Overview

OFS Capital Corporation and Subsidiaries (the “Company”) is a business development company that primarily invests in debt and equity investments in middle-market companies in the United States. The key highlights from the financial report are:

• The Company’s net asset value (NAV) per common share increased from $8.16 at March 31, 2026 to $8.41 at June 30, 2026, due to a net gain on investments of $0.34 per common share, partially offset by the quarterly distribution of $0.17 per common share exceeding the quarterly net investment income of $0.08 per common share.

• Total investment income decreased from $8.9 million in the prior quarter to $6.8 million in the current quarter, primarily due to a decrease in interest and dividend income.

• The Company’s total outstanding debt decreased from $202.5 million at March 31, 2026 to $185.8 million at June 30, 2026, due to net paydowns on its revolving credit facilities. The weighted-average debt interest costs remained stable at 7.41%.

• The Company recognized a net gain on investments of $4.6 million in the current quarter, due to net unrealized appreciation, net of taxes, of $10.6 million, partially offset by a net realized loss of $6.0 million.

• As of June 30, 2026, the Company had non-accrual loans with an aggregate fair value of $21.4 million, or 7.2% of its total investments at fair value.

• The Company’s asset coverage ratio was 161% as of June 30, 2026, exceeding the minimum asset coverage requirement of 150% under the 1940 Act.

Revenue and Profit Trends

The Company’s total investment income decreased from $8.9 million in the prior quarter to $6.8 million in the current quarter, primarily due to a decrease in interest and dividend income. This was driven by a smaller average debt investment portfolio, the placement of loans to a portfolio company on non-accrual status, and a decrease in the effective yields on the Company’s Structured Finance Securities.

Net investment income decreased from $2.5 million in the prior quarter to $1.0 million in the current quarter, primarily due to the decrease in total investment income. The Company’s net gain on investments of $4.6 million in the current quarter, compared to a net loss of $13.9 million in the prior quarter, was due to net unrealized appreciation, net of taxes, of $10.6 million, partially offset by a net realized loss of $6.0 million.

Strengths and Weaknesses

Strengths:

• Diversified portfolio of debt and equity investments in middle-market companies
• Stable weighted-average debt interest costs
• Compliance with asset coverage requirements under the 1940 Act

Weaknesses:

• Decrease in total investment income due to smaller average debt investment portfolio and lower yields
• Increase in non-accrual loans, representing 7.2% of total investments at fair value
• Reliance on debt financing, which can be subject to market conditions and covenants

Outlook

The Company’s future performance will depend on its ability to maintain a stable investment portfolio, manage its debt levels, and generate consistent investment income. The Company’s access to capital and its ability to deploy capital into new investments will be key factors in its future growth and profitability. Continued market volatility and economic uncertainty could also impact the Company’s investment performance and valuation of its portfolio.

Overall, the Company appears to be navigating the current market environment reasonably well, but will need to closely monitor its portfolio and liquidity position to address any potential challenges that may arise.