Financial Data and Key Metrics Changes - For Q1 2021, the company reported GAAP net investment income of $0.26 per share, covering the dividend of $0.25 per share, with core net investment income at $0.28 per share [6][10] - Net asset value per share remained stable at $14.03 [6] - The investment portfolio at fair value increased to $714.5 million from $653 million at year-end, with a growth of approximately $60 million for the quarter [10][12] Business Line Data and Key Metrics Changes - The company funded $93 million in new investments during the quarter, with $33.6 million in repayments, resulting in a net increase in the portfolio [10] - The portfolio is heavily weighted towards secured lending, with 95% of loans secured and 93% at floating rates [11] - 86% of the loan portfolio consists of first lien or unit tranche loans, indicating a focus on lower-risk investments [11] Market Data and Key Metrics Changes - The company has identified potential fundings of approximately $75 million that could be executed by the end of the current quarter [13] - The company continues to see an increase in investment opportunities, with a solid pipeline of actionable investments [13] Company Strategy and Development Direction - The company has maintained a stable asset quality rating, with 17% of the portfolio rated ahead of plan and only 8% rated below plan [12] - The investment strategy focuses on maintaining a high percentage of first lien investments, which is expected to remain the norm moving forward [40][42] - The company is leveraging its SBIC licenses to draw low-cost debentures, enhancing its capital structure [7][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of asset quality and the ability to cover dividends, indicating a positive outlook for the upcoming quarters [5][6] - The company anticipates a robust second quarter, driven by increased activity and a strong pipeline of investments [32][34] Other Important Information - Since its IPO in November 2012, the company has invested approximately $1.7 billion across over 135 companies, with a total of $164 million in dividends paid to investors [9] - The company completed a $100 million institutional bond offering to refinance existing debt and strengthen its balance sheet [6][10] Q&A Session Summary Question: What will the company do with excess cash in the second quarter? - Management indicated that most of the cash will be reinvested through SBIC licenses, with expectations to fully invest by June 30 [20] Question: What is the outlook for Grupo HIMA, which has non-accrual investments? - Management acknowledged the troubled situation with Grupo HIMA but noted that it represents a small position in the overall portfolio [22] Question: Is the non-accrual status of a commercializing company due to COVID-related issues? - Management clarified that the non-accrual status is more related to structural issues rather than COVID, and they expect to resolve it positively [28] Question: How has the portfolio construction changed over the years? - Management confirmed that the current focus on first lien debt investments is part of their long-term strategy and is not expected to change significantly [40][42] Question: What are the company's targets for leverage post-COVID? - Management reiterated targets of one-to-one regulatory leverage and up to two-to-one total leverage, with potential for slight increases due to the nature of the portfolio [44]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-35730 STELLUS CAPITAL INVESTMENT CORPORATION (Exact Name of Registrant as Specified in Its Charter) Maryland 46-0937320 (State or other Jurisdiction of Incorporati ...

Financial Data and Key Metrics Changes - The net asset value per share increased by $0.86 during the fourth quarter, rising from $13.17 to $14.03, attributed to the early declaration of the fourth quarter dividend and net appreciation on the investment portfolio [12] - The company reported a net realized loss of $7.7 million, primarily related to one investment, offset by unrealized gains of $19.6 million during the quarter [13] - The company’s liquidity and capital position improved significantly, with an increase in the bank facility by $10 million to $230 million and an institutional bond offering of $100 million completed in January 2021 [14][15] Business Line Data and Key Metrics Changes - The investment portfolio at fair value was $653 million across 66 portfolio companies, up from $629 million across 63 companies a year ago [20] - The company invested $152 million in 10 new and 20 existing portfolio companies during 2020, receiving $129 million in repayments, resulting in a net portfolio growth at cost of about $23 million for the year [20] Market Data and Key Metrics Changes - The company maintained a diversified portfolio, with the largest industry sector accounting for 17% of the total, and 97% of loans were secured while 93% were priced at floating rates [21][22] - The asset quality remained stable, with a rating of 2.0 on the investment rating system, and only 1% of the total loan portfolio was marked as non-accrual [23] Company Strategy and Development Direction - The company’s strategy includes investing in the equity of portfolio companies modestly to generate realized gains sufficient to offset losses over time [24] - The company aims to grow its portfolio to approximately $800 million by the end of the year, with a focus on SBIC financings [42] Management's Comments on Operating Environment and Future Outlook - Management noted an increase in investment opportunities, with $158 million invested on a cost basis in the first quarter of 2021 [9] - The investment philosophy remains unchanged, focusing on companies that can survive economic downturns, with a preference for businesses with low maintenance capital expenditures [57] Other Important Information - The company has reduced unfunded commitments from $37.5 million at the beginning of the year to $24.2 million [15] - The company continues to commit equity capital to its second SBIC subsidiary, allowing for low-cost debentures [16] Q&A Session Summary Question: Status of a previously non-accrual loan - Management confirmed that a preferred equity position has been written up and the loan amount has gone back on accrual [31][32] Question: Future debt offerings and leverage ratios - Management indicated that while the bond offering was attractive, the current mix of fixed and floating rate liabilities is deemed appropriate, with potential for modest additional bond offerings if yields decrease [33][35] Question: Pipeline of investment opportunities - Management stated that the pipeline is consistent, with expectations for continued opportunities and a significant portion of new investments qualifying for SBIC financing [39][40] Question: Quality of deals and leverage trends - Management noted that most deals are first lien unitranche, with leverage ratios remaining stable and covenants in place [45][47] Question: Breakdown of unrealized gains - Management provided a breakdown indicating that approximately $10 million of unrealized gains were due to reversals of previous losses, with the remainder primarily from equity portfolio gains [52][54] Question: Changes in investment philosophy post-COVID - Management confirmed that the investment philosophy has not changed, focusing on companies that can withstand downturns, while noting an increase in SBIC-qualifying investments [57][60]

TABLE OF CONTENTS UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-35730 STELLUS CAPITAL INVESTMENT CORPORATION (Exact name of registrant as specified in its charter) Maryland 46-0937320 (State or other jurisdiction of incorpora ...

Financial Data and Key Metrics Changes - The company generated net investment income of $0.27 per share, exceeding the regular distribution of $0.25 per share for Q3 2020 [10] - Core net investment income, including taxes, was reported at $0.29 per share [10] - Total earnings for the quarter amounted to $0.39 per share, with a net asset value (NAV) decline to $13.17 per share at the end of the quarter [11][13] Business Line Data and Key Metrics Changes - The portfolio valuation increased by approximately $2.1 million, or $0.11 per share, with realized gains contributing an additional $0.01 per share [11] - Non-accrual loans represented only 1.5% of the total loan portfolio's fair value, with no new loans added to non-accrual status since April 1 [17] - The investment portfolio at fair value decreased to $622.4 million across 66 portfolio companies, down from $641 million at the end of Q2 2020 [18] Market Data and Key Metrics Changes - The company noted that 90% of its portfolio is rated at two or better on a one-to-five investment rating system, indicating stable asset quality [16] - The largest industry sector represented 18% of the total portfolio at fair value, with an average investment per company of about $9.4 million [17] Company Strategy and Development Direction - The company is focusing on investing in first lien unitranche debt and is unlikely to participate in mezzanine financing, indicating a strategic shift towards safer investments [35] - The company plans to utilize both cash in SBIC 1 and debentures in SBIC 2 to fund new investments, reflecting a proactive approach to capital management [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the portfolio and noted that most portfolio companies are managing well in the current environment [15] - The company anticipates new investments in Q4 2020 to at least match the amount of repayments and equity realizations, potentially reaching $30 million [21] - Management highlighted a robust pipeline of over 10 companies under consideration, indicating a return to pre-COVID levels of activity [45][55] Other Important Information - The company declared a regular dividend of $0.25 per share and a special dividend of $0.06 per share for Q4 2020, totaling $1.15 per share for the year [22] - The company has extended the revolving period of its $230 million bank facility to September 2024, enhancing its liquidity position [19] Q&A Session Summary Question: What is the current cash position in SBIC and plans for debentures? - The company has approximately $25 million in cash in SBIC 1 and plans to use this along with debentures from SBIC 2 for new investments [26] Question: Thoughts on the redemption of 2022 baby bonds? - The company has $49 million of unsecured notes maturing in September 2022 and is considering a new fixed income offering to address this requirement [29][30] Question: Trends in portfolio favoring first lien debt? - The company has been shifting towards first lien debt over the past 2-2.5 years and expects this trend to continue [35] Question: Drivers of stable interest income despite lower investment volumes? - The stability in interest income is attributed to fee income from payoffs during the quarter [37] Question: Insights on market activity and deal quality? - The company is seeing strong activity in business-to-business sectors and technology-related companies, with a robust pipeline of quality transactions [44][46] Question: Anticipated changes in investment philosophy? - The company remains selective in its investments, focusing on companies that can withstand economic downturns, while also being cautious about the impact of COVID-19 on performance [58][62]

Stellus Capital Investment Corporation (NYSE:SCM) Q2 2020 Earnings Conference Call July 31, 2020 11:00 AM ET Company Participants Robert Ladd – President and Chief Executive Officer Todd Huskinson – Chief Financial Officer Conference Call Participants Ryan Lynch – KBW Bryce Rowe – National Securities Christopher Nolan – Ladenburg Thalmann Robert Dodd – Raymond James Operator Good morning, ladies and gentlemen, and thank you for standing by. At this time, I would like to welcome everyone to the Stellus Capit ...

Stellus Capital Investment Corporation (NYSE:SCM) Q1 2020 Results Earnings Conference Call May 12, 2020 11:00 AM ET Company Participants Robert Ladd - Chief Executive Officer Todd Huskinson - Chief Financial Officer Conference Call Participants Christopher Nolan - Ladenburg Thalmann Bryce Rowe - National Securities Paul Johnson - KBW Matt Tjaden - Raymond James David Miyazaki - Confluence Investment Management Kevin Tripp - Oppenheimer & Company Operator Good morning ladies and gentlemen and thank you for s ...

Financial Data and Key Metrics Changes - For fiscal year 2019, the company reported realized income of $2.30 per share, covering the dividend of $1.36 per share, which included net realized gains of $19.6 million or $1.07 per share [8] - Core net investment income was $1.32 per share, while GAAP net investment income was $1.23 per share [9] - Net asset value increased from $224.8 million to $270.6 million, primarily due to an equity offering, with a per share increase from $14.09 to $14.14 [11] Business Line Data and Key Metrics Changes - The investment portfolio at fair value was approximately $629 million across 63 portfolio companies, up from $505 million across 57 companies at the end of 2018 [17] - During 2019, the company invested $251 million in 17 new and 12 existing portfolio companies, with repayments of approximately $128 million, resulting in net portfolio growth of about $124 million [17] - 96% of loans were secured, and 93% were priced at floating rates, indicating a focus on secured lending [18] Market Data and Key Metrics Changes - The 90-day LIBOR rate decreased from 195 basis points at December 31 to about 1.24% recently, impacting the pricing of loans [22] - The company has been structuring loans with LIBOR floors, averaging around 1%, to mitigate the impact of falling rates [22][30] Company Strategy and Development Direction - The strategy includes modest investments in the equity of portfolio companies to generate realized gains sufficient to offset losses over time [20] - The company aims to maintain a cautious approach in investing, particularly in light of potential economic impacts from the coronavirus [44] Management's Comments on Operating Environment and Future Outlook - Management noted that while there has been limited impact from sourcing from China, the long-term effects of COVID-19 are being closely monitored [23] - The company expects to generate an additional $4 million of realized gains for the year, following $1.3 million received since year-end [24] Other Important Information - The company has two loans in non-accrual status, comprising just under 1% of the fair value of the loan portfolio, indicating stable asset quality [19] - The company has paid over $141 million in dividends since its IPO, representing $10 per share to investors [16] Q&A Session Summary Question: Impact of China sourcing supply chain - Management indicated limited direct exposure to China among portfolio companies, but potential broader impacts on the U.S. economy are being evaluated [27][29] Question: LIBOR floor issue - Most loans have LIBOR floors, with less than 5% having no floors, and recent structuring has included higher floors to maintain yield [30][32] Question: Markdowns in the fourth quarter - Management noted technological changes in the security monitoring business affecting incumbent companies, but did not comment on specific portfolio companies [34] Question: Leverage expectations - The targeted regulatory leverage is aimed at one-to-one, with potential adjustments based on economic conditions and bank support [41][54] Question: Monitoring portfolio companies amid COVID-19 - The investment teams maintain constant contact with portfolio companies to assess real-time impacts and will provide more information in the next quarterly call [57][59]

Financial Data and Key Metrics Changes - The company reported realized income of $0.63 per share, including gains of $0.33 per share, exceeding the dividend of $0.34 per share by $0.29 [8] - Total realized income to date, including $19.1 million of realized gains, is $1.92 per share, surpassing distributions of $1.02 per share for the same period, representing an annualized return on equity of 12.4% for the third quarter and 12.7% year to date [9] - Net asset value increased by $2.1 million over the quarter, or $0.11 per share, from $14.29 to $14.40 per share, primarily due to realized gains [10] Business Line Data and Key Metrics Changes - The portfolio ended the quarter with a fair value of $586.4 million across 61 portfolio companies, a $55 million increase over the second quarter [12] - The portfolio is weighted toward first lien and unitranche loans, now comprising 73% of the total portfolio, which is expected to result in stronger asset quality over time [13] - Non-accrual loans decreased to just three portfolio companies, comprising 2.3% of the fair value of the total portfolio, down from four loans and 4.8% in the prior quarter [15] Market Data and Key Metrics Changes - The yield on the debt portfolio decreased from 10.9% to 9.4% during 2019, driven by a lower LIBOR rate and a continued rotation towards first lien and unitranche loans [17] - The portfolio size increased to approximately $630 million, up $42 million since quarter end [18] Company Strategy and Development Direction - The company received its second SBIC license in August, allowing access to up to $175 million of SBA debentures, which are a long-term low-cost source of capital [16] - The company expects modest growth for the balance of the quarter, with earnings for the fourth quarter not expected to fully cover the dividend from GAAP NII due to lower yields and current leverage levels [18] Management's Comments on Operating Environment and Future Outlook - Management indicated that while they expect to cover the dividend gap from additional realized gains, they do not expect to fully cover it from GAAP NII in the fourth quarter [18] - The company anticipates that it will take a couple of years to fully deploy the SBIC debentures, with a goal of exceeding a $700 million portfolio size to cover dividends from a GAAP NII basis [49] Other Important Information - The company noted that the average investment per company is $9.6 million, with the largest investment at $21.2 million at fair value [13] - The company has been operating at a regulatory leverage of about 0.68 to 0.7 to 1, implying a need for a portfolio in excess of $700 million to achieve a 1 to 1 regulatory leverage [49] Q&A Session Summary Question: Performance of furniture factory outlet portfolio company - Management refrained from discussing specific private companies but acknowledged a slight markdown in the first lien piece while the smaller sub-debt pieces were marked at zero [25] Question: Average cost range of SBA debentures - The current environment suggests that the average cost of debentures drawn down is around 3% to 4% [27] Question: Tax expense recorded this quarter - The tax expense of approximately $350,000 is related to excise tax accrued during the year [29] Question: Percentage of deal flow that is SBIC compliant - Approximately 50% of the company's activity has historically qualified for SBIC compliance, with a realistic deployment timeline of about 18 months to a couple of years [36] Question: Update on Grupo Hima portfolio company - The reduction in the mark for Grupo Hima was to reflect new information, with management indicating that the first lien should ultimately be worth full value [45] Question: Portfolio size needed to cover dividends from GAAP NII - A portfolio in excess of $700 million is needed to achieve a 1 to 1 regulatory leverage, with a combination of lower cost SBIC debentures and bank facilities expected to improve the position [49] Question: Expectations for realized gains in 2020 - Management expects realized gains to be lower in 2020 compared to the current year, potentially around half as much, but still anticipates additional realized gains from newer equity positions [52]

Stellus Capital Investment (NYSE:SCM) Q2 2019 Earnings Conference Call August 9, 2019 11:00 AM ET Company Participants Todd Huskinson - Chief Financial Officer Robert Ladd - Chief Executive Officer Conference Call Participants Robert Dodd - Raymond James Christopher Nolan - Ladenburg Thalmann Ryan Lynch - KBW Chris Kotowski - Oppenheimer & Company Operator Good morning, ladies and gentlemen and thank you for standing by. At this time, I would like to welcome everyone to Stellus Capital Investment Corporatio ...