cswc-20221031
0000017313FALSE00000173132022-10-312022-10-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported):  October 31, 2022

CAPITAL SOUTHWEST CORPORATION
(Exact Name Of Registrant As Specified In Charter)
Texas814-0006175-1072796
(State or Other Jurisdiction of Incorporation)(Commission File Number)(IRS Employer Identification No.)

8333 Douglas Avenue, Suite 1100
Dallas, Texas 75225
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (214) 238-5700
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.25 par value per shareCSWCThe Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐



Item 2.02  Results of Operations and Financial Condition.

On October 31, 2022, Capital Southwest Corporation (the “Company”) issued a press release, a copy of which has been furnished as Exhibit 99.1 hereto.

The information furnished in this Current Report on Form 8-K under Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the "Securities Act"), except as shall be expressly set forth by reference in a future filing.

Item 7.01  Regulation FD Disclosure.

The Company expects to hold a conference call with analysts and investors on November 1, 2022.  A copy of the investor presentation slides to be used by the Company on such conference call is furnished as Exhibit 99.2 to this Form 8-K and incorporated herein by reference.

The information set forth under this Item 7.01, including Exhibit 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, nor shall it be deemed incorporated by reference into any filing under the Securities Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01  Financial Statements and Exhibits

(d)          Exhibits
Exhibit No.Description




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: October 31, 2022
By:/s/ Bowen S. Diehl
Name: Bowen S. Diehl
Title:   Chief Executive Officer and President





Document
Exhibit 99.1

https://cdn.kscope.io/96079ef48e1ed21460b82a241e5e821e-currentcswca27a.jpg
8333 Douglas Avenue, Suite 1100
Dallas, Texas 75225
T 214.238.5700
F 214.238.5701


Capital Southwest Announces Financial Results for Second Fiscal Quarter Ended September 30, 2022
CSWC Reports Pre-Tax Net Investment Income of $0.54 Per Share for Quarter Ended September 30, 2022
Dallas, Texas – October 31, 2022 – Capital Southwest Corporation (“Capital Southwest,” “CSWC” or the “Company”) (Nasdaq: CSWC), an internally managed business development company focused on providing flexible financing solutions to support the acquisition and growth of middle market businesses, today announced its financial results for the second fiscal quarter ended September 30, 2022.
Second Quarter Fiscal Year 2023 Financial Highlights
Total Investment Portfolio: $1.1 billion
Credit Portfolio of $903.5 million:
94% 1st Lien Senior Secured Debt
$84.9 million in new committed credit investments
Weighted Average Yield on Debt Investments: 10.6%
Current non-accruals with a fair value of $9.4 million, representing 0.9% of the total investment portfolio
Equity Portfolio of $102.6 million, excluding investment in I-45 Senior Loan Fund ("I-45 SLF")
$0.8 million in new equity co-investments
CSWC Investment in I-45 SLF of $50.9 million at fair value
I-45 SLF portfolio of $168.6 million
Portfolio consists of 40 issuers: 95% 1st Lien Debt
$110.0 million of debt outstanding at I-45 SLF as of September 30, 2022
I-45 SLF fund leverage of 1.73x debt to equity at fair value at quarter end
I-45 SLF paid a $2.0 million quarterly dividend to CSWC; an annualized yield of 15.7%
Pre-Tax Net Investment Income: $15.0 million, or $0.54 per weighted average share outstanding
Dividends: Paid $0.50 per share Regular Dividend
106% LTM Pre-Tax NII Regular Dividend Coverage
Undistributed Taxable Income at quarter end estimated at $0.33 per share
Net Realized and Unrealized Depreciation on Investments: $5.0 million
$4.2 million of net appreciation related to the equity portfolio
$8.4 million of net depreciation related to the credit portfolio
$0.8 million of net depreciation related to I-45 SLF



Balance Sheet:
Cash and Cash Equivalents: $30.2 million
Total Net Assets: $475.7 million
Net Asset Value (“NAV”) per Share: $16.53

In commenting on the Company’s results, Bowen Diehl, President and Chief Executive Officer, stated, “Our portfolio continued to perform well this quarter, producing $0.54 of Pre-Tax Net Investment Income. Deal activity remained strong, as we closed new commitments of approximately $86 million during the quarter. On the capitalization front, we continued to programmatically raise equity through our equity ATM program, raising $26.9 million in gross proceeds at 118% of the prevailing NAV per share during the quarter. Over the past nine months, we have raised over $97 million in equity capital and reduced our regulatory leverage from 1.23x to 1.11x as of the current quarter end. Finally, in consideration of the performance of our portfolio, improvements in our operating leverage, and rising market interest rates, the Board of Directors has declared an increase in our regular quarterly dividend to $0.52 per share. Based on the strength of our balance sheet, liquidity position, leverage profile, and the current interest rate environment, we feel confident in our ability to continue to grow Pre-Tax Net Investment Income. In addition, given the excess earnings being generated by the Federal Reserve's aggressive interest rate increases and the resulting excess earnings being generated by our floating rate debt portfolio, our Board of Directors has also declared a supplemental dividend of $0.05 per share for the December quarter. While future dividend declarations are at the discretion of our Board of Directors, it is our intent to distribute supplemental dividends for the foreseeable future while base rates remain materially above long-term historical averages. Future supplemental dividends will also continue to be supported by realizations in our equity co-investment portfolio.”

Second Quarter Fiscal Year Investment Activities
Originations
During the quarter ended September 30, 2022, the Company originated $85.7 million in new commitments, consisting of investments in five new portfolio companies totaling $66.6 million and add-on commitments in five portfolio companies totaling $19.1 million. New portfolio company investment transactions that closed during the quarter ended September 30, 2022 are summarized as follows:
VersiCare Management, LLC, $13.5 million 1st Lien Senior Secured Debt, $5.0 million Delayed Draw Term Loan, $2.5 million Revolving Loan: VersiCare Management provides home and community-based health, human services, and therapy services to individuals with intellectual, developmental, physical and behavioral disabilities and other special needs.
Pipeline Technique Ltd., $10.0 million 1st Lien Senior Secured Debt, $3.3 million Revolving Loan: Pipeline Technique Ltd. is a specialized welding and related energy infrastructure services company that offers services including welding, field joint coating, testing and fabrication services, and design of end-to-end solutions.
Spectrum of Hope, LLC (dba Kids SPOT), $13.1 million 1st Lien Senior Secured Debt: Kids SPOT is a Florida and Texas-based roll up-strategy within the behavioral healthcare space, specifically focused on providing its patients with Applied Behavior Analysis and speech, physical and occupational therapy.
Opco Borrower, LLC (dba Giving Home Health Care), $9.2 million 1st Lien Senior Secured Debt, $3.0 million 2nd Lien Loan with Attached Warrants, $0.8 million Revolving Loan: Giving Home Health Care provides skilled and unskilled home health services to beneficiaries of the Energy Employees Occupational Illness Compensation Program Act.
Gulf Pacific Acquisition, LLC, $3.7 million 1st Lien Senior Secured Debt, $1.0 million Revolving Loan, $1.5 million Delayed Draw Term Loan: Gulf Pacific is a leading producer of healthy and organic rice varietals, rice flour ingredients, beans and spice blends.
Prepayments and Exits
During the quarter ended September 30, 2022, the Company received full prepayments on two debt investments totaling $13.9 million and proceeds from the sale of one debt investment totaling $0.7 million.
Binswanger Holding Corp.: Proceeds of $9.9 million, generating an IRR of 11.4%.



Fast Sandwich, LLC: Proceeds of $3.3 million, generating an IRR of 19.4%.
Dunn Paper, Inc.: Proceeds of $0.7 million, generating an IRR of (5.8)%.

Second Fiscal Quarter 2023 Operating Results
For the quarter ended September 30, 2022, Capital Southwest reported total investment income of $26.8 million, compared to $22.5 million in the prior quarter. The increase in investment income was primarily attributable to an increase in average debt investments outstanding, an increase in the weighted average yield on investments and an increase in dividend income received from I-45 SLF.
For the quarter ended September 30, 2022, total operating expenses (excluding interest expense) were $5.2 million, compared to $4.4 million in the prior quarter. The increase in expenses was primarily attributable to an increase in accrued bonus compensation in the current quarter.
For the quarter ended September 30, 2022, interest expense was $6.6 million as compared to $5.5 million in the prior quarter. The increase was primarily attributable to an increase in average debt outstanding and an increase in the weighted average interest rate on debt.
For the quarter ended September 30, 2022, total pre-tax net investment income was $15.0 million, compared to $12.6 million in the prior quarter.
During the quarter ended September 30, 2022, Capital Southwest recorded total net realized and unrealized losses on investments of $5.0 million, compared to $9.9 million in the prior quarter. For the quarter ended September 30, 2022, this included net realized and unrealized gains on equity investments of $4.2 million, net realized and unrealized losses on debt investments of $8.4 million and net unrealized losses on I-45 SLF of $0.8 million. The net increase in net assets resulting from operations was $9.5 million for the quarter, compared to $2.5 million in the prior quarter.
The Company’s NAV at September 30, 2022 was $16.53 per share, as compared to $16.54 at June 30, 2022. The decrease in NAV per share from the prior quarter is primarily due to net realized losses on investments, partially offset by net unrealized gains on investments and the issuance of common stock at a premium to NAV per share under the Equity ATM Program (as described below).

Liquidity and Capital Resources
At September 30, 2022, Capital Southwest had approximately $30.2 million in unrestricted cash and money market balances, $240.0 million of total debt outstanding on the Credit Facility (as defined below), $138.9 million, net of unamortized debt issuance costs, of the 4.50% Notes due January 2026 outstanding, $146.9 million, net of unamortized debt issuance costs, of the 3.375% Notes due October 2026 and $77.6 million, net of unamortized debt issuance costs, of SBA Debentures (as defined below) outstanding. As of September 30, 2022, Capital Southwest had $139.4 million in available borrowings under the Credit Facility. The regulatory debt to equity ratio at the end of the quarter was 1.11 to 1.
The Company has an "at-the-market" offering (the "Equity ATM Program"), pursuant to which the Company may offer and sell, from time to time through sales agents, shares of its common stock having an aggregate offering price of up to $100,000,000. On May 26, 2021, the Company (i) increased the maximum amount of shares of its common stock to be sold through the Equity ATM Program to $250,000,000 from $100,000,000 and (ii) reduced the commission paid to the sales agents for the Equity ATM Program to 1.5% from 2.0% of the gross sales price of shares of the Company's common stock sold through the sales agents pursuant to the Equity ATM Program on and after May 26, 2021. On August 2, 2022, the Company increased the maximum amount of shares of its common stock to be sold through the Equity ATM Program to $650,000,000 from $250,000,000.
During the quarter ended September 30, 2022, the Company sold 1,381,716 shares of its common stock under the Equity ATM Program at a weighted-average price of $19.48 per share, raising $26.9 million of gross proceeds. Net proceeds were $26.5 million after commissions to the sales agents on shares sold. Cumulative to date, the Company has sold 11,822,228 shares of its common stock under the Equity ATM Program at a weighted-average price of $21.75, raising $257.1 million of gross proceeds. Net proceeds were $252.9 million after commissions to the sales agents on shares sold. As of September 30, 2022, the Company has $392.9 million available under the Equity ATM Program.



In August 2016, CSWC entered into a senior secured credit facility (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Facility”) to provide additional liquidity to support its investment and operational activities. The Credit Facility contains an accordion feature that allows CSWC to increase the total commitments under the Credit Facility up to $400 million from new and existing lenders on the same terms and conditions as the existing commitments. On August 9, 2021, CSWC entered into the Second Amended and Restated Senior Secured Revolving Credit Agreement (the "Credit Agreement"). Prior to the Credit Agreement, (1) borrowings under the Credit Facility accrued interest on a per annum basis at a rate equal to the applicable LIBOR rate plus 2.50% with no LIBOR floor, and (2) the total borrowing capacity was $340 million with commitments from a diversified group of eleven lenders. The Credit Agreement (1) decreased the total borrowing capacity under the Credit Facility to $335 million with commitments from a diversified group of ten lenders, (2) reduced the interest rate on borrowings to LIBOR plus 2.15% with no LIBOR floor and removed conditions related thereto as previously set forth in the Amended and Restated Senior Secured Revolving Credit Agreement, and (3) extended the end of the Credit Facility's revolver period from December 21, 2022 to August 9, 2025 and extended the final maturity from December 21, 2023 to August 9, 2026. The Credit Agreement also modified certain covenants in the Credit Facility, including, among other things, to increase the minimum obligors’ net worth test from $180 million to $200 million. CSWC pays unused commitment fees of 0.50% to 1.00% per annum, based on utilization, on the unused lender commitments under the Credit Facility.
On May 11, 2022, CSWC entered into Amendment No. 2 (the "Amendment") to the Credit Agreement. The Amendment changed the benchmark interest rate from LIBOR to Term SOFR. In addition, on May 11, 2022, CSWC entered into an Incremental Commitment Agreement, pursuant to which the total commitments under the Credit Agreement increased from $335 million to $380 million.
On April 20, 2021, our wholly owned subsidiary, Capital Southwest SBIC I, LP (“SBIC I”), received a license from the SBA to operate as a Small Business Investment Company ("SBIC") under Section 301(c) of the Small Business Investment Act of 1958, as amended. The SBIC license allows SBIC I to obtain leverage by issuing SBA-guaranteed debentures ("SBA Debentures"), subject to the issuance of a leverage commitment by the SBA. SBA debentures are loans issued to an SBIC which 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. Current statutes and regulations permit SBIC I to borrow up to $175 million in SBA Debentures with at least $87.5 million in regulatory capital, subject to SBA approval.
In November 2015, I-45 SLF entered into a senior secured credit facility led by Deutsche Bank. The I-45 credit facility has total commitments outstanding of $150 million from a group of four bank lenders, which is scheduled to mature in March 2026. Borrowings under the I-45 credit facility bear interest at a rate equal to LIBOR plus 2.15%. As of September 30, 2022, I-45 SLF had $110.0 million in borrowings outstanding under its credit facility.

Share Repurchase Program
On July 28, 2021, the Company's board of directors (the "Board") approved a share repurchase program authorizing the Company to repurchase up to $20 million of its outstanding shares of common stock in the open market at certain thresholds below its NAV per share, in accordance with guidelines specified in Rules 10b5-1(c)(1)(i)(B) and 10b-18 under the Securities Exchange Act of 1934. On August 31, 2021, the Company entered into a share repurchase agreement, which became effective immediately, and the Company will cease purchasing its common stock under the share repurchase program upon the earlier of, among other things: (1) the date on which the aggregate purchase price for all shares equals $20 million including, without limitation, all applicable fees, costs and expenses; or (2) upon written notice by the Company to the broker that the share repurchase agreement is terminated. During the quarter ended September 30, 2022, the Company did not repurchase any shares of the Company’s common stock under the share repurchase program.






Regular Dividend of $0.52 Per Share and Supplemental Dividend of $0.05 Per Share for Quarter Ended December 31, 2022

On September 20, 2022, the Board declared a quarterly dividend of $0.52 per share for the quarter ended December 31, 2022. On October 26, 2022, the Board declared a supplemental dividend of $0.05 per share for the quarter ended December 31, 2022.
The Company's dividends will be payable as follows:

Quarterly Dividend

Amount Per Share: $0.52
Ex-Dividend Date: December 14, 2022
Record Date: December 15, 2022
Payment Date: December 30, 2022

Supplemental Dividend

Amount Per Share: $0.05
Ex-Dividend Date: December 14, 2022
Record Date: December 15, 2022
Payment Date: December 30, 2022


When declaring dividends, the Board reviews estimates of taxable income available for distribution, which may differ from net investment income under generally accepted accounting principles. The final determination of taxable income for each year, as well as the tax attributes for dividends in such year, will be made after the close of the tax year.
 
Capital Southwest maintains a dividend reinvestment plan ("DRIP") that provides for the reinvestment of dividends on behalf of its registered stockholders who hold their shares with Capital Southwest’s transfer agent and registrar, American Stock Transfer and Trust Company.  Under the DRIP, if the Company declares a dividend, registered stockholders who have opted into the DRIP by the dividend record date will have their dividend automatically reinvested into additional shares of Capital Southwest common stock. 

Second Quarter 2023 Earnings Results Conference Call and Webcast
Capital Southwest has scheduled a conference call on Tuesday, November 1, 2022, at 11:00 a.m. Eastern Time to discuss the second quarter 2023 financial results. You may access the call by using the Investor Relations section of Capital Southwest's website at www.capitalsouthwest.com, or by using http://edge.media-server.com/mmc/p/gmxd6ax5.
An audio archive of the conference call will also be available on the Investor Relations section of Capital Southwest’s website.
For a more detailed discussion of the financial and other information included in this press release, please refer to the Capital Southwest Form 10-Q for the period ended September 30, 2022 to be filed with the Securities and Exchange Commission and Capital Southwest’s Second Fiscal Quarter 2023 Earnings Presentation to be posted on the Investor Relations section of Capital Southwest’s website at www.capitalsouthwest.com.

About Capital Southwest
Capital Southwest Corporation (Nasdaq: CSWC) is a Dallas, Texas-based, internally managed business development company with approximately $1.1 billion in investments at fair value as of September 30, 2022. Capital Southwest is a middle market lending firm focused on supporting the acquisition and growth of middle market businesses with $5 million to $35 million investments across the capital structure, including first lien, second lien and non-control equity co-investments. As a public company with a permanent capital base, Capital Southwest has the flexibility to be creative in its financing solutions and to invest to support the growth of its portfolio companies over long periods of time.




Forward-Looking Statements
This press release contains historical information and forward-looking statements with respect to the business and investments of Capital Southwest, including, but not limited to, the statements about Capital Southwest's future performance and financial condition, the timing, form and amount of any distributions or supplemental dividends in the future, and our ability to realize gains from our equity investments. Capital Southwest's board of directors has not yet declared any supplemental dividends for subsequent quarters and would only do so, in its sole discretion. No assurance can be provided that any future supplemental dividends will be declared by Capital Southwest's board of directors. Forward-looking statements are statements that are not historical statements and can often be identified by words such as "will," "believe," "expect" and similar expressions and variations or negatives of these words. These statements are based on management's current expectations, assumptions and beliefs. They are not guarantees of future results and are subject to numerous risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement. These risks include risks related to: changes in the markets in which Capital Southwest invests; changes in the financial, capital, and lending markets; changes in the interest rate environment; regulatory changes; tax treatment and general economic and business conditions; our ability to operate our wholly owned subsidiary, SBIC I, as an SBIC; and uncertainties associated with the impact from the COVID-19 pandemic, including its impact on the global and U.S. capital markets and the global and U.S. economy, the length and duration of the COVID-19 outbreak in the United States as well as worldwide and the magnitude of the economic impact of that outbreak; the effect of the COVID-19 pandemic on our business prospects and the operational and financial performance of our portfolio companies, including our ability and their ability to achieve their respective objectives, and the effects of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business.
Readers should not place undue reliance on any forward-looking statements and are encouraged to review Capital Southwest's Annual Report on Form 10-K for the year ended March 31, 2022 and subsequent filings, including the "Risk Factors" sections therein, with the Securities and Exchange Commission for a more complete discussion of the risks and other factors that could affect any forward-looking statements. Except as required by the federal securities laws, Capital Southwest does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changing circumstances or any other reason after the date of this press release.

Investor Relations Contact:
Michael S. Sarner, Chief Financial Officer
214-884-3829



CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(In thousands, except shares and per share data)
September 30,March 31,
20222022
(Unaudited)
Assets
Investments at fair value:
Non-control/Non-affiliate investments (Cost: $835,452 and $721,392, respectively)$859,250 $747,132 
Affiliate investments (Cost: $153,192 and $140,911, respectively)146,784 131,879 
Control investments (Cost: $76,000 and $76,000, respectively)50,897 57,603 
Total investments (Cost: $1,064,644 and $938,303, respectively)1,056,931 936,614 
Cash and cash equivalents30,238 11,431 
Receivables:
Dividends and interest14,686 12,106 
Escrow363 1,344 
Other893 2,238 
Income tax receivable158 158 
Debt issuance costs (net of accumulated amortization of $5,090 and $4,573, respectively)4,044 4,038 
Other assets5,858 6,028 
Total assets$1,113,171 $973,957 
Liabilities
SBA Debentures (Par value: $80,000 and $40,000, respectively)$77,553 $38,352 
January 2026 Notes (Par value: $140,000 and $140,000, respectively)138,883 138,714 
October 2026 Notes (Par value: $150,000 and $150,000, respectively)146,893 146,522 
Credit facility240,000 205,000 
Other liabilities22,434 14,808 
Accrued restoration plan liability2,628 2,707 
Income tax payable258 1,240 
Deferred tax liability8,798 5,747 
Total liabilities637,447 553,090 
Commitments and contingencies (Note 10)
Net Assets
Common stock, $0.25 par value: authorized, 40,000,000 shares; issued, 31,121,574 shares at September 30, 2022 and 27,298,032 shares at March 31, 20227,780 6,825 
Additional paid-in capital521,072 448,235 
Total distributable (loss) earnings(29,191)(10,256)
Treasury stock - at cost, 2,339,512 shares(23,937)(23,937)
Total net assets475,724 420,867 
Total liabilities and net assets$1,113,171 $973,957 
Net asset value per share (28,782,062 shares outstanding at September 30, 2022 and 24,958,520 shares outstanding at March 31, 2022)$16.53 $16.86 




CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except shares and per share data)
Three Months EndedSix Months Ended
September 30,September 30,
2022202120222021
Investment income:
Interest income:
Non-control/Non-affiliate investments$19,632 $14,752 $35,380 $28,068 
Affiliate investments2,487 1,348 4,999 2,658 
Payment-in-kind interest income:
Non-control/Non-affiliate investments550 466 966 1,103 
Affiliate investments834 413 1,105 751 
Dividend income:
Non-control/Non-affiliate investments527 510 1,077 1,570 
Affiliate investments— — 101 — 
Control investments2,000 1,560 3,535 3,157 
Fee income:
Non-control/Non-affiliate investments567 1,138 1,857 1,415 
Affiliate investments134 105 252 146 
Control investments50 — 50 — 
Other income18 20 
Total investment income26,799 20,296 49,342 38,875 
Operating expenses:
Compensation2,254 2,298 3,796 3,730 
Share-based compensation1,060 923 1,881 1,999 
Interest6,629 5,405 12,113 10,360 
Professional fees810 648 1,659 1,349 
General and administrative1,068 982 2,285 1,958 
Total operating expenses11,821 10,256 21,734 19,396 
Income before taxes14,978 10,040 27,608 19,479 
Federal income, excise and other taxes178 15 251 215 
Deferred taxes356 299 475 495 
Total income tax provision (benefit)534 314 726 710 
Net investment income$14,444 $9,726 $26,882 $18,769 
Realized (loss) gain
Non-control/Non-affiliate investments$(2,396)$3,496 $153 $2,544 
Affiliate investments(6,318)— (6,303)— 
Income tax benefit (provision)79 — (165)— 
Total net realized (loss) gain on investments, net of tax(8,635)3,496 (6,315)2,544 
Net unrealized appreciation (depreciation) on investments
Non-control/Non-affiliate investments2,609 2,363 (1,942)9,393 
Affiliate investments3,338 (393)2,624 (851)
Control investments(804)(1,634)(6,706)(720)
Income tax provision(1,494)(1,027)(2,575)(1,462)
Total net unrealized appreciation (depreciation) on investments, net of tax3,649 (691)(8,599)6,360 
Net realized and unrealized (losses) gains on investments(4,986)2,805 (14,914)8,904 
Realized loss on extinguishment of debt— (17,087)— (17,087)
Net increase (decrease) in net assets from operations$9,458 $(4,556)$11,968 $10,586 
Pre-tax net investment income per share - basic and diluted$0.54 $0.45 $1.03 $0.89 
Net investment income per share – basic and diluted$0.52 $0.43 $1.01 $0.86 
Net increase (decrease) in net assets from operations – basic and diluted$0.34 $(0.20)$0.45 $0.48 
Weighted average shares outstanding – basic and diluted27,987,699 22,534,443 26,757,376 21,871,805 

q22023earningspresentati
Q2 2023 Earnings Presentation 8333 Douglas Avenue, Suite 1100 | Dallas, Texas 75225 | 214.238.5700 | capitalsouthwest.com November 1, 2022 Capital Southwest Corporation


 
Page 2 Important Notices • These materials and any presentation of which they form a part are neither an offer to sell, nor a solicitation of an offer to purchase, any securities of Capital Southwest. • These materials and the presentations of which they are a part, and the summaries contained herein, do not purport to be complete and no obligation to update or otherwise revise such information is being assumed. Nothing shall be relied upon as a promise or representation as to the future performance of Capital Southwest. Such information is qualified in its entirety by reference to the more detailed discussions contained elsewhere in Capital Southwest’s public filings with the Securities and Exchange Commission (the "SEC"). • There is no guarantee that any of the estimates, targets or projections illustrated in these materials and any presentation of which they form a part will be achieved. Any references herein to any of the Capital Southwest’s past or present investments or its past or present performance, have been provided for illustrative purposes only. It should not be assumed that these investments were or will be profitable or that any future investments by Capital Southwest will be profitable or will equal the performance of these investments. • The information contained herein has been derived from financial statements and other documents provided by the portfolio companies unless otherwise stated. • Past performance is not indicative of future results. In addition, there can be no assurance that unrealized investments will be realized at the expected multiples shown as actual realized returns will depend on, among other factors, future operating results of each of Capital Southwest’s current portfolio companies, the value of the assets and economic conditions at the time of disposition, any related transaction costs, and the timing and manner of sale, all of which may differ from the assumptions on which Capital Southwest’s expected returns are based. In many instances, Capital Southwest will not determine the timing or manner of sale of its portfolio companies. • Capital Southwest has filed a registration statement (which contains the prospectus) with the SEC for any offering to which this communication may relate and may file one or more prospectus supplements to the prospectus in the future. Before you invest in any of Capital Southwest's securities, you should read the registration statement and the applicable prospectus and prospectus supplement(s), including the information incorporated by reference therein, in order to fully understand all of the implications and risks of an offering of Capital Southwest's securities. You should also read other documents Capital Southwest has filed with the SEC for more complete information about Capital Southwest and any offering of its securities. You may get these documents for free by visiting EDGAR on the SEC's website at www.sec.gov. Alternatively, Capital Southwest will arrange to send you any applicable prospectus and prospectus supplement(s) if you request such materials by calling us at (214) 238-5700. These materials are also made available, free of charge, on our website at www.capitalsouthwest.com. Information contained on our website is not incorporated by reference into this communication.


 
Page 3 • This presentation contains forward-looking statements relating to, among other things, the business, market conditions, financial condition and results of operations of Capital Southwest, the anticipated investment strategies and investments of Capital Southwest, and future market demand. Any statements that are not statements of historical fact are forward-looking statements. Forward-looking statements are often, but not always, preceded by, followed by, or include words such as "believe," "expect," "intend," "plan," "should" or similar words, phrases or expressions or the negative thereof. These statements are made on the basis of the current beliefs, expectations and assumptions of the management of Capital Southwest and speak only as of the date of this presentation. There are a number of risks and uncertainties that could cause Capital Southwest’s actual results to differ materially from the forward-looking statements included in this presentation. • These risks include risks related to: changes in the markets in which Capital Southwest invests; changes in the financial, capital, and lending markets; the impact of rising interest rates on Capital Southwest's business and its portfolio companies; the impact of supply chain constraints and labor difficulties on our portfolio companies; regulatory changes; tax treatment and general economic and business conditions; our ability to operate our wholly owned subsidiary, Capital Southwest SBIC I, LP, as a small business investment company ("SBIC"); and uncertainties associated with the continued impact from the COVID-19 pandemic, including its impact on the global and U.S. capital markets and the global and U.S. economy, the length and duration of the COVID-19 outbreak in the United States as well as worldwide and the magnitude of the economic impact of that outbreak, the effect of the COVID-19 pandemic on our business prospects and the operational and financial performance of our portfolio companies, including our and their ability to achieve their respective objectives, and the effects of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business. • For a further discussion of some of the risks and uncertainties applicable to Capital Southwest and its business, see Capital Southwest’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022 and its subsequent filings with the SEC. Other unknown or unpredictable factors could also have a material adverse effect on Capital Southwest’s actual future results, performance, or financial condition. As a result of the foregoing, readers are cautioned not to place undue reliance on these forward-looking statements. Capital Southwest does not assume any obligation to revise or to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, or otherwise, except as may be required by law. Forward-Looking Statements


 
Page 4 Bowen S. Diehl President and Chief Executive Officer Michael S. Sarner Chief Financial Officer Chris Rehberger VP Finance / Treasurer Conference Call Participants


 
Page 5 • CSWC was formed in 1961, and elected to be regulated as a BDC in 1988 • Publicly-traded on Nasdaq: Common Stock (“CSWC”) • Internally Managed BDC with RIC tax treatment for U.S. federal income tax purposes • September 2015: completed tax free spin off of CSW Industrials ("Spin Off") (NASDAQ: "CSWI") • April 2021: received SBIC license from the U.S. Small Business Administration • 24 employees based in Dallas, Texas • Total Balance Sheet Assets of $1.1 B as of September 30, 2022 • Manage I-45 Senior Loan Fund (“I-45 SLF”) in partnership with Main Street Capital (NYSE: “MAIN”) CSWC Company Overview CSWC is a middle-market lending firm focused on supporting the acquisition and growth of middle-market companies across the capital structure


 
Page 6 • Q2 2023 Pre-Tax Net Investment Income (“NII”) of $15.0 MM or $0.54 per share • Paid $0.50 per share Regular Dividend for the quarter ended September 30, 2022 ◦ Increased Regular Dividend to $0.52 per share for the quarter ending December 31, 2022, an increase of 4.0% compared to the prior quarter • Declared Supplemental Dividend of $0.05 per share for the quarter ending December 31, 2022 • Investment Portfolio at Fair Value increased to $1.1 B from $1.0 B in prior quarter ◦ $85.7 MM in total new committed investments from five new portfolio companies and five existing portfolio companies ◦ $13.9 MM in total proceeds from two debt prepayments and one debt sale ▪ Exits during the quarter generated an IRR of 10.1% • Raised $26.9 MM in gross proceeds through Equity ATM Program during the quarter ◦ Sold shares at weighted-average price of $19.48 per share, or 118% of the prevailing NAV per share • $139.4 MM available on Credit Facility and $30.2 MM in cash and cash equivalents as of quarter end Q2 2023 Highlights Financial Highlights


 
Page 7 • In the last twelve months ended 9/30/2022, CSWC generated $2.05 per share in Pre-Tax NII and paid out $1.93 per share in Regular Dividends • Cumulative Pre-Tax NII Regular Dividend Coverage of 107% since the 2015 Spin-Off • Total of $3.61 per share Special and Supplemental Dividends declared since the 2015 Spin-Off • Estimated Undistributed Taxable Income ("UTI") of $0.33 per share as of September 30, 2022 Track Record of Consistent Dividends Continues Dividend Yield – Quarterly Annualized Total Dividend / CSWC Share Price at Qtr. End D iv id en d Pe r Sh ar e $0.28 $0.48 $0.50 $0.44 $0.46 $0.48 $0.49 $0.50 $0.51 $0.51 $0.51 $0.51 $0.52 $0.53 $0.54 $0.97 $0.57 $0.89 $1.25 $0.63 $0.28 $0.29 $0.34 $0.36 $0.38 $0.39 $0.40 $0.40 $0.41 $0.41 $0.41 $0.41 $0.42 $0.43 $0.44 $0.47 $0.48 $0.48 $0.50 $0.52 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.50 $0.05 $0.50 $0.75 $0.15 Regular Dividend Per Share Supplemental Dividend Per Share Special Dividend Per Share 03/31/18 6/30/2018 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 $0.00 $0.25 $0.50 $0.75 $1.00 $1.25 $1.50 6.6% 19.7% 9.3% 9.6% 9.1% 9.4% 9.2% 24.0% 17.9% 15.1% 14.5% 11.5% 9.4% 9.1% 8.6% 15.3% 8.1% 13.7% 11.8%


 
Page 8 History of Value Creation $17.68 $17.38 $18.63 $20.90 $22.71 $21.97 $24.90 $28.27 $28.58 $29.07 $17.68 $17.34 $17.80 $19.08 $18.62 $15.13 $16.01 $16.86 $16.54 $16.53 $0.26 $0.26 $1.16 $2.31 $2.71 $3.41 $3.56 $3.56 $0.04 $0.57 $1.56 $2.93 $4.53 $6.18 $8.00 $8.48 $8.98 Net Asset Value Per Share Cumulative Special/Supplemental Dividends Paid Per Share Cumulative Regular Dividends Paid Per Share 9/30/2015 3/31/2016 3/31/2017 3/31/2018 3/31/2019 3/31/2020 3/31/2021 3/31/2022 6/30/2022 9/30/2022 $0.00 $3.00 $6.00 $9.00 $12.00 $15.00 $18.00 $21.00 $24.00 $27.00 $30.00 Total Value (Net Asset Value + Cumulative Dividends Paid) Increase of $11.39 per share at 9/30/2022 from 9/30/2015 Spin-off of CSWI


 
Page 9 CORE: Lower Middle Market (“LMM”): CSWC led or Club Deals ◦ Companies with EBITDA between $3 MM and $20 MM ◦ Typical leverage of 2.0x – 4.0x Debt to EBITDA through CSWC debt position ◦ Commitment size up to $35 MM with hold sizes generally $5 MM to $35 MM ◦ Both Sponsored and Non-sponsored deals ◦ Securities include first lien, unitranche, and second lien ◦ Frequently make equity co-investments alongside CSWC debt OPPORTUNISTIC: Upper Middle Market (“UMM”): Syndicated or Club, First and Second Lien ▪ Companies typically have in excess of $20 MM in EBITDA ▪ Typical leverage of 3.0x – 5.5x Debt to EBITDA through CSWC debt position ▪ Hold sizes generally $5 MM to $20 MM ▪ Floating rate first and second lien debt securities ▪ More liquid assets relative to LMM investments ▪ Provides flexibility to invest/divest opportunistically based on market conditions and liquidity position Investment Strategy


 
Page 10 Credit Portfolio Heavily Weighted Towards First Lien Investments 94% of Credit Portfolio as of 9/30/2022 in first lien senior secured loans Credit Portfolio Heavily Weighted to First Lien $ (M ill io ns ) $272 $337 $351 $368 $382 $387 $456 $474 $487 $521 $531 $573 $671 $689 $745 $794 $865 $903 6/30/2018 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 9/30/2022 $0.0 $200.0 $400.0 $600.0 $800.0 $1,000.0 Sub-DebtSecond LienFirst Lien 6% 85% 9% 7% 86% 7% 4% 86% 10% 86% 10% 4% 87% 9% 4% 87% 9% 4% 90% 8% 2% 90% 8% 2% 90% 8% 2% 91% 7% 2% 91% 7% 2% 92% 6% 2% 90% 8% 2% 91% 7% 2% 91% 7% 2% 93% 7% 94% 6% 94% 6%


 
Page 11 $85.7 MM in total new committed investments to five new portfolio companies and five existing portfolio companies Q2 2023 Originations Portfolio Originations Q2 2023 Name Industry Type Total Debt Funded at Close ($000s) Total Equity Funded at Close ($000s) Unfunded Commitments at Close ($000s) Debt Yield to Maturity VersiCare Management LLC Healthcare services First Lien $13,500 $— $7,500 10.54% Pipeline Technique LTD Energy services (midstream) First Lien $10,000 $— $3,333 10.27% Spectrum of Hope, LLC (DBA Kids SPOT) Healthcare services First Lien $13,135 $— $— 10.50% Opco Borrower, LLC (DBA Giving Home Health Care) Healthcare services First Lien / Second Lien & Warrants $12,500 $— $500 9.97% The Producto Group Industrial products First Lien $10,026 $— $— 12.15% Gulf Pacific Acquisition, LLC Food, agriculture & beverage First Lien $3,661 $— $2,525 10.29% Crafty Apes, LLC Media, marketing & entertainment First Lien $5,000 $— $— 11.22% SIB Holdings, LLC Business services First Lien $1,778 $— $— 9.33% Roof OpCo, LLC Consumer services First Lien / Equity $1,467 $750 $— 10.28% Roseland Management, LLC Healthcare services Equity $— $66 $— N/A Total / Wtd. Avg $71,067 $816 $13,858 10.62% • $71.9 MM funded at close


 
Page 12 Portfolio Exits Q2 2023 Name Industry Type Net Proceeds ($000s) Realized Gain ($000s) IRR Binswanger Holding Corp. Distribution First Lien $9,955 $11 11.4% Fast Sandwich, LLC Restauraunts First Lien $3,277 $28 19.4% Dunn Paper, Inc. Paper & forest products Second Lien $692 $(2,292) (5.8)% Total / Weighted Average $13,924 $(2,253) 10.1% Track Record of CSWC Exits Continues • During the quarter, CSWC exited three debt investments, generating total proceeds of $13.9 MM and an IRR of 10.1% • Cumulative IRR of 14.7% on 66 portfolio company exits generating $762.8 MM in proceeds since launch of credit strategy in January 2015 $13.9 MM in total proceeds from three portfolio company exits


 
Page 13 CSWC Investment Portfolio Composition Note: All metrics above exclude the I-45 Senior Loan Fund (1) At September 30, 2022 and June 30, 2022, we had equity ownership in approximately 59% and 59%, respectively, of our investments (2) The weighted-average annual effective yields were computed using the effective interest rates during the quarter for all debt investments at cost as of September 30, 2022, including accretion of original issue discount but excluding fees payable upon repayment of the debt instruments (3) The weighted average annual effective yields on total investments were calculated by dividing total investment income, exclusive of non-recurring fees, by average total investments at fair value (4) Includes CSWC debt investments only. Weighted average EBITDA metric is calculated using investment cost basis weighting. For both quarters ended September 30, 2022 and June 30, 2022, six portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful (5) 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. For both quarters ended September 30, 2022 and June 30, 2022, six portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful Maintaining appropriate portfolio leverage while receiving attractive risk-adjusted returns Investment Portfolio - Statistics (in $000's) 6/30/2022 9/30/2022 Total CSWC Portfolio Total CSWC Portfolio Number of Portfolio Companies 75 78 Total Cost $943,496 $988,644 Total Fair Value $954,939 $1,006,034 Average Hold Size Debt Investments (at Fair Value) $12,727 $12,906 Average Hold Size Equity Investments (at Fair Value) $2,082 $2,230 % First Lien Investments (at Fair Value) 85.4% 84.8% % Second Lien Investments (at Fair Value) 5.1% 5.0% % Subordinated Debt Investments (at Fair Value) 0.1% 0.0% % Equity (at Fair Value) (1) 9.4% 10.2% Wtd. Avg. Yield on Debt Investments (2) 9.3% 10.6% Wtd. Avg. Yield on Total Investments (3) 9.1% 10.3% Wtd. Avg. EBITDA of Issuer ($MM's) (4) $20.4 $22.1 Wtd. Avg. Leverage through CSWC Security (5) 4.0x 4.1x


 
Page 14 Approximately 97% of all debt investments are currently rated a "1" or "2" as credit portfolio continues to demonstrate strong performance Investment Rating 6/30/2022 Investment Rating Upgrades Investment Rating Downgrades 9/30/2022 # of Loans Fair Value ($MM) % of Portfolio (FV) # of Loans Fair Value ($MM) % of Portfolio (FV) # of Loans Fair Value ($MM) % of Portfolio (FV) # of Loans Fair Value ($MM) % of Portfolio (FV) 1 5 $87.1 10.1% 4 $25.5 2.8% — $— —% 8 $105.0 11.6% 2 72 $733.1 84.7% 2 $12.4 1.4% 1 $15.0 1.7% 74 $770.4 85.3% 3 8 $44.2 5.1% — $— —% 1 $3.3 0.4% 7 $27.8 3.1% 4 2 $1.0 0.1% — $— —% 1 $0.0 —% 2 $0.3 —% Wtd. Avg. Investment Rating (at Cost) 1.98 1.95 Quarter-over-Quarter Investment Rating Migration


 
Page 15 CSWC Portfolio Mix as of September 30, 2022 at Fair Value Current Investment Portfolio (By Type) Current Investment Portfolio (By Industry) Current Investment Portfolio of $1.1 B continues to be diverse across industries First Lien 80.7% I-45 SLF 4.8% Second Lien 4.8% Equity 9.7% Media, Marketing & Entertainment 11% Healthcare Services 10% Business Services 10% Consumer Products & Retail 8% Consumer Services 8% Healthcare Products 6% Food, Agriculture & Beverage 5% I-45 SLF LLC 5% Technology Products & Components 5% Financial Services 4% Transportation & Logistics 4% Distribution 3% Software & IT Services 3% Education 3% (Note 1) I-45 SLF consists of 95% first lien senior secured debt (Note 2) Equity represents equity co-investments across 46 portfolio companies


 
Page 16 I-45 SLF Portfolio Overview Current I-45 Portfolio (By Industry) I-45 SLF loan portfolio of $168.6 MM is 95% first lien senior secured debt with average hold size of 2.6% of the I-45 portfolio (1) For the quarter ended September 30, 2022, two portfolio companies are excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful (2) Through I-45 SLF security Telecommunications Services: Consumer Current I-45 Portfolio (By Type) I-45 Portfolio Statistics (In Thousands) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 Total Investments at Fair Value $180,052 $176,704 $173,509 $168,610 Fund Leverage (Debt to Equity) at Fair Value 1.52x 1.59x 1.70x 1.73x Number of Issuers 42 42 39 39 Wtd. Avg. Issuer EBITDA (1) $72,800 $71,857 $78,190 $81,162 Avg. Investment Size as a % of Portfolio 2.4% 2.4% 2.6% 2.6% Wtd. Avg. Net Leverage on Investments (1)(2) 5.0x 4.2x 4.7x 4.4x Wtd. Avg. Spread to LIBOR 6.2% 6.2% 6.1% 6.3% Wtd. Avg. Duration (Yrs) 3.7 3.6 3.5 3.3 95% 5% First Lien Non-First Lien Telecommunications Healthcare & Pharmaceuticals High Tech Industries Business Services 14% 12% 11% 10% 9% Retail


 
Page 17 Income Statement (In Thousands, except per share amounts) Quarter Ended 12/31/21 Quarter Ended 3/31/22 Quarter Ended 6/30/22 Quarter Ended 9/30/22 Investment Income Interest Income $16,921 $17,611 $18,260 $22,119 PIK Interest Income 814 543 687 1,384 Dividend Income 1,714 1,961 2,186 2,527 Fees and Other Income 2,862 915 1,410 769 Total Investment Income $22,311 $21,030 $22,543 $26,799 Expenses Cash Compensation $3,353 $1,755 $1,542 $2,254 Share Based Compensation 849 737 821 1,060 General & Administrative 1,617 1,643 2,066 1,878 Total Expenses (excluding Interest) $5,819 $4,135 $4,429 $5,192 Interest Expense $4,655 $4,909 $5,484 $6,629 Pre-Tax Net Investment Income $11,837 $11,986 $12,630 $14,978 Gains / Losses and Taxes Net Realized and Unrealized Gains (Losses) on Investments $661 $7,736 $(9,928) $(4,986) Realized Loss on Disposal of Fixed Assets — (86) — — Income Tax (Expense) / Benefit 62 33 (192) (534) Net increase in Net Assets Resulting from Operations $12,560 $19,669 $2,510 $9,458 Weighted Average Diluted Shares Outstanding 23,433 24,202 25,514 27,988 Pre-Tax NII Per Diluted Weighted Average Share $0.51 $0.50 $0.50 $0.54 Net Increase in Net Assets Per Dil. Wtd. Average Share $0.54 $0.82 $0.10 $0.34


 
Page 18 Operating Leverage Trend Continue to realize operating efficiencies of internally managed structure Period Ending To ta l A ss et s ( $M M ) O perating Expenses as % of A vg A ssets $284 $326 $417 $552 $585 $736 $974 $1,054 $1,113 4.9% 4.2% 3.7% 3.0% 2.8% 2.4% 2.2% 2.1% 2.0% FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 Q1 FY23 Q2 FY23 $0 $250 $500 $750 $1,000 1% 2% 3% 4% 5% 6% Total Assets Operating Expenses(1) as % of Average Total Assets Note: Operating Leverage calculated as last twelve months operating expenses (excluding interest expense) divided by average annual assets (1) Operating expenses exclude interest expense


 
Page 19 $16.54 $0.54 $(0.50) $(0.32) $0.15 $0.13 $(0.01) $16.53 6/3 0/2 02 2 N AV/Shar e Pre- Tax Net I nv est ment In com e Regu lar Divi den d Net C han ge in Valu ati on of Debt Port fol io Net C han ge in Valu ati on of Equ ity Port fol io Accr eti on fro m Equ ity Iss uan ce Othe r C orp ora te 9/3 0/2 02 2 N AV/Shar e $14 $14.5 $15 $15.5 $16 $16.5 $17 $17.5 NAV per Share Bridge for Quarter Ended 9/30/2022 Earnings / Dividends $0.04 per Share Investment Portfolio Valuation Change $(0.17) per Share Other Corporate $0.12 per Share


 
Page 20 Significant Unused Debt Capacity with Long-Term Duration Earliest debt maturity occurs in January 2026 Facility Total Commitments Interest Rate Maturity Principal Drawn Undrawn Commitment January 2026 Notes (1) $140.0 MM 4.50% January 2026 $140.0 MM N/A I-45 Credit Facility (2) $150.0 MM L + 2.15% March 2026 $110.0 MM $40.0 MM Credit Facility (3) $380.0 MM Term SOFR + 2.15% (4) August 2026 $240.0 MM $139.4 MM (5) October 2026 Notes (6) $150.0 MM 3.375% October 2026 $150.0 MM N/A SBA Debentures $80.0 MM 3.52% (7) September 2031 (8) $80.0 MM $0.0 MM (9) P rin ci pa l P ay m en ts ($ M M ) Long-Term Debt Obligations (Calendar Year) $640.0 $15.0 $65.0 140.0 110.0 240.0 150.0 January 2026 Notes I-45 Credit Facility Credit Facility October 2026 Notes SBA Debentures CY 2022 CY 2023 CY 2024 CY 2025 CY 2026 CY 2027 - CY 2030 CY 2031 CY 2032 $0 $100 $200 $300 $400 $500 $600 $700 (1) Redeemable in whole or in part at any time prior to October 31, 2025, at par plus a "make whole" premium, and thereafter at par (2) CSWC owns 80% of the equity and 50% of the voting rights of I-45 SLF LLC with a joint venture partner (3) The Credit Facility has an accordion feature that allows for an increase in total commitments up to $400 MM (4) Additional 0.10% adjustment for 1-month SOFR loans, and 0.15% adjustment for 3-month SOFR loans (5) Net of $0.6 MM in letters of credit outstanding (6) Redeemable in whole or in part at any time prior to July 1, 2026, at par plus a "make whole" premium, and thereafter at par (7) Weighted average interest rate of all pooled SBA Debentures for the three months ended September 30, 2022 (8) First pooled SBA Debentures mature on September 1, 2031 (9) Current statutes and regulations permit SBIC I to borrow up to $175 million in SBA Debentures with at least $87.5 million in regulatory capital, subject to SBA approval


 
Page 21 Balance Sheet (In Thousands, except per share amounts) Quarter Ended 12/31/21 Quarter Ended 3/31/22 Quarter Ended 6/30/22 Quarter Ended 9/30/22 Assets Portfolio Investments $876,765 $936,614 $1,006,640 $1,056,931 Cash & Cash Equivalents 18,668 11,431 18,770 30,238 Other Assets 17,122 25,912 28,549 26,002 Total Assets $912,555 $973,957 $1,053,959 $1,113,171 Liabilities SBA Debentures $27,965 $38,352 $77,461 $77,553 January 2026 Notes 138,630 138,714 138,798 138,883 October 2026 Notes 146,357 146,522 146,708 146,893 Credit Facility 190,000 205,000 215,000 240,000 Other Liabilities 22,266 24,502 23,007 34,118 Total Liabilities $525,218 $553,090 $600,974 $637,447 Shareholders Equity Net Asset Value $387,337 $420,867 $452,985 $475,724 Net Asset Value per Share $16.19 $16.86 $16.54 $16.53 Regulatory Debt to Equity 1.23x 1.16x 1.10x 1.11x


 
Page 22 Portfolio Statistics (1) CSWC utilizes an internal 1 - 4 investment rating system in which 1 represents material outperformance and 4 represents material underperformance. All new investments are initially set to 2. Weighted average investment rating calculated at cost (2) Excludes CSWC equity investment in I-45 SLF (3) At Fair Value Continuing to build a well performing credit portfolio (In Thousands) Quarter Ended 12/31/21 Quarter Ended 3/31/22 Quarter Ended 6/30/22 Quarter Ended 9/30/22 Portfolio Statistics Fair Value of Debt Investments $744,681 $793,834 $865,432 $903,451 Average Debt Investment Hold Size $11,820 $12,213 $12,727 $12,906 Fair Value of Debt Investments as a % of Par 97% 97% 97% 96% % of Investment Portfolio on Non-Accrual (at Fair Value) 1.6% 1.5% 1.6% 0.9% Weighted Average Investment Rating (1) 1.90 1.92 1.98 1.95 Weighted Average Yield on Debt Investments 9.48% 9.30% 9.31% 10.59% Total Fair Value of Portfolio Investments $876,765 $936,614 $1,006,640 $1,056,931 Weighted Average Yield on all Portfolio Investments 9.35% 9.01% 9.11% 10.29% Investment Mix (Debt vs. Equity) (2)(3) 91% / 9% 90% / 10% 91% / 9% 91% / 9%


 
Page 23 Investment Income Detail Constructing a portfolio of investments with recurring cash yield (In Thousands) Quarter Ended 12/31/21 Quarter Ended 3/31/22 Quarter Ended 6/30/22 Quarter Ended 9/30/22 Investment Income Breakdown Cash Interest $16,164 $16,785 $17,414 $21,173 Cash Dividends 1,714 1,962 2,186 2,527 PIK Income 814 543 687 1,384 Amortization of purchase discounts and fees 758 828 848 963 Management/Admin Fees 340 259 264 329 Prepayment Fees & Other Income 2,520 653 1,144 423 Total Investment Income $22,310 $21,030 $22,543 $26,799 Key Metrics Cash Income as a % of Investment Income 93% 93% 93% 91% % of Total Investment Income that is Recurring 89% 96% 95% 98%


 
Page 24 Key Financial Metrics Strong Pre-Tax Net Investment Income and Dividend Yield driven by net portfolio growth and investment performance (1) Return on Equity is calculated as the quarterly annualized Pre-Tax NII, Realized Earnings, or Total Earnings, respectively, divided by equity at the end of the prior quarter Quarter Ended 12/31/21 Quarter Ended 3/31/22 Quarter Ended 6/30/22 Quarter Ended 9/30/22 Key Financial Metrics Pre-Tax Net Investment Income Per Wtd Avg Diluted Share $0.51 $0.50 $0.50 $0.54 Pre-Tax Net Investment Income Return on Equity (ROE)(1) 12.35% 12.24% 11.74% 12.94% Realized Earnings Per Wtd Avg Diluted Share $0.62 $0.52 $0.58 $0.21 Realized Earnings Return on Equity (ROE)(1) 15.25% 12.86% 13.72% 5.02% Earnings Per Wtd Avg Diluted Share $0.54 $0.81 $0.10 $0.34 Earnings Return on Equity (ROE)(1) 13.11% 20.08% 2.33% 8.17% Regular Dividends per Share $0.47 $0.48 $0.48 $0.50 Supplemental / Special Dividends per Share $0.50 $— $0.15 $— Total Dividends per Share $0.97 $0.48 $0.63 $0.50


 
Page 25 Interest Rate Sensitivity Fixed vs. Floating Credit Portfolio Exposure (1) Note: Illustrative change in annual NII is based on a projection of CSWC’s existing debt investments as of 9/30/2022, adjusted only for changes in Base Interest Rate. Base Interest Rate used in this analysis is 3-Month LIBOR of 3.75% at 9/30/2022. The results of this analysis include the I-45 Senior Loan Fund, which is comprised of 98% floating rate debt assets and 100% floating rate liabilities (1) Portfolio Exposure includes I-45 assets pro rata as a % of CSWC’s equity investment in the fund Change in Base Interest Rates Illustrative Annual NII Change ($'s) Illustrative Annual NII Change (Per Share) (100 bps) (7,060,738) (0.25) (75 bps) (5,295,553) (0.18) (50 bps) (3,530,369) (0.12) (25 bps) (1,765,184) (0.06) 25 bps 1,765,184 0.06 50 bps 3,530,369 0.12 75 bps 5,295,553 0.18 100 bps 7,060,738 0.25 2% 98% Fixed Floating


 
Page 26 Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Bowen S. Diehl March 31 Bowen S. Diehl President & Chief Executive Officer Independent Directors Independent Auditor David R. Brooks Michael S. Sarner RSM US LLP Chicago, ILChristine S. Battist Chief Financial Officer, Secretary & Treasurer Jack D. Furst William R. Thomas Joshua S. Weinstein Ramona Rogers-Windsor Senior Managing Director Corporate Counsel Eversheds Sutherland (US) LLP Corporate Offices & Website Investor Relations 8333 Douglas Avenue Michael S. Sarner 11th Floor Capital Southwest Dallas, TX 75225 214-884-3829 http://www.capitalsouthwest.com msarner@capitalsouthwest.com Transfer Agent American Stock Transfer & Trust Company, LLC Securities Listing 800-937-5449 Nasdaq: "CSWC" (Common Stock) www.amstock.com Industry Analyst Coverage Firm Analyst Contact Information Ladenburg Thalmann & Co., Inc. Mickey M. Schleien, CFA Direct: 305-572-4131 JMP Securities, LLC Devin Ryan Direct: 415-835-8900 Hovde Group Erik Zwick Direct: 617-510-1239 Jefferies, LLC Kyle Joseph Direct: 510-418-0754 Raymond James & Associates Robert Dodd Direct: 901-579-4560 Oppenheimer & Co., Inc. Mitchel Penn Direct: 212-667-7136