Capital Southwest Announces Financial Results for Second Fiscal Quarter Ended September 30, 2026
CAPITAL SOUTHWEST CORP (CSWC) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 8333 Douglas Avenue, Suite 1100 Dallas, Texas 75225 T 214.238.5700 F 214.238.5701 Capital Southwest Announces Financial Results for Second Fiscal Quarter Ended September 30, 2026 Dallas, Texas – November 2, 2026 – Capital Southwest Corporation (“Capital Southwest,” “
How this was made
The 30-second read
Why it matters
The quarterly filing provides the first public disclosure of Q2 performance, new credit origination volume, and a $350 M bond issuance, all of which were not previously known.
Market read
Fresh earnings and financing data for a Nasdaq‑listed BDC; may influence investor positioning in the sector.
What to watch
Potential impact of higher non‑accruals and the modest NAV per share increase may temper upside.
Capital Southwest reported $37.2 million of pre-tax net investment income, originated $391.0 million in new commitments, and declared $0.64 per share of total dividends for the quarter ending December 31, 2026.
Investment income, pre-tax net investment income, NAV per share and originations increased sequentially, but the Company recorded $13.4 million of net realized and unrealized depreciation and a $1.4 million realized loss on extinguishment of debt.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total investment income, three months ended September 30, 2026GAAP | $67.16M | – | – |
| Interest income, non-control/non-affiliate investments, three months ended September 30, 2026GAAP | $47.22M | – | – |
| Interest income, affiliate investments, three months ended September 30, 2026GAAP | $7.45M | – | – |
| Interest income, control investments, three months ended September 30, 2026GAAP | $ 443 | – | – |
| Payment-in-kind interest income, non-control/non-affiliate investments, three months ended September 30, 2026GAAP | $3.40M | – | – |
| Payment-in-kind interest income, affiliate investments, three months ended September 30, 2026GAAP | $1.05M | – | – |
| Payment-in-kind interest income, control investments, three months ended September 30, 2026GAAP | $ 535 | – | – |
| Dividend income, non-control/non-affiliate investments, three months ended September 30, 2026GAAP | $608K | – | – |
| Dividend income, affiliate investments, three months ended September 30, 2026GAAP | $ 345 | – | – |
| Dividend income, control investments, three months ended September 30, 2026GAAP | $1.04M | – | – |
| Fee income, non-control/non-affiliate investments, three months ended September 30, 2026GAAP | $3.88M | – | – |
| Fee income, affiliate investments, three months ended September 30, 2026GAAP | $ 473 | – | – |
| Fee income, control investments, three months ended September 30, 2026GAAP | $ 29 | – | – |
| Other income, three months ended September 30, 2026GAAP | $696K | – | – |
| Total operating expenses, three months ended September 30, 2026GAAP | $29.99M | – | – |
| Compensation expense, three months ended September 30, 2026GAAP | $3.24M | – | – |
| Share-based compensation expense, three months ended September 30, 2026GAAP | $1.94M | – | – |
| Interest expense, three months ended September 30, 2026GAAP | $20.98M | – | – |
| Professional fees, three months ended September 30, 2026GAAP | $1.96M | – | – |
| General and administrative expense, three months ended September 30, 2026GAAP | $1.87M | – | – |
| Income before taxes, three months ended September 30, 2026GAAP | $37.17M | – | – |
| Pre-tax net investment income, three months ended September 30, 2026GAAP | $37.2M | – | – |
| Total income tax provision, three months ended September 30, 2026GAAP | $874K | – | – |
| Net investment income, three months ended September 30, 2026GAAP | $36.29M | – | – |
| Total net realized gain (loss) on investments, net of tax, three months ended September 30, 2026GAAP | $3.15M | – | – |
| Total net unrealized (depreciation) appreciation on investments, net of tax, three months ended September 30, 2026GAAP | −$16.59M | – | – |
| Net realized and unrealized (losses) gains on investments, three months ended September 30, 2026GAAP | −$13.45M | – | – |
| Realized loss on extinguishment of debt, three months ended September 30, 2026GAAP | −$1.41M | – | – |
| Net increase in net assets from operations, three months ended September 30, 2026GAAP | $21.44M | – | – |
| Pre-tax net investment income per share - basic, three months ended September 30, 2026GAAP | $ 0.58 | – | – |
| Net investment income per share – basic, three months ended September 30, 2026GAAP | $ 0.56 | – | – |
| Net increase in net assets from operations – basic, three months ended September 30, 2026GAAP | $ 0.33 | – | – |
| Net increase in net assets from operations - diluted, three months ended September 30, 2026GAAP | $ 0.33 | – | – |
| Weighted average common shares outstanding – basic, three months ended September 30, 2026GAAP | 63,648,525 | – | – |
| Weighted average common shares outstanding – diluted, three months ended September 30, 2026GAAP | 73,036,538 | – | – |
| Total investment income, six months ended September 30, 2026GAAP | $128.2M | – | – |
| Total operating expenses, six months ended September 30, 2026GAAP | $56.07M | – | – |
| Income before taxes, six months ended September 30, 2026GAAP | $72.13M | – | – |
| Net investment income, six months ended September 30, 2026GAAP | $71.97M | – | – |
| Net realized and unrealized (losses) gains on investments, six months ended September 30, 2026GAAP | −$24.39M | – | – |
| Net increase in net assets from operations, six months ended September 30, 2026GAAP | $46.17M | – | – |
| Pre-tax net investment income per share - basic, six months ended September 30, 2026GAAP | $ 1.14 | – | – |
| Net investment income per share – basic, six months ended September 30, 2026GAAP | $ 1.14 | – | – |
| Net increase in net assets from operations – basic, six months ended September 30, 2026GAAP | $ 0.73 | – | – |
| Net increase in net assets from operations - diluted, six months ended September 30, 2026GAAP | $ 0.73 | – | – |
| Total investment portfolio at fair valueother | $2.4B | – | – |
| Credit portfolio at fair valueother | $2.2B | – | – |
| Weighted average yield on debt investmentsother | 10.9% | – | – |
| Current non-accruals at fair valueother | $34.8M | – | – |
| Current non-accruals as a percentage of total investment portfolioother | 1.4% | – | – |
| Estimated undistributed taxable income per share as of September 30, 2026other | $0.92 per share | – | – |
| LTM operating leverage as of September 30, 2026other | 1.4% | – | – |
| Net asset value per share as of September 30, 2026GAAP | $16.64 | – | – |
Capital returns
- Paid Total Dividends for the quarter ended September 30, 2026 of $0.64.
- Paid $0.58 per share Regular Quarterly Dividend ($0.1934 per share in each of July, August and September 2026).
- Paid $0.06 per share Supplemental Quarterly Dividend in September 2026.
- The Board declared a regular quarterly dividend of $0.58, of which $0.1934 per share will be paid in each of October, November and December 2026.
- The Board declared a supplemental quarterly dividend of $0.06 per share payable in December 2026.
- During the quarter ended September 30, 2026, the Company did not repurchase any shares of the Company’s common stock under the share repurchase program.
- During the quarter ended September 30, 2026, the Company sold 2,732,562 shares of its common stock under the Equity ATM Program at a weighted-average price of $24.50 per share, raising $67.0 million of gross proceeds. Net proceeds were $66.0 million after commissions to the sales agents on shares sold.
What drove it
- The Company originated $391.0 million in new commitments, consisting of investments in 14 new portfolio companies totaling $327.1 million and add-on commitments in 16 portfolio companies totaling $63.9 million.
- New portfolio company originations were comprised of $314.2 million in first lien senior secured debt and $12.9 million in equity investments.
- The Company committed $25.0 million in equity to Desert Star.
- The increase in investment income was primarily attributable to an increase in interest income due to an increase in the weighted average cost basis of investments held.
- Total operating expenses excluding interest expense were $9.0 million, compared to $7.6 million in the prior quarter, primarily attributable to an increase in legal fees and proxy solicitation expenses incurred in connection with the annual meeting of shareholders and an increase in employee compensation.
- Interest expense was $21.0 million, compared to $18.5 million in the prior quarter, primarily attributable to an increase in average borrowings outstanding and an increase in the weighted average interest rate on total debt.
- The Company issued $350 million in aggregate principal amount of 6.750% Notes due 2031 in September 2026 and used the proceeds to pay down the Corporate Credit Facility.
- SBIC II received approval from the SBA to increase its leverage commitment from $175.0 million to $250.0 million.
Concerns
- Net realized and unrealized depreciation was $13.4 million, or 0.6% of total investments at fair value, including $14.6 million of net depreciation related to the credit portfolio.
- Current non-accruals had a fair value of $34.8 million, representing 1.4% of the total investment portfolio, and a cost basis of $85.5 million, representing 3.5% of the total investment portfolio.
- The Company recorded a $1.4 million realized loss on extinguishment of debt during the three months ended September 30, 2026.
- Net investment income per share – basic was $ 0.56 for the three months ended September 30, 2026, compared to $ 0.57 for the three months ended September 30, 2025.
What to watch
- Performance of the credit portfolio, which recorded $14.6 million of net depreciation during the quarter.
- Non-accruals, reported at $34.8 million of fair value and $85.5 million of cost basis.
- Deployment of the $25.0 million Desert Star commitment and the Desert Star portfolio at fair value of $128.2 million.
- Use of the expanded SBIC II leverage commitment of $250.0 million.
- Interest expense following the September 2026 issuance of $350 million of 6.750% Notes due 2031 and the refinancing of the Corporate Credit Facility.
- The Company had $999.3 million available under the Equity ATM Program as of September 30, 2026.
Balance sheet and cash flow
- Cash and Cash Equivalents: $48.0 million.
- Total Net Assets: $1.1 billion.
- Total investments at fair value: $ 2,410,129 as of September 30, 2026, compared to $ 2,097,446 as of March 31, 2026.
- Total assets: $ 2,524,742 as of September 30, 2026, compared to $ 2,177,518 as of March 31, 2026.
- Total liabilities: $ 1,418,312 as of September 30, 2026, compared to $ 1,166,526 as of March 31, 2026.
- Capital Southwest had approximately $48.0 million in unrestricted cash and money market balances and $599.2 million of unused capacity under the Corporate Credit Facility and the SPV Credit Facility.
- The regulatory debt to equity ratio at the end of the quarter was 1.00 to 1.
- $90.0 million of total debt outstanding on the Corporate Credit Facility.
- $105.0 million of total debt outstanding on the SPV Credit Facility.
- $225.3 million, net of amortized debt issuance costs, of the 5.125% convertible notes due November 2029.
- $344.6 million, net of amortized debt issuance costs, of the 5.950% Notes due 2030.
- $337.9 million, net of amortized debt issuance costs and effective hedge accounting adjustment, of the 6.750% Notes due 2031.
- $281.7 million, net of unamortized debt issuance costs, of SBA Debentures.
- During the quarter ended September 30, 2026, the Company received proceeds of $74.2 million from four portfolio company prepayments and exits, generating a weighted average IRR of 14.5%.
- Operating cash flow and free cash flow were not reported.
Analysis
Capital Southwest’s second fiscal quarter showed higher investment earnings and strong deployment. Total investment income was $67.2 million, compared to $61.0 million in the prior quarter, while pre-tax net investment income rose to $37.2 million from $35.0 million. Management attributed the income increase to higher interest income from an increase in the weighted average cost basis of investments held. The Company originated $391.0 million in new commitments and separately committed $25.0 million of equity to Desert Star.
The earnings increase came with a higher expense base. Total operating expenses excluding interest expense were $9.0 million compared with $7.6 million in the prior quarter, reflecting legal fees, proxy solicitation expenses and higher employee compensation. Interest expense rose to $21.0 million from $18.5 million as average borrowings and the weighted average interest rate on total debt increased. Net investment income was $36.3 million, while net investment income per share – basic was $0.56, compared with $0.57 in the prior-year quarter.
Portfolio marks were the principal offset to net investment income. The Company reported $13.4 million of net realized and unrealized depreciation, including $14.6 million of net depreciation in the credit portfolio, partly offset by $1.7 million of net appreciation in the equity portfolio. Current non-accruals stood at $34.8 million of fair value, or 1.4% of the total investment portfolio, with a cost basis of $85.5 million, or 3.5% of the total investment portfolio. NAV increased to $16.64 per share from $16.61 per share in the prior quarter, primarily due to common-stock issuance at a premium to NAV, partly offset by investment losses.
Capital allocation combined dividend distributions, ATM equity issuance and additional debt capacity. The Company paid $0.64 per share of total dividends for the quarter ended September 30, 2026 and declared the same total for the quarter ending December 31, 2026, consisting of a $0.58 regular dividend and a $0.06 supplemental dividend. It raised $67.0 million of gross proceeds through the Equity ATM Program, issued $350 million of 6.750% Notes due 2031, and received SBA approval to increase SBIC II’s leverage commitment from $175.0 million to $250.0 million. Liquidity included approximately $48.0 million of unrestricted cash and money market balances and $599.2 million of unused facility capacity.
Management, verbatim
Capital Southwest delivered the largest origination quarter in our history, with approximately $391 million of originations across 14 new and 16 existing portfolio companies. We also committed $25 million to Desert Star, a new joint venture with Trinity Capital.
Michael Sarner, President and Chief Executive Officer
Our portfolio continued to generate strong earnings for our shareholders, producing $0.58 of pre-tax net investment income per share.
Michael Sarner, President and Chief Executive Officer
During the quarter, we successfully raised a new $350 million unsecured bond at 6.75%, which we used to pay down our Corporate Credit Facility.
Michael Sarner, President and Chief Executive Officer
Not in the filing
stated, not guessed- Revenue was not reported; the Company reported total investment income.
- Gross margin was not reported.
- Operating cash flow was not reported.
- Free cash flow was not reported.
- A financial outlook for revenue, expenses, margins, tax rate or earnings was not reported.
- Prior-quarter values were not reported for most individual income-statement line items.
- Percentage year-over-year and sequential changes were generally not reported.
- The filing did not report operating segments.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was checked against the filing text, and a metric whose value, prior period and change do not add up is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Capital Southwest Corp (NASDAQ:CSWC) is a publicly traded business‑development company focused on middle‑market financing.
Ticker impact
SEC 8‑K filing discloses Capital Southwest's Q2 FY2027 results, including $391 M of originations, $67.2 M investment income and a new $350 M unsecured bond issuance.
likely modest upside as investors price in higher investment income and fresh capital raise.
First‑report earnings numbers and a sizable bond issuance provide fresh material; the BDC's NAV per share rose slightly, supporting a positive bias.
Market effects
Results may lift sentiment for the business‑development‑company sector and other BDCs as capital availability improves.
Limited to U.S. capital‑markets; no broader regional effect.
Low – the news is company‑specific with no global macro implications.
Counterpoint
If the new bond issuance signals higher leverage needs, the stock could face pressure from rising debt costs.
Key entities
- ExecutiveMichael Sarner
President and CEO of Capital Southwest, quoted on the results.
- PartnerTrinity Capital
Joint venture partner for the new Desert Star technology‑lending JV.
