Stellus Investment Income Falls as SOFR Rates Ease

The Tip Desk · November 12, 2026 · 3 min read

Investment income was $22.4 million in the three months ended September 30, 2026, down from $26.3 million a year earlier.

Stellus Capital Investment Corporation (SCM), an externally managed business development company, reported investment income of $22.4 million for the three months ended September 30, 2026, down from $26.3 million a year earlier.

The company said the decline was due primarily to lower prevailing market rates on its loans, typically tied to the Secured Overnight Financing Rate, and a decrease in principal debt outstanding. Interest income fell to $19.5 million from $23.6 million. PIK interest was $1.6 million and miscellaneous fees were $1.3 million.

Sequentially, investment income was $22.4 million after $22.3 million in the three months ended June 30, 2026. Interest income was $19.5 million after $19.6 million.

As of September 30, 2026, the portfolio stood at $966.1 million at fair value across 119 companies, down from $968.2 million across 116 companies at June 30, 2026. First-lien debt, including unitranche, remained about 89% of the book at fair value. Equity investments were $94.4 million, or 10% of the portfolio.

The weighted average yield on debt investments was 9.1% at September 30, 2026, up from 9.0% at June 30, 2026. Yield including non-income-producing equity positions was 8.5%.

Cash and cash equivalents were $2.3 million at September 30, 2026, down from $5.1 million at June 30, 2026. Unfunded commitments were $43.8 million for 76 companies, down from $45.7 million for 77 companies. The company said it had sufficient liquidity through cash on hand and available borrowings under its credit facility to fund those commitments. The asset coverage ratio was 198% at September 30, 2026, down from 206% at June 30, 2026.

Credit quality mixed. Loans to six portfolio companies were on non-accrual status at September 30, 2026, representing 9.6% of investments at cost and 5.4% at fair value, versus five companies at 8.5% of cost and 5.4% of fair value at June 30, 2026. Unaccrued income from non-accrual investments was $17.3 million.

Under Stellus Capital’s five-level rating system, Category 3 investments, which perform below expectations and require closer monitoring, fell to $162.8 million, or 17% of the portfolio across 17 companies, from $198.8 million, or 21% across 20 companies, at June 30, 2026. Category 5 investments, where some loss of return and principal is expected, rose to $13.2 million across 9 companies from $9.5 million across 8 companies. Category 1 was $229.0 million, or 24% of the portfolio. Category 2 was $518.2 million, or 54%. Category 4 was $42.9 million, or 4%.

During the nine months ended September 30, 2026, the company made $83.5 million of investments in 10 new and 10 existing portfolio companies and received $121.2 million in repayment proceeds. In the year-ago nine months it invested $142.0 million and received $85.6 million.

California remained the largest geographic concentration at 17.70% of investments at fair value. Texas was 11.96% and Florida 9.31%. Services: Business was the largest industry at 30.29% of fair value.

The company said it was in compliance with RIC requirements as of September 30, 2026.