OFS Capital Corporation — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net investment income per common share decreased to $0.05 for the quarter ended September 30, 2026, from $0.08 in the prior quarter, driven by a $0.6 million decrease in net interest margin.
• Net loss on investments was $0.89 per common share for the quarter, compared to a net gain of $0.34 per share in the prior quarter.
• Net earnings (loss) per common share was $(0.86) for the quarter, compared to $0.42 in the prior quarter.
• Net asset value (NAV) per common share declined from $8.41 as of June 30, 2026, to $7.38 as of September 30, 2026.
• Total investment income decreased to $5.9 million from $6.8 million in the prior quarter, primarily due to a $1.1 million drop in interest income, partially offset by a $0.2 million increase in non-recurring fee income.
• Total expenses, net of base management fee waivers, decreased to $5.2 million from $5.8 million in the prior quarter, primarily due to a $0.6 million reduction in interest expense.
• Net loss on investments totaled $11.9 million, comprising a $7.8 million net realized loss and $4.1 million net unrealized depreciation.
• Total outstanding debt decreased from $185.8 million to $154.4 million, reflecting the redemption of $20.0 million in 7.50% Unsecured Notes and $11.4 million in net repayments under the Natixis Facility.
• Average dollar borrowings decreased to $164.8 million from $202.0 million in the prior quarter, while the weighted-average effective interest rate increased to 7.65% from 7.41%.
• Cash and cash equivalents stood at $3.1 million as of September 30, 2026.

Guidance and Future Outlook:

• No specific forward guidance, revenue targets, or future growth projections were provided in the press release.

Business Segments and Product Lines:

• The investment portfolio consists of 91% floating rate loans and 100% first and second lien loans based on fair value.
• The weighted-average performing income yield on interest-bearing investments increased to 13.1% from 12.1% in the prior quarter, driven by non-recurring fee and interest income from loan repayments.
• As of September 30, 2026, the portfolio included $252.1 million in total investments, comprised of $111.1 million in debt investments (97% first lien, 3% second lien), $113.9 million in equity investments, and $27.1 million in structured finance securities.
• During the quarter, loans to three portfolio companies were placed on non-accrual status (aggregate fair value $2.1 million), while loans to two previously non-accrual companies were restructured.
• Non-accrual loans represented 9.3% of total investments at fair value ($23.4 million) as of September 30, 2026.
• Investment purchases and originations totaled $7.7 million for the quarter, compared to $2.1 million in the prior quarter.

Market and Competitive Landscape:

• No specific market share data, competitor analysis, or broader market trend commentary was included in the press release.

Risks and Challenges:

• The company faces litigation risks; Pfanstiehl Holdings, Inc. filed a complaint in Delaware Court of Chancery challenging a transaction involving SBIC I LP, seeking to void the transaction and claiming breach of stockholder agreements.
• The outcome of the litigation is unpredictable, and the company cannot reasonably estimate any potential loss or range of loss.
• Cash held by subsidiary OFSCC-FS is restricted by contractual conditions of the Natixis Facility, limiting distribution capabilities.
• Borrowing base and other covenants apply to unused commitments under credit facilities.

Management Commentary and Tone:

• Management stated it intends to defend the Pfanstiehl Holdings litigation matter vigorously.
• The press release notes that NAV decreased primarily due to the net loss on investments and the quarterly distribution of $0.17 per share exceeding net investment income of $0.05 per share.

Other Key Points:

• On October 5, 2026, a third-party investor acquired 56.62% of limited partnership interests in SBIC I LP for $52.3 million, which was distributed to OFS Capital; SBIC I LP is no longer a wholly owned subsidiary.
• The Board declared a fourth-quarter distribution of $0.17 per common share, payable on January 7, 2027, to stockholders of record as of December 18, 2026.
• The company maintains a regulatory asset coverage ratio of 164% as of September 30, 2026, exceeding the 150% minimum requirement.
• Unused commitments included $15.0 million under the Banc of California revolving credit facility and $54.6 million under the Natixis Facility.
• Outstanding commitments to fund undrawn revolvers for portfolio companies totaled $4.0 million.