come down here in Q2; essentially, the lowest level since Q1 of 2014. And then, also in your press release that you did note the unavailable commitments due to milestones.

Yes. It’s a very, very important distinction and discerning that caveat there where these un-funded commitment are not contractual obligations until its times are earn and performance by the company and then we agree to release on diligence. So there, in essence are almost meaningless for that content. However, we strongly do believe that when an un-funded commitment is readily available to the company that is something that we will need to reserve for and look after as we’ve done historically and in fact we now included in our investor presentation deck, an historical chart that gives I think the trailing eight quarters of what that un-funded commitment look like and you will see it’s about 13% or so of our portfolio. And that’s where we've historically have managed the business to and you will see that’s self-evidence in our presentation.

Great. Thanks for that additional color. And then, you've invested in the platform over the last couple of quarters to build out the infrastructure at Hercules. Given this investment in the business and recent changes in conditions at some other competitors, I was wondering if you could give us an update on thoughts of acquisitions.

You are putting me in the spot a little bit. we have said from time-to-time, we remain very acquisitive, we are looking at and continue to look at portfolios, teams, and companies to acquire and we remain actively looking at those I mean its hard for me to go beyond this other than, yes we’re interested, yes we are evaluating opportunities and that’s I think the extent that I think I’ m comfortable with one of the most difficult things for us to encounter is that when we super pose our credit screens on targets, we find that valuations and fair value impairment are more lighter than we would deemed to appropriate. We are very much credit shop and we are very diligent when it comes with that and lot of targets tend to break down on yield and credit.

Got it. Yes, I know that you're potentially limited if you're looking at something to comment. But, let's see, maybe philosophically. So, how are you thinking about the culture at Hercules and fit when considering, I guess, maybe new hires and then, down the line, potentially acquisitions?

Well I think it we got to bifurcate the question into buying assets and buying a team, and they are both materially different. The softer nature i.e. buying a team is a much more comprehensive process, cultural fit as we all know for many acquisitions are very tough to asses and handicap, it is not untypical you may see 25% to 35% of the workforce just a attrition, naturally upon a change of control, certain teams that we are looking at we would like to obviously have a good retention program in place. All of these acquisition that we are evaluating are potentially be a creative and offer a winding of our platform, but honestly until we are closer until we have more definitive agreements all these acquisitions have a complete different colors and look and feel for themselves in doing that. Obviously in asset acquisition, our portfolio acquisition is much easier the kind of dial-in and we are evaluating some of those as well.

Great. That's it for me. Thanks very much.

Thanks Chris.

And our next question comes from Greg Mason with KBW. Sir you may began.

Great. Thanks, Manuel. Just to follow up on Chris' questions, still on the unfunded commitments. I think it's a big issue that people still - we can't still fully get our head around. So, if we think about in your press release you talked about $216 million of available liquidity to make new loans, but you've got $160 million of the unfunded commitments. Is the way the Commission is looking at it, would that $160 million of unfunded commitments essentially sop up a huge part of that $216 million of liquidity? Or is the calculus different than that?

Well, I’ll begin, ill have Mark jump in here as well. First and foremost I am not going to pretend to speak for the commission or how they are feeling and how they are visioning things I think that commission will eventually put out a public paper on their view on this issue, we would welcome that strongly, but I think that the part of your question that you addressing fundamental flaw that people don’t seem to remember. Hercules does not do seven year bullets or five year bullets, so the cash flows that we get on a quarterly basis are quite tremendous as you see in Q2, so it’s not untypical that we are seeing $50 million to $100 million of cash flows just coming in by loan amortization, which could range anywhere between $30 million to $40 million of quarter as that unexpected early repayments that could be anywhere between $40 million to $70 million a quarter and that’s give us $110 million in normalized cash flow to come in, and yes those cash flows you can point to a sources of funding in to help for the backstop any of those funding commitments. Secondly a lot of unfunded commitments we are working to whittle down and we would naturally begin to drop meaningfully between Q3 and Q4 just both naturally and how we are restructuring a lot of our deals. So, we think that this situation if nothing is done will automatically correct itself on it’s own by Q4, but we are working clearly with this staff and helping them understand our business model and working collaboratively would find a good balance in language that hopefully the staff will put out on this issue, but clearly yes the liquidity - looking at liquidity is a way of I think I’ll used the word mopping up or dampening down on those unfunded commitment, absolutely Mark anything you want to add?

Yes, I mean I also would add, one of the comment that you made is we have $216 million of liquidity and I also mentioned that we have $294 million of ability to increase if we should so choose, the other comment that I would make in the aggregate numbers that you’re referring to, $85 million of that are revolvers, which typically are not drawn down, so it’s very much a pro forma. And the last comment I would make since I have had direct discussions with the Securities and Exchange Commission is I think they are realizing by just going out there with the broad stroke of BDC may not be the right way to do it, because you do have small middle market lenders versus venture debt lenders and we all are very different in terms of our unfunded commitments. So as we start to work through that we are still optimistic that there may be a distinction of the SEC would come out with an official ruling that is hopefully softer than what we are reading about in the papers right now.

Okay, great. I appreciate those comments. On the $150 million of 7% notes that are still outstanding, those are callable now. You called a little bit of them. What is your thought process in terms of, now that you've got an investment-grade rating from S&P, going out and doing more of kind of an institutional bond deal and essentially refinancing those out for, hopefully, meaningfully lower coupons? Are you thinking about that? And what do you think that could potentially look like?

Sure. Let me try to answer the question obviously again in the previous part of my call I mentioned that we are up at 5.5% backing out non-cash fees in terms of our cost of debt it dropped out below 5% we have already began the process to look at other financing opportunities in the capital markets to do what you just discussed but I do want to clarify for you that not all of those bonds are callable right now only at the end of September well all of the 2019, 7% baby bonds be callable. So I don’t want to give the impression that we can do that as of today.

And Greg one thing I would add as we have been kind of - seeing the markets and evaluating the market in a different options as a hypothetical you can presume for example that if we were to go out in the market and we place the loans, the $150 million of the 2019 bonds at 7% you can actually if you wanted to go straight, use 4.5% or 4.6% coupon rate for example that would translate into 2.5% to 2.4% savings on that $150 million. So you are looking at some real impact to our bottom line that could be as much as $7 million. The interest rate savings towards shareholders and our investors but more importantly which is something that we really do want to do we will do that is highly accretive but more importantly it allows us to have better competitive position by having overall weighted cost of funds that will be in the sub 5% level that gives us the ability to have a wider NIMs and wider net interest margin for the benefit of our shareholders that we intend to do in the markets. So you are obviously right. We do expect the cash in institutional market here shortly.

Great. Great commentary. Thanks. I appreciate it, Manuel. .

You’re welcome.

And our next question comes from Robert Dodd with Raymond James. Sir you may begin.

Hi guys.

Hi Robert.

One just clarification first. Just to be clear, the $1.3 billion to $1.5 billion target for the end of year, that is a target for the loan book, right? Not the total portfolio.

Yes when we look at those numbers, we focus primarily on interest earning assets and yes it is most of the loan book and we are out $1.17 billion today, so we are well within strike distance and just getting to that point but yes it is in reference to the interest earning loan book which is basically only $130 million away from that target on the low end of the range.

Right, got it. And then if could, on the prepayment acceleration that you're expecting in kind of Q4, starting in Q3, can you give us any color on the source of that? Obviously, you're primary competition you say right now is equity. So, just is there so much VC equity floating around that you expect more equity injections and that's going to result in a pay-down? Or is it M&A activity? M&A activity I would expect to flow into realized gains potentially. So, I mean different sources generate different other incomes for you as well.

There are many factors, two of which you just highlighted that are correct that point to the early repayment activities occurring, Q4 typically is a strongest quarter ever for typically venture lenders and certainly the continuation of IPO monetization and M&A monetization will certainly contribute to that acceleration. However, there is a more fundamental of process that is underway and that is venture portfolios typically only have a duration of 22 to 24 months even though we may underwrite 36 or 42 months the average tenure of the outstandings are typically 22 to 24 months of our loan portfolios As the portfolio begins to mature and our capacity age of portfolio that we grew in the second half of 2014 and it grew in the first half of 2015, is relatively young, its called composite age. The static age of the portfolio. So as an example, we’ll pursue that static of the portfolio is around 13 months or so. As you notch every other quarter under your belt, and it get older, go for 13 to then 16 months to 19 months and if that cross over plan which is that 19 month mark more or less as Mike said earlier, you start seeing the acceleration of prepayment activity just because you reached the natural tender of the portfolio at 22 to 24 months and because of that, and this is how dieseled we are at Hercules and how much we look at our portfolio. We can actually tell you that we could see an increase in that monetization or exit event taking place in a portfolio of natural recycling itself as it close that month 19 and beyond that point.

Okay. Got it. Thank you.

You’re welcome.

Okay. We have a question from Fin O'Shea with Wells Fargo Securities. Sir? Mr. O'Shea, your line is open. Fin O’Shea: Sorry about that, guys. I had myself on mute. Following the Silicon Valley Bank quarter it looked at first like those guys were going to retrench a bit. But, from what we're hearing, they seem to be saying that the provisions were a couple idiosyncratic one-off types. So, if you can give us an update on what you're seeing from activity from the bank side.

Well, I cannot tie in what a bank does and doesn’t do. I think that the bank competitive environment remains no different than it was for the last quarter in the last few quarter. I think that the banks remain competitive I think that the regulatory environment and the bank is increasing that is actually a favorable outcome for our landscape and I think that some of the banks have already spoken about the increase of regulatory activity and increasing reserve requirement in their own business models that may be adversely impacting them. As to the credit issue, I can’t speak to specific looking by banks, there are fine institutions, they are very good players, they know what they are doing and I think that they are probably right, it’s probably indigenous to unique credits. We are not seeing any broad system and credit concerns in our portfolio right now. And so I think that would be agreeing with Silicon Valley bank is probably just isolated in to random variables, random credits [Author ID1: at Mon Aug 10 18:14:00 2015 ]. But we are not seeing this as a systemic issues in our portfolio as of yet either. Fin O’Shea: Okay, great. Thank you. And then just a smaller question. If you could provide a bit more color on what we'll see from here in terms of SG&A and comp. I think you said we'll see some scale from here, but with a bit higher of a variable expense.

I think that our SG&A is pretty much begun to plateau. I don’t think it’s going to materially move, M&A one direction up or down and I think that comp is not going to more variable related meaning it’s co related to portfolio increases that’s going on and you will see that increase in the variable comp but I do not expect any more material increases in overall OpEx excluding interest spread obviously. Interest expense will go up, we indicated that earlier that about $500,000, 450 as such will start going up just attributed to the Wells Forgo borrowing at $50 million but beyond that and also need to highlight again any event that we end up doing the retirement of our 2019, $150 million baby bond that that would lead to a significant interest savings ones, when that is done, that will further lower your overall OpEx from you include interest expense. Fin O’Shea: Okay. Very well. Thank you.

Thanks, Fin.

Okay. We have a question from Hugh Miller with Macquarie Group.

Thanks for taking my questions.

Hi,

Hi. So, I guess one other, not to bash the subject, but with regard to the unfunded commitments. Obviously it seems as though you're going to try and take a strategy of maybe adjusting the terminology and the language in which you're underwriting those commitments. Do you think that that -- is there a risk at all that that could put you at maybe a competitive disadvantage by not having kind of a formal mandate for an unfunded commitment with or without milestones or just with milestones relative to maybe some non-BDC competitors?

Well, I think as we said in these - I think comes to mind is rising [indiscernible] boats in these context so I don’t think that we are any different anybody else, I think we are taking the more proactive approach and working diligently with our companies and also with the SEG staff I’m working on a language and changing some of our business practice I think ministry as a whole we’ll probably end of confirming to similar changes as we address this issue. At the end of the day the whole senior security definition and asset covered ratio is very much of fluid issue as you know there is bill on the floor of consideration by Congress that actually could ameliorate so whole entire discussion by raising of the overall asset coverage ratio, limits as well, that said, we’re not waiting for that we have taken a proactive approach to adjust that issue we do not think it will have an impact whatsoever in our business and a some of our competitors want to go do of that issue let [indiscernible] I don’t think its something that we’re going to get concerned about because on how we underwrite we don’t get cut up with what other are doing, we do what we do and we will take it is right underwriting things to do and if the SEC staff makes decision important point for them or we are going with the staff and finally have solution with them together. It’s something of that as an institution I believe it is very important that we need work with our regulators and also listen to them, but [indiscernible] we had feedback for them as well.

That's helpful. And then a follow-up question. Just if I take a look at the 10-Q, it looks as though exposure to kind of the energy technology names has increased over the past six months. Can you just give us a sense of what you're seeing there for opportunity and what you think the risk-reward is relative to other areas?

Absolutely, I think it’s a great question. There is absolutely no question that we have actually truly like and are seeing very, very attractive investment opportunities and the renewals area. We are not necessarily interested and looking at Cleantech solutions there are falls of fuel dependant, most of our investments are much more disruptive and enabling, solutions in that area and I think that we are one of the few players that I am aware right now that has an active interest and growing in that area, but we are now looking to have much exposure to volatility on all prices or false of fuels much more focused on improving the environment, reducing contaminants, getting lower cost of operations are like for example of eclectic vehicles or buses as an example. So our strategy in the energy area is much more enabling disruptive then its petroleum base in focus.

Okay, thank you so much.

Okay, we have a question from Christopher Nolan with MLV & Company.

Hi Chris.

Hi guys. All my question have been asked and answered. Thank you very much.

You are right Chris, thank you.

Okay, so next we have Aaron Deer with Sandler O'Neill.

Hi.

Hi, guys. Just following up on the capital question. You had previously kind of hinted at the idea that a capital raise and equity raise could be possible before the end of the year. I guess, given some of the uncertainty surrounding the unfunded commitment treatment and your forecast, is it possible we could be seeing a common raise before year end or is that more likely pushed out further into 2016 or beyond?

It is certainly not my interest to do a capital and stock raises these level whatsoever and it that means that one of the strategy that we do is slow down originations and it stop around $1.3 billion, $1.350 billion and it something that we will definitely do borrowing any kind of force capital raise. We do not like the issue acuity of these levels we are internally manage, we are directly lying with shareholders on one of the largest shareholders and I actually do not want to see unnecessary dilution and so I think that we are going to be prudent and very unwilling to do equity raise at these prices unless we are absolutely forcibly which I don’t think will be but that is our, so I don’t think and equity raise and this year and these prices is absolutely on the table, no.

That's great. And then, one for you, Mark. You guys don't seem too worried about credit. But I was just wondering if you could give some color behind the increase in the grade-5 loans in the quarter. And of the $7.5 million loan impairment how much of that was credit-related?

So a lot of that, they wanted credit that was put into non-accrual and five rated category was attributed to a change in strategy going on in the company that we are not going to get into specifically because these companies are private and when the change of strategy takes place often times you are waiting for the financing strategy to then follow however because of fair value churning often times we are forced into a fair value of choice where we need to make sure that loan is properly reflected from a value, we actually believe two of the credit and the non-accruals will begin to show change positive change taken place as early as Q3 and possibly as late as Q4. And one of the credits in particular is - I should say very strong signs of improvement and the other one is in a last couple of weeks showing much better outlook and so I think that we are going to take it month by month and continue to look for positive affirmation and ultimately positive equity infusion into these companies that will then give us the much more solid confidence to Mark and James.

Okay, good stuff. Thanks for taking my questions.

Thank you.

[Operator Instructions] And we have a question from Doug Harter with Credit Suisse.

Thanks. Manuel, historically you've been very conservative around the use of your warehouse lines. Can you talk about, as growth happens in the back half of the year here, your willingness to use those lines?

There is absolutely no question, it is very interesting issue for me, [indiscernible] for me and investors want me to over leveraged and other quarters being conservative about leverage and so there is never really good balance and what we are saying is because we believe and the portfolio and the availability of good opportunities that beginning to use our bank lines especially with the capital markets that are open and willing and coupled with our institutional investment grade rating our confidence in securing additional bank financing with bond or additional bank is pretty much there and so one of these we will do because we have the ability to leverage up to 125 to 1 we feel confident and willing to go up to the 1.1 leverage level but that probably we will not have it until late Q4 maybe early Q1 for example, it is going to be a subject when we feel that the quality of the assets that we like and the yields of the assets that we like, we will target the portfolios of that level. As we go to that level, you can see pro forma portfolio is near $1.4 billion level that the 1.1 leverage line. And so that kind of gives you can indication that when you look at a portfolio that goes up to the 1.1 leverage point again just slightly 1.4 billion and you multiply that anywhere to that 13% or 14% yield or yield you want to use, you will see the level of accretion that drops to the bottom line for our shareholders in terms of NII growth and that is something that we have in purposely growing quietly into that and that when you see I said earlier that we think the cadence of earnings growth is going to be probably $0.02 per quarter growth and you can add $0.01 to that plus or minus on increase in portfolio fundings or effective yields going up. Now $0.01 can also weigh between just those two factors, effective yield or portfolio growth that drive further that earnings growth in the company and that will be driven by leverage because we don’t want to issue equity at these prices.

So I guess, following up on that, understandable that you don't want to issue equity at these levels. I guess, how do you balance kind of the near-term opportunities versus potentially starting to dial back growth a little bit sooner and sort of allow that opportunity to sort of spread out the growth over potentially a longer period of time?

That we do have interest in doing, we want to get to that core portfolio of $13 billion, $14 billion, $15 billion at that point we have the optionality to decide what we want to do, there is absolutely no question that a prudent thing to do expensive stocks of these prices led the earnings catch up and let the stock catch up to the earnings and therefore grow the portfolio $1.3 million, $1.4 billion and you are weighing quarter two or more. I mean it is really a function of seeing a good stock appreciation return back come with dividends and really beginning to show the investor community that this platform is as strong as it historically has been and it will continue to be. And that means that we have to grow and start below it, I won’t have fall with that, these would be throwing up very strong earnings at that point.

Great. That makes sense. Thanks, Manuel.

You’re welcome. End of Q&A

I’m not showing any further questions. Mr. Manuel, please proceed with any further remarks.

Well, Candice, thank you very much. Thank you everybody for joining us for the today, as well as you know typically after these earnings call we participate and attend various investor conference from the various banks that follow-ups, we will be attending conferences here shortly in Boston and some in New York. And if you would like to have participation or attend one of those meetings please let Michael Hara, our Investor Relations department know. We happy to schedule if we have available time. And again, thank you shareholders, thank you analysts, and we look forward to our next earnings calls. Thank you very much everybody.