Stellus Private Credit BDC Boosts Assets, Investment Income in Q3

TL;DR

**Stellus is growing its loan book aggressively, but rising costs are eating into net investment income, so watch those margins closely.**

AI Summary

Stellus Private Credit BDC reported a net increase in net assets from operations of $13,088,598 for the nine months ended September 30, 2025, an increase from $11,583,161 in the prior year period. Total investment income rose to $26,187,708 for the nine months ended September 30, 2025, up from $21,283,041 in the same period of 2024, driven by increased interest income of $25,648,553. Operating expenses also increased significantly to $17,224,646 for the nine months ended September 30, 2025, compared to $12,769,774 in the prior year, primarily due to higher interest expense and management fees. Net investment income, however, saw a slight decrease to $10,928,451 for the nine months ended September 30, 2025, from $12,079,872 in 2024. The company's total assets grew to $384,843,161 as of September 30, 2025, from $304,791,076 at December 31, 2024, largely due to an increase in non-controlled, non-affiliated investments at fair value to $376,434,763. Credit Facilities payable increased to $191,655,862 from $138,692,860, indicating increased leverage. Net Asset Value Per Share slightly increased to $15.26 from $15.16 at year-end 2024.

Why It Matters

Stellus Private Credit BDC's significant asset growth and increased investment income signal a robust expansion in its lending activities, which could be attractive to investors seeking exposure to private credit. However, the concurrent rise in operating expenses, particularly interest expense and management fees, warrants close attention as it compressed net investment income. For employees, this growth suggests stability and potential for expansion. Customers benefit from increased access to private credit. In a competitive landscape, Stellus's ability to scale its investment portfolio while managing rising costs will be key to its long-term performance and market positioning.

Risk Assessment

Risk Level: medium — The company's Credit Facilities payable increased by $52,963,002 to $191,655,862 as of September 30, 2025, from $138,692,860 at December 31, 2024, indicating higher leverage. Additionally, interest expense surged to $9,879,767 for the nine months ended September 30, 2025, up from $6,884,954 in the prior year, reflecting increased borrowing costs and potentially higher interest rate sensitivity.

Analyst Insight

Investors should monitor Stellus Private Credit BDC's net investment income and expense ratios closely in future filings. While asset growth is positive, the rising cost of debt and management fees could impact profitability. Evaluate the quality of new investments to ensure sustainable returns.

Financial Highlights

debt To Equity

1.04

revenue

$26,187,708

operating Margin

41.7%

total Assets

$384,843,161

total Debt

$191,655,862

net Income

$13,088,598

eps

$1.10

gross Margin

N/A

cash Position

$6,386,635

revenue Growth

+23.1%

Revenue Breakdown

Key Numbers

• $13.09M — Net Increase in Net Assets from Operations (Increased from $11.58M in 2024 for the nine-month period, showing operational growth.)
• $26.19M — Total Investment Income (Up from $21.28M in 2024 for the nine-month period, indicating expanded investment activity.)
• $17.22M — Total Operating Expenses (Increased from $12.77M in 2024 for the nine-month period, driven by higher interest and management fees.)
• $10.93M — Net Investment Income (Decreased from $12.08M in 2024 for the nine-month period, despite higher total investment income.)
• $384.84M — Total Assets (Grew from $304.79M at December 31, 2024, reflecting significant portfolio expansion.)
• $191.66M — Credit Facilities Payable (Increased from $138.69M at December 31, 2024, indicating higher leverage.)
• $15.26 — Net Asset Value Per Share (Slightly increased from $15.16 at December 31, 2024, showing modest per-share value growth.)
• $9.88M — Interest Expense and Other Fees (Increased from $6.88M in 2024 for the nine-month period, a key driver of higher operating expenses.)
• $376.43M — Non-controlled, non-affiliated investments, at fair value (Increased from $300.73M at December 31, 2024, representing the core of asset growth.)
• 12,371,428 — Common shares outstanding (Increased from 10,715,095 at December 31, 2024, indicating share issuance.)

Key Players & Entities

• Stellus Private Credit BDC (company) — registrant
• SEC (regulator) — filing authority
• $13,088,598 (dollar_amount) — net increase in net assets from operations for nine months ended September 30, 2025
• $11,583,161 (dollar_amount) — net increase in net assets from operations for nine months ended September 30, 2024
• $26,187,708 (dollar_amount) — total investment income for nine months ended September 30, 2025
• $21,283,041 (dollar_amount) — total investment income for nine months ended September 30, 2024
• $17,224,646 (dollar_amount) — total operating expenses for nine months ended September 30, 2025
• $12,769,774 (dollar_amount) — total operating expenses for nine months ended September 30, 2024
• $10,928,451 (dollar_amount) — net investment income for nine months ended September 30, 2025
• $12,079,872 (dollar_amount) — net investment income for nine months ended September 30, 2024

FAQ

Risk Factors

• Increased Leverage [high — financial]: Credit Facilities payable increased significantly by $53.0M to $191.7M as of September 30, 2025, from $138.7M at December 31, 2024. This indicates a substantial increase in the company's reliance on borrowed funds, amplifying financial risk.
• Rising Interest Expenses [medium — financial]: Interest expense and other fees rose to $9.88M for the nine months ended September 30, 2025, a significant increase from $6.88M in the prior year period. This directly impacts net investment income and is a consequence of higher debt levels.
• Increased Operating Expenses [medium — operational]: Total operating expenses grew by 34.9% to $17.22M for the nine months ended September 30, 2025, from $12.77M in the prior year. This increase is primarily driven by higher interest expenses and management fees, impacting profitability.
• Fair Value Fluctuations [medium — market]: The company's primary assets are non-controlled, non-affiliated investments at fair value, totaling $376.4M as of September 30, 2025. Fluctuations in the fair value of these investments can significantly impact net asset value and investment income.
• Net Investment Income Decline [medium — financial]: Despite a 23.1% increase in total investment income to $26.19M, net investment income decreased by 9.5% to $10.93M for the nine months ended September 30, 2025, compared to $12.08M in the prior year. This highlights the impact of rising expenses on profitability.

Industry Context

The private credit market continues to be a dynamic sector, with BDCs playing a crucial role in providing capital to middle-market companies. Increased competition and evolving regulatory landscapes are key trends. BDCs are increasingly leveraging their balance sheets to enhance returns, but this also introduces higher financial risk.

Regulatory Implications

As a BDC, Stellus Private Credit is subject to specific regulations, including asset coverage requirements. The significant increase in leverage (Credit Facilities Payable) will require careful monitoring to ensure compliance with these regulatory thresholds. Changes in accounting standards or tax laws could also impact reported performance.

What Investors Should Do

1. Monitor leverage ratios closely: The increase in Credit Facilities Payable to $191.7M warrants attention. Investors should track the debt-to-equity ratio and ensure it remains within acceptable risk parameters.
2. Analyze expense management: The significant rise in operating expenses, particularly interest expense and management fees, is impacting net investment income. Investors should assess the drivers of these increases and the BDC's ability to control costs.
3. Evaluate portfolio performance: While total investment income is up, the decrease in net investment income suggests potential pressure on underlying portfolio yields or increased borrowing costs. Investors should scrutinize the quality and performance of the investment portfolio.
4. Assess NAV per share growth: The modest increase in NAV per share to $15.26 suggests that while the company is growing, per-share value appreciation is slow. Investors should compare this to peers and consider the impact of share issuances.
5. Review dividend policy and coverage: While not detailed in the provided text, investors should assess the sustainability of the BDC's dividend payouts in light of its net investment income and overall financial health.

Glossary

Net Asset Value Per Share

The value of a company's assets minus its liabilities, divided by the number of outstanding shares. It represents the per-share market value of the company. (Indicates the per-share value of the BDC's holdings, showing a slight increase from $15.16 to $15.26.)

Credit Facilities Payable

The amount of money a company owes under credit agreements, typically used for short-term financing or working capital. (Shows the company's reliance on debt financing, which increased significantly to $191.7M, indicating higher leverage.)

Non-controlled, non-affiliated investments, at fair value

Investments in companies where Stellus Private Credit BDC does not have control or affiliation, and whose value is determined by current market prices. (Represents the vast majority of the company's assets ($376.4M), highlighting the core investment portfolio and its market valuation.)

Net Investment Income

The income generated from a company's core operations (interest and dividends) minus its operating expenses, excluding any capital gains or losses. (Decreased to $10.93M despite higher total income, indicating that rising expenses are outpacing investment income growth.)

BDC (Business Development Company)

A type of closed-end investment company that invests in small and medium-sized businesses and often provides managerial assistance. (Provides context for Stellus Private Credit BDC's investment strategy and regulatory framework.)

Amortized Cost

The initial cost of an asset minus any accumulated amortization or depreciation. For investments, it represents the original purchase price adjusted for premium or discount amortization. (Provided for investments ($371.4M for non-controlled, non-affiliated investments), offering a historical cost perspective alongside fair value.)

Year-Over-Year Comparison

Compared to the prior year period, Stellus Private Credit BDC has experienced robust growth in total assets, up to $384.8M from $304.8M, primarily driven by an increase in investments. Total investment income also saw a healthy rise of 23.1% to $26.19M. However, this growth has been accompanied by a significant increase in liabilities, with Credit Facilities Payable jumping by $53.0M, leading to higher operating expenses and a slight decrease in net investment income from $12.08M to $10.93M. The Net Asset Value Per Share has seen a marginal increase from $15.16 to $15.26.

Key Financial Figures

• $0.01 — hares of Beneficial Interest, par value $0.01 per share, outstanding as of November 1

Filing Documents

• tmb-20250930x10q.htm (10-Q) — 14407KB
• tmb-20250930xex31d1.htm (EX-31.1) — 12KB
• tmb-20250930xex31d2.htm (EX-31.2) — 12KB
• tmb-20250930xex32d1.htm (EX-32.1) — 5KB
• tmb-20250930xex32d2.htm (EX-32.2) — 5KB
• 0001104659-25-112365.txt ( ) — 35229KB
• tmb-20250930.xsd (EX-101.SCH) — 110KB
• tmb-20250930_cal.xml (EX-101.CAL) — 59KB
• tmb-20250930_def.xml (EX-101.DEF) — 386KB
• tmb-20250930_lab.xml (EX-101.LAB) — 649KB
• tmb-20250930_pre.xml (EX-101.PRE) — 482KB
• tmb-20250930x10q_htm.xml (XML) — 7655KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Item 1.

Financial Statements

Financial Statements 1 Consolidated Statements of Assets and Liabilities as of September 30, 2025 (unaudited) and December 31, 2024 1 Consolidated Statements of Operations for the three and nine-month periods ended September 30, 2025 and 2024 (unaudited) 2 Consolidated Statements of Changes in Net Assets for the three and nine-month periods ended September 30, 2025 and 2024 (unaudited) 3 Consolidated Statements of Cash Flows for the three and nine-month periods ended September 30, 2025 and 2024 (unaudited) 4 Consolidated Schedule of Investments as of September 30, 2025 (unaudited) 5 Consolidated Schedule of Investments as of December 31, 2024 16 Notes to Unaudited Financial Statements 26 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 60 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 77 Item 4.

Controls and Procedures

Controls and Procedures 78

OTHER INFORMATION

PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 79 Item 1A.

Risk Factors

Risk Factors 79 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 79 Item 3. Defaults Upon Senior Securities 80 Item 4. Mine Safety Disclosures 80 Item 5. Other Information 81 Item 6. Exhibits 82

SIGNATURES

SIGNATURES 83 i Table of Contents

Financial Statements

Item 1. Financial Statements

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION STELLUS PRIVATE CREDIT BDC CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES September 30, 2025 (unaudited) December 31, 2024 ASSETS Non-controlled, non-affiliated investments, at fair value (amortized cost of $ 371,417,536 and $ 297,791,269 , respectively) $ 376,434,763 $ 300,732,065 Cash and cash equivalents 6,386,635 2,144,116 Other receivable 14,778 4,340 Interest receivable 1,774,269 1,367,849 Expense reimbursement receivable from the Advisor (Note 2) 1,615 161,473 Deferred offering costs 57,662 127,983 Related party receivable — 2,004 Prepaid expenses 50,024 164,350 Receivable for sales and repayments of investments 123,415 86,896 Total Assets $ 384,843,161 $ 304,791,076 LIABILITIES Credit Facilities payable $ 191,655,862 $ 138,692,860 Unearned revenue 1,197,734 921,629 Management fees payable 855,941 648,149 Income incentive fee payable 475,545 452,186 Capital gains incentive fee payable 559,652 306,229 Interest payable 711,239 613,821 Administrative services payable 162,970 109,027 Income tax payable 56,752 51,427 Deferred tax liability 272,073 259,455 Other accrued expenses and liabilities 120,102 348,413 Total Liabilities $ 196,067,870 $ 142,403,196 Commitments and contingencies (Note 7) Net Assets $ 188,775,291 $ 162,387,880 NET ASSETS Common shares of beneficial interest, par value $ 0.01 per share (unlimited shares authorized; 12,371,428 and 10,715,095 issued and outstanding, respectively) $ 123,714 $ 107,151 Paid-in capital 184,807,352 159,483,435 Total distributable earnings 3,844,225 2,797,294 Net Assets $ 188,775,291 $ 162,387,880 Total Liabilities and Net Assets $ 384,843,161 $ 304,791,076 Net Asset Value Per Share $ 15.26 $ 15.16 1 Table of Contents STELLUS PRIVATE CREDIT BDC CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Mon

View Full Filing

View this 10-Q filing on SEC EDGAR