The Company had a weighted average cost of borrowings comprised of interest and fees, of 4.9% in Q4 2023, as
compared to 4.6% for Q4 2022. The increase is primarily due to higher interest rates on credit facilities between periods.
NII Net Investment
Income
NII for Q4 2023 was $86.0 million, or $0.56 per share, based on 152.6 million basic weighted average shares outstanding, compared to
$62.1 million, or $0.47 per share, based on 130.6 million basic weighted average shares outstanding in Q4 2022. The increase is primarily attributable to a higher weighted average debt investment portfolio, an increase in core yields and
elevated fee income from early payoffs between periods, and a decrease in total net operating expenses.
Continued Credit Discipline and Strong Credit
Performance
Hercules net cumulative realized gain/(loss) position, since its first origination activities in October 2004 through
December 31, 2023, (including net loan, warrant and equity activity and excluding loss on debt extinguishment and other non-credit related losses) on investments totaled ($45.4) million, on a GAAP basis,
spanning 20 years of investment activities.
When compared to total net new debt investment commitments during the same period of $17.3 billion, the
total realized gain/(loss) since inception of ($45.4) million represents approximately 26 basis points (bps), or 0.26%, of cumulative debt commitments, or an effective annualized loss rate of 1.4 bps, or 0.014%.
Realized Gains/(Losses)
During Q4 2023, Hercules had net
realized gains of $2.8 million comprised of net realized gains of $4.6 million primarily due to the gain on equity investments, offset by ($1.8) million due to the loss on debt and warrant investments.
Unrealized Appreciation/(Depreciation)
During Q4 2023,
Hercules recorded $31.3 million of net unrealized appreciation, net of the impact of foreign currency movements. This is primarily attributable to $9.2 million of net unrealized appreciation on debt investments, $12.0 million of net
unrealized appreciation attributable to valuation movements on publicly traded equity and warrant investments, $(0.2) million of net unrealized depreciation attributable to valuation movements in the privately held equity, warrant and investment
funds, $0.4 million of net unrealized appreciation attributable to net foreign exchange movements. In addition, Hercules recorded $9.9 million attributable to reversal of previous quarter depreciation upon a realization event.
Portfolio Asset Quality
As of December 31, 2023,
the weighted average grade of the debt investment portfolio, at cost, was 2.24 compared to 2.28 as of September 30, 2023, based on a scale of 1 to 5, with 1 being the highest quality. Hercules policy is to generally adjust the credit
grading down on its portfolio companies as they approach their expected need for additional growth equity capital to fund their respective operations for the next 9-14 months. Various companies in the
Companys portfolio will require additional rounds of funding from time to time to maintain their operations.
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