Executive Summary

Q3 2025 was steady operationally: NII per share was $0.38 and GAAP EPS was $0.29, while NAV per share declined 0.6% to $14.66 due to a handful of idiosyncratic non-accruals despite a gain on Merx; dividend maintained at $0.38 per share .
EPS modestly beat consensus by ~$0.001 and total investment income (proxy for revenue) was slightly below by ~$0.9M; management flagged a 100 bp rate-cut sensitivity of ~$9.4M NII (−$0.10/sh) and outlined offsets (Merx paydowns, resolving non-accruals, liability refinancings) . Consensus numbers from S&P Global: EPS $0.379*, Revenue $83.49M*.
Strategic actions improved funding costs and flexibility: revolver margin cut 10 bps, unused fee reduced 5 bps, and Bethesda CLO 1 upsized/repriced (AAA spread tightened 91 bps vs original), lowering floating liability spread by 19 bps; expect ~$3.3M one-time charges in Q4 2025 for these transactions .
Portfolio de-risking continued: Merx net repayment of ~$97M reduced exposure to 3.3% of portfolio; first lien share rose to 95%; non-accruals increased to 3.1% FV but described as company-specific rather than systemic .

What Went Well and What Went Wrong

What Went Well

Merx monetizations and insurance recoveries drove ~$16.6M gain and ~$97M net repayment; remaining ~$25M expected late 2025/early 2026; CEO: “meaningfully de-risked our investment portfolio and improved MFIC’s earnings power” .
Liability optimization: revolver amended/extended (−10 bps funded margin; unused fee −5 bps) and CLO reset with AAA at SOFR+149 (−91 bps vs original), cutting floating liability spread by 19 bps .
NII resilient with stronger fee/prepayment income: total investment income $82.6M (+1.6% QoQ), prepayment income rose to ~$3.2M; NII per share $0.38 covered dividend .

What Went Wrong

NAV per share declined 0.6% QoQ to $14.66, primarily due to several idiosyncratic non‑accrual additions; non‑accruals rose to 3.1% of portfolio FV (from 2.0% in Q2) .
Yield pressure: weighted average yield at cost declined to 10.3% (from 10.5% in Q2 and 10.7% in Q1) with spread compression and lower base rates; CFO noted tightening in recurring interest income .
Forward rate cuts pose earnings headwind: management quantified a 100 bp decline as −$9.4M NII/−$0.10 per share, requiring offsets via deployment and liability repricing .

Financial Results

Metric	Q1 2025	Q2 2025	Q3 2025
Total Investment Income ($USD Millions)	$78.7	$81.3	$82.6
Net Investment Income per Share ($)	$0.37	$0.39	$0.38
GAAP EPS ($)	$0.32	$0.19	$0.29
NAV per Share ($)	$14.93	$14.75	$14.66
Net Leverage (x)	1.31x	1.44x	1.35x
Weighted Avg Yield at Cost (Direct Origination) (%)	10.7%	10.5%	10.3%
Fee Income ($USD)	$0.25	$0.22	$0.458
Dividend Income ($USD)	$0.25	$0.20	$0.20

Segment/Composition (Fair Value)

Portfolio Composition (%)	Q1 2025	Q2 2025	Q3 2025
First Lien Secured Debt	92%	93%	95%
Second Lien Secured Debt	1%	0%	0%
Structured Products & Other	1%	1%	1%
Preferred Equity	1%	1%	1%
Common Equity/Interests & Warrants	5%	5%	3%

KPIs

KPI	Q1 2025	Q2 2025	Q3 2025	Trend
Non-Accruals (% FV)	0.9%	2.0%	3.1%	Rising
Weighted Avg Spread (Corp Lending) (bps)	569	560	559	Slight compression
Borrower Net Leverage (Debt/EBITDA, weighted avg)	5.25x	5.32x	5.29x	Stable
Interest Coverage (weighted avg)	2.1x	2.1x	2.2x	Improving
Investment Portfolio (FV, $USD Billions)	$3.19	$3.33	$3.18	Flat-to-down

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per Share	Q4 2025 (payable Dec 23)	$0.38	$0.38	Maintained
NII Sensitivity to −100 bps Base Rates	Forward	n/a	~~−$9.4M (~~−$0.10/sh)	New disclosure (risk watch)
Revolving Credit Facility Spread	Effective Oct 1, 2025	197.5 bps	187.5 bps	Lowered 10 bps
Revolver Unused Commitment Fee	Effective Oct 1, 2025	0.375%	0.325%	Lowered 5 bps
Floating Liability Spread (WAS)	Forward	195 bps	176 bps	Lowered 19 bps
One-time Financing Costs	Q4 2025	n/a	~$3.3M (revolver amendment + CLO reset)	New (non-recurring)

Earnings Call Themes & Trends

Topic	Q1 2025 (Mar)	Q2 2025 (Jun)	Q3 2025 (Sep)	Trend
Tariffs/Macro	Elevated uncertainty; limited direct tariff exposure; underwriting stress-tested	Volatility easing; issuance picked up post tariff pause	Fed cut 25 bps in Sep & Oct; resilient economy; tariff impacts idiosyncratic	Stabilizing macro; watch rate cuts
M&A/Pipeline	Muted M&A; incumbency drives add-ons	Pipeline building; sponsors active; expect busier H2	Improving sponsor activity; deployment deliberate and granular	Gradual recovery
Pricing/Spreads	Portfolio spread 569 bps; new commits 513 bps	Portfolio 560 bps; new commits 538 bps	Portfolio 559 bps; new commits 521 bps	Compression persists
Credit Quality	Non-accruals down to 0.9% FV	Non-accruals up to 2.0% FV	Non-accruals up to 3.1% FV; described as idiosyncratic	Deteriorated, idiosyncratic
Merx Strategy	$185M FV; sales & insurance recoveries progressing	Post-Q2: ~+$90M net paydown envisaged; accretive to NII	~$97M net repayment; ~$16.6M gain; 3.3% of portfolio; +$25M expected	De-risking, runoff
Capital Structure	CLO closed Feb (blended spread 161 bps)	Intent to reprice/upsize CLO in fall	Revolver amended (−10 bps); CLO reset/upsized (AAA −91 bps)	Funding cost down

Management Commentary

“We believe the reduction in our Merx exposure, and the redeployment into middle market loans, has meaningfully de-risked our investment portfolio and improved MFIC’s earnings power.” — Tanner Powell, CEO .
“We amended our revolving credit facility… reduced the applicable margin by 10 basis points. We also reset and upsized our first CLO… new senior AAA coupon of S+149 basis points, a decrease of 91 basis points from the original coupon.” — Kenneth Seifert, CFO .
“A 100-basis-point reduction in base rates would reduce MFIC's annual net investment income by approximately $9.4 million or $0.10 per share… we’re pursuing additional paydowns from Merx and resolving certain non-accrual and under-earning assets.” — Tanner Powell, CEO .

Q&A Highlights

Non-accrual drivers are idiosyncratic; one tariff-impacted, another consumer sentiment-related; no systemic theme noted .
Dividend outlook: maintained at $0.38; management expects offsets (Merx redeployment, liability repricing, resolving non‑accruals) to mitigate lower base rate pressure .
Share repurchases remain a “compelling tool” subject to liquidity, leverage, and deployment opportunity; authorization remains with room .
M&A outlook and deployment: sponsorship activity improving; MFIC aims to return leverage toward ~1.4x in a measured way, leveraging incumbency and broad origination funnel .
Renovo bankruptcy (post-quarter), Global Eagle repayment: ongoing portfolio clean-up; PIK income low at 5.1% of TII for Q3, signaling focus on cash-pay assets .

Estimates Context

Metric	Wall Street Consensus (Q3 2025)	Actual Reported (Q3 2025)	Surprise
Primary EPS ($)	0.379*	0.38	+0.001
Revenue / Total Investment Income ($USD)	$83.49M*	$82.58M	−$0.91M

Values marked with * retrieved from S&P Global.

Implications: Slight EPS beat and minor revenue miss; given disclosed rate sensitivity (−$0.10/sh per −100 bps), estimate revisions may modestly trim forward NII/EPS if the forward curve declines materialize, partly offset by liability cost reductions and Merx redeployment .

Key Takeaways for Investors

Defensive repositioning is working: Merx exposure reduced to 3.3% with additional ~$25M expected; portfolio now 95% first lien; supports lower risk and more consistent NII generation .
Earnings durability hinges on rate path: management quantified −$0.10/sh NII per 100 bp rate cut; watch Fed trajectory and MFIC’s offset execution (redeployment, non‑accrual resolutions, funding cost cuts) .
Funding cost tailwind: revolver and CLO actions reduce floating liability spread by 19 bps, improving NIM despite asset spread compression; expect ~$3.3M one-time Q4 cost .
Credit watch: non‑accruals rose to 3.1% FV but remain idiosyncratic; monitoring is warranted; improving interest coverage to 2.2x offers cushion if rates fall .
Dividend: maintained at $0.38 with NII coverage in Q3; sustainability will track redeployment pace and rate moves; management communicating proactively on sensitivities .
Deployment strategy: incumbency and MidCap origination funnel support selective, granular growth; expect measured return toward ~1.4x leverage as M&A activity recovers .
Tactical angle: potential catalysts include additional Merx paydowns, continued liability repricing opportunities, stabilization in non‑accruals, and signs of sponsor M&A acceleration; risks include faster-than-expected rate cuts and persistent spread compression .

Appendix: Additional Operating Detail (Q3 2025)

Investment activity: New commitments $138M across 21 companies; weighted average spread 521 bps; net repayments $148M (ex‑Merx: $51M); gross fundings (ex‑revolvers) $142M .
Portfolio metrics: FV $3.18B across 246 companies; direct origination 95%; sponsor‑backed 91%; weighted average spread 559 bps; borrower net leverage 5.29x; interest coverage 2.2x .
Liquidity: outstanding debt $1.921B; revolver capacity ~$575M (pro forma $525M after commitment reduction); facility commitments $1.610B with accordion to $2.415B .

MidCap Financial Investment Corp (MFIC)·Q3 2025 Earnings Summary