UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

Item 1. Reports to Stockholders.

The Report to Shareholders is attached herewith.

Annual Report

December 31, 2015

NASDAQ BANX

stonecastle-financial.com

STONECASTLE FINANCIAL CORP.

Table of Contents

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Letter To Shareholders

To Our Shareholders,

In cities and small towns across the country, there are approximately 6,100 banks within the $3.0 trillion community bank industry. Nearly 81% of these banks are privately owned or closely controlled and 92% have less than $1 billion of assets.¹ These local banks are critical to the health of our nation's economy. By taking deposits and making loans within their geographic footprint, these institutions help drive local job growth by fueling the creation of, and support for, small business. This, in turn, helps to keep these local economies flowing with local commerce.

For example, community banks represent only 19% of the banking industry's total assets, yet currently provide almost 55% of the nation's total small business loans made by banks.¹ These loans can have a significant impact on local communities. In fact, small businesses have historically accounted for nearly 74% of the job creation in the U.S.²

One of the most important attributes of the banking industry is what we call the multiplier effect. Every dollar of bank capital allows a bank to take nine times that amount in deposits, which then can be used to make loans. This multiplier effect has the potential to create an economic impact of $10 million for every $1 million of capital invested.

Community banks generally avoid participating in higher risk business lines, such as sub-prime lending, capital markets activities or energy-related lending. As a result, unlike larger banks, their performance usually is less exposed to macroeconomic cycles and more tightly aligned with the economics of their local market, including the small businesses within those markets. Yet, this laser focus on the local community limits the options many of these banks have for raising capital, even when they are stable, healthy financial institutions.

StoneCastle Financial Corp. ("StoneCastle Financial" or the "Company") has a unique public market platform which directly addresses this capital access challenge. The Company believes this platform can help community banks grow their businesses, while seeking to provide investors with a current cash yield that is generally higher than is found from companies in other industries with comparable credit quality. This alternative source of capital is designed to provide community banks with the ability to increase their local lending, fund potential acquisitions, or repurchase shares to bring liquidity to local shareholders.

The opportunity to access capital through an entity such as StoneCastle Financial may also lower the bank's cost of capital. A lower cost of capital can be advantageous because the bank could provide a better cost of loans to its customers or improve the financial resiliency of the bank during difficult times.

Sources:

¹  Federal Depository Insurance Company, www.fdic.gov

²  Small Business Administration, www.sba.gov

Letter To Shareholders

StoneCastle Financial generally invests in the senior debt, subordinated debt, preferred shares, and, to a lesser extent, common stock of community banks in order to generate income distributions for the Company's shareholders. The Company believes that its unwavering focus on credit quality provides StoneCastle Financial with a competitive advantage over other yield-oriented investment funds in the market.

StoneCastle Financial's investment team monitors bank call reports filed quarterly with the FDIC and other industry data to ensure it maintains a high level of transparency into an individual bank's loan portfolio and market conditions. We are pleased to report that, as of the end of 2015, a majority of the portfolio's underlying assets were scored equivalent to BBB- or better by Kroll Ratings.

On the following pages, we provide additional detail on our 2015 financial and operational results. As we move forward, we believe our investment strategy, rigorous credit standards, and long-term orientation properly positions us to deliver sustainable value creation for our investors.

We appreciate your continued involvement with StoneCastle Financial and its mission. We look forward to updating you on our progress.

Sincerely,

Joshua S. Siegel
Chairman & CEO
StoneCastle Financial Corp.

About StoneCastle Financial Corp.

MANAGEMENT DISCUSSION AND SUMMARY

This report provides information on the financial performance for StoneCastle Financial Corp. ("StoneCastle Financial" or the "Company") for the year ended December 31, 2015. StoneCastle Financial (BANX) is a closed-end management investment company listed on the NASDAQ Global Select Market.

As of year-end, the Company had total assets of $192.6 million, consisting of total portfolio investments of $184.8 million and cash and other assets of $7.7 million. The total portfolio investments consisted of 4.1% term loans, 3.1% debt securities, 24.3% preferred shares of credit securitization, 25.2% trust preferred securities, 35.8% preferred stock, 2.9% convertible preferred stock, 3.9% common stock and exchange traded funds, and 0.7% in limited partnership interest and money market fund investments.

For the full year, StoneCastle Financial had gross investment income of $15.77 million and operating expenses of $6.42 million. This resulted in net investment income of $9.35 million or $1.44 per share based on average shares outstanding during the year. The Company also realized capital losses of approximately $1 million, or $0.15 per share, during the year.

During the year, StoneCastle Financial declared distributions of $1.51 per share. Based on the fourth quarter 2015 dividend rate of $0.35 per share, and as of December 31, 2015 the distribution rate was 8.60%, based on a closing market price of $16.30. For the full year, based on the market prices of StoneCastle Financial's stock, an investment in StoneCastle Financial resulted in a total annual return of (8.68%), including the reinvestment of distributions.

This, however, does not fully reflect the credit and valuation stability of StoneCastle Financial's underlying assets and net income generated by the portfolio over the period. For the year ended December 31, 2015, the Company returned 5.81% on net asset value, which includes realized and unrealized gains/(losses) before distributions to shareholders.

Net Asset Value at year end was $21.62 per share, reflecting a decrease of $0.24 from the prior year end. This was comprised of net investment income of $1.44 per share, offset by net realized and unrealized losses of ($0.17) per share, and distributions paid to shareholders of ($1.51) per share.

To review the Company's change in NAV since inception, StoneCastle Financial's Initial Public Offering Price/Net Asset Value was $23.49 in November 2013, net of initial sales charge and expenses. We generated net investment income of $2.18 per share, incurred net realized and unrealized losses of $0.21 per share, and secondary offering expenses of $0.05 per share. We declared total distributions of $3.79 per share, resulting in a return of $1.87 per share of invested capital back to investors. This results in a NAV of $21.62 per share at year end 2015.

For the 2015 tax year, 13.40% of the total distributions paid in 2015 were determined to be non-taxable distributions. Please see the 2015 Tax Information posted on the StoneCastle Financial website (www.Stonecastle-Financial.com).

About StoneCastle Financial Corp.

PORTFOLIO DISCUSSION

THE PORTFOLIO

StoneCastle Financial makes long-term, non-control investments in community banks seeking capital for organic growth, acquisitions, and share repurchases along with other investment opportunities. The Company primarily invests in preferred securities, subordinated debt, senior debt and, to a lesser extent, common stock.

Over the course of 2015, StoneCastle Financial purchased securities totaling $194.5 million, which consisted of 44 transactions in 40 securities. During the same period, the Company executed sales of $99.2 million in 41 transactions. In addition, the Company received call (redemption) notices for 22 transactions totaling $80.4 million for the year, with $42.2 million, or 53% occurring in the fourth quarter.

As of December 31, 2015, the Company had a total investment portfolio of $184.8 million representing 96% of total assets and consisting of:

TERM LOANS

StoneCastle Financial purchased $41.0 million of term loans in eight transactions in 2015. At year-end, the Company held two investments in term loans totaling $7.5 million or 4.1% of total investments. The Company's largest holding in a term loan is a loan of $5.0 million to Community 1st Bancorp in California (Subordinated Term Loan, 7.99%, 1/1/2026).

DEBT SECURITIES

StoneCastle Financial purchased $26.1 million of debt securities in eight transactions in 2015. At year-end, the Company held one debt security investment valued at $5.7 million or 3.1% of total assets. The investment is in MMCaps Funding I Ltd. (Fixed Rate Mezzanine Notes, 8.04%, 6/8/2031).

About StoneCastle Financial Corp.

TRUST PREFERRED SECURITIES

In 2015, StoneCastle Financial purchased $24.9 million of trust preferred securities in seven transactions. At year-end, the Company held 14 trust preferred investments totaling $46.6 million, or 25.2% of the total investments. Trust preferred securities are debt securities that may qualify as capital for a bank or bank holding company.

While trust preferred securities may have been issued by both public and private banks, the securities held by the Company are typically more liquid securities, offered by large public banking institutions. The Company holds a number of these securities as higher-yielding, short term positions that are expected to be redeployed into higher yielding, long term investments as these investments become available.

PREFERRED SHARES OF CREDIT SECURITIZATION

In the fourth quarter, StoneCastle Financial purchased $45.5 million Preferred Shares of Community Funding CLO, Ltd., a credit securitization. The net proceeds of the pooled transaction were used primarily to fund direct capital investments into 35 community and regional banks from 24 different states. The estimated effective yield for the investment was 10.49% and net investment income will be recorded as ordinary income due to the income characterization from the underlying loans. As of year-end, the Community Funding CLO, Ltd. was valued at $44.9 million, or 24.3% of total investments.

PREFERRED SECURITIES

During 2015, StoneCastle Financial purchased $33.9 million of preferred securities in 15 transactions. At year-end, the Company held 22 distinct investments in preferred securities totaling $66.2 million, or 35.8% of total investments. The Company's largest holdings in preferred securities were $16.0 million in First United Corporation in Maryland (Fixed Rate Cumulative Perpetual Preferred Stock, Series A, 9%); $10 million in Katahdin Bankshares Corporation in Maine (Floating Rate Non-Cumulative Preferred Stock, Series D, 8.75%); and $9.6 million in First Reliance Bancshares in South Carolina (Fixed Rate Cumulative Perpetual Preferred stock, Series A, 9%).

A majority of these investments qualify for dividend received deduction (DRD) or qualified dividend income (QDI) tax treatment. Please note that StoneCastle Financial is not a tax advisor and advises that shareholders consult a tax advisor regarding their personal tax status.

CONVERTIBLE PREFERRED STOCK

StoneCastle Financial held two positions in convertible preferred stock purchased in the prior year that at year-end were valued at $5.3 million or 2.9% of total investments.

About StoneCastle Financial Corp.

COMMON STOCK & EXCHANGE TRADED FUNDS

During the year, StoneCastle Financial purchased $41,558 of common stock in a single transaction. At the end of 2015, the Company had three equity investments totaling $3.6 million, or 1.9% of the total investments. Equity securities are typically held for capital appreciation, however, some positions may be held for both dividend income and capital appreciation. In addition, the Company utilizes certain exchange traded funds and other 1940 Act money market funds as short-term positions expected to be redeployed into higher yielding, long-term investments. During the year, the Company purchased a total of $23.1 million iShares S&P U.S. Preferred Stock Index Fund in four transactions at various times during the year. The Company's holdings in this security varied during the course of the year and at year end the Company held a position valued at $3.7 million, or 2.0% of total Investments.

LIMITED PARTNERSHIP INTEREST & MONEY MARKET FUND

In the prior year, StoneCastle Financial purchased $1.0 million of Priam Capital Fund I, L.P., a holding company for stock of First Mariner Bank in Baltimore, Maryland. At year end, 2015, the Company's partnership interest was valued at $895,500, or 0.5% of the total investments. In addition, the Company utilizes 1940 Act money market funds as short term positions expected to be redeployed into higher yielding, long-term investments.

CAPITAL MARKET ACTIVITIES

In the fourth quarter of 2015, StoneCastle Financial purchased $45.5 million Preferred Shares of Community Funding CLO, Ltd., a credit securitization. The transaction closed on October 15, 2015 with an estimated effective yield of 10.49%.

Citigroup, the placement agent, structured the transaction in two tranches: $205.0 million of senior secured Class A Notes rated A3 by Moody's Investors Service and $45.5 million of unrated Preferred Shares, for a total issuance of $250.5 million. The collateral has an average fixed rate of 7.00% and the Class A Notes initially pays a fixed rate coupon of 5.75%. The net proceeds of this transaction were primarily used to fund direct capital investments into 35 community and regional banks from 24 different states. The capital issued to the banks was predominantly in the form of subordinated loans that rank senior in priority to Trust Preferred Securities, TARP, SBLF, Preferred Shares and Common Shares. These banks can use this capital to support nearly $2.5 billion of local lending, fund acquisitions or refinance more expensive capital.

PORTFOLIO CONSIDERATIONS

StoneCastle Financial is steadfast in its pursuit of constructing a portfolio that is able to generate long-term, consistent and stable returns, primarily for income distribution and to a lesser extent, capital appreciation. The Company seeks to achieve this goal while maintaining high credit quality standards. At year end, the Company reported no charge offs and no impaired assets within the underlying portfolio. The Company also maintains an A3 rating from Moody's Investor Services on its revolving credit facility.

About StoneCastle Financial Corp.

While we continued to make significant progress in our second full year of operations, the Company observed that the pace of capital deployment and transaction closings were extended or delayed due to several external factors that were not as pronounced prior to the implementation of Dodd Frank and Basel III. Among the factors that affected the timing for capital deployment were: (i) a bank's timeframe to obtain internal approvals to issue, (ii) the protracted nature of mergers and acquisitions, and (iii) the longer than expected approval process from government regulators which must provide final regulatory approvals for a bank merger, capital issuances and capital redemptions (refinancing).

INVESTMENT PROCESS

The Company conducts due diligence on pending investments in several phases, beginning with a preliminary screening and ending, in most cases, with an on-site management visit. The investment process includes both quantitative and qualitative reviews with investment decisions made by an investment committee with over 90 years of combined investment experience in the bank sector. The Company's disciplined approach to due diligence and commitment to credit quality reflects its long-term view. The Company believes shareholders have high regard for this dedicated and disciplined approach to portfolio construction, as we expect it will serve to provide predictable cash flows over an extended period of time.

Conclusion

We believe that StoneCastle Financial offers investors a unique opportunity to participate in the community banking industry.

The Company will continue to work diligently for our shareholders by prudently constructing an investment portfolio with the capital entrusted to us. As we work to deploy capital with a long-term view, credit quality and a rigorous investment approach are of paramount focus to our shareholders.

While StoneCastle Financial continued its solid progress in 2015, we look forward to our work ahead in pursuit of our goals.

We appreciate the feedback we receive from our shareholders. Thank you for your support of StoneCastle Financial Corp.

StoneCastle Financial Corp.

Schedule of Investments

As of December 31, 2015

See notes to Financial Statements

See notes to Financial Statements

See notes to Financial Statements

⁽¹⁾  We do not "control" and are not an "affiliate" of any of our investments, each as defined in the Investment Company Act (the "1940 Act").

⁽²⁾  $ represents security position traded in par amount.

⁽³⁾  Fair Value is determined in good faith in accordance with the Company's valuation policy and is reviewed and accepted by the company's Board of Directors.

⁽⁴⁾  Security is exempt from registration under Rule 144A of the Securities Act of 1933.

⁽⁵⁾  The preferred shares are considered an equity position in the credit securitization. Equity investments are entitled to recurring distributions which are generally equal to the remaining cash flow of the payments made by the underlying company's securities less contractual payments to debt holders and company expenses. The estimated effective yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon termination. Such projections are periodically reviewed and adjusted as needed. The estimated yield may ultimately not be realized.

⁽⁶⁾  Currently non-income producing security.

⁽⁷⁾  Investments are income producing assets unless otherwise noted by footnote (6).

⁽⁸⁾  Cost values reflect accretion of original issue discount or market discount, and amortization of premium.

⁽⁹⁾  Includes $25.0 million in bank loans from Texas Capital Bank.

†  As of December 31, 2015, the cost basis of investment securities owned was substantially identical for both book and tax purposes. Gross unrealized appreciation of investments was $2,416,791 and gross unrealized depreciation was $2,661,766, resulting in net unrealized depreciation of $244,975.

*  The following is a listing of the underlying unsecured loans, unsecured subordinated debentures and notes that were made by Community Funding CLO, Ltd. See Notes to Financial Statements for additional information on StoneCastle Financial Corp's. investment in Community Funding CLO, Ltd.

See notes to Financial Statements

See notes to Financial Statements

StoneCastle Financial Corp.

As of December 31, 2015

⁽¹⁾  The term "Bank Issuers" as used herein refers to banks or holding companies thereof and includes issuers in which we have direct and indirect investments.

⁽²⁾  For purposes of this table the calculation of the percentage of total Long-Term Investments are based on the Bank Issuers in which SCFC directly and indirectly holds investments. With respect to direct investments that are secured by obligations issued by Bank Issuers (each a "Secured Bond"), the percentage was calculated by prorating the market value of the Secured Bond among the obligations issued by the underlying Bank Issuers that collateralize such Secured Bond and dividing each such amount by total Long-Term Investments.

⁽³⁾  Does not include the Community Funding CLO, Ltd.

See notes to Financial Statements

StoneCastle Financial Corp.

As of December 31, 2015

⁽¹⁾  For purposes of this table the calculation of the percentage of total Investment in the Community Funding CLO, Ltd. are based on the Bank Issuers in which Community Funding directly holds investments. With respect to direct investments that are secured by obligations issued by Bank Issuers (each a "Secured Bond"), the percentage was calculated by prorating the market value of the Secured Bond among the obligations issued by the underlying Bank Issuers that collateralize such Secured Bond and dividing each such amount by total Investment.

See notes to Financial Statements

Financial Statements

Statement of Assets and Liabilities As of December 31, 2015

See notes to Financial Statements

Statement of Operations For the Year Ended December 31, 2015

This Statement of Operations summarizes the Company's investment income earned and expenses incurred in operating the Company. It also shows net gains (losses) for the period stated.

See notes to Financial Statements

Statement of Changes In Net Assets

These statements of changes in net assets show how the value of the Company's net assets has changed during the last two periods. The difference reflects earnings less expenses, any investment gains and losses, distributions, if any, paid to shareholders and the net of Company share transactions.

*  Underwriting fees and offering costs were $1,657,840 and $304,000 for year ended December 31, 2014.

**  Includes accumulated net investment loss of ($2,278,834) and ($3,250,518), respectively.

See notes to Financial Statements

Statement of Cash Flow

This Statement of Cash Flows shows cash flow from operating and financing activities for the year stated.

See notes to Financial Statements

Financial Highlights

The financial highlights show how the Company's net asset value for a common stock share has changed during the period.

¹  Net asset value at beginning of period reflects a deduction of $1.51 per share of sales load and offering expense from the initial public offering price of $25 per share.

²  The net investment income, unrealized gain/(loss) on investments and offering costs per share was calculated using the average shares outstanding method.

³  Based on share market price and reinvestment of distributions at the price obtained under the Dividend Reinvestment Plan. Total return does not include sales load and offering expenses.

⁴  Ratio of expenses before waivers to managed assets equals 3.62% for the year ended December 31, 2015.

⁵  Excluding interest expense, net operating expenses would have been 3.54% and 3.33% for the years ended December 31, 2015 and 2014, respectively.

⁶  Ratio of expenses after waivers to managed assets equals 3.35%.

⁷  Ratio of net investment income to managed assets equals 4.88% for the year ended December 31, 2015.

⁸  Calculated by subtracting the Company's total liabilities (excluding the loan) from the Company's total assets and dividing that amount by the loan outstanding in 000's.

*  Not-annualized

**  Annualized

†  The Company commenced operations on November 13, 2013.

See notes to Financial Statements

Notes to Financial Statements

Note 1 — Organization

StoneCastle Financial Corp. ("SCFC" or the "Company") is a Delaware corporation registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended, (the "Investment Company Act") which commenced investment operations on November 13, 2013. In addition, SCFC has elected to be treated for tax purposes as a regulated investment company, or "RIC" under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code''). As an investment company, the Company follows the accounting and reporting guidance of the Financial Accounting Standards Board and the Accounting Standards Codification Topic 946 "Financial Services — Investment Companies".

SCFC's primary investment objective is to provide stockholders with current income, and to a lesser extent capital appreciation. We attempt to achieve our investment objectives through investments in preferred equity, subordinated debt, convertible securities and, to a lesser extent, common equity primarily in the U.S. community bank sector. We may also invest in similar securities of larger U.S. domiciled banks and companies that provide goods and/or services to banking companies. Together with banks, we refer to these types of companies as banking-related and intend, under normal circumstances, to invest at least 80% of the value of our net assets plus the amount of any borrowings for investment purposes in such businesses. There is no guarantee that we will achieve our investment objective.

Note 2 — Significant Accounting Policies

The following is a summary of significant accounting policies consistently followed by SCFC in the preparation of its financial statements. The preparation of the financial statements is in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") and requires the Board of Directors, inclusive of the sub-committees, and the Advisor to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents — SCFC considers all highly liquid debt instruments with a maturity of three months or less at the time of purchase to be cash equivalents.

Investment Valuation — The most significant estimates made in the preparation of the Company's financial statements are the valuation of equity and debt investments and the effective yield calculation with respect to certain debt securities, as well as the related amounts of unrealized appreciation and depreciation of investments recorded. The Company believes that there is no single definitive method for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments that SCFC makes. The Company is required to specifically fair value each individual investment on a quarterly basis.

The Company complies with ASC 820-10, Fair Value Measurements and Disclosure, which establishes a three-level valuation hierarchy for disclosure of fair value measurements. ASC 820-10 clarified the definition of fair value and requires companies to expand their

disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e. the "exit price") in an orderly transaction between market participants at the measurement date. ASC 820-10 also establishes the following three-tier fair value hierarchy:

•  Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access;

•  Level 2 — Valuations based on inputs, other than quoted prices included in Level 1, that are observable either directly or indirectly; and

•  Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

To the extent securities owned by the Company are actively traded and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. Securities traded on inactive markets or valued by reference to similar instruments are generally categorized in Level 2 of the fair value hierarchy.

The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by SCFC in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement. The valuation levels are not necessarily an indication of the risk associated with investing in those securities.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, SCFC's own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. SCFC uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.

SCFC will determine fair value of its assets and liabilities in accordance with valuation procedures adopted by its Board of Directors. The Company may utilize the services of one or more regionally or nationally recognized independent valuation firms to help it determine the value of each investment for which a market price is not available. SCFC's Board will also review valuations of such investments provided by the Advisor. Securities for which market

quotations are readily available shall be valued at "market value." If a market value cannot be obtained or if SCFC's Advisor determines that the value of a security as so obtained does not represent a fair value as of the measurement date (due to a significant development subsequent to the time its price is determined or otherwise), fair value shall be determined pursuant to the methodologies established by our Board of Directors. In making these determinations, the Company may engage an independent valuation firm from time to time to assist in determining the fair value of our investments. The methods for valuing these investments may include fundamental analysis, discounts from market prices of similar securities, purchase price of securities, subsequent private transactions in the security or related securities, or discounts applied to the nature and duration of restrictions on the disposition of the securities, as well as a combination of these and other factors.

Investment in Preferred Shares of Credit Securitization. On October 15, 2015, SCFC made an investment in Community Funding CLO, Ltd. ("Community Funding") a credit securitization. SCFC purchased $45.5 million of Preferred Shares issued by Community Funding.

Community Funding was structured in two tranches: $205.0 million of senior secured Class A Notes rated A3 by Moody's Investors Service and $45.5 million of unrated Preferred Shares, for a total issuance of $250.5 million. The collateral has an average yield of 7.00% and the Class A Notes initially pay a fixed rate coupon of 5.75%. The net proceeds were primarily used to fund direct capital investments into 35 community and regional banks from 24 different states. The capital issued to the banks was predominantly in the form of subordinated loans that rank senior in priority to Trust Preferred Securities, TARP, SBLF, Preferred Shares and Common Shares.

SCFC was the sole purchaser of the $45.5 million Preferred Shares, funding their purchase with portfolio securities and cash. Income received by SCFC from its investments in the Preferred Shares is characterized as ordinary income. Income from the investment in Community Funding is recorded based upon an estimate of effective yield to maturity utilizing assumed cash flows. SCFC monitors the expected cash flows from its investment in Community Funding and the effective yield is determined and updated as needed. The Preferred Shares receive the remaining cash flows generated from the pooled transaction after expenses are paid. Expenses consist of administrative expenses and interest expense on the Class A notes, as well as, a service fee paid to StoneCastle Investment Management, LLC, an affiliate of StoneCastle Asset Management, StoneCastle Financial Corp.'s advisor. The Servicer will fully rebate the service fee to SCFC quarterly.

The fair value of the credit securitization is determined using market price quotations (where observable) and other observable market inputs. When using market price quotations from brokers, fair value is calculated using the average of two or more indicative broker quotes obtained as of the valuation date. When quotations are unobservable, internal valuation models (typically including discounted cash flow analysis and comparable analysis) are employed. Credit securitizations are generally categorized as Level 2 or 3 in the fair value hierarchy, depending on the availability of broker quotes and observable inputs. At December 31, 2015, SCFC's investment in Community Funding was valued on the basis of the average of two broker quotes.

Preferred and Trust Preferred Securities. The fair value of preferred securities and trust preferred securities is generally determined using market price quotations (where observable)

and other observable market inputs (including recently executed transactions). When using market price quotations from brokers, fair value is calculated using the average of two or more indicative broker quotes obtained as of the valuation date. When quotations are unobservable, internal valuation models (typically including discounted cash flow analysis and comparable analysis) are employed. Perpetual preferred securities are generally categorized as Level 2 or 3 in the fair value hierarchy, depending on the availability of observable inputs.

Debt Securities. Under procedures established by our Board of Directors, we value secured debt, unsecured debt, senior term loans and other debt securities, for which market quotations are readily available, at such market quotations (unless they are deemed not to represent fair value). We attempt to obtain market quotations from at least two brokers if available. If not available or when market quotations are deemed not to represent fair value, we typically utilize independent third party valuation firms to assist us in determining fair value. Our independent valuation firms consider observable market inputs together with significant unobservable inputs in arriving at their valuation recommendations for such Level 2 and Level 3 categorized assets. Investments that are not publicly traded or whose market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of our Board of Directors. Such determination of fair values may involve subjective judgments and estimates.

Equity Securities. SCFC may invest in equity securities (including exchange traded funds) for which bid and ask prices can be observed in the marketplace. Bid prices reflect the highest price that the marketplace participants are willing to pay for an asset. Ask prices represent the lowest price that the marketplace participants are willing to accept for an asset. The Company's policy for listed securities for which no sale was reported on that date is generally to value the security using the last reported "bid" price if held long, and last reported "ask" price if sold short. Equity securities are generally categorized as Level 1 or 2 in the fair value hierarchy, depending on trading volume levels.

The Company's assets measured at fair value subject to the disclosure requirements of ASC 820-10-35 at December 31, 2015, were as follows:

The Level 3 categorized assets listed above have been valued via the use of a) independent third party valuation firms, or, b) fair valued as determined in good faith by the Board of Directors, in accordance with procedures established by the Board of Directors.

For fair valuations using significant unobservable inputs, U.S. GAAP requires SCFC to present reconciliation of the beginning to ending balances for reported market values that presents changes attributable to total realized and unrealized gains or losses, purchase and sales, and transfers in and out of Level 3 during the period. Transfers in and out between levels are based on values at the end of a period. U.S. GAAP also requires SCFC to disclose amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. A reconciliation of Level 3 investments is presented below:

*  Valuation changed from single broker quote to multiple broker quotes.

⁽¹⁾  Value based on price to book valuation analysis.

The change in unrealized appreciation on Level 3 securities still held as of December 31, 2015 was $349,472.

Securities Transactions, Investment Income and Expenses — Securities transactions are recorded on trade date for accounting and financial statement preparation purposes. Realized gains and losses on investments sold are recorded on the identified cost basis. Interest income is recorded on the accrual basis. Accretion of discounts and amortization of premiums are recorded on a daily basis using the effective yield method except for short term securities, which records discounts and premiums on a straight-line basis. Dividends are recorded on the ex-dividend date.

Dividends and Distributions to Shareholders — Dividends from net investment income, if any, are declared and paid quarterly. Distributions, if any, of net short-term capital gain and net capital gain (the excess of net long-term capital gain over the short-term capital loss) realized by SCFC, after deducting any available capital loss carryovers are declared and paid to shareholders at least annually. Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. These differences include the treatment of non-taxable dividends, losses deferred due to wash sales and excise tax regulations. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications within the components of net assets.

Note 3 — Investment Advisory Fee and Other Fee Arrangements

StoneCastle Asset Management, LLC ("Advisor"), a subsidiary of StoneCastle Partners, LLC ("StoneCastle Partners"), serves as investment advisor to SCFC pursuant to a management agreement with SCFC (the "Management Agreement"). For its services as the investment advisor, SCFC pays the Advisor a fee at the annual rate of 1.75% of total assets. SCFC will pay the management fee quarterly in arrears, and it will be equal to 0.4375% (1.75% annualized) of our assets at the end of such quarter, including cash and cash equivalents and assets purchased with borrowings. The Advisor had agreed to waive the management fee that would otherwise be payable in respect of net proceeds to the Company obtained through the issuance of the shares of common stock issued on November 7, 2014 and December 2, 2014 through August 31, 2015. The Advisor continued this waiver through September 30, 2015. For the year ended December 31, 2015, the Advisor waived fees of $520,789.

SCFC currently pays each Director who is not an officer or employee of the Advisor a fee of $45,000 per annum, plus $1,000 for each in-person meeting of the Board of Directors or committee meeting. The chairman of SCFC's audit committee and the Lead Independent Director are each to be paid an additional amount not expected to exceed $10,000 per year. Directors do not receive any pension or retirement plan benefits and are not part of any profit sharing plan. Interested Directors do not receive any compensation from SCFC. SCFC has incurred $180,000 of Directors fees for the year ended December 31, 2015.

Note 4 — Purchases and Sales and Redemptions of Securities

For the year ended December 31, 2015, (i) the cost of purchases was $194,595,062, (ii) the sales and redemptions of securities was $179,349,590. At December 31, 2015, the aggregate cost basis of securities for federal income tax purposes was $184,998,847 and the aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value was $244,975.

Note 5 — Federal Tax Information

The Company intends to operate so as to qualify to be taxed as a RIC under Subchapter M of the Internal Revenue Code and, as such, to not be subject to federal income tax on the portion of its taxable income and gains distributed to stockholders. To qualify for RIC tax treatment, SCFC is required to distribute at least 90% of its investment company taxable income, as defined by the Code.

Because federal income tax regulations differ from accounting principles generally accepted in the United States, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statement to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

SCFC has followed the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires SCFC to determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. SCFC has determined that there was no effect on the financial statements from following this authoritative guidance. In the normal course of business, SCFC is subject to examination by federal, state and local jurisdictions, where applicable, for tax years for which applicable statutes of limitations have not expired.

As of December 31, 2015, the components of distributable earnings on a tax basis were as follows:

For the year ended December 31, 2015,the tax character of distributions paid by the Company was $9,349,924 of ordinary income dividends and $1,446,765 return of capital. For the year ended December 31, 2014, the tax character of distributions paid by the Company was $3,025,328 of ordinary income dividends, $10,347 of long term capital gains and $4,009,870 return of capital. Distributions from net investment income and short-term capital gains are treated as ordinary income for federal tax purposes.

The Company declared a $0.50 per share dividend on March 5, 2015 and $0.33 per share dividend on May 20, 2015, September 10, 2015, and $0.35 per share dividend on December 8, 2015 which was paid on March 30, 2015, June 29, 2015, September 29, 2015

and January 4, 2016, respectively. Shareholders have been notified of the tax character of these distributions.

At December 31, 2015, the federal tax cost, aggregate gross unrealized appreciation and depreciation of securities held by SCFC were as follows:

Pursuant to federal income tax rules applicable to regulated investment companies, SCFC may elect to treat certain capital losses up to and including December 31 as occurring on the first day of the following tax year. For the period after October 31, 2015 and ending December 31, 2015, any amount of losses elected within the tax year will not be recognized for federal income tax purposes until 2016. For the year ended December 31, 2015, SCFC had no ordinary income or long-term capital loss deferrals.

Accumulated capital losses represent net capital loss carry forwards as of December 31, 2015 that may be available to offset future realized capital gains and thereby reduce future capital gains distributions. Under the Regulated Investment Company Modernization Act of 2010, SCFC is permitted to carry forward capital losses incurred for an unlimited period. Additionally, capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law. For the year ended December 31, 2015, SCFC had capital loss carryforwards of $1,007,881 all of which are short-term capital losses.

Note 6 — Risk Considerations

Risks are inherent in all investing. The following summarizes some, but not all, of the risks that should be considered for the Company. For additional information about the risks associated with investing in the Company, please see the Company's prospectus as well as other Company regulatory filings.

Investment and Market Risk — An investment in the Company's common shares ("Common Shares") is subject to investment risk, including the possible loss of the entire principal invested. Common Shares at any point in time may be worth less than the original investment, even after taking into account the reinvestment of Company dividends and distributions. The Company expects to utilize leverage, which will magnify investment risk.

Preferred and Debt Securities Risk — Preferred and debt securities in which the Company invests are subject to various risks, including credit risk, interest rate risk, call/prepayment risk and reinvestment risk. In addition, preferred securities are subject to certain other risks, including deferral and omission risk, subordination risk, limited voting rights risk and special redemption rights risk.

Credit Risk — The Company is subject to credit risk, which is the risk that an issuer of a security may be unable or unwilling to make dividend, interest and principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability or willingness to make such payments.

Leverage Risk — The use of leverage by the Company can magnify the effect of any losses. If the income and gains from the securities and investments purchased with leverage proceeds do not cover the cost of leverage, the return on the Common Shares will be less than if leverage had not been used. Moreover, leverage involves risks and special considerations for holders of Common Shares including the likelihood of greater volatility of net asset value and market price of the Common Shares than a comparable portfolio without leverage, and the risk that fluctuations in interest rates on reverse repurchase agreements, borrowings and short-term debt or in the dividend rates on any preferred shares issued by the Company will reduce the return to the holders of Common Shares or will result in fluctuations in the dividends paid on the Common Shares. There is no assurance that a leveraging strategy will be successful. See Note 7 for additional information on leverage.

Call/Prepayment and Reinvestment Risk — If an issuer of a security exercises an option to redeem its issue at par or prepay principal earlier than scheduled, the Company may be forced to reinvest in lower yielding securities. A decline in income could affect the Common Shares' market price or the overall return of the Company.

Risks of Concentration in the Banking industry/Financial Sector — Because the Company concentrates in the banking industry and may invest up to 100% of its managed assets in the banking industry and financials sector, it will be more susceptible to adverse economic or regulatory occurrences affecting the banking industry and financials sector, such as changes in interest rates, loan concentration and competition.

Regulatory Risk — Financial institutions, including community banks, are subject to various state and federal banking regulations that impact how they conduct business, including but not limited to how they obtain funding. Changes to these regulations could have an adverse effect on their operations and operating results and our investments. We expect to make long-term investments in financial institutions that are subject to various state and federal regulations and oversight. Congress, state legislatures and the various bank regulatory agencies frequently introduce proposals to change the laws and regulations governing the banking industry in response to the Dodd-Frank Act, Consumer Financial Protection Bureau (the "CFPB") rulemaking or otherwise. The likelihood and timing of any proposals or legislation and the impact they might have on our investments in financial institutions affected by such changes cannot be determined and any such changes may be adverse to our investments. Federal banking regulators recently proposed amended regulatory capital regulations in response to The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") and Basel Ill protocols which would impose even more stringent capital requirements. In the event that a regulated bank falls below certain capital adequacy standards, it may become subject to regulatory intervention including, but not limited to, being placed into a FDIC-administered receivership or conservatorship. The effect of inadequate capital can have a potentially adverse consequence on the institution's financial condition, its ability to operate as a going concern and its ability to operate as a regulated financial institution and may have a material adverse impact on our investments.

Interest Rate Risk — The Company is subject to interest rate risk, which is the risk that the preferred and debt securities in which the Company invests will decline in value because of rising market interest rates.

Convertible Securities/Contingent Convertible Securities Risk — The market value of convertible securities tends to decline as interest rates increase and, conversely, tends to

increase as interest rates decline. In addition, because of the conversion feature, the market value of convertible securities tends to vary with fluctuations in the market value of the underlying common stock. Contingent convertible securities provide for mandatory conversion into common stock of the issuer under certain circumstances. Since the common stock of the issuer may not pay a dividend, investors in these instruments could experience a reduced income rate, potentially to zero; and conversion would deepen the subordination of the investor, hence worsening standing in a bankruptcy. In addition, some such instruments have a set stock conversion rate that would cause a reduction in value of the security if the price of the stock is below the conversion price on the conversion date.

Illiquid and Restricted Securities Risk — Investment of the Company's assets in illiquid and restricted securities may restrict the Company's ability to take advantage of market opportunities. Illiquid and restricted securities may be difficult to dispose of at a fair price at the times when the Company believes it is desirable to do so. The market price of illiquid and restricted securities generally is more volatile than that of more liquid securities, which may adversely affect the price that the Company pays for or recovers upon the sale of such securities. Illiquid and restricted securities are also more difficult to value, especially in challenging markets. The risks associated with illiquid and restricted securities may be particularly acute in situations in which the Company's operations require cash and could result in the Company borrowing to meet its short-term needs or incurring losses on the sale of illiquid or restricted securities.

Note 7 — Revolving Credit Agreement

On June 9, 2014, the Company entered into a revolving credit agreement (the "Credit Agreement") with a syndicate of financial institutions led by Texas Capital Bank, N.A. (collectively, the "Syndicates") to borrow up to $45,000,000. On January 16th, 2015 the Company closed an additional $25 million on the Credit Agreement, which increased the maximum borrowing amount to $70 million. As of December 31, 2015, $25,000,000 has been committed and drawn and is at fair value. Such borrowings constitute financial leverage. The Agreement has a five year term and a stated maturity in June 2019 and was priced at LIBOR +2.85%.The Company is charged a fee of 0.50% on any undrawn commitment balance. The Credit Agreement contains customary covenants, negative covenants and default provisions, including covenants that limit the Company's ability to incur additional debt or consolidate or merge into or with any person, other than as permitted, or sell, lease or otherwise transfer, directly or indirectly, all or substantially all of its assets. The covenants also impose on the Company asset coverage requirements, which are more stringent than those imposed on the Company by the Investment Company Act, as well as the Company's policies. For the year ended December 31, 2015, the average daily loan balance was $38,751,366 at a weighted average interest rate of 3.52%. With respect to these borrowings, interest of $1,367,125 is included in the Statement of Operations. The Company has cash collateral segregated with Texas Capital Bank in the amount of $3,500,000 in lieu of the Credit Agreement.

Note 8 — Indemnification

In the normal course of business, SCFC may enter into contracts that provide general indemnifications. SCFC's maximum exposure under these arrangements is dependent on claims that may be made against SCFC in the future, and therefore, cannot be estimated; however, based on experience, the risk of material loss from such claims is considered remote.

Under the SCFC's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to SCFC.

Note 9 — Other Income

Other income includes closing fees, or origination fees, associated with investments in portfolio companies. Such fees are normally paid at closing of the Company's investments, are fully earned and non-refundable, and are generally non-recurring. SCFC had origination fee income of $803,298 and other income of $156,511 for the year ended December 31, 2015.

Note 10 — Capital Share Transactions

As of December 31, 2014, 50,000,000 shares of $0.001 par value capital stock were authorized. Of the authorized shares, SCFC is authorized to issue 40,000,000 shares of common stock and 10,000,000 shares of preferred stock. Prior to commencement of operations on November 13, 2013, SCFC issued 4,001 shares of common stock. On November 13, 2013, SCFC sold 4,400,000 shares of our common stock via an initial public offering at a price of $25.00 per share. On December 3, 2013 and December 11, 2013, SCFC sold an additional 125,000 shares and 167,047 shares, respectively, of our common stock at a public offering price of $25.00 per share pursuant to the underwriters' exercise of the over-allotment option. On November 7, 2014, SCFC sold an additional 1,600,000 shares via an initial public offering at a price of $23.00 per share. On December 2, 2014, SCFC sold an additional 202,000 shares of our common stock at a public offering price of $23.00 per share pursuant to the underwriters' exercise of the over-allotment option. Total shares issued and outstanding at December 31, 2015 were 6,510,953.

Note 11 — Changes in Accountants

KPMG LLP ("KPMG") was previously the Company's independent registered public accounting firm. On November 19, 2015, the Board and its Audit Committee terminated KPMG's appointment as the Company's independent registered public accounting firm and approved the engagement of Tait, Weller & Baker LLP ("TWB") as the independent registered public accounting firm to audit the Company's financial statements for the fiscal years ending December 31, 2015 and 2016. The selection of TWB does not reflect any disagreements with or dissatisfaction by the Company, the Board or the Company's Audit Committee with the performance of the Company's prior independent registered public accounting firm, KPMG.

KPMG's report on the Company's financial statements for the Company's most recently completed fiscal year ended December 31, 2014 did not contain any adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles. During the Company's most recently completed fiscal year ended December 31, 2015 and through November 19, 2015, there were no disagreements between the Company and KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG, would have caused it to make reference to the subject matter of the disagreements in connection with its reports. During the fiscal year ended December 31, 2014 and through November 19, 2015, there were no "reportable events" within the meaning of Item 304, paragraph (a)(1)(v), of Regulation S-K under the Securities Exchange Act of 1934, as amended ("Regulation S-K").

As indicated above, the Company has appointed TWB as the independent registered public accounting firm to audit the Company's financial statements for the fiscal years ending December 31, 2015 and 2016. During the Company's fiscal years ended December 31, 2014,

and for the period from January 1, 2015 through November 19, 2015, neither the Company nor anyone on its behalf has consulted TWB on items which: (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements; or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) or reportable events (as described in paragraph (a)(1)(v) of said Item 304).

Note 12 — Subsequent Events

Management has evaluated the impact of all subsequent events on the company and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.

Auditor's Report

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of
StoneCastle Financial Corp.

We have audited the accompanying statement of assets and liabilities, of StoneCastle Financial Corp. (the "Company"), including the schedule of investments, as of December 31, 2015, and the related statements of operations, changes in net assets, and cash flows, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The Statement of Changes in Net Assets for the year ended December 31, 2014 and the financial highlights for the year ended December 31, 2014 and for the period November 13, 2013 (commencement) to December 31, 2013 were each audited by other auditors, and in their opinions dated February 27, 2015 and February 24, 2014 (respectively), they each expressed unqualified opinions on said financial statement and financial highlights.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2015, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of StoneCastle Financial Corp. as of December 31, 2015, and the results of its operations, the changes in its net assets, its cash flows, and its financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
February 25, 2016

Dividends and Distributions

Dividends and Distributions

Dividends from net investment income are declared and paid on a quarterly basis. Distributions of net realized capital gains, if any, will be made at least annually. It is the Company's policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to "regulated investment companies" or "RICs" and to distribute substantially all of its taxable income to its shareholders. In order to provide shareholders with a more stable level of dividend distributions, the Company may at times pay out more or less than distributable income earned in any particular quarter. The Company's current accumulated but undistributed net investment income, if any, is disclosed in the Statement of Assets and Liabilities, which comprises part of the financial information included in this report. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.

Summary of Dividends Declared in 2015

Dividend Reinvestment Plan

We have a common stock dividend reinvestment plan for our stockholders. Our plan is implemented as an "opt out" dividend reinvestment plan. As a result, if a stockholder participates in our Automatic Dividend Reinvestment Plan ("Plan") all distributions will automatically be reinvested in additional common stock (unless a stockholder is ineligible or elects otherwise). If a stockholder opts out of the Plan, such stockholder will receive distributions in cash. If a stockholder holds shares with a brokerage firm that does not participate in the Plan, the stockholder may not be able to participate in the Plan and any dividend reinvestment may be effected on different terms than those of the Plan.

In the case that newly issued shares of our common stock are used to implement the Plan, the number of shares of common stock to be delivered to a participating stockholder shall be determined by (i) dividing the total dollar amount of the dividends payable to such stockholder by (ii) 97% of the average market prices per share of common stock at the close of regular trading on the NASDAQ Global Select Market for the five trading days immediately prior to the valuation date to be fixed by our Board of Directors.

In the case that shares repurchased on the open market are used to implement the Plan, the number of shares of common stock to be delivered to a participating stockholder shall be determined by dividing (i) the total dollar amount of the dividends payable to such stockholder by (ii) the weighted average purchase price of such shares.

We intend to use primarily newly issued shares to implement the dividend reinvestment plan (so long as we are trading at a premium to net asset value). If our shares are trading at a

significant enough discount to net asset value and we are otherwise permitted under applicable law to purchase such shares, we intend to purchase shares in the open market in connection with our obligations under our dividend reinvestment plan. However, we reserve the right to issue new shares of our common stock in connection with our obligations under the dividend reinvestment plan even if our shares are trading below net asset value. Automatically reinvesting dividends and distributions does not mean that a stockholder does not have to pay income taxes due upon receiving dividends and distributions. Capital gains and income are realized although cash is not received by the stockholder.

For further information or to opt-out of or withdraw from the Plan, contact the Plan Agent, Computershare Trust Company, N.A. by writing to 250 Royall Street, Canton, Massachusetts 02021.

Tax Information

For federal income tax purposes, the following information is furnished with respect to the distributions of the Company, if any, paid during its taxable year ended December 31, 2015.

61.32% of ordinary income dividends paid qualify for the corporate dividends-received deduction.

Under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the "Act"), 62.39% of ordinary dividends paid during the fiscal year ended December 31, 2015 are designated as "qualified dividend income," as defined in the Act, and are subject to reduced tax rates.

Eligible shareholders were mailed a 2015 Form 1099-DIV in early 2016. This reflected the tax character of all distributions paid in calendar year 2015.

Additional Information

Availability of Quarterly Schedule of Investments

The Company files their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Company's Form N-Q is available on the SEC's website at http:// www.sec.gov and may also be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on how to access documents on the SEC's website without charge may be obtained by calling (800) SEC-0330. The Company's Form N-Q may also be obtained upon request and without charge by calling (212) 354-6500 or on the Company's website at www.StoneCastle-Financial.com.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Company uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (212) 354-6500; (2) at www.StoneCastle-Financial.com; and (3) on the SEC's website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Company voted proxies relating to securities held in the Company's portfolio during the Annual period ended June 30 is available upon request and without charge (1) at www.StoneCastle-Financial.com or by calling (212) 354-6500 and (2) on the SEC's website at http://www.sec.gov.

Results of Stockholders Meeting

The Annual Meeting of Stockholders of StoneCastle Financial Corp (the "Company") was held on May 19, 2015, presenting two proposals to stockholders. A description of the proposals and the number of shares voted at the meeting are as follows:

Proposal 1:

To elect two Class II Directors of the Company, each to serve for a term ending at the 2018 Annual Meeting of Stockholders of StoneCastle Financial Corp. and when his or her successor is duly elected and qualifies.

Proposal 2*:

To approve an Agreement and Plan of Reorganization, pursuant to which the Company would be reorganized into a newly formed Delaware statutory trust named "StoneCastle Financial Company."

*  The approval of Proposal 2 was adjourned until June 8, 2015 to permit the solicitation of additional votes. However, as the required number of votes to reach a quorum was not obtained, Proposal 2 was not approved.