CSWC 10-K & 10-Q changes, risk factors and insider trading

Investing in our securities involves a number of significant risks. In addition to other information contained in this Annual Report on Form 10-K, investors should consider the following information before making an investment in our securities. The risks and uncertainties described below could materially adversely affect our business, financial conditionscondition and results of operations. The risks set forth below are not the only risks we face. Additional risks and uncertainties not presently known to us, or not presently deemed material by us, also may impair our operations and performance. If any of the following risks, or risks not presently known to us, actually occur, the trading price of our securities could decline, and you may lose all or part of your investment.

•Our business model depends to a significant extent upon strong referral relationships. Our inability to maintaindevelop or developmaintain these relationships, as well as the failure of these relationships to generate investment opportunities, could adversely affect our business.

•In addition to regulatory limitations on our ability to raise capital, our current debt obligations contain various covenants, that, if not complied with, could accelerate our repayment obligations under the Corporate Credit Facility and/or the SPV Credit Facility, and thereby materially and adversely affectingaffect our liquidity, financial condition, results of operations and ability to pay distributions.

•We will becomebe subject to U.S. federal income tax imposed at corporate rates on our earnings if we are unable to qualify as a RIC under subchapter M of the Code.

•We are currently operating in a period of economic uncertainty. Such market conditions may materially and adversely affect debt and equity capital markets, which may have a negative impact on our business, financial condition and results of operations. An extended disruption in the capital markets and the credit markets could negatively affect our business.

In addition to regulatory limitations on our ability to raise capital, our current debt obligations contain various covenants,covenants that, if not complied with, could accelerate our repayment obligations under the Corporate Credit Facility and/or the SPV Credit Facility, and thereby materially and adversely affectingaffect our liquidity, financial condition, results of operations and ability to pay distributions.

We will becomebe subject to U.S. federal income tax imposed at corporate rates on our earnings if we are unable to qualify as a RIC under subchapter M of the Code.

We have elected, and intend to qualify annually, to be treatedannually as a RIC under subchapter M of the Code. No assurance can be given that we will be able to qualify for and maintain ourRIC qualificationtax as a RIC.treatment. To qualify as a RIC, we must meet thecertain followingrequirements, annualincluding distribution, income source andsource-of-income, asset diversification and distribution requirements:

•The source-of-income requirement iswill be satisfied if we obtain at least 90% of our grossannual income for each taxable year from dividends, interest, payments with respect to loans of certain securities loans,securities, gains from the sale or other disposition of stock or other securities or foreign currencies or other income derived with respect to our business of investing in such stock, securities or currencies andcurrencies, net income derived from an interest in acertain “qualified publicly traded partnershippartnerships” (as defined in the Code), or other income derived from the 90%business Incomeof Test.investing in stocks or securities.

•The asset diversification requirement iswill be satisfied if we meetdiversify certainour assetholdings diversificationso requirementsthat at the end of each quarter of our taxable year.year: To satisfy this requirement,(1) at least 50% of the value of our assets must consist of cash, cash items,items (including receivables), U.S. Government securities, securities of other RICs, and other securities, provided thatif such other securities will not include any securities of any one issuer, if our holdings of such issuer constitutedo not represent more than 5% of the total value of our assets or if we hold more than 10% of the outstanding voting securities of the issuer; and (which for these purposes includes the equity securities of a “qualified publicly traded partnership”2). In addition, no more than 25% of the value of our assets canmay be invested in (i) the securities, other than U.SU.S. Government securities or securities of other RICs, of one issuer;issuer, (ii) the securities, other than the securities of other RICs, of two or more issuers that are controlled,controlled asby us and which are determined under applicable taxTreasury rules,regulations, byto us and that arebe engaged in the same or similar or related trades or businesses;businesses, or (iii) the securities of one or morecertain “qualified publicly traded partnerships.”

We are currently operating in a period of economic uncertainty. Such market conditions may materially and adversely affect debt and equity capital markets, which may have a negative impact on our business, financial condition and results of operations. An extended disruption in the capital markets and the credit markets could negatively affect our business.

From time to time, capital markets may experience periods of disruption and instability. TheSuch U.S.disruptions could materially and adversely affect debt and equity capital marketsmarkets, which may have experienceda extremenegative volatilityimpact on our business, financial condition and disruption following the global outbreakresults of COVID-19operations. thatUncertainty beganwith inrespect Decemberto, 2019,among theother conflictthings, betweeninflationary Russiapressures, andelevated Ukraineinterest that began in late February 2022, the ongoing war in the Middle East, and uncertainties regarding shifts inrates, U.S. and foreign trade, economic and other policies, including with respect to treatiestariffs and tariffs.trade Concernsbarriers, overgeopolitical inflation,tensions, economicincluding recession,the interestongoing rateconflict between Russia and Ukraine, the ongoing turmoil and political unrest in the Middle East and South America, and immigration and work permit policies, and the effect of this volatility andhas fluctuations,materially impacted and geopoliticalcould tensioncontinue haveto exacerbatedmaterially impact our market volatility.risks. We anticipate our and our portfolio companies' business would be materially and adversely affected by a prolonged economic downturn or recession in the United States and other major markets. In addition, disruptions in the capital markets could increase the spread between the yields realized on risk-free and higher risk securities, which could result in illiquidity in parts of the capital markets.

These conditions and future market disruptions and/or illiquidity could have an adverse effect on our (and our portfolio companies') business, financial condition, results of operations and cash flows. Ongoing unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to our portfolio companies and/or us. Significant disruption or volatility in the capital markets also may affect the pace of our investment activity and the potential for liquidity events involving our investments. The illiquidity of our investments may make it difficult for us to sell such investments to access capital if required, and as a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them for liquidity purposes. These events have limited and could continue to limit our investment originations and our ability to grow and could also have a material negative impact on our operating results and the fair values of our debt and equity investments. Additionally, we may have to access, if available, alternative markets for debt and equity capital. A severe disruption in the global financial markets, deterioration in credit and financing conditions, highelevated interest rates, uncertainty regarding U.S. government spending and deficit levels or other global economic conditions could have a material adverse effect on our business, financial condition and results of operations.

Even if capital markets remain stable or improve, conditions could deteriorate again in the future. Past economic downturns or recessions have had a significant negative impact on the operating performance and fair value of middle marketLMM companies. Despite actions of the U.S. federal government and foreign governments, these events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular.

Equity capital may be difficult to raise during periods of adverse or volatile market conditions because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price less than NAV without first obtaining approval for such issuance from our shareholders and our directors who are not "interested persons" (as such term is used under Section 2(a)(19) of the 1940 Act) of the Company, or independent directors. Volatility and dislocation in the capital markets also can create a challenging environment in which to raise or access debt capital. Under these conditions, it could make it difficult to refinance or extend the maturity of our existing indebtedness or obtain new indebtedness with similar terms and any failure to do so could have a material adverse effect on our business. The debt capital that will be available to us in the future, if at all, may be at a higher cost and on less favorable terms and conditions than what we currently experience, including being at a higher cost in an elevated interest rate environment. If any of these conditions appear, they may have an adverse effect on our business, financial condition, and results of operations. These events could limit our investment originations, limit our ability to increase returns to equity holders through the effective use of leverage, and negatively impact our operating results.

Certain of our portfolio companies may be impacted by inflation, which may, in turn, impact the valuation of such portfolio companies. InflationaryU.S. inflation rates have fluctuated in recent periods, and remain well above historical levels over the past several decades. Ongoing inflationary pressures have increased the costs of labor, energy and raw materials and have adversely affected consumer spending, economic growth and our portfolio companies' operations. If such portfolio companies are unable to pass any increases in their costs along to their customers, it could adversely affect their results and their ability to pay interest and principal on our loans, particularly if interest rates remain high in response to inflation. In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future unrealized losses and therefore reduce our net assets resulting from operations.

The Republican Party currently controlsWhile the Presidency,current U.S. presidential administration has signaled a reduced emphasis on regulation with respect to the Senatefinancial andservices industry, the Houseultimate impact of Representatives,any whichderegulatory increasesefforts theremains likelihood that legislation may be adopted.uncertain. Any new or changed laws or regulations, including executive orders, as well as changes in the positions of regulatory agencies, which may lead to changes in the level of oversight in the financial service industry, could have a material adverse effect on our business, and we expect to see continued regulatory uncertainty in the near term. The nature, timing and economic and political effects of potential changes to the current legal and regulatory framework affecting financial institutions remain highly uncertain. The current global economic and political conditions and the uncertainty on applicable laws or regulations that impact us and our portfolio companies could have a significant adverse effect on our and our portfolio companies' business.

The U.S. government has recently imposed, and may in the future increase, tariffs on specific countries and commodities. In response, certain foreign trading partners, and others in the future may, impose retaliatory tariffs on certain U.S. goods. The foregoing trade policy landscape has created significant uncertainty about the future relationship between the United States and certain other countries with respect to trade policies, treaties and new and increased tariffs. These developments, or the continued uncertainty relating to U.S. trade policies, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce or re-route global trade and, in particular, trade between the impacted nations and the United States. The uncertainty relating to U.S. trade policies has increased market volatility. AnyAdditionally, oftrade thesetensions, factorspolitical could depress economic activitydisagreements, and restrictregulatory certainconcerns offrom ourtrading portfoliopartners companies’may accessmake customers, governments and investors more hesitant to suppliersengage with, purchase from, or customers, and increase costs, decrease margins, and reduce the competitiveness of products and services offered by our portfolio companies. The foregoing may adversely affect the revenues and profitability of such portfolio companies and,invest in turn,U.S.-based negatively affect our results of operations, which could cause the market value of our shares of common stock to decline. It is not possible to predict the impact that these or similar future events will have on the United States and other economies, specific industries, us or our underlying portfolio companies from an economic, tax or regulatory perspective, but any such impact could be material and adverse for us.companies.

Climate change creates physical and financial risk and our business operations and our portfolio companies may face risks associated with climate change, including risks related to the impact of climate-related legislation and regulation (both domestically and internationally), risks related to climate-related business trends (such as the process of transitioning to a lower-carbon economy), and risks stemming from the physical impacts of climate change. To the extent weather conditions are affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes. Increases in the cost of energy could adversely affect the cost of operations of our portfolio companies if the use of energy products or services is material to their business. A decrease in energy use due to weather changes may affect some of our portfolio companies’ financial condition through, for example, decreased revenues, which may, in turn, impact the valuation of such portfolio companies. Extreme weather conditions (including wildfires, droughts, hurricanes and floods) in general require more system backup, adding to costs, and can contribute to increased system stresses, including service interruptions, which, in turn, may impact the business operations of our portfolio companies. These events and the disruptions they cause, alone or together, could also lead to increased costs of insurance for us and/or our portfolio companies.

Some of our portfolio companies may periodically become subject to new or strengthened regulations or legislation to address global climate change, which could increase their operating costs and/or decrease their revenues, which may, in turn, impact their ability to make payments on our investments.investments and, in turn, impact the valuation of such portfolio companies.

Our business faces increasing public scrutiny related to environmental, social and governance (“ESG”) activities. We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as environmental stewardship, corporate governance and transparency. Adverse incidents with respect to ESG activities could impact the value of our brand, the cost of our operations and relationships with investors, all of which could adversely affect our business and results of operations. Additionally, new regulatory initiatives related to ESG could increase our costs and adversely affect our business. Compliance with any new laws or regulations increases our regulatory burden and could make compliance more difficult and expensive, affect the manner in which we or our prospective portfolio companies conduct our businesses and adversely affect our profitability.

U.S. debt ceiling and budget deficit concerns have increased the possibility of credit-rating downgrades or a recession in the United States. U.S. lawmakers have passed legislation to raise the federal debt ceiling on multiple occasions, but there is no guarantee that any such legislation will be passed in the future. DespiteAdditionally, takingconcerns action to suspendover the debtUnited ceiling,States' budget deficit have led ratings agencies haveto threatenedlower, or threaten to lowerlower, the long-term sovereign credit rating onof the United States, including downgrades by Fitch downgrading the U.S. government’s credit rating from AAA to AA+ in August 20232023, and by Moody’s lowering the U.S. government’s credit rating outlook from “stable”AAA to “negative”Aa1 in NovemberMay 2023.2025. There is no guarantee that there will not be a further downgradedowngrades or downgrades by other ratings agencies in the future. The impact of the increased debt ceiling and/or downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. These developments could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms.

In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time resulting in, among other things, inadequate funding for and/or the shutdown of certain government agencies, including the SEC and the SBA, on which the operation of our business may rely. Inadequate funding for and/or the shutdown of these or other government agencies prevents them from performing their normal business functions, which could impact, among other things: (i) our portfolio companies’ ability to access the public markets and obtain necessary capital in order to, among other things, properly capitalize, continue or expand operations, or liquidate such investments; (ii) the ability for the SBIC Subsidiaries to originate loans; and (iii) the ability of other governmental agencies to timely review and process regulatory submissions of our portfolio companies, as applicable. Continued adverse political and economic conditions, including a prolonged U.S. federal government shutdown, could have a material adverse effect on our business, financial condition and results of operations.

Our business is dependent on bank relationships and recentany strain on the banking system may adversely impact us.

The financial markets have periodically encountered volatility associated with concerns about the balance sheets of banks, especially small and regional banks that mayhave haveexperienced significant losses associatedin connection with investmentsprevious thatevents makeof insolvency. In such distress events, it may be difficult for such banks to fund demands to withdraw deposits and other liquidity needs. Although the federal government previously announced measures to assist these banks and protect depositors, there can be no assurance that similar measures will be implemented during future periods of volatility. Our business is dependent on bank relationships, including small and regional banks, and we proactively monitor the financial health of banks with which we (or our portfolio companies) do or may in the future do business. To the extent that our portfolio companies work with banks that have been, or may be, negatively impacted by the foregoing, such portfolio companies’ ability to access their own cash, cash equivalents and investments may be threatened. In addition, such affected portfolio companies may not be able to enter into new banking arrangements or credit facilities or receive the benefits of their existing banking arrangements or credit facilities. If our portfolio companies are unable to access working capital, make payroll, meet operating expenses, or service their obligations to us or other lenders as a result of banking disruptions, such events could result in defaults, reduced valuations, or credit losses that adversely affect our business. Any such developments could harm our business, financial condition, and operating results, and prevent us from fully implementing our investment plan. ContinuedAny continued strain on the banking system may adversely impact our business, financial condition and results of operations.

We and our portfolio companies are subject to federal, state and local laws and regulations and are subject to judicial and administrative decisions that affect our business and the operations of our portfolio companies, including our loan originations, maximum interest rates, fees and other charges, disclosures to portfolio companies, the terms of secured transactions, collection and foreclosure procedures and other trade practices. These laws and regulations, as well as their interpretation, may be changed from time to time, and new laws and regulations may be enacted. Any change in the laws or regulations, the interpretations of such laws and regulations, or newly enacted laws or regulations could require changes to certain business practices used by us or our portfolio companies, negatively impact the operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies. Regulatory changes could result in greater competition from banks and other lenders with which we compete for lending and other investment opportunities. In addition, if we do not comply with applicable laws, regulations and decisions, we may lose licenses needed for the conduct of our business and/or be subject to civil fines and criminal penalties, any of which could have a material adverse effect upon our business, results of operations or financial condition.

We compete for attractive investment opportunities with other financial institutions, including BDCs, junior capital lenders, and banks. Some of these competitors are substantially larger and have greater financial, technical and marketing resources, and some are subject to different, and frequently less stringent, regulations. Our competitors may have a lower cost of funds and may have access to funding sources that are not available to us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC and the Code imposes on us as a RIC. As a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and there can be no assurance that we will be able to identify and make investments that satisfy our objectives. A significant increase in the number and/or size of our competitors in our target market could force us to accept less attractive investment terms, which may impact our return on these investments. We cannot assure you that the competitive pressures we face will not have a materially adverse effect on our business, financial condition and results of operation.operations.

As a public entity, we are subject to the reporting requirements of the Exchange Act andAct, requirements of the Sarbanes-Oxley ActAct, and the related rules and regulations promulgated by the SEC. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting, as well as requires that our independent registered public accounting firm attest to the effectiveness of our internal controls over financial reporting as a large accelerated filer. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal controls, significant resources and management oversight are required. We have implemented procedures, processes, policies and practices for the purpose of addressing the standards and requirements applicable to public companies. These activities may divert management’s time and attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

On April 20, 2021 and April 17, 2025, SBIC I and SBIC II, respectively,II received licensesa license from the SBA to operate as an SBIC under Section 301(c) of the Small Business Investment Act of 1958, as amended, on April 20, 2021 and April 17, 2025, respectively, and the SBIC Subsidiaries are regulated by the SBA.

Illustration: Example of Dilutive Effect of the Issuance of Shares Below NAV. Assume that Company XYZ has 1,000,000 total shares outstanding, $15,000,000 in total assets and $5,000,000 in total liabilities. The NAV per share of the common stock of Company XYZ is $10.00. The following table illustrates the reduction in NAV and the dilution experienced by shareholder A following the sale of 100,000 shares of the common stock of Company XYZ at $9.00 per share, a price below its NAV per share.

Legislative or other actions relating to taxes could have a negative effect on us.us and our shareholders. Matters pertaining to U.S. federal income tax are constantly under review by persons involved in the legislative process, the IRS and the U.S. Department of the Treasury. The Trump Administration has proposed significant changes to the Code and existing U.S. federal income tax regulations and there are a number of proposals in Congress that would similarly modify the Code. We cannot predict with certainty how any changes in the tax laws might affect us, our shareholders, or our portfolio investments. While the likelihood of any such legislation being enacted is uncertain, newNew legislation and any U.S. Treasury regulations, administrative interpretations or court decisions interpreting such legislation or regulations could affect our ability to qualify as a RIC or otherwise impact the U.S. federal income tax consequences to us and our shareholders of such qualification, or could have other adverse consequences. Shareholders are urged to consult with their tax advisor regardingwith taxrespect to the impact of the status of any legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in our securities.

We, and others in our industry, are the targets of malicious cyber activity. A successful cyber-attack, whether perpetrated by criminal or state-sponsored actors, against us or our service providers, or an accidental disclosure of non-public information could have an adverse effect on our ability to communicate or conduct business, negatively impacting our operations and financial condition. This adverse effect can become particularly acute if those events affect our electronic data processing, transmission, storage, and retrieval systems, or impact the availability, integrity, or confidentiality of our data, especially personal and other confidential information. IfThe rapid evolution and scale of artificial intelligence technologies also may increase the likelihood or effectiveness of a significantcyber-attack numberagainst us or our third-party service providers. For example, threat actors may use artificial intelligence technologies to deploy more sophisticated attacks, including AI-enabled fraud that can materially impact the effectiveness of our employeestraditional werecybersecurity unavailablecontrols inby theaccelerating eventand ofscaling asocial disaster,engineering, ourcreating abilityrealistic tosynthetic effectivelydocuments, conductand ourdefeating businesscommon couldauthentication be severely compromised.methods.

We, and the third-party service providers with which we do business, depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures, our computer systems, networks, and data, like those of other companies, could be subject to unauthorized access, acquisition, use, alteration, disruption, or destruction, such as from the insertion of malware (including ransomware), physical and electronic break-ins or unauthorized tampering. We may experience threats to our data and systems, including malware and computer virus attacks, unauthorized access, or system failures and disruptions. The rapid development of artificial intelligence technologies may cause cyber-attacks and related risks to become more difficult to detect, contain and mitigate. Such an attack could cause interruptions or malfunctions in our operations, misstated or unreliable financial data, misappropriation of assets, loss of personal information, or liability for stolen information, any of which could result in financial losses, litigation, regulatory enforcement action and penalties, client dissatisfaction or loss, reputational damage, and increased costs associated with mitigation of damages and remediation. We may have to make a significant investment to fix or replace any inoperable or compromised systems or to modify or enhance itsour cybersecurity controls, procedures and measures. Similarly, the public perception that we or our affiliates may have been the target of a cybersecurity threat, whether successful or not, also could have a material adverse effect on our reputation and lead to financial losses from loss of business, depending on the nature and severity of the threat.

Third parties with which we do businessbusiness, including our third-party service providers, are sources of cybersecurity or other technological risks. We outsource certain functions, and these relationships allow for the storage and processing of our information, as well as counterparty, employee and borrower information. Cybersecurity failures or breaches toby our service providers (including, but not limited to, transfer agents and custodians), and the issuersportfolio of securitiescompanies in which we invest, also have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, interference with our ability to calculate itsour NAV, impediments to trading, the inability of our stockholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputationreputational damages,damage, reimbursement ofor other compensation costs, or additional compliance costs. While we engage in actions to reduce our exposure resulting from outsourcing, ongoing threats may result in unauthorized access, loss, exposure or destruction of data, or other cybersecurity incidents with increased costs and other consequences, including those as described above. In addition, substantial costs may be incurred to prevent any cyber-incidents in the future. The Company does not control the cybersecurity measures put in place by third parties, and such third parties could have limited indemnification obligations to the Company and its affiliates. If such a third party fails to adopt or adhere to adequate cybersecurity procedures, or if despite such procedures its networks or systems are breached, information relating to investor transactions and/or personal information of investors may be lost or improperly accessed, used or disclosed.

Privacy and information security laws and regulatory changes, and compliance with those changes, may result in cost increases due to system changes and the development of new administrative processes. For example, the SEC adopted rules requiring disclosure of material cybersecurity incidents and disclosure relating to cybersecurity risk management, and amendments to Regulation S-P governing policies and procedures designed to address unauthorized access to customer information. We may face increased costs to comply with any new or changing regulations. In addition, we may be required to expend significant additional resources to modify our protective measures and to investigate and remediate vulnerabilities or other exposures arising from operational and security risks.

The continued threat of global terrorism and the impact of military and other action will likely continue to cause volatility in the economies of certain countries, contribute to increased market volatility and economic uncertainties or deterioration in the United States and worldwide and various aspects thereof, including in prices of commodities. Our portfolio investments may involve significant strategic assets having a national or regional profile. The nature of these assets could expose them to a greater risk of being the subject of a terrorist attack than other assets or businesses. In late February 2022, Russia launched a large scale military attack on Ukraine.Ukraine Theand invasionthe significantlyongoing amplifiedconflict alreadyhas existingresulted in geopolitical tensionsvolatility among Russia, Ukraine, Europe, NATO and theother West,western countries, including the United States. In response to the ongoingcontinued military action by Russia, various countries, including the United States, the United Kingdom, and European Union issued broad-ranging economic sanctions against Russia.Russia Additionaland additional sanctions may be imposed in the future. Such sanctions (and any future sanctions) and other actions against Russia may adversely impact, among other things, the Russian economy andimpact various sectors of the Russian economy, including but not limited to, financials, energy, metals and mining, engineering and defense and defense-related materials sectors;sectors. Such sanctions may result in a decline in the value and liquidity of Russian securities; result in boycotts, tariffs, and purchasing and financing restrictions on Russia’s government, companies and certain individuals; weaken the value of the ruble; downgrade the country’s credit rating; freeze Russian securities and/or funds invested in prohibited assets and impair the ability to trade in Russian securities and/or other assets; and have other adverse consequences on the Russian government, economy, companies and region.

In addition, the recentongoing outbreakturmoil ofand hostilitiespolitical unrest in the Middle East and in Europe, and escalating tensions in thethose regionregions, may create volatility and disruption of global markets.

The ramifications of thethese hostilitiesconflicts and sanctions, however,sanctions may not be limited to Russiathe affected regions and thecompanies Middlein Eastthose and Russian and Middle Eastern companies, respectively,regions, but may spill overextend to and negatively impact other regional and global economic markets (including Europe and the United States), companies in other countries (particularly those that have done business with Russia) and on various sectors, industries and markets for securities and commodities globally, such as oil and natural gas. Accordingly, the actions discussed above and theany potentialfurther forexpansion aof widerongoing conflictconflicts could increase financial market volatility, causenegatively severe negative effects onimpact regional and global economic markets, industries,markets and companiescertain industries, and have a negative effect on the Company’sour investments and performance, which may, in turn, impact the valuation of such portfolio companies. In particular, U.S. involvement and escalating hostilities in the Middle East may lead to global market instability due to the impact of such conflict on oil prices and shipping costs. In addition, parties in such conflicts may take retaliatory actions and other countermeasures, includingsuch as cyberattacks andor espionage against other countries and companies around the world, whichand mayany such countermeasures could negatively impact such countries and/or the portfolio companies in which the Company invests. The extent and duration of the military action or future escalation of such hostilities, the extent and impact of existing and future sanctions, market disruptions and volatility, and the result of any diplomatic negotiations cannot be predicted. These and any related events could have a significant impact on the Company’s performance and the value of an investment in the Company.

We primarily invest in privately held U.S. middle marketLMM companies. Investments in privately held middle marketLMM companies involve a number of significant risks, including the following:

In addition, in the course of providing significant managerial assistance to certain of our portfolio companies, certain of our officers and directors may serve as directors on the boards of these companies. To the extent that litigation arises out of our investments in these companies, our officers and directors may be named as defendants in such litigation, which could result in an expenditure of funds for claims in excess of our directors’ and officers’ insurance coverage (through our indemnification of our officers and directors) and the diversion of management’s time and resources. Further, a portfolio company's off-balance sheet obligations may increase that borrower's effective leverage, reduce free cash flow and elevate default risk beyond what is apparent from the portfolio company's financial statements or management reports, which may result in a miscalculation of the risk of our investment.

We invest in senior loans, which are usually rated below investment grade or also may be unrated. As a result, the risks associated with senior loans may be considered by credit rating agencies to be similar to the risks of below investment grade fixed-income instruments. Investment in senior loans rated below investment grade is considered speculative because of the credit risk of the company incurring the indebtedness. Such companies are more likely than investment grade issuers to default on their payments of interest and principal owed to us, and such defaults could have a material adverse effect on our performance. An economic downturn would generally lead to a higher non-payment rate, and a senior loan may lose significant market value before a default occurs. Moreover, any specific collateral used to secure a senior loansloan may decline in value or become illiquid, which would adversely affect the senior loan’s value.

Because we are internally managed, we do not pay any external investment advisory fees, but instead directly incur the operating costs associated with employing investment and portfolio management professionals. We believe that our internally managed structure provides us with a beneficial operating expense structure when compared to other publicly traded and privately held investment firms that are externally managed, and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our investment portfolio. ForAs the years endedof March 31, 2026, 2025, 2024 and 2023,2024 the ratio of our last twelve months ("LTM") operating expenses, excluding interest expense, as a percentage of our LTM average total assets was 1.73%,1.43%, 1.72%1.73% and 1.91%,1.72%, respectively.

The most significant determination inherent in the preparation of our consolidated financial statements is the valuation of our investment portfolio and the related amounts of unrealized appreciation and depreciation. As of both March 31, 20252026 and March 31, 2024,2025, our investment portfolio at fair value represented approximately 96.3% and 94.8% of our total assets, respectively. We are required to report our investments at fair value. We follow the provisions of ASC 820. ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. See Note 4 —- Fair Value Measurements in the Notes to the Consolidated Financial Statements for a detailed discussion of our investment portfolio valuation process and procedures.

Interest and dividend income is recorded on an accrual basis to the extent amounts are expected to be collected. Dividend income is recognized on the date dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. Discounts/premiums received to par on loans purchased are capitalized and accreted or amortized into income over the life of the loan using the effective interest method. Upon the prepayment of a loan, any unamortized discount or premium is accelerated into interest income. In accordance with our valuation policy, accrued interest and dividend income is evaluated quarterly for collectability. When we do not expect the debtor to be able to service all of its debt or other obligations, we will generally establish a reserve against interest income receivable, thereby placing the loan or debt security on non-accrual status, and cease to recognize interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security’s status significantly improves regarding itsthe portfolio company's ability to service debt or other obligations, it will be restored to accrual basis. As of March 31, 2026, investments on non-accrual status represented approximately 1.1% of our total investment portfolio's fair value and approximately 2.4% of its cost. As of March 31, 2025, investments on non-accrual status represented approximately 1.7% of our total investment portfolio's fair value and approximately 3.5% of its cost. As of March 31, 2024, investments on non-accrual status represented approximately 2.3% of our total investment portfolio's fair value and approximately 3.9% of its cost.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which was issued to enhance the transparency and decision usefulness of income tax disclosures, including an annual requirement to (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. The new guidance is effective for annual periods beginning after December 15, 2024. The Company ishas currentlyadopted evaluating the impact of the newthis standard on thea Company'sprospective consolidatedbasis financialas statementscurrently required and these are reflected in the related disclosures and does not believe it will have a material impact on its consolidated financial statements or its disclosure.disclosures.

In November 2024, the FASB issued ASU 2024-03, "Disaggregation of Income Statement Expenses," which requires additional disclosure of the nature of expenses included in the income statement in response to requests from investors for more information about an entity's expenses. The new standard requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The new guidance is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of the new standard on the Company's consolidated financial statements and related disclosures and does not believe it will have a material impact on its consolidated financial statements or its disclosures.

(d)Includes CSWC debt investments only. Weighted average EBITDA metric is calculated using investment cost basis weighting. ForAs theof threeMarch months31, ended2026, 10 portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful. As of March 31, 2025, 12 portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful. For the year ended March 31, 2024, 12 portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful.

(e)Includes CSWC debt investments only. Calculated as the amount of each portfolio company’s debt (including CSWC’s position and debt senior or pari passu to CSWC’s position, but excluding debt subordinated to CSWC’s position) in the capital structure divided by each portfolio company’s adjusted EBITDA. Weighted average leverage is calculated using investment cost basis weighting. Management uses this metric as a guide to evaluate relative risk of its position in each portfolio debt investment. ForAs theof yearMarch ended31, 2026, 10 portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful. As of March 31, 2025, 12 portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful. For the year ended March 31, 2024, 12 portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful.

•Investment Rating 3 involves an investment performing below underwriting expectations and the trends and risk factors are generally neutral to negative. The investment may be out of compliance with financial covenants and interest payments may be impaired,covenants, however principalinterest payments are generally not past due.due and the investment is typically on accrual.

•Investment Rating 4 indicates that the investment is performing materially below underwriting expectations, the trends and risk factors are generally negative and the risk of the investment has increased substantially.increased. Interest and principal payments on our investment are likely to be impaired.impaired and the investment is typically on non-accrual, however there is not an expectation of significant principal loss.

We continue to observe commoditycertain inflation,macro-economic elementsrisks ofand financialuncertainties, market instability (including elevatedthose interest rates), supply chain disruptions, changesrelating to U.S.commodity tariff and import/export regulations,inflation and elements of geopolitical instability (including the ongoing warconflict inbetween Ukraine,Russia conflictand Ukraine and the ongoing turmoil and political unrest in the Middle East,East and U.S.South and China relationsAmerica). Changes to trade policies, including the imposition of new tariffs, could disrupt supply chains and may negatively impact the financial condition of certain of our portfolio companies as well as the macro-economic environment. In the event that the U.S. economy enters into a protracted recession, it is possible that the results of certain U.S. middle marketLMM companies could experience deterioration. We are closely monitoring the effect of such market volatility may have on our portfolio companies and our investment activities, and we have also increased oversight of credits in vulnerable industries to mitigate any decline in loan performance and reduce credit risk.

During the year ended March 31, 2025,2026, we made debt investments totaling $554.0$597.0 million and equity investments totaling $14.5$15.7 million. In connection with the sale of a preferred equity investment, we also received an earnout with a cost basis of $3.5 million. We received contractual principal repayments totaling approximately $60.8$39.7 million and full prepayments of approximately $151.4$221.3 million. We funded $52.0$74.4 million on revolving loans and received $36.5$51.9 million in repayments on revolving loans. In addition, we received proceeds from sales of debt and equity investments totaling $49.6$74.0 million.

During the year ended March 31, 2024,2025, we made debt investments totaling $403.4$554.0 million and equity investments totaling $16.6$14.5 million. We received contractual principal repayments totaling approximately $52.5$60.8 million and full prepayments of approximately $99.9$151.4 million. We funded $39.9$52.0 million on revolving loans and received $27.3$36.5 million in repayments on revolving loans. In addition, we received proceeds from sales of debt and equity investments totaling $18.0$49.6 million.

1In(1)In connection with the dissolution and liquidation of I-45 SLF LLC ("I-45 SLF"),LLC, the joint venture between CSWC and Main Street Capital Corporation, the Company received distributions-in-kind of investments. See Note 14 - Related Party Transactions in the Notes to the Consolidated Financial Statements for more information.

The composite measure of our financial performance in the Consolidated Statements of Operations is captioned “Net increase in net assets from operations” and consists of four elements. The first is “Net investment income,” which is the difference between income from interest, dividends and fees and our combined operating and interest expenses, net of applicable income taxes. The second element is “Net realized gain (loss) gain on investments, net of tax,” which is the difference between the proceeds received from the disposition of portfolio securities and their stated cost. The third element is the “Net unrealized (depreciation) appreciation on investments, net of tax,” which is the net change in the market or fair value of our investment portfolio, compared with the stated cost. The “Net realized gain (loss) gain on investments before income tax” and “Net unrealized (depreciation) appreciation on investments, net of tax” are directly related in that when an appreciated portfolio security is sold to realize a gain, a corresponding decrease in net unrealized appreciation occurs by transferring the gain associated with the transaction from being “unrealized” to being “realized.” Conversely, when a loss is realized on a depreciated portfolio security, an increase in net unrealized appreciation occurs. The fourth element is the “Realized loss on extinguishment of debt”, which is the acceleration of unamortized deferred fees associated with amendments to the Corporate Credit Facility that trigger a debt extinguishment or,which, with respect to the full redemption of the January 2026 Notes, the October 2026 Notes and the August 2028 Notes, is the difference between the principal amount due at maturity adjusted for any unamortized debt issuance costs.

Comparison of yearsyear ended March 31, 20252026 and March 31, 20242025

The following table summarizes the components of investment income for the yearsyear ended March 31, 20252026 and 20242025 (amounts in thousands):

Interest income, PIK interest income, and amortization of purchase discounts and fees on an aggregate basis for the year ended March 31, 20252026 totaled $186.9$206.4 million as compared to $160.7$186.9 million for the year ended March 31, 2024.2025. The increase was primarily due to a 25.1%20.3% increase in the average monthly cost basis of debt investments held by us from $1,189.2$1,487.4 million to $1,487.4$1,789.9 million year-over-year, partially offset by a decrease in weighted average yield on debt investments from 13.3%11.7% to 11.7%10.8% year-over-year.year-over-year Feeprimarily due to a decrease in benchmark interest rates. Dividend income for the year ended March 31, 20252026 increased $5.6$8.2 million as compared to the year ended March 31, 2024 primarily2025 due to an increase in arrangerdistributions fees.received Dividendfrom portfolio companies. Fee income for the year ended March 31, 20252026 decreasedincreased $7.2$0.3 million as compared to the year ended March 31, 20242025 primarily due to thean liquidationincrease ofin I-45administrative SLFfees. duringOther income for the quarteryear ended March 31, 2024.2026 decreased $0.4 million as compared to the year ended March 31, 2025 primarily due to a decrease in interest income on cash balances held.

For the year ended March 31, 2025,2026, our total interest expense was $55.0$66.6 million, an increase of $11.9$11.7 million, as compared to the total interest expense of $43.1$54.9 million for the year ended March 31, 2024.2025. The increase was primarily attributable to an increase of $145.5$189.6 million in average borrowings outstandingoutstanding. and an increase in theThe weighted average interest rate on our total debt fromremained 5.45%relatively flat at 5.52% for the year ended March 31, 2026, as compared to 5.53% for the year ended March 31, 2024 and March 31, 2025, respectively. The increase in the weighted average interest rate was primarily due to an increase in the base rate on the Corporate Credit Facility and the addition of the SPV Credit Facility.2025.

For the year ended March 31, 2025,2026, our total employee compensation expense (including both cash and share-based compensation) increaseddecreased by $3.0$1.2 million as compared to the total employee compensation expense for the year ended March 31, 2024.2025. The increasedecrease was primarily due to $2.6 million of one-time compensation expenses incurred in the prior year related to the departure of the Company's former President and Chief Executive Officer.Officer, partially offset by an increase in bonus compensation. For the year ended March 31, 2025,2026, our total general and administrative expense, including professional fees, was $10.9$12.0 million, an increase of $2.0$1.1 million, or 22.1%,9.8%, as compared to $8.9$10.9 million for the year ended March 31, 2024.2025. The increase was primarily attributable to a variety of factors including an increase in professionallegal feesfees, incurredemployee inrecruiting connectionand building expenses associated with the compensation consultant engaged by the Compensation Committee, an increase in audit fees and an increase in legal fees related to the transition of leadership, as well as an increase in rent expense due toour additional office space, andas thewell write off of deferred offering costs related to our previous shelf registration statement, in addition toas individually immaterial increases across several general operating expenses.

For the year ended March 31, 2025,2026, income before taxes increased by $9.5$16.1 million, or 8.6%.13.4%. Net investment income increased from the prior year period by $8.2$17.3 million, or 7.4%,14.6%, to $118.2$135.5 million as a result of a $26.3$27.7 million increase in total investment income,income and a $1.1 million decrease in income tax provision, partially offset by a $11.9$11.7 million increase in interest expense and a $1.3 million increase in income tax provision.expense.

The following table provides a summary of the primary components of the total net realized lossgain on investments of $49.7$5.5 million for the year ended March 31, 20252026 (amounts in thousands):

1Includes1 Includes a deferred tax provision of $3.7 million associated with the Taxable Subsidiary.

For the year ended March 31, 2025,2026, we experienced a net increasedecrease in cash and cash equivalents in the amount of $12.6$15.4 million. During the foregoing period, our operating activities used $217.3$193.5 million in cash, consisting primarily of new portfolio investments made by the Company of $620.5$683.2 million, partially offset by $276.9$340.0 million from sales and repayments received from debt investments in portfolio companies and $18.0$39.3 million from sales of equity investments in portfolio companies. In addition, our financing activities provided cash of $231.5$178.4 million, consisting primarily of net proceeds from the issuance of the 2029September Convertible2030 Notes of $223.1$344.2 million, net proceeds from the Equity ATM Program of $178.5 million, net borrowings on our Credit Facilities of $78.0$157.8 million and net proceeds from the issuance of SBA Debentures of $21.5$46.8 million, partially offset by the full redemption of $150.0 million in aggregate principal amount of the JanuaryOctober 2026 Notes of $140.0 million andNotes, cash dividends paid in the amount of $125.3$147.2 million.million, and the full redemption of $71.9 million in aggregate principal amount of the August 2028 Notes. At March 31, 2025,2026, the Company had cash and cash equivalents of approximately $43.2$29.0 million and restricted cash of approximately $1.7$0.4 million.

For the year ended March 31, 2024,2025, we experienced a net increase in cash and cash equivalents in the amount of $10.7$12.6 million. During that period, our operating activities used $188.5$217.3 million in cash, consisting primarily of new portfolio investments made by the Company of $497.5$620.5 million, partially offset by $191.4$276.9 million from sales and repayments received from debt investments in portfolio companies, $12.8 million from a return of capital relating to our investment in I-45 SLFcompanies and $4.1$18.0 million from sales and return of capital relating to our equity investments in portfolio companies. In addition, our financing activities provided cash of $199.2$231.5 million, consisting primarily of net proceeds from the Equity ATM Programissuance of $181.5the 2029 Convertible Notes of $223.1 million, net proceeds from the issuanceEquity ATM Program of the$178.5 Augustmillion, 2028net Notesborrowings on our Credit Facilities of $69.7$78.0 million,million and net proceeds from the issuance of SBA debenturesDebentures of $32.2 million and net borrowings on our Corporate Credit Facility of $30.0$21.5 million, partially offset by the full redemption of $140.0 million in aggregate principal amount of the January 2026 Notes and cash dividends paid in the amount of $102.9$125.3 million. At March 31, 2024,2025, the Company had cash and cash equivalents of approximately $32.3$43.2 million and restricted cash of approximately $1.7 million.

As of March 31, 2025,2026, we had $235.0$245.0 million borrowings outstanding and $249.2$264.2 million of undrawn commitments under the Corporate Credit Facility, and $108.0$100.0 million outstanding and $92.0$100.0 million of undrawn commitments under the SPV Credit Facility. Availability under the Credit Facilities is subject to certain leverage and borrowing base limitations, various covenants, reporting requirements and other customary requirements for similar credit facilities. For more information on our Credit Facilities, including material terms and financial covenants, refer to Note 5 - Borrowings in the Notes to the Consolidated Financial Statements.

In December 2020, the Company issued $75.0 million in aggregate principal amount of 4.50% notes due 2026 (the "January 2026 Notes"). In February 2021, the Company issued an additional $65.0 million in aggregate principal amount of the January 2026 Notes. The outstanding aggregate principal amount of January 2026 Notes was $140.0 million as of March 31, 2024. On December 9, 2024, the Company redeemed $140.0 million in aggregate principal amount of the issued and outstanding January 2026 Notes in full. The January 2026 Notes were redeemed at 100% of their principal amount, plus the accrued and unpaid interest thereon, through, but excluding the redemption date. Accordingly, the Company recognized a realized loss on extinguishment of debt, equal to the write-off of the related unamortized debt issuance costs, of $0.4 million during the year ended March 31, 2025.

In August 2021, the Company issued $100.0 million in aggregate principal amount of 3.375% notes due 2026 (the "October 2026 Notes"). In November 2021, the Company issued an additional $50.0 million in aggregate principal amount of the October 2026 Notes. TheOn outstandingOctober 13, 2025, the Company redeemed $150.0 million in aggregate principal amount of the issued and outstanding October 2026 Notes wasin $150.0full. The October 2026 Notes were redeemed at 100% of their principal amount, plus the accrued and unpaid interest thereon, through, but excluding the redemption date. Accordingly, the Company recognized a realized loss on extinguishment of debt, equal to the write-off of the related unamortized debt issuance costs, of $0.8 million asduring ofthe bothyear ended March 31, 2025 and March 31, 2024.2026.

In June 2023, the Company issued approximately $71.9 million in aggregate principal amount, including the underwriters' full exercise of their option to purchase an additional $9.4 million in aggregate principal amount to cover over-allotments, of 7.75% notes due 2028 (the "August 2028 Notes"). TheOn outstandingOctober 13, 2025, the Company redeemed $71.9 million in aggregate principal amount of the issued and outstanding August 2028 Notes wasin $71.9full. The August 2028 Notes were redeemed at 100% of their principal amount, plus the accrued and unpaid interest thereon, through, but excluding the redemption date. Accordingly, the Company recognized a realized loss on extinguishment of debt, equal to the write-off of the related unamortized debt issuance costs, of $1.4 million asduring ofthe bothyear ended March 31, 2025 and March 31, 2024.2026.

In November 2024, the Company issued $230.0 million in aggregate principal amount of 5.125% convertible notes due 2029 (the "2029 Convertible Notes"), including the underwriters' full exercise of their option to purchase an additional $30.0 million in aggregate principal amount to cover over-allotments. The outstanding aggregate principal amount of the 2029 Convertible Notes as of both March 31, 2026 and March 31, 2025 was $230.0 million.

For more information on each of the January 2026 Notes, the October 2026 Notes, the August 2028 Notes, and the 2029 Convertible Notes, and the September 2030 Notes, including material terms,terms governing the unsecured notes, refer to Note 5 - Borrowings in the Notes to the Consolidated Financial Statements.

On April 20, 2021,2021 and April 17, 2025, SBIC I and SBIC II, respectively, received a license from the SBA to operate as an SBIC under Section 301(c) of the Small Business Investment Act of 1958, as amended. The licenselicenses allowsallow each of SBIC I and SBIC II to obtain leverage by issuing SBA Debentures, subject to the issuance of a leverage commitment by the SBA. Current SBA regulations permit SBIC I and SBIC II to each borrow up to $175 million in SBA Debentures with at least $87.5 million in regulatory capital (as defined in the SBA regulations). As of March 31, 2025,2026, SBIC I had a total leverage commitment from the SBA in the amount of $175.0 million, all of which was drawn. As of March 31, 2026, SBIC II had a total leverage commitment from the SBA in the amount of $90.0 million, of which $48.0 million was drawn. SBA Debentures have interest payable semi-annually and a ten-year maturity. The interest rate is fixed shortly after issuance at a market-driven spread over U.S. Treasury Notes with ten-year maturities. Interest on SBA Debentures is payable semi-annually on March 1 and September 1. The first maturity date related to the SBA Debentures occurs in September 2031.

For more information on the SBA Debentures, refer to Note 5 - Borrowings in the Notes to the Consolidated Financial Statements. Subsequent to the year ended March 31, 2025, we received our second SBIC license. See "Recent Developments" for more information.

The following table summarizes certain information relating to shares sold under the Equity ATM Program (dollars in thousands):

1Net(1)Net proceeds reflects proceeds after deducting commissions to the sales agents on shares sold. As of both March 31, 20252026 and March 31, 2024,2025, no amounts remained receivable.

Cumulative to date,March 31, 2026, the Company has sold 33,041,17740,437,289 shares of its common stock under the Equity ATM Program at a weighted-average price of $21.49,$21.52, raising $710.0$870.1 million of gross proceeds. Net proceeds were $699.0$856.9 million after commissions to the sales agents on shares sold. As of March 31, 2025,2026, the Company had $290.0$129.9 million available under the Equity ATM Program.

Investing in our common stock involves a number of significant risks. ThereOther than the risk factor set forth below, there have been no material changes to the risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 20252026 that we filed with the SEC on May 20,19, 2025.2026.

Because we are internally managed, we do not pay any external investment advisory fees, but instead directly incur the operating costs associated with employing investment and portfolio management professionals. We believe that our internally managed structure provides us with a beneficial operating expense structure when compared to other publicly traded and privately held investment firms that are externally managed, and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our investment portfolio. As of DecemberJune 31,30, 20252026 and 2024,2025, the ratio of our last twelve months ("LTM") operating expenses, excluding interest expense, as a percentage of our LTM average total assets was 1.67%1.36% and 1.61%,1.69%, respectively.

The most significant determination inherent in the preparation of our consolidated financial statements is the valuation of our investment portfolio and the related amounts of unrealized appreciation and depreciation. As of DecemberJune 31,30, 20252026 and March 31, 2025,2026, our investment portfolio at fair value represented approximately 95.1% and 94.8%96.3% of our total assets, respectively. We are required to report our investments at fair value. We follow the provisions of ASC 820. ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. See Note 4 - Fair Value Measurements in the Notes to the Consolidated Financial Statements for a detailed discussion of our investment portfolio valuation process and procedures.

Pursuant to Rule 2a-5 under the 1940 Act, the Board of Directors designated a valuation committee (the "Valuation Committee") comprised of certain officers of the Company as its valuation designee to determine the fair value of the Company's investments that do not have readily available market quotations, subject to the oversight of the Board of Directors. Our Valuation Committee believes that our investment portfolio as of DecemberJune 31,30, 20252026 and March 31, 20252026 reflects the fair value as of those dates based on the markets in which we operate and other conditions in existence on those reporting dates.

Interest and dividend income is recorded on an accrual basis to the extent amounts are expected to be collected. Dividend income is recognized on the date dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. Discounts/premiums received to par on loans purchased are capitalized and accreted or amortized into income over the life of the loan using the effective interest method. Upon the prepayment of a loan, any unamortized discount or premium is accelerated into interest income. In accordance with our valuation policy, accrued interest and dividend income is evaluated quarterly for collectability. When we do not expect the debtor to be able to service all of its debt or other obligations, we will generally establish a reserve against interest income receivable, thereby placing the loan or debt security on non-accrual status, and cease to recognize interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security’s status significantly improves regarding the portfolio company's ability to service debt or other obligations, it will be restored to accrual basis. As of DecemberJune 31,30, 2025,2026, investments on non-accrual status represented approximately 1.5%1.1% of our total investment portfolio's fair value and approximately 3.2%2.9% of its cost. As of March 31, 2025,2026, investments on non-accrual status represented approximately 1.7%1.1% of our total investment portfolio's fair value and approximately 3.5%2.4% of its cost.

The total fair value of our investment portfolio was $2,013.2$2,202.3 million as of DecemberJune 31,30, 2025,2026, as compared to $1,785.3$2,097.4 million as of March 31, 2025.2026. As of DecemberJune 31,30, 2025,2026, we had investments in 132141 portfolio companies with an aggregate cost of $2,031.2$2,234.6 million. As of March 31, 2025,2026, we had investments in 121131 portfolio companies with an aggregate cost of $1,779.4$2,119.5 million. The following table presents certain additional selected information regarding our debt investments as of DecemberJune 31,30, 20252026 and March 31, 20252026 (dollars in millions):

The following tablestable provideprovides a summary of our investments in portfolio companies as of DecemberJune 31,30, 20252026 and March 31, 20252026:

(a)At DecemberJune 31,30, 20252026 and March 31, 2025,2026, we had equity ownership in approximately 65.9%67.4% and 65.3%,66.4%, respectively, of our portfolio companies.

(b)The weighted average annual effective yield of debt investments is not the same as a return on investment for CSWC's shareholders, but rather relates to CSWC's investment portfolio and is calculated before the payment of all of CSWC's and subsidiaries' fees and expenses. The weighted average annual effective yields were computed using the effective interest rates during the quarter for all debt investments at cost as of DecemberJune 31,30, 20252026 and March 31, 2025,2026, respectively, including accretion of original issue discount but excluding fees payable upon repayment of the debt instruments. As of DecemberJune 31,30, 2025,2026, investments on non-accrual status represented approximately 1.5%1.1% of our total investment portfolio's fair value and approximately 3.2%2.9% of its cost. As of March 31, 2025,2026, investments on non-accrual status represented approximately 1.7%1.1% of our total investment portfolio's fair value and approximately 3.5%2.4% of its cost. Weighted average annual effective yield is not a return to shareholders and is higher than what an investor in shares in our common stock will realize on its investment because it does not reflect our expenses or any sales load paid by an investor.

(d)Includes CSWC debt investments only. Weighted average EBITDA metric is calculated using investment cost basis weighting. As of DecemberJune 31,30, 2025,2026, 1413 portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful. As of March 31, 2025,2026, 1210 portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful.

(e)Includes CSWC debt investments only. Calculated as the amount of each portfolio company’s debt (including CSWC’s position and debt senior or pari passu to CSWC’s position, but excluding debt subordinated to CSWC’s position) in the capital structure divided by each portfolio company’s adjusted EBITDA. Weighted average leverage is calculated using investment cost basis weighting. Management uses this metric as a guide to evaluate relative risk of its position in each portfolio debt investment. As of DecemberJune 31,30, 2025,2026, 1413 portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful. As of March 31, 2025,2026, 1210 portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful.

We continue to observe certain macro-economic risks and uncertainties, including those relating to commodity inflation and elements of geopolitical instability (including the conflictsongoing conflict between Russia and Ukraine and the ongoing turmoil and political unrest in Europe and the Middle East and U.S.South and China relationsAmerica). Changes to trade policies, including the imposition of new tariffs, could disrupt supply chains and may negatively impact the financial condition of certain of our portfolio companies as well as the macro-economicmacroeconomic environment. In the event that the U.S. economy enters into a protracted recession, it is possible that the results of certain U.S. middle marketLMM companies could experience deterioration. We are closely monitoring the effect of such market volatility may have on our portfolio companies and our investment activities, and we have also increased oversight of credits in vulnerable industries to mitigate any decline in loan performance and reduce credit risk.

The following table shows the distribution of our debt portfolio investments on the 1 to 5 investment rating scale at fair value as of DecemberJune 31,30, 20252026 and March 31, 20252026:

As of DecemberJune 31,30, 2025,2026, investments on non-accrual status represented approximately 1.5%1.1% of our total investment portfolio's fair value and approximately 3.2%2.9% of its cost. As of March 31, 2025,2026, investments on non-accrual status represented approximately 1.7%1.1% of our total investment portfolio's fair value and approximately 3.5%2.4% of its cost.

During the ninethree months ended DecemberJune 31,30, 2024,2026, we made debt investments totaling $420.3$186.0 million and equity investments totaling $9.1$6.1 million. We also funded $21.0 million on our $50.0 million capital commitment to CapTrin. We received contractual principal repayments totaling approximately $40.8$14.0 million and full prepayments of approximately $131.1$21.0 million. We funded $37.5$21.1 million on revolving loans and received $29.6$18.1 million in repayments on revolving loans. In addition, we received proceeds from sales of debt and equity investments totaling $27.3$71.7 million.million and proceeds of $2.4 million related to the earnout.

Total portfolio investment activity for the ninethree months ended DecemberJune 31,30, 20252026 and 20242025 was as follows (dollars in thousands):

The composite measure of our financial performance in the Consolidated Statements of Operations is captioned “Net increase in net assets from operations” and consists of fourthree elements. The first is “Net investment income,” which is the difference between income from interest, dividends and fees and our combined operating and interest expenses, net of applicable income taxes. The second element is “Net realized gain (loss) gain on investments, net of tax,” which is the difference between the proceeds received from the disposition of portfolio securities and their stated cost. The third element is the “Net unrealized (depreciation) appreciation on investments, net of tax,” which is the net change in the market or fair value of our investment portfolio, compared with the stated cost. The “Net realized gain (loss) gain on investments before income tax” and “Net unrealized (depreciation) appreciation on investments, net of tax” are directly related in that when an appreciated portfolio security is sold to realize a gain, a corresponding decrease in net unrealized appreciation occurs by transferring the gain associated with the transaction from being “unrealized” to being “realized.” Conversely, when a loss is realized on a depreciated portfolio security, an increase in net unrealized appreciation occurs. The fourth element is the “Realized loss on extinguishment of debt”, which, with respect to the full redemption of the January 2026 Notes, the October 2026 Notes and the August 2028 Notes, is the difference between the principal amount due at maturity adjusted for any unamortized debt issuance costs.

Comparison of three months ended DecemberJune 31,30, 20252026 and DecemberJune 31,30, 20242025

Total investment income for the three months ended DecemberJune 31,30, 20252026 was approximately $61.4$61.0 million, a $9.5$5.1 million, or 18.2%,9.1%, increase as compared to the three months ended DecemberJune 31,30, 2024.2025. Investment income primarily consists of interest income, dividend income, fee income and other income for each applicable period.

The following table summarizes the components of investment income for the three months ended DecemberJune 31,30, 20252026 and 20242025 (amounts in thousands):

Interest income (including PIK interest income and amortization of purchase discounts and fees) for the three months ended DecemberJune 31,30, 20252026 totaled $53.4$55.4 million as compared to $46.1$50.4 million for the three months ended DecemberJune 31,30, 2024.2025. The increase was primarily due to a 22.5%20.3% increase in the average monthly cost basis of debt investments held by us from $1,508.0$1,673.8 million to $1,848.0$2,013.6 million year-over-year, partially offset by a decrease in the weighted average yield on debt investments from 12.1%11.8% to 11.3%10.9% year-over-year. Dividend income for the three months ended DecemberJune 31,30, 20252026 increaseddecreased $3.2$2.0 million as compared to the three months ended DecemberJune 31,30, 20242025 due to ana increasedecrease in distributions received from portfolio companies. Fee income for the three months ended DecemberJune 31,30, 20252026 decreasedincreased $0.6$2.1 million as compared to the three months ended DecemberJune 31,30, 20242025 primarily due to aan decreaseincrease in arranger fees and prepaymentother fees received in the current period. Other income for the three months ended December 31, 2025 decreased $0.3 million as compared to the three months ended December 31, 2024 primarily due to a decrease in interest income on cash balances held.

For the three months ended DecemberJune 31,30, 2025,2026, our total interest expense was $18.0$18.5 million, an increase of $3.3$3.2 million, as compared to the total interest expense of $14.7$15.3 million for the three months ended DecemberJune 31,30, 2024.2025. The increase was primarily attributable to an increase of $196.2$216.1 million in average borrowings outstanding and an increase in the weighted average interest rate on our total debt outstanding from 5.49%5.46% to 5.65%5.53% for the three months ended DecemberJune 31,30, 20242025 and DecemberJune 31,30, 2025,2026, respectively. This increase in the weighted average interest rate on our total debt was primarily due to the issuance of the September 2030 Notes, partially offset by the decrease in the weighted average interest rate on our Credit Facilities and the redemption of the October 2026 Notes.Facilities.

For the three months ended DecemberJune 31,30, 2025,2026, our total employee compensation expense (including both cash and share-based compensation) increaseddecreased by $1.9$1.0 million, or 49.1%,18.7%, as compared to the total employee compensation expense for the three months ended DecemberJune 31,30, 2024.2025. The increasedecrease was primarily due to an increasedecrease in accrued bonus compensation based on the Company's projected performance compared to its plan, partially offset by a decrease in share-based compensation due to a lower fair value on current year restricted stock award grants.plan. For the three months ended DecemberJune 31,30, 2025,2026, our total general and administrative expense increased by $0.3$0.6 million, or 9.9%,19.7%, as compared to the total general and administrative expense for the three months ended DecemberJune 31,30, 2024.2025. The increase was primarily due to an increase in legal fees, as well as individually immaterial increases across several general operating expenses.

For the three months ended DecemberJune 31,30, 2025,2026, income before taxes increased by $3.9$2.3 million, or 12.9%.6.9%. Net investment income increased from the prior year period by $6.7$3.8 million, or 22.0%,11.9%, to $37.0$35.7 million as a result of a $9.5$5.1 million increase in total investment income and a $2.7$1.5 million decrease in income tax provision, partially offset by a $3.3$3.2 million increase in interest expense.

The following table provides a summary of the primary components of the total net realized loss on investments of $12.8$0.6 million for the three months ended DecemberJune 31,30, 20242026 (amounts in thousands):

The following table provides a summary of the total net unrealized depreciation on investments of $0.8$10.4 million for the three months ended DecemberJune 31,30, 20242026 (amounts in thousands):