Rand Capital (NASDAQ:RAND) reported lower second-quarter investment income and net investment income as portfolio non-accruals continued to reduce interest income, while the business development company expanded its portfolio through two new investments and realized a gain on the exit of Applied Image.
Total investment income for the second quarter of 2026 was $1.4 million, compared with $1.6 million in the year-earlier period. Net investment income was $710,000, or $0.24 per share, down from $2.5 million, or $0.83 per share, a year earlier.
New Investments and Portfolio Changes
During the quarter, Rand invested $6.9 million in two new portfolio companies. The company made a $4.5 million investment in Feature Healthcare, which does business as 4 Seasons Home Care. The investment consisted of a term loan with 12% cash interest and 2% payment-in-kind, or PIK, interest.
Rand also invested $2.4 million in Termite Guy Corporation, including a $2.1 million term loan bearing 13% cash interest plus 1% PIK interest, as well as a $300,000 equity investment. Penberthy said Rand partnered on the transaction with The Rack Group, also known as Seybert’s, a sponsor involved in a previous Rand investment.
On the realization side, Rand received full repayment of its $1.7 million debt investment in Applied Image and recognized a $959,000 realized gain on warrants associated with the investment. The company also received a $250,000 repayment on another debt investment.
Those portfolio actions were partly offset by the cessation of operations at BMP Swanson. Rand recorded a full write-down of the position, resulting in a $2.5 million quarter-over-quarter decline in fair value. Penberthy described the outcome as unexpected and disappointing, while characterizing it as a specific portfolio event rather than a change in the company’s broader investment strategy.
“This does demonstrate the ongoing challenging economic and business environment in which our companies operate,” Penberthy said, noting that supplier disruptions or actions by senior lenders can create significant pressure for portfolio businesses.
Portfolio Value, Yield and Concentration
At June 30, Rand’s portfolio had a fair value of $56.5 million across 21 portfolio companies, up from $48.5 million at Dec. 31, 2025. Debt investments represented 79% of the portfolio’s fair value, while equity represented 21%.
The annualized weighted-average yield on debt investments, including PIK interest, was 8.98% at quarter-end, compared with 11.3% at the end of 2025. Penberthy said the reported yield continued to be affected by non-accruals, adding that newly deployed capital is generally being priced in the low- to mid-teens.
Professional and business services was the company’s largest industry exposure, followed by health and wellness, distribution, manufacturing and consumer-related investments. Rand’s five largest investments accounted for $24.1 million of fair value, or 43% of the portfolio, at quarter-end. Those holdings included Inter-National Electronic Alloys, Caitec, Feature Healthcare, Highland All About People and BMP Foodservice Supply Holdco.
Expenses, Net Asset Value and Liquidity
Chief Financial Officer Margaret Brechtel said the decline in total investment income primarily reflected lower interest income from portfolio companies on non-accrual status. Dividend and other investment income contributed $153,000 during the quarter, partly offsetting the reduction.
Non-cash PIK interest totaled $116,000, representing 10% of interest income from portfolio companies, compared with 40% in the prior-year quarter. Brechtel said the decline reflected investments being placed on non-accrual status, reducing the PIK income recognized.
Total expenses were $647,000, compared with a benefit of $864,000 in the second quarter of 2025. The prior-year results included a $1.5 million capital-gain incentive-fee benefit. Excluding capital-gain incentive fees, adjusted expenses were $647,000, compared with $626,000 a year earlier.
Net assets increased modestly during the quarter, ending at approximately $51.5 million. Rand reported net asset value of $17.33 per share, up from the prior quarter. The company said $710,000 of net investment income and the realized gain on Applied Image more than offset $302,000 of net unrealized depreciation and $861,000 in dividends declared.
Rand ended the quarter with $5.1 million outstanding on its senior credit facility and approximately $12.4 million of remaining availability. Consolidated cash totaled about $430,000.
Dividend and Outlook
Rand paid its regular quarterly dividend of $0.29 per share for the second quarter and declared another $0.29-per-share dividend for the third quarter. Penberthy said the company is seeking to support shareholder distributions through recurring income, liquidity management and portfolio rebuilding.
For the balance of 2026, management said it plans to continue pursuing lower-middle-market origination opportunities while maintaining discipline in underwriting, deal structure and risk-adjusted returns. The company also plans to remain focused on active oversight of challenged investments and balancing portfolio growth with shareholder returns.
About Rand Capital (NASDAQ:RAND)
Rand Capital Corporation is a publicly traded business development company (BDC) focused on providing financing solutions to growing businesses. Established in 1999 and headquartered near Buffalo, New York, Rand Capital seeks to partner with small to mid-size companies across a variety of industries. By leveraging its balance sheet, the firm aims to deliver flexible debt and equity investments designed to support expansion, acquisitions, working capital needs and other strategic initiatives.
The company’s financing activities span senior secured loans, subordinated debt, equity co-investments and royalty or revenue-based financing.
