Hercules Capital posted record financial results in the second quarter of 2026.Net investment income reached $92.9 million, or $0.50 per share, while total investment income amounted to $149.1 million, representing an 8% increase over the prior year.
The return on equity was 16.8%, and the return on total capital was 8.3%. The net interest margin was 10.5%, while the effective yield on the debt portfolio reached 13.4%.
Available liquidity of $652.9 million offers significant potential for new investments. The company holds investment-grade ratings from four rating agencies: Fitch (BBB-), Moody’s (Baa2), DBRS (BBB high), and KBRA (BBB+).
Return on equity consistently outperformed that of comparable companies: Hercules achieved 16.8% in the second quarter of 2026, compared with 9.9% for its competitors. Return on total capital was also significantly higher at 8.3%, compared to 4.3% for the peer group.
Total investments at cost reached $4.6 billion in the second quarter of 2026, representing an average annual growth rate of 12.8% since 2016, while total assets rose to $4.7 billion, growing at an average annual rate of 13.5%. This sustained growth trajectory demonstrates the company’s ability to scale its platform while maintaining strong credit performance.
Net assets reached $2.27 billion, or $12.15 per share, compared to $12.13 per share as of December 31, 2025. The increase in net asset value per share compared to the previous quarter resulted from strong net investment income and positive net appreciation, which was partially offset by dividend payments. Outstanding debt increased from $2.29 billion to $2.34 billion, enabling portfolio expansion while maintaining a conservative debt-to-equity ratio.
Forward-Looking Statements
Looking ahead to the third quarter of 2026, management indicated a certain degree of normalization following the exceptionally strong performance in the second quarter. The core yield is expected to range between 11.8% and 12.0%, slightly below the 12.0% reported in the second quarter. This primarily reflects the portfolio composition, as higher-yielding legacy holdings are being replaced by new investments at current market interest rates.
Early loan repayments are expected to normalize to between $200 million and $300 million in the third quarter, which is significantly below the $572.1 million in early repayments recorded in the second quarter. This normalization is expected to reduce fee income and the accelerated recognition of revenue compared to the record-breaking second quarter. Management noted that loan volume is likely to be lower in the third quarter due to seasonal factors, in line with historical patterns, but that the loan pipeline remains solid.
