Earnings

MSC Income Fund's Annualized Return on Equity Falls to 9.7%

The Tip Desk · November 11, 2026 · 4 min read

Net investment income was $14.4 million, or $0.32 a share, as expenses and a capital-gains fee accrual offset a modest rise in investment income.

MSC Income Fund, Inc. (MSIF), a principal investment firm that provides debt capital to private companies, reported net investment income of $14.4 million, or $0.32 a share, for the three months ended September 30, 2026, down 13% from $16.6 million, or $0.35 a share, a year earlier.

Adjusted net investment income was $15.3 million, or $0.34 a share, compared with $16.6 million, or $0.35 a share, in the third quarter of 2025. Adjusted NII before taxes was $16.3 million, or $0.36 a share.

Total investment income was $35.5 million, up $0.2 million from $35.4 million a year earlier. Interest income was $30.2 million, essentially unchanged from $30.1 million. Dividend income rose 5% to $3.8 million and fee income fell 9% to $1.5 million. The company said the increase in total investment income included $0.9 million of income it considered less consistent or non-recurring, primarily from dividend income and from accelerated prepayment, repricing and other activity on certain debt investments.

Total expenses, net of waivers, increased 9.6% to $20.1 million from $18.3 million a year earlier. The company attributed the rise principally to a $1.3 million increase in interest expense, a $0.9 million increase in the ending accrual for the capital gains incentive fee and a $0.5 million increase in the base management fee, partially offset by an $0.8 million decrease in incentive fee on income, net of waivers. Interest expense rose with higher average borrowings and a higher weighted-average rate on unsecured notes after the May 2029 and September 2029 issuances, partly offset by lower rates on credit facilities. The capital-gains accrual increase reflected net fair-value appreciation of investments. NII-related tax expenses in NII rose $0.6 million. The company said the $0.03 a share decline in NII per share reflected a $0.02 a share capital-gains incentive fee accrual.

The net increase in net assets resulting from operations was $18.1 million, or $0.40 a share, down 32% from $26.5 million, or $0.56 a share, a year earlier. Annualized return on equity for the quarter was 9.7%, compared with 14.6% in the third quarter of 2025. Trailing-twelve-month return on equity was 12.3%.

The company said the year-over-year drop in net assets from operations was driven by a $6.0 million lower net fair-value increase in the portfolio, a $2.2 million decrease in NII and a $0.2 million higher net tax provision on the fair-value change. Net fair-value appreciation was $5.2 million, versus $11.2 million a year earlier. That $5.2 million increase included $9.0 million of net unrealized appreciation, including reversals of prior-period unrealized depreciation tied to realized losses, offset by a $3.9 million net realized loss. Realized results included an $11.0 million gain on the exit of Core Transformers, a $9.4 million loss on a private loan restructure and a $6.4 million loss on a full exit of an LMM investment.

Net asset value was $16.56 a share as of September 30, 2026, up $0.05, or 0.3%, from $16.51 a share at June 30, 2026. Total NAV was $750.0 million.

The fund completed $61.4 million of private loan investments. After repayments, return of equity capital and a cost-basis decrease from realized losses, private loan cost basis fell $10.5 million, reversing a $9.7 million net increase in the prior quarter.

As of September 30, 2026, the private loan portfolio held 81 companies at $843.8 million fair value and $849.6 million cost, with a 10.5% weighted-average annual effective yield. The LMM portfolio held 53 companies at $503.0 million fair value and $388.1 million cost, with a 12.7% yield. The total portfolio at fair value was about 61.2% private loan, 36.5% LMM, 1.4% middle market and 0.9% other. Investments on non-accrual were 1.4% of fair value and 5.2% of cost; total portfolio fair value was 107% of cost.

The fund issued $75.0 million of 6.83% unsecured notes due September 30, 2029, the first of two $75.0 million tranches under a $150.0 million offering; it issued the second tranche in October 2026. Aggregate liquidity was $224.7 million, including $27.3 million cash and $197.4 million unused capacity after a $75.0 million reduction for scheduled repayment of the October 2026 Notes. Debt-to-equity was 0.86x.

The fund declared regular monthly dividends of $0.33 a share for the fourth quarter of 2026 and a supplemental dividend of $0.03 a share payable in December, for total third-quarter dividends of $0.36 a share. It entered a share-repurchase plan of up to $20.0 million from September 2026 through February 2027 when the market price trades below reported NAV by pre-determined levels. Nick Meserve was named to become chief executive effective November 9, 2026, with Dwayne L. Hyzak continuing as executive chairman.

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MSC INCOME FUND, INC. — all coverage and financials