Stellus Capital Investment Stock Earnings Reports

Stellus reported Q1 FY2026 GAAP net investment income of $0.26 per share and core NII of $0.27 per share; total realized income was $0.29 per share (including $0.75M realized equity gain). Net asset value declined $0.28 per share in the quarter (driven by $0.08 of dividends in excess of earnings and $0.20 of net realized/unrealized losses, primarily on debt). The portfolio at quarter-end was roughly $990M (116 companies) and is about $970M across 117 companies as of the call. New investments were modest ($18M into three new companies) with $35M of full repayments and additional $6.6M other repayments. Asset quality: 81% of the portfolio is rated 1–2 (on or ahead of plan) and 19% is rated 3 or below; six loans are on nonaccrual (≈9.2% of cost, 5.2% of fair value) — management says this is higher than desired and they are actively working to resolve or return positions to accrual, expecting meaningful progress by late 2026/early 2027. Portfolio characteristics: 99% of loans secured, 92% floating rate, average loan ~ $9M, largest investment ~$18.5M; nearly all borrowers are private equity-backed. Spreads in the current pipeline have stabilized (roughly mid-4% to mid-5% over SOFR, average ~5%). Balance sheet/leverage: regulatory leverage low (~1x) with SBA debentures bringing total leverage to just under 2x; management notes ample borrowing capacity subject to borrowing base. Key strategic items: adviser Stellus Capital Management will join the Ridgepost Capital platform this summer, which management expects to materially expand lower-middle-market deal flow (RCP Advisors’ relationships with 200+ private equity firms could create “hundreds of millions” in new lending opportunities); a $20M share repurchase program was authorized to take advantage of stock trading at ~25% discount to NAV. Management reiterated the dividend policy will trend toward net investment income plus realized gains and cautioned that dividend levels are likely to be lower than current levels over time. They also cited potential portfolio growth capacity of $75M–$100M from a possible third SBIC license and recycling of realized assets.