Key Highlights

  • Investment income for the three months to Sep 30, 2026 came to $67.2 million, a 17.9% advance on $56.9 million a year before.
  • Per basic share, net Investment income was $0.56, slightly below the $0.57 of a year earlier, though the dollar figure reached $36.3 million, a 13.5% increase.
  • Net Assets from operations totaled $21.4 million ($0.33 diluted), down from $25.6 million ($0.44).
  • NAV per share now sits at $16.64 as of Sep 30, 2026, slightly below the $16.69 figure from March 31, 2026.
  • Holdings rose to 153 companies valued at $2,410.1 million, compared with 131 companies worth $2,097.4 million in March.

Interest Costs Up 31% Alongside a 17.9% Rise in Investment Income

Capital Southwest (NASDAQ:CSWC) filed its fiscal second-quarter 2027 report, covering the three months ended Sep 30, 2026, on Nov 2, 2026. Investment income totaled $67.2 million, a 17.9% advance on $56.9 million a year before. Interest income contributed $52.4 million, payment-in-kind interest $5.0 million and fees $4.4 million.

Borrowing costs rose: interest expense reached $21.0 million, up 31.0%, on average borrowings higher by $339.6 million. Other operating expenses increased 30.4%, reaching $9.0 million. Despite that, net investment income advanced to $36.3 million, aided by a tax provision that was $0.9 million smaller.

Managed internally, this Business Development Company lends mostly through first Lien loans to lower middle market firms, with yearly EBITDA between $3.0 million and $25.0 million.

Net Unrealized Depreciation of $16.6 Million Trims the Operating Result

Net unrealized depreciation, after tax, reached $16.6 million, compared with $1.4 million last year. Realized gains netted to $3.1 million, versus a $4.9 million realized loss in the year-earlier quarter. Early Debt retirement also generated a realized loss of $1.4 million.

The operating result shrank 16.3%, landing at $21.4 million, which works out to $0.33 for both basic and diluted shares. Last year's comparable quarter showed $25.6 million, with per-share figures of $0.46 on a basic basis and $0.44 diluted. For six months, the total was $46.2 million; per share that equals $0.73, against $52.6 million ($0.95 basic).

NAV per share slid to $16.64, against $16.69 recorded at the March 31, 2026 date, while 66.5 million shares were outstanding, up from 60.6 million. Six-month distributions reached $1.28 per share, equal to the same period last year.

Debt Investments Make Up 90.5% of a $2.4 Billion Book as Non-Accrual Exposure Edges Up

Fair value stood at $2,410.1 million, with debt at 90.5%, Equity at 8.0% and joint venture equity at 1.5%. Senior secured first lien holdings represented 89.4% of fair value; on a weighted average effective basis, debt yielded 10.9% and total investments 11.1%. Across the first half, $454.0 million went into debt positions and $20.3 million into equity.

Non-accrual exposure was about 1.4% of Fair Value and 3.5% of cost, compared with 1.1% and 2.4% in late March 2026. Average Leverage across the portfolio was 3.7x, compared with 3.6x previously.

The company put $28.5 million into CapTrin against a $50.0 million commitment, and $8.0 million into Desert Star against a $25.0 million commitment, both joint ventures.

Fresh 6.750% Notes Due 2031 and $599.2 Million of Undrawn Capacity Support Future Lending

In September 2026 the company placed a $350.0 million issuance of 6.750% notes due in 2031, and it sold 2.7 million shares via its equity program at an average of $24.50. Cash on hand finished at $48.0 million, while $599.2 million of Credit remained unused and asset coverage stood at 198%. For the next filing, investors will focus on portfolio expansion, non-accrual movement and net asset value.