Here are 1-2 brief analogies to describe Capital Southwest (CSWC):

• Like a REIT, but instead of real estate, it invests in loans and equity of private, middle-market companies.
• A specialized commercial bank that exclusively lends to and invests in private, mid-sized businesses.

• First Lien Debt: Loans that hold the senior-most position in a company's capital structure, providing the highest security for Capital Southwest.
• Unitranche Debt: A blend of senior and subordinated debt into a single debt instrument, simplifying the capital structure for borrower companies.
• Second Lien Debt: Debt that is secured by a company's assets but is subordinated to first lien debt, offering higher yields but also higher risk.
• Equity Investments: Minority equity stakes, such as warrants or preferred stock, often acquired in conjunction with debt financing to participate in portfolio companies' growth.

Capital Southwest (CSWC) is a Business Development Company (BDC) that specializes in providing flexible financing solutions, including senior debt, unitranche debt, and equity co-investments, to **privately held middle-market companies** across a wide range of industries.

Given this business model, CSWC's "customers" are the numerous companies within its investment portfolio that receive capital from CSWC. Due to the highly diversified nature of their portfolio and their strategy of mitigating risk across many investments, CSWC does not typically have "major customers" in the traditional sense, where a small number of entities represent a dominant or significant portion of their revenue.

The companies that receive financing from CSWC are predominantly private, middle-market entities and are not publicly traded. Therefore, it is not possible to list specific named major customer companies with symbols, as their business model does not involve a concentrated customer base of publicly disclosed major clients.

• KeyCorp (KEY)
• Truist Financial Corporation (TFC)
• Citizens Financial Group, Inc. (CFG)
• Comerica Incorporated (CMA)
• Synovus Financial Corp. (SNV)
• Capital One Financial Corporation (COF)
• Hancock Whitney Corporation (HWC)
• Bank of America Corporation (BAC)
• JPMorgan Chase & Co. (JPM)
• Wells Fargo & Company (WFC)
• Raymond James Financial, Inc. (RJF)
• U.S. Bancorp (USB)
• Fifth Third Bancorp (FITB)
• Huntington Bancshares Incorporated (HBAN)
• M&T Bank Corporation (MTB)
• KPMG LLP

Michael S. Sarner, President and Chief Executive Officer

Michael S. Sarner was appointed President and Chief Executive Officer of Capital Southwest in February 2025. He joined Capital Southwest in 2015 and previously held the roles of Chief Financial Officer, Chief Compliance Officer, and Secretary for the company. Mr. Sarner has been instrumental in the planning and execution of Capital Southwest's corporate and capitalization strategy, helping to raise over $2 billion in both debt and equity. He has over 30 years of financial and business development company (BDC) experience. Prior to joining Capital Southwest, he spent 15 years at American Capital, Ltd., a publicly traded alternative asset manager, in various financial roles, including Executive Vice President and Treasurer. He also served on American Capital's debt capital markets, treasury, and financial planning and analysis initiatives. Mr. Sarner holds a BBA in Accounting from James Madison University and an MBA in Finance from George Washington University's School of Business and Public Management.

Chris Rehberger, Chief Financial Officer, Treasurer and Secretary

Chris Rehberger was promoted to Chief Financial Officer, Treasurer, and Secretary of Capital Southwest in February 2025. He joined the company in 2015 and has 20 years of experience in corporate finance within the BDC sector. Before Capital Southwest, Mr. Rehberger spent 10 years in corporate finance roles at American Capital, where he worked alongside Michael Sarner. He earned a bachelor's in commerce with a concentration in finance from the McIntire School and a master's from the Darden School of Business, both from the University of Virginia.

Joshua S. Weinstein, Chief Investment Officer, Senior Managing Director

Joshua S. Weinstein serves as the Chief Investment Officer and Senior Managing Director at Capital Southwest, a position he was appointed to in 2024.

Tabitha Geiger, Chief Compliance Officer

Tabitha Geiger was promoted to Chief Compliance Officer of Capital Southwest in February 2025. She brings nearly a decade of experience in compliance, including eight years in compliance consulting with IQ-EQ, where she was responsible for implementing and overseeing compliance programs for private equity, venture capital, and hedge fund managers.

Amy Baker, Executive Vice President, Accounting

Amy Baker holds the title of Executive Vice President, Accounting at Capital Southwest, and has also served as Controller.

The key risks to Capital Southwest (CSWC) are:

1. Credit Risk from Lower Middle-Market Investments: Capital Southwest's investment portfolio is heavily exposed to lower middle-market companies, which inherently carries higher risk compared to investments in larger, more established firms. Economic downturns or sector-specific challenges could lead to increased defaults or reduced valuations within the portfolio, directly impacting the company's Net Asset Value (NAV) and dividend sustainability.

2. Interest Rate Fluctuations: As a Business Development Company (BDC), a significant portion of CSWC's income is derived from interest on its investments. Lower base rates are anticipated to present headwinds for CSWC's earnings by compressing net interest margins, potentially leading to reduced Net Investment Income. Conversely, a significant increase in market interest rates could increase CSWC's cost of capital, making it more expensive to finance investments and potentially decreasing the value of any fixed-interest rate investments it holds.

3. Market Volatility and Economic Downturns: General market volatility and broader economic downturns pose a persistent threat to CSWC's business. Such conditions can impact the valuation of CSWC's investments, the financial performance of its portfolio companies, and its ability to realize gains. These fluctuations can necessitate adjustments to its investment strategy and affect its overall returns.

The prolonged "higher for longer" interest rate environment is a clear emerging threat. While BDCs like Capital Southwest can benefit from floating-rate assets in a rising rate environment, a sustained period of elevated interest rates significantly increases the debt servicing burden for their lower-middle-market portfolio companies. This can lead to deteriorating credit quality, increased default rates, reduced capacity for growth or reinvestment, and difficulties in refinancing existing debt for these underlying businesses. The full impact of this sustained pressure is still unfolding and could worsen, posing a material risk to CSWC's investment portfolio performance and future income.

Capital Southwest (CSWC) is a Business Development Company (BDC) that primarily offers debt and equity financing solutions to lower middle market and middle market companies within the United States. The company focuses on providing first-lien senior secured debt investments. These target companies typically have earnings before interest, taxes, depreciation, and amortization (EBITDA) ranging from $3 million to $20 million and enterprise values between $10 million and $100 million.

The addressable market for Capital Southwest's main products and services can be understood through the U.S. private credit and middle market lending landscape:

• The U.S. private credit market is estimated to be between $1.5 trillion and $2.1 trillion. Other estimates place the global private credit market at $3 trillion, with the U.S. accounting for approximately $1.1 trillion of that in 2024. This market is projected to reach US$3.5 trillion by 2028 globally.
• The U.S. middle market comprises approximately 300,000 mid-sized businesses, generating $13 trillion in annual revenue and employing over 40 million people. Within this, the lower middle market, which Capital Southwest specifically targets, consists of companies with annual revenues between $5 million and $50 million, representing over 90% of all middle market companies.
• Total syndicated middle market loan volume in the U.S. reached $159.6 billion in 2024, with institutional middle market volume hitting $24 billion.

Capital Southwest (CSWC) is expected to drive future revenue growth over the next 2-3 years through several key initiatives and market dynamics:

1. Growth in Credit Portfolio and Origination Activity: Capital Southwest has consistently demonstrated robust origination activity and growth in its credit portfolio. In the third quarter of calendar year 2025, the company reported approximately $245 million of originations across seven new and ten existing portfolio companies. The on-balance sheet credit portfolio grew to $1.7 billion as of Q2 fiscal year 2026, marking a 24% year-over-year increase from September 2024. Management anticipates continued increased origination activity and a strong pipeline, projecting over $150 million in originations. Analysts forecast a 5.1% revenue improvement in 2026, reaching approximately US$228.2 million, driven by this expanded lending footprint.
2. Increased Investment Income from Debt Investments: The company's strategy of deploying capital into debt investments with attractive yields is a significant revenue driver. For the first fiscal quarter of 2026, the weighted average yield on its debt investments stood at 11.8%. Total investment income has shown sequential growth, increasing to $55.9 million in Q1 fiscal year 2026 from $52.4 million, largely due to higher cash interest and dividend income. This trend continued into Q2 fiscal year 2026, with total investment income rising to $56.9 million from $55.9 million, primarily boosted by an increase in fees and other income.
3. Expanded Capital Access and Diversified Funding Sources: Capital Southwest has strategically enhanced its capital access, which supports its investment capacity. The company received final approval for a second Small Business Investment Company (SBIC) license, providing access to an additional $175 million in debentures. Furthermore, CSWC successfully raised $350 million through an inaugural unsecured bond transaction at 5.950% and continued to efficiently raise approximately $40 million in equity capital via its At-The-Market (ATM) program. These diversified funding sources provide the necessary capital to fuel portfolio growth.
4. Realized Gains from Equity Exits: Monetizing equity investments in its portfolio companies contributes significantly to the company's undistributed taxable income (UTI) and potential future distributions, indirectly supporting revenue growth through capital recycling. In Q1 fiscal year 2026, Capital Southwest generated $27.2 million in realized gains from two equity exits. Over the 12 months leading up to Q2 fiscal year 2026, the company harvested $44.8 million in realized gains from equity exits. Management anticipates further harvesting of unrealized appreciation from its equity portfolio in fiscal year 2026.