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CapitalSource Reports Third Quarter 2012 Results and Announces New $250 Million Share Buyback Plan

  • Third Quarter Net Income of $31 Million or $0.14 Per Share
  • Strong Loan Production of $623 Million at CapitalSource Bank
  • Net Interest Margin of 4.97% at CapitalSource Bank
  • 10.2 Million Shares Repurchased in the Quarter – Outstanding Shares Reduced by 35% Since December 2010
  • Prior Repurchase Authorization Nearly Completed After Quarter Close / New $250 Million Buyback Plan Announced

LOS ANGELES, Oct. 30, 2012 (GLOBE NEWSWIRE) -- CapitalSource Inc. (NYSE:CSE) today announced financial results for the third quarter of 2012. The Company reported net income for the quarter of $31 million or $0.14 per diluted share, compared to net income of $388 million or $1.66 per diluted share in the prior quarter and a net loss of $81 million or $0.26 per diluted share in the third quarter of 2011. Net income in the prior quarter included $1.49 per diluted share resulting from the reversal of $347 million of the Company's deferred tax asset valuation allowance. The loss in the third quarter of 2011 was driven by a one-time charge of $114 million or $0.37 per share resulting from the early retirement of debt.

"In addition to strong operating results, we repurchased 10 million of our shares in the third quarter and an additional 5 million shares in October. Since inception of our buyback plan in December of 2010, we have reduced the total share count by approximately 36% and returned $766 million to shareholders," said James J. Pieczynski, CapitalSource CEO. "A higher than projected level of loan payoffs at the Parent Company provided added liquidity and permitted us to nearly complete the previous repurchase authorization this month. As a result, our Board has approved a new buyback plan with an initial authorization of $250 million."

"The third quarter at CapitalSource Bank was solid in all respects. Pre-tax pre-provision income was up 17% compared to the prior quarter, net interest margin of 4.97% was near the top end of our projected range, and after-tax return on assets (ROA) rose to 1.88%, assisted by a very low loan loss provision," said Tad Lowrey, CapitalSource Bank Chairman and CEO. "The combination of portfolio management activities, which reduced the loan portfolio by approximately $163 million, and an elevated level of loan payoffs largely offset strong loan production of $623 million in the quarter but year-to-date loan growth remains a healthy 10%."

"Cash generation at the Parent was ahead of expectations, as we ended the quarter with $156 million in unrestricted cash despite $75 million of share repurchases and $23 million spent to redeem the remaining convertible debentures in July," said John Bogler, CapitalSource CFO. "Consolidated operating expenses decreased meaningfully in the quarter as well, due largely to the continuing benefits of our internal consolidation efforts. Total consolidated operating expenses remain on track for a full year reduction of about 10%, compared to 2011."

CAPITALSOURCE BANK SEGMENT

This segment includes our commercial lending and banking business activities in CapitalSource Bank.

Third Quarter 2012 Highlights

  • Net Income was $34 million, an increase of $11 million or 47% from the prior quarter primarily due to a lower loan loss provision. Total interest income rose 4% to $100 million.
  • Loans and Leases increased $24 million as funded loan and lease productionof $623 million, compared to $596 million in the prior quarter, was largely offset by $599 million of loan repayments, sales and other reductions. $163 million of those repayments and sales were the result of portfolio management activities designed to reduce hold sizes and limit credit exposure. Absent those portfolio management activities, loan growth would have been ~3.5% in the quarter. Total loans and leases were $5.4 billion at quarter end, a year-to-date increase of 10% and an 18% increase since September 30, 2011.
  • Net Interest Margin was 4.97%, an increase of 2 basis points from the prior quarter, primarily due to a more favorable asset mix and lower cost of funds.
  • Capital – The Tier 1 leverage ratio increased 13 basis points to 12.82%, and the total risk-based capital ratio increased 49 basis points to 16.69%.
  • Credit Quality – Loan loss provision was $0.3 million, compared to $13 million in the prior quarter. Net charge-offs were $4 million in the quarter, compared to $7 million in the prior quarter. Non-accrual loans decreased to $64 million or 1.21% of loans at quarter end, compared to $102 million or 1.94% of loans at the end of the prior quarter. The allowance for loan and lease losses was $98 million or 1.89% of loans at quarter end, compared to $102 million or 1.96% of loans at the end of the prior quarter.

Third Quarter 2012 Details

Quarter Ended
9/30/2012 vs. 6/30/2012 9/30/2012 vs. 9/30/2011
9/30/2012 6/30/2012 9/30/2011 $ % $ %
($ in thousands)
Interest income $ 99,807 $ 96,112 $ 92,173 $ 3,695 4% $ 7,634 8%
Interest expense 15,521 15,394 15,982 (127) (1) 461 3
Provision for loan losses 273 12,569 13,725 12,296 98 13,452 98
Non-interest income 13,585 13,198 14,614 387 3 (1,029) (7)
Non-interest expense 39,964 43,179 35,345 3,215 7 (4,619) (13)
Income tax expense 23,782 15,106 16,513 (8,676) (57) (7,269) (44)
Net income 33,852 23,062 25,222 10,790 47 8,630 34

Net Interest Margin was 4.97%, an increase of 2 basis points from the prior quarter. Interest income was $100 million, an increase of $4 million from the prior quarter. Net interest income was $84 million, an increase of $4 million from the prior quarter.

Quarter Ended
9/30/2012 6/30/2012
Net Interest Margin Average
Balance
Interest
Income/Expense
Average
Yield/Cost
Average
Balance
Interest
Income/Expense
Average
Yield/Cost
($ in thousands)
Loans $ 5,231,242 $ 91,367 6.95% (1) $ 4,973,262 $ 87,680 7.09%
Investment securities 1,206,868 8,123 2.68 1,238,781 8,029 2.61
Cash and other interest-earning assets 314,439 317 0.40 346,288 403 0.47
Total interest-earning assets 6,752,549 99,807 5.88 6,558,331 96,112 5.89
Deposits 5,469,501 12,738 0.93 5,334,190 12,640 0.95
Borrowings 597,674 2,783 1.85 585,791 2,754 1.89
Total interest-bearing liabilities $ 6,067,175 15,521 1.02 $ 5,919,981 15,394 1.05
Net interest income / spread 84,286 4.86% $ 80,718 4.84%
Net interest margin 4.97% 4.95%
(1) Loan yield for the quarter included 70 basis points of fee and discount accretion, compared to 65 basis points in the prior quarter.

Non-interest Expense was $40 million, a decrease of $3 million from the prior quarter. Operating expenses were $37 million, a decrease of $3 million from the prior quarter due primarily to a $2 million decrease in loan servicing expenses. Non-operating expenses were unchanged at $3 million.

Income Tax Expense was $24 million for the quarter, compared to $15 million in the prior quarter, due to higher pre-tax income. The effective tax rate for the quarter was 41% compared to 40% in the prior quarter.

Cash and Investments increased by $177 million to $1.7 billion due to the high level of loan repayments and sales. The portfolio yield at quarter end decreased 34 basis points to 2.01%, primarily due to the higher mix of cash and cash equivalents.

Cash and Investments 9/30/2012 6/30/2012
($ in thousands) Balance Yield Duration
(Years)
Balance Yield Duration
(Years)
Cash and cash equivalents and restricted cash $ 508,862 0.26% -- $ 275,456 0.29% --
Agency callable notes 5,031 2.50% 3.1 5,053 2.50% 3.3
Agency debt 23,359 1.90% 0.1 23,810 1.94% 0.4
Agency MBS 966,856 2.51% 2.6 1,014,783 2.53% 2.8
Non-agency MBS 45,396 4.26% 2.0 50,785 4.31% 2.1
CMBS 108,066 4.00% 2.1 108,520 4.04% 2.3
Asset-backed securities 10,985 11.22% 0.9 12,453 11.38% 0.9
U.S. Treasury and agency securities 18,296 2.56% 6.1 19,165 2.56% 6.2
$ 1,686,851 2.01% 1.8 $ 1,510,025 2.35% 2.2

Loans and Leases increased $24 million from the prior quarter as detailed below.

Quarter Ended
Loan and Lease Roll Forward (1) 9/30/2012 6/30/2012 9/30/2011
($ in thousands)
Beginning balance $ 5,338,673 $ 5,088,426 $ 4,202,073
New fundings 623,445 595,737 646,851
Existing loans and leases
Principal repayments, net (535,047) (265,491) (234,651)
Leased equipment depreciation (2,307) (2,288) (668)
Transfers to held for sale, net (13,260) (31,519) (30,092)
Loan sales (44,285) (38,615) --
Transfers to foreclosed assets (932) (176) (1,438)
Net charge-offs (3,622) (7,401) (3,633)
Intercompany sales -- -- (26,880)
Ending balance $ 5,362,665 $ 5,338,673 $ 4,551,562
(1) Includes operating leases and equity investments related to operating leases which are included in other assets and other investments, respectively, on our balance sheet.
Quarter Ended
Loan and Lease Portfolio Detail 9/30/2012 6/30/2012 9/30/2011
($ in thousands)
Healthcare Asset Based $ 155,444 $ 145,758 $ 203,370
Equipment Finance (1) 561,607 470,275 361,830
Lender Finance & Timeshare 763,144 761,310 583,683
Premium Finance 11,083 7,638 --
Other Asset Based 46,060 47,103 49,751
Total Asset Based 1,537,338 1,432,084 1,198,634
General Cash Flow 216,213 263,593 250,981
Technology Cash Flow 595,689 511,880 367,216
Healthcare Cash Flow 300,210 315,719 257,724
Security Cash Flow 272,531 323,414 295,628
Professional Practice 158,608 147,084 89,768
Total Cash Flow 1,543,251 1,561,690 1,261,317
General Real Estate 670,994 684,312 623,689
Multi Family 867,654 884,164 785,728
Healthcare Real Estate 519,042 570,888 533,608
Small Business 224,386 205,535 148,586
Total Real Estate 2,282,076 2,344,899 2,091,611
Total $ 5,362,665 $ 5,338,673 $ 4,551,562
(1) Includes $102 million of operating leases and related equity investments as of September 30, 2012 and $102 million as of June 30, 2012, which are included in other assets and other investments, respectively, on our balance sheet.

Deposits were $5.5 billion at quarter end, an increase of $153 million from the prior quarter. The weighted average interest rate on total deposits declined 3 basis points to 0.91% at the end of the quarter. The weighted average rate of new and renewing time deposits in the quarter was 0.86%, compared to 0.83% in the prior quarter.

FHLB Borrowings were $600 million, an increase of $3 million from the prior quarter. The weighted average rate of FHLB borrowings was 1.81% as of September 30, 2012, compared to 1.83% at the end of the prior quarter and the average remaining maturity was 3.4 years, compared to 3.6 years at the end of the prior quarter.

Allowance for Loan and Lease Losses was $98 million or 1.89% of the loan portfolio, a decrease of $3 million from the prior quarter.

Quarter Ended
Allowance for Loan and Lease Losses 9/30/2012
($ in thousands) General Specific Total % Loans
Beginning balance $ 87,912 $ 13,872 $ 101,784
Provision / (Reserve release) 2,242 (1,969) 273
Charge-offs, net -- (3,622) (3,622)
Ending balance $ 90,154 $ 8,281 $ 98,435 1.89%
Quarter Ended
6/30/2012
General Specific Total % Loans
Beginning balance $ 84,376 $ 12,240 $ 96,616
Provision 3,536 9,033 12,569
Charge-offs, net -- (7,401) (7,401)
Ending balance $ 87,912 $ 13,872 $ 101,784 1.96%

Non-performing Assets were $70 million or 0.96% of total assets, a decrease of $37 million (35%) from the prior quarter. Non-accrual loans were $64 million, a decrease of $38 million (37%) from the prior quarter. REO increased by $0.4 million (7%).

Non-performing Assets 9/30/2012 6/30/2012
Balance % of Total
Assets
Balance % of Total
Assets
($ in thousands)
Non-accrual loans - current $ 26,836 0.37% $ 80,571 1.14%
Non-accrual loans - delinquent 30-89 days 29,948 0.41 59 --
Non-accrual loans - delinquent 90+ days 7,462 0.10 21,360 0.31
Total non-accrual loans 64,246 0.88% 101,990 1.45%
REO 6,050 0.08 5,644 0.08
Total non-performing assets $ 70,296 0.96% $ 107,634 1.53%

Troubled Debt Restructurings were $66 million, a decrease of $9 million from the prior quarter. TDRs on accrual status decreased to $20 million from $69 million in the prior quarter. Non-accruing TDRs were $45 million (included in the "Non-accrual loans" in the table above), $16 million of which were current as to payment status, compared to $7 million in the prior quarter.

OTHER COMMERCIAL FINANCE SEGMENT

This segment includes the CapitalSource Inc. loan portfolio and other business activities at the Parent Company.

Third Quarter 2012 Details

Net Loss was $2 million, compared to net income of $365 million in the prior quarter. Second quarter results included a tax benefit of $347 million related to the release of a portion of the deferred tax asset valuation allowance and an $8 million gain on early retirement of debt.

Quarter Ended
9/30/2012 vs. 6/30/2012 9/30/2012 vs. 9/30/2011
9/30/2012 6/30/2012 9/30/2011 $ % $ %
($ in thousands)
Interest income $ 16,899 $ 22,978 $ 28,653 $ (6,079) (26)% $ (11,754) (41)%
Interest expense 3,992 4,770 18,506 778 16 14,514 78
Provision for loan losses 8,686 (2,033) 21,393 (10,719) (527) 12,707 59
Non-interest income 1,439 1,594 35,015 (155) (10) (33,576) (96)
Non-interest expense 13,037 11,629 158,305 (1,408) (12) 145,268 92
Income tax benefit (5,779) (355,123) (27,793) (349,344) (98) (22,014) (79)
Net (loss) income (1,598) 365,329 (106,743) (366,927) (100) 105,145 99

Interest Income was $17 million, a decrease of $6 million from the prior quarter due primarily to a lower average loan balance.

Non-interest Expense was $13 million, compared to $12 million in the prior quarter. Operating expenses were $11 million, a decrease of $7 million from the prior quarter due primarily to expenses in the prior quarter related to the establishment of a $2 million lease abandonment charge for excess office space and higher third party loan workout expenses. Non-operating expenses were $2 million compared to non-operating income of $6 million in the prior quarter, due primarily to an $8 million gain on debt extinguishment in the prior quarter.

Unrestricted Cash at quarter end was $156 million, a decrease of $35 million from the prior quarter. The largest sources of cash were principal collections related to non-securitized loans and a quarterly tax payment from the Bank to the Parent Company pursuant to the tax sharing arrangement. The principal uses of cash in the quarter were share repurchases totaling $75 million and the redemption of $23 million of the Company's outstanding 7.25% convertible debentures.

Loans decreased by $114 million from the prior quarter as detailed below.Securitized loan balances were $411 million, a decrease of $8 million from the prior quarter. The non-securitized loan balance was $316 million, including $40 million of loans held for sale, a decrease of $65 million from the prior quarter.

Quarter Ended
Loan and Lease Roll Forward 9/30/2012 6/30/2012 9/30/2011
($ in thousands)
Beginning balance $ 801,127 $ 899,836 $ 1,399,910
Existing loans and leases
Principal repayments, net (46,939) (56,857) (111,693)
Transfers to held for sale, net (39,930) -- (8,648)
Loan sales (14,616) (20,174) --
Transfers to foreclosed assets -- -- (77)
Net charge-offs (12,066) (21,678) (22,271)
Intercompany sales -- -- 26,880
Ending balance $ 687,576 $ 801,127 $ 1,284,101

Allowance for Loan and Lease Losses was $28 million, or 4.15% of the loan portfolio, a decline of $3 million from the prior quarter as detailed below.

Quarter Ended
Allowance for Loan and Lease Losses 9/30/2012
($ in thousands) General Specific Total % Loans
Beginning balance $ 24,647 $ 6,928 $ 31,575
(Reserve release) / Provision (7,984) 16,670 8,686
Charge-offs, net -- (12,066) (12,066)
Ending balance $ 16,663 $ 11,532 $ 28,195 4.15%
Quarter Ended
6/30/2012
General Specific Total % Loans
Beginning balance $ 37,162 $ 18,124 $ 55,286
(Reserve release) / Provision (12,515) 10,482 (2,033)
Charge-offs, net -- (21,678) (21,678)
Ending balance $ 24,647 $ 6,928 $ 31,575 3.99%

Non-performing Assets were $109 million, a decline of $5 million (5%) from the prior quarter, due to declines in both non-accruals and REO, as detailed below. As of September 30, 2012, $61 million of non-accrual loans were current as to payment status. All collections on those loans are applied to the outstanding principal balance.

Non-performing Assets 9/30/2012 6/30/2012
Balance % of Total
Assets
Balance % of Total
Assets
($ in thousands)
Non-accrual loans - current $ 60,576 4.31% $ 58,907 4.03%
Non-accrual loans - delinquent 30-89 days 58 -- 460 0.03
Non-accrual loans - delinquent 90+ days 38,085 2.70 41,744 2.86
Total non-accrual loans 98,719 7.01% 101,111 6.92%
Accruing loans - delinquent 90+ days -- -- -- --
REO 10,264 0.73 13,303 0.92
Total non-performing assets $ 108,983 7.74% $ 114,414 7.84%

Troubled Debt Restructurings were $154 million, a decrease of $19 million from the prior quarter. TDRs on accrual status decreased by $7 million to $109 million. Non-accruing TDRs were $45 million (included in the "Non-accrual loans" in the table above), though $30 million were current as to payment status compared to $57 million in the prior quarter.

CONSOLIDATED

Third Quarter 2012 Details

Net Income was $31 million or $0.14 per diluted share, compared to net income of $388 million, or $1.66 per diluted share, in the prior quarter as detailed below. Net income in the prior quarter included the impact of the reversal of the Company's deferred tax asset valuation allowance of $347 million or $1.49 per diluted share. Pre-tax income was $49 million compared to $48 million in the prior quarter.

Quarter Ended
9/30/2012 vs. 6/30/2012 9/30/2012 vs. 9/30/2011
9/30/2012 6/30/2012 9/30/2011 $ % $ %
($ in thousands)
Interest income $ 115,234 $ 117,982 $ 121,476 $ (2,748) (2)% $ (6,242) (5)%
Interest expense 19,513 20,164 34,488 651 3 14,975 43
Provision for loan and lease losses 8,959 10,536 35,118 1,577 15 26,159 74
Non-interest income 9,297 8,450 32,484 847 10 (23,187) (71)
Non-interest expense 47,009 48,200 176,346 1,191 2 129,337 73
Income tax expense (benefit) 18,003 (340,017) (11,280) (358,020) (105) (29,283) (260)
Net income (loss) 31,047 387,549 (80,712) (356,502) (92) 111,759 138

Interest Income was $115 million, a decrease of $3 million from the prior quarter.

Net Interest Margin was 4.99%, a decrease of 21 basis points from the prior quarter. Net interest income was $96 million, a decrease of $2 million from the prior quarter.

Non-Interest Expense was $47 million, a decrease of $1 million from the prior quarter as detailed below.

Quarter Ended
Non-Interest Expense 9/30/2012 6/30/2012 % Change
($ in thousands)
Compensation and benefits $ 25,523 $ 25,408 (0)%
Professional fees 2,469 3,089 20
Occupancy expenses 3,422 6,221 45
FDIC fees and assessments 1,507 1,463 (3)
General depreciation and amortization 1,330 1,511 12
Other administrative expenses 7,660 13,622 44
Total operating expenses 41,911 51,314 18
Leased equipment depreciation 2,307 2,288 (1)
Expense of real estate owned and other foreclosed assets, net 2,308 3,821 40
(Gain) loss on extinguishment of debt -- (8,142) 100
Other non-interest expense, net 483 (1,081) 145
Total non-interest expense $ 47,009 $ 48,200 2%

Income Tax Expense was $18 million, compared to a tax benefit of $340 million in the prior quarter as a result of the reversal of a portion of the Company's deferred tax asset valuation allowance. Utilization of the Federal Net Operating Loss Carry Forward portion of the Company's deferred tax asset, however, reduced the Company's cash tax liability to $3 million.

Loans and Leases decreased $90 million from the prior quarter as detailed below:

Quarter Ended
Loan and Lease Roll Forward (1) 9/30/2012 6/30/2012 9/30/2011
($ in thousands)
Beginning balance $ 6,139,800 $ 5,988,262 $ 5,601,983
New fundings 623,445 595,737 646,851
Existing loans and leases
Principal repayments, net (581,985) (322,348) (346,344)
Leased equipment depreciation (2,307) (2,288) (668)
Transfers to held for sale, net (53,190) (31,519) (38,740)
Loan sales (58,902) (58,789) --
Transfers to foreclosed assets (932) (176) (1,515)
Net charge-offs (15,688) (29,079) (25,904)
Ending balance $ 6,050,241 $ 6,139,800 $ 5,835,663
(1) Includes operating leases and equity investments related to operating leases which are included in Other Assets and Other Investments on our balance sheet.

Allowance for Loan and Lease Losses was $127 million, or 2.15% of the loan portfolio, compared to $133 million, or 2.23% at the end of the prior quarter.

Net Charge-offs were $16 million, a decrease of $13 million from the prior quarter. Net charge-offs as a percentage of average loans for the twelve month period ended September 30, 2012 were 2.09%, compared to 2.30% for the twelve month period ended June 30, 2012.

Quarter Ended
Allowance for Loan and Lease Losses 9/30/2012
($ in thousands) General Specific Total % Loans
Beginning balance $ 112,559 $ 20,800 $ 133,359
(Reserve release) / Provision (5,742) 14,701 8,959
Charge-offs, net -- (15,688) (15,688)
Ending balance $ 106,817 $ 19,813 $ 126,630 2.15%
Quarter Ended
6/30/2012
General Specific Total % Loans
Beginning balance $ 121,538 $ 30,364 $ 151,902
(Reserve release) / Provision (8,979) 19,515 10,536
Charge-offs, net -- (29,079) (29,079)
Ending balance $ 112,559 $ 20,800 $ 133,359 2.23%

Non-performing Assets were $179 million, a decline of $43 million (19%) from the prior quarter primarily due to a $40 million decrease in non-accrual loans. As of September 30, 2012, $87 million of non-accrual loans were current as to payment status. All collections on those loans are applied to the outstanding principal balance.

Non-performing Assets 9/30/2012 6/30/2012
Balance % of Total
Assets
Balance % of Total
Assets
($ in thousands)
Non-accrual loans - current $ 87,412 1.00% $ 139,478 1.64%
Non-accrual loans - delinquent 30-89 days 30,006 0.35 519 0.01
Non-accrual loans - delinquent 90+ days 45,547 0.53 63,104 0.74
Total non-accrual loans 162,965 1.88% 203,101 2.39%
Accruing loans - delinquent 90+ days -- -- -- --
REO 16,314 0.19 18,947 0.22
Total non-performing assets $ 179,279 2.07% $ 222,048 2.61%

Troubled Debt Restructurings were $219 million, a decrease of $29 million from the prior quarter. TDRs on accrual status decreased by $56 million to $129 million. Non-accruing TDRs were $90 million (included in the "Non-accrual loans" in the table above), though $46 million were current as to payment status, compared to $64 million in the prior quarter.

Valuation Allowance related to the Company's deferred tax assets was $159 million, a decrease of $7 million from the end of the prior quarter, primarily due to the utilization of capital loss carry forwards. The net deferred tax asset at quarter end after subtracting the valuation allowance was $371 million, a decrease of $14 million from the prior quarter, primarily due to the utilization of $20 million Federal Net Operating Loss Carry Forwards in the quarter.

Book Value Per Share was $8.09 at the end of the quarter, an increase of $0.17 from the end of the prior quarter. Total shareholders' equity was $1.7 billion at the end of the quarter, including intangible assets of $173 million, which was a decrease of $38 million from the prior quarter primarily due to share repurchases of $75 million in the quarter.

Tangible Book Value Per Share was $7.29 at the end of the quarter, an increase of $0.14 from the end of the prior quarter.

Share Repurchases during the quarter totaled 10.2 million shares at a total cost of $74.8 million. As a result, the remaining authority for share repurchases as of September 30, 2012 was $56.4 million. Since inception of the share buyback program through September 30, 2012, the Company repurchased 112.8 million shares, or approximately 35% of the December of 2010 starting balance of 323 million shares, at an average purchase price of $6.46 per share.

Subsequent to quarter end, the Company repurchased an additional 5 million shares, reducing the remaining authorization for share repurchases to $18 million. The CapitalSource Board of Directors approved a new buyback plan on October 26, 2012, scheduled to expire in December of 2013, with an initial authorization of $250 million.

Any share repurchases made pursuant to the Company's stock repurchase program will be made through open market purchases or privately negotiated transactions from time to time until December 2013. The amount and exact timing of any repurchases will depend upon market conditions and other factors. There are no assurances the Company will repurchase any shares during the period and the plan may be suspended or discontinued at any time.

Average Diluted Shares Outstanding was 226.4 million shares for the quarter, compared to 233.1 million shares for the prior quarter. Total outstanding shares at September 30, 2012 were 215.2 million.

Quarterly Cash Dividend of $0.01 per common share was paid on September 28, 2012 to common shareholders of record on September 14, 2012.

Conference Call Details

A conference call to discuss the results will be hosted on Tuesday, October 30, 2012 at 2:30 p.m. PDT / 5:30 p.m. EDT. Interested parties may access the call via webcast on the Investor Relations section of the CapitalSource web site at http://ir.capitalsource.com. An audio replay will also be available on the website from approximately 6:00 p.m. PDT / 9:00 p.m. EDT October 30, 2012 through April 30, 2013.

CapitalSource Bank Call Report

CapitalSource Bank will file its Consolidated Reports of Condition and Income for a Bank With Domestic Offices Only-FFIEC 041, for the quarter ended September 30, 2012 (the Call Report) with the Federal Deposit Insurance Corporation (FDIC) on October 30, 2012. The Call Report will subsequently be posted by the FDIC on its website at http://cdr.ffiec.gov/Public/.

About CapitalSource

CapitalSource Inc. (NYSE:CSE), through its wholly owned subsidiary CapitalSource Bank, makes commercial loans to small and middle-market businesses nationwide and offers depository products and services in 21 retail branches in southern and central California. CapitalSource, headquartered in Los Angeles, CA, had total assets of $8.7 billion and total deposits of $5.5 billion as of September 30, 2012. For more information, visit www.capitalsource.com.

Forward Looking Statements

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including certain plans, expectations, strategies, goals, and projections and including statements about consolidated operating expenses, all which are subject to numerous assumptions, risks, and uncertainties. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words 'anticipate,' 'assume,' 'intend,' 'believe,' 'expect,' 'estimate,' 'forecast,' 'plan,' 'position,' 'project,' 'will,' 'should,' 'would,' 'seek,' 'continue,' 'outlook,' 'look forward,' and similar expressions are generally intended to identify forward-looking statements. All forward-looking statements (including statements regarding preliminary and future financial and operating results and future transactions and their results) involve risks, uncertainties and contingencies, many of which are beyond our control which may cause actual results, performance, or achievements to differ materially from anticipated results, performance or achievements. Actual results could differ materially from those contained or implied by such statements for a variety of factors, including without limitation: higher than anticipated increases in operating expenses; increased asset workout and loan servicing expenses; higher compensation costs to retain and/or incent employees; anticipated synergies expected from moving Parent Company employees to CapitalSource Bank may not be achieved; CapitalSource Bank's inability to adjust expenses as part of the consolidation effort; and other factors described in CapitalSource's 2011 Annual Report on Form 10-K and documents subsequently filed by CapitalSource with the Securities and Exchange Commission. All forward-looking statements included in this release are based on information available at the time of the release. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise except as required by applicable law.

CapitalSource Third Quarter 2012 – Financial Supplement
CapitalSource Inc.
Consolidated Balance Sheets
($ in thousands)
September 30, December 31,
2012 2011
(Unaudited)
ASSETS
Cash and cash equivalents $ 615,495 $ 458,548
Restricted cash 71,412 65,484
Investment securities:
Available-for-sale, at fair value 1,094,070 1,188,002
Held-to-maturity, at amortized cost 108,066 111,706
Total investment securities 1,202,136 1,299,708
Loans held for sale 84,883 193,021
Loans held for investment 5,948,119 5,758,990
Less deferred loan fees and discounts (53,907) (68,843)
Total loans held for investment 5,894,212 5,690,147
Less allowance for loan and lease losses (126,630) (153,631)
Total loans held for investment, net 5,767,582 5,536,516
Interest receivable 31,894 38,796
Other investments 66,791 81,245
Goodwill 173,135 173,135
Deferred tax asset, net 370,577 45,445
Other assets 293,396 408,170
Total assets $ 8,677,301 $ 8,300,068
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $ 5,535,482 $ 5,124,995
Term debt 203,307 309,394
Other borrowings 1,009,880 1,015,099
Other liabilities 185,172 275,434
Total liabilities 6,933,841 6,724,922
Shareholders' equity:
Preferred stock (50,000,000 shares authorized; no shares outstanding) -- --
Common stock ($0.01 par value, 1,200,000,000 shares
authorized; 215,238,561 and 256,112,205 shares issued
and outstanding, respectively) 2,152 2,561
Additional paid-in capital 3,217,582 3,487,911
Accumulated deficit (1,498,131) (1,934,732)
Accumulated other comprehensive income, net 21,857 19,406
Total shareholders' equity 1,743,460 1,575,146
Total liabilities and shareholders' equity $ 8,677,301 $ 8,300,068
CapitalSource Third Quarter 2012 – Financial Supplement
CapitalSource Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
($ in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
Net interest income: (Unaudited)
Interest income:
Loans and leases $ 105,066 $ 108,301 $ 107,161 $ 322,437 $ 344,308
Investment securities 9,784 9,236 13,635 29,737 44,675
Other 384 445 680 1,119 2,070
Total interest income 115,234 117,982 121,476 353,293 391,053
Interest expense:
Deposits 12,738 12,640 13,422 38,669 40,203
Borrowings 6,775 7,524 21,066 21,866 86,844
Total interest expense 19,513 20,164 34,488 60,535 127,047
Net interest income 95,721 97,818 86,988 292,758 264,006
Provision for loan and lease losses 8,959 10,536 35,118 30,567 81,450
Net interest income after provision for loan and lease losses 86,762 87,282 51,870 262,191 182,556
Non-interest income:
Loan fees 4,174 3,057 3,421 11,899 11,435
Leased equipment income 3,299 3,258 901 9,815 974
Gain (loss) on investments, net 1,856 (620) 19,141 929 51,381
(Loss) gain on derivatives, net (978) 432 (2,113) (649) (4,262)
Other non-interest income, net 946 2,323 11,134 7,303 15,445
Total non-interest income 9,297 8,450 32,484 29,297 74,973
Non-interest Expense:
Compensation and benefits 25,523 25,408 31,047 77,347 90,524
Professional fees 2,469 3,089 3,097 9,158 12,985
Occupancy expenses 3,422 6,221 3,690 13,402 11,663
FDIC fees and assessments 1,507 1,463 1,375 4,419 4,706
General depreciation and amortizations 1,330 1,511 1,662 4,536 5,283
Other administrative expenses 7,660 13,622 8,023 30,902 28,780
Total operating expenses 41,911 51,314 48,894 139,764 153,941
Leased equipment depreciation 2,307 2,288 668 6,883 708
Expense of real estate owned and other foreclosed assets, net 2,308 3,821 12,835 6,579 34,124
(Gain) loss on extinguishment of debt -- (8,142) 113,679 (8,059) 113,679
Other non-interest expense, net 483 (1,081) 270 (908) (1,095)
Total non-interest expense 47,009 48,200 176,346 144,259 301,357
Net income (loss) before income taxes 49,050 47,532 (91,992) 147,229 (43,828)
Income tax expense (benefit) 18,003 (340,017) (11,280) (296,305) 17,131
Net income (loss) 31,047 387,549 (80,712) 443,534 (60,959)
Other comprehensive income (loss), net of tax
Unrealized gain (loss) on available-for-sale securities, net of tax 2,315 (960) (4,078) 2,802 21,219
Unrealized (loss) gain on foreign currency translation, net of tax -- -- (10,795) (351) 665
Other comprehensive income (loss) 2,315 (960) (14,873) 2,451 21,884
Comprehensive income (loss) $ 33,362 $ 386,589 $ (95,585) $ 445,985 $ (39,075)
Net income per share:
Basic $ 0.14 $ 1.71 $ (0.26) $ 1.94 $ (0.19)
Diluted $ 0.14 $ 1.66 $ (0.26) $ 1.88 $ (0.19)
Average shares outstanding:
Basic 219,664,637 226,532,286 306,535,063 229,091,849 315,719,413
Diluted 226,441,293 233,097,740 306,535,063 235,712,522 315,719,413
Dividends declared per share $ 0.01 $ 0.01 $ 0.01 $ 0.03 $ 0.03
CapitalSource Inc.
Segment Balance Sheets
(Unaudited)
($ in thousands)
September 30, 2012 June 30, 2012
CAPITALSOURCE
BANK
OTHER
COMMERCIAL
FINANCE
INTERCOMPANY
ELIMINATIONS
CONSOLIDATED CAPITALSOURCE
BANK
OTHER
COMMERCIAL
FINANCE
INTERCOMPANY
ELIMINATIONS
CONSOLIDATED
ASSETS
Cash and cash equivalents and restricted cash $ 508,862 $ 178,045 $ -- $ 686,907 $ 275,456 $ 216,088 $ -- $ 491,544
Investment securities:
Available-for-sale 1,069,923 24,147 -- 1,094,070 1,126,049 21,993 -- 1,148,042
Held-to-maturity 108,066 -- -- 108,066 108,520 -- -- 108,520
Loans 5,259,524 720,084 (513) 5,979,095 5,216,670 790,866 959 6,008,495
Allowance for loan and lease losses (98,435) (28,195) -- (126,630) (101,784) (31,575) -- (133,359)
Loans, net of allowance for loan and lease losses 5,161,089 691,889 (513) 5,852,465 5,114,886 759,291 959 5,875,136
Receivables due from affiliates 3,755 15,622 (19,377) -- 4,743 (1,827) (2,916) --
Other assets 434,258 502,540 (1,005) 935,793 429,806 521,055 (4,444) 946,417
Total assets $ 7,285,953 1,412,243 (20,895) 8,677,301 7,059,460 1,516,600 (6,401) 8,569,659
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $ 5,535,482 $ -- $ -- $ 5,535,482 $ 5,382,012 $ -- $ -- $ 5,382,012
Borrowings 600,000 613,187 -- 1,213,187 597,000 646,665 -- 1,243,665
Balance due to affiliates 15,622 3,755 (19,377) -- (1,827) 4,743 (2,916) --
Other liabilities 69,211 120,580 (4,619) 185,172 51,546 118,543 (7,794) 162,295
Total liabilities 6,220,315 737,522 (23,996) 6,933,841 6,028,731 769,951 (10,710) 6,787,972
Shareholders' equity:
Common stock 921,000 2,152 (921,000) 2,152 921,000 2,250 (921,000) 2,250
Additional paid-in capital/retained earnings/deficit 129,197 650,712 939,542 1,719,451 94,129 724,857 940,909 1,759,895
Accumulated other comprehensive income, net 15,441 21,857 (15,441) 21,857 15,600 19,542 (15,600) 19,542
Total shareholders' equity 1,065,638 674,721 3,101 1,743,460 1,030,729 746,649 4,309 1,781,687
Total liabilities and shareholders' equity $ 7,285,953 1,412,243 (20,895) 8,677,301 7,059,460 1,516,600 (6,401) 8,569,659
Book value per outstanding share $ 4.95 3.13 0.01 8.09 4.58 3.32 0.02 7.92
Tangible book value per outstanding share $ 4.15 3.13 0.01 7.29 3.81 3.32 0.02 7.15
CapitalSource Inc.
Segment Statements of Operations
(Unaudited)
($ in thousands)
Three Months Ended September 30, 2012 Three Months Ended June 30, 2012
Net interest income: CAPITALSOURCE
BANK
OTHER COMMERCIAL
FINANCE
INTERCOMPANY
ELIMINATIONS
CONSOLIDATED CAPITALSOURCE
BANK
OTHER COMMERCIAL
FINANCE
INTERCOMPANY
ELIMINATIONS
CONSOLIDATED
Interest income:
Loans and leases 91,367 15,171 (1,472) 105,066 87,680 21,729 (1,108) 108,301
Investment securities 8,123 1,661 -- 9,784 8,029 1,207 -- 9,236
Other 317 67 -- 384 403 42 -- 445
Total interest income $ 99,807 $16,899 $ (1,472) $ 115,234 $ 96,112 $ 22,978 $ (1,108) $ 117,982
Interest expense:
Deposits 12,738 -- -- 12,738 12,640 -- -- 12,640
Borrowings 2,783 3,992 -- 6,775 2,754 4,770 -- 7,524
Total interest expense 15,521 3,992 -- 19,513 15,394 4,770 -- 20,164
Net interest income 84,286 12,907 (1,472) 95,721 80,718 18,208 (1,108) 97,818
Provision for loan and lease losses 273 8,686 -- 8,959 12,569 (2,033) -- 10,536
Net interest income after provision for loan and lease losses 84,013 4,221 (1,472) 86,762 68,149 20,241 (1,108) 87,282
Non-interest income:
Loan fees 3,469 705 -- 4,174 2,759 298 -- 3,057
Leased equipment income 3,299 -- -- 3,299 3,258 -- -- 3,258
Other non-interest income, net 6,817 734 (5,727) 1,824 7,181 1,296 (6,342) 2,135
Total non-interest income, net 13,585 1,439 (5,727) 9,297 13,198 1,594 (6,342) 8,450
Non-interest expense:
Compensation and benefits 25,254 269 -- 25,523 24,981 427 -- 25,408
Professional fees 1,404 1,065 -- 2,469 1,844 1,245 -- 3,089
Leased equipment depreciation 2,307 -- -- 2,307 2,288 -- -- 2,288
Expense of real estate owned and other foreclosed assets, net 16 2,292 -- 2,308 1,616 2,205 -- 3,821
Gain on extinguishment of debt -- -- -- -- -- (8,142) -- (8,142)
Other non-interest expense, net 10,983 9,411 (5,992) 14,402 12,450 15,894 (6,608) 21,736
Total non-interest expense, net 39,964 13,037 (5,992) 47,009 43,179 11,629 (6,608) 48,200
Net income (loss) before income taxes 57,634 (7,377) (1,207) 49,050 38,168 10,206 (842) 47,532
Income tax expense (benefit) 23,782 (5,779) -- 18,003 15,106 (355,123) -- (340,017)
Net income (loss) $ 33,852 $ (1,598) $ (1,207) $ 31,047 $ 23,062 $ 365,329 $ (842) $ 387,549
Nine Months Ended September 30, 2012 Nine Months Ended September 30, 2011
Net interest income: CAPITALSOURCE
BANK
OTHER COMMERCIAL
FINANCE
INTERCOMPANY
ELIMINATIONS
CONSOLIDATED CAPITALSOURCE
BANK
OTHER COMMERCIAL
FINANCE
INTERCOMPANY
ELIMINATIONS
CONSOLIDATED
Interest income:
Loans and leases 267,905 58,357 (3,825) 322,437 234,679 110,011 (382) 344,308
Investment securities 25,626 4,111 -- 29,737 38,821 5,854 -- 44,675
Other 1,008 111 -- 1,119 967 1,103 -- 2,070
Total interest income $ 294,539 $ 62,579 $ (3,825) $ 353,293 $ 274,467 $ 116,968 $ (382) $ 391,053
Interest expense:
Deposits 38,669 -- -- 38,669 40,203 -- -- 40,203
Borrowings 8,305 13,561 -- 21,866 6,601 80,243 -- 86,844
Total interest expense 46,974 13,561 -- 60,535 46,804 80,243 -- 127,047
Net interest income 247,565 49,018 (3,825) 292,758 227,663 36,725 (382) 264,006
Provision for loan and lease losses 14,745 15,822 -- 30,567 23,636 57,814 -- 81,450
Net interest income (loss) after provision for loan and lease losses 232,820 33,196 (3,825) 262,191 204,027 (21,089) (382) 182,556
Non-interest income:
Loan fees 9,565 2,334 -- 11,899 5,373 6,062 -- 11,435
Leased equipment income 9,815 -- -- 9,815 974 -- -- 974
Other non-interest income, net 22,872 4,190 (19,479) 7,583 21,607 94,111 (53,154) 62,564
Total non-interest income, net 42,252 6,524 (19,479) 29,297 27,954 100,173 (53,154) 74,973
Non-interest expense:
Compensation and benefits 74,818 2,529 -- 77,347 36,819 56,458 (2,753) 90,524
Professional fees 4,615 4,543 -- 9,158 1,107 11,878 -- 12,985
Leased equipment depreciation 6,883 -- -- 6,883 708 -- -- 708
Expense of real estate owned and other foreclosed assets, net 1,334 5,245 -- 6,579 10,225 23,899 -- 34,124
(Gain) loss on extinguishment of debt -- (8,059) -- (8,059) -- 113,679 -- 113,679
Other non-interest expense, net 36,657 35,968 (20,274) 52,351 59,396 43,446 (53,505) 49,337
Total non-interest expense, net 124,307 40,226 (20,274) 144,259 108,255 249,360 (56,258) 301,357
Net income (loss) before income taxes 150,765 (506) (3,030) 147,229 123,726 (170,276) 2,722 (43,828)
Income tax expense (benefit) 62,047 (358,352) -- (296,305) 38,448 (21,317) -- 17,131
Net income (loss) $ 88,718 $ 357,846 $ (3,030) $ 443,534 $ 85,278 $ (148,959) $ 2,722 $ (60,959)
CapitalSource Third Quarter 2012 – Financial Supplement
CapitalSource Inc.
Selected Financial Data
(Unaudited)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
CapitalSource Bank Segment:
Performance ratios:
Return on average assets 1.88% 1.33% 1.55% 1.69% 1.82%
Return on average equity 12.75% 9.15% 9.90% 11.45% 11.71%
Return on average tangible equity 15.42% 11.03% 12.08% 13.75% 14.25%
Yield on average interest earning assets 5.88% 5.89% 5.97% 5.96% 6.19%
Cost of interest bearing liabilities 1.02% 1.05% 1.19% 1.06% 1.21%
Deposits 0.93% 0.95% 1.10% 0.97% 1.13%
Borrowings 1.85% 1.89% 2.01% 1.90% 2.02%
Net interest spread 4.86% 4.84% 4.78% 4.90% 4.98%
Net interest margin 4.97% 4.95% 4.94% 5.01% 5.14%
Operating expenses as a percentage of average total assets 2.07% 2.29% 2.05% 2.21% 2.10%
Efficiency ratio (1) 38.83% 43.49% 36.68% 41.02% 38.69%
Loan yield 6.95% 7.09% 7.51% 7.09% 7.89%
Capital ratios:
Tier 1 leverage 12.82% 12.69% 13.50% 12.82% 13.50%
Total risk-based capital 16.69% 16.20% 18.13% 16.69% 18.13%
Tangible common equity to tangible assets 12.55% 12.45% 13.40% 12.55% 13.40%
Average balances ($ in thousands):
Average loans $ 5,231,242 $ 4,973,262 $ 4,192,610 $ 5,046,915 $ 3,977,519
Average assets 7,174,140 6,963,062 6,464,975 7,016,564 6,259,099
Average interest earning assets 6,752,549 6,558,331 6,123,923 6,598,045 5,925,633
Average deposits 5,469,501 5,334,190 4,833,941 5,347,534 4,749,229
Average borrowings 597,674 585,791 506,413 583,785 435,879
Average equity 1,056,261 1,013,953 1,010,782 1,035,100 973,461
Other Commercial Finance Segment:
Performance ratios:
Return on average assets (0.43%) 120.00% (16.79%) 34.65% (6.70%)
Return on average equity (0.86%) 331.24% (41.11%) 86.57% (18.29%)
Yield on average interest earning assets 7.66% 9.20% 5.67% 8.47% 6.56%
Cost of interest bearing liabilities 2.56% 2.78% 5.70% 2.63% 6.51%
Net interest spread 5.10% 6.42% (0.03%) 5.83% 0.05%
Net interest margin 5.85% 7.29% 2.01% 6.63% 2.06%
Operating expenses as a percentage of average total assets 2.92% 5.90% 5.40% 4.25% 5.08%
Loan yield 7.91% 9.91% 8.58% 8.84% 8.57%
Average balances ($ in thousands):
Average loans $ 763,361 $ 881,960 $ 1,256,049 $ 882,013 $ 1,717,145
Average assets 1,477,940 1,224,451 2,522,401 1,379,590 2,972,692
Average interest earning assets 877,722 1,004,777 2,003,654 987,268 2,385,213
Average borrowings 621,371 690,928 1,288,807 687,966 1,647,602
Average equity 742,001 443,584 1,030,100 552,141 1,089,019
Consolidated CapitalSource Inc.: (2)
Performance ratios:
Return on average assets 1.43% 18.99% (3.59%) 7.06% (0.89%)
Return on average equity 6.85% 106.31% (15.65%) 37.18% (3.94%)
Return on average tangible equity 7.58% 120.60% (17.12%) 41.73% (4.31%)
Yield on average interest earning assets 6.01% 6.27% 5.93% 6.22% 6.29%
Cost of interest bearing liabilities 1.16% 1.23% 2.06% 1.22% 2.49%
Net interest spread 4.85% 5.04% 3.87% 5.00% 3.80%
Net interest margin 4.99% 5.20% 4.24% 5.15% 4.25%
Efficiency ratio (1) 40.81% 49.35% 36.68% 44.34% 38.69%
Operating expenses as a percentage of average total assets 1.94% 2.50% 2.23% 2.22% 2.26%
Leverage ratios:
Equity to total assets (as of period end) 20.09% 20.79% 20.41% 20.09% 20.41%
Tangible common equity to tangible assets 18.47% 19.15% 18.71% 18.47% 18.71%
Average balances ($ in thousands):
Average loans $ 5,995,021 $ 5,856,981 $ 5,451,395 $ 5,930,657 $ 5,698,155
Average assets 8,648,882 8,206,790 8,924,852 8,394,136 9,176,704
Average interest earning assets 7,630,690 7,564,867 8,130,313 7,587,042 8,314,338
Average borrowings 1,219,045 1,276,719 1,795,220 1,271,751 2,083,481
Average deposits 5,469,501 5,334,190 4,833,941 5,347,534 4,749,229
Average equity 1,802,085 1,466,177 2,045,996 1,593,372 2,068,085
(1) Efficiency ratio is defined as operating expense (non-interest expense less REO expense, early debt term expense, provision for unfunded commitments and lease depreciation) divided by net interest and non-interest income, less leased equipment depreciation.
(2) Applicable ratios have been calculated on a continuing operations basis.
CapitalSource Inc.
Credit Quality Data
(Unaudited)
September 30,2012 June 30,2012 March 31,2012 December 31,2011 September 30,2011
Loans 30-89 days contractually delinquent:
As a % of total loans(1) 0.50% 0.01% 0.31% 0.21% 0.27%
Loans 30-89 days contractually delinquent $30.2 $0.7 $19.0 $12.7 $15.7
Loans 90 or more days contractually delinquent:
As a % of total loans(1) 0.75% 1.04% 1.22% 1.61% 2.51%
Loans 90 or more days contractually delinquent $45.5 $63.1 $73.8 $95.8 $145.9
Loans on non-accrual:(2)
As a % of total loans(1) 2.70% 3.35% 3.94% 4.72% 5.72%
Loans on non-accrual $163.0 $203.1 $238.2 $280.7 $332.8
Impaired loans:(3)
As a % of total loans(1) 4.50% 6.03% 6.51% 7.15% 7.93%
Impaired loans $271.2 $365.7 $393.4 $425.3 $461.8
Allowance for loan and lease losses:
As a % of total loans(4) 2.15% 2.23% 2.61% 2.70% 3.64%
As a % of non-accrual loans 77.70% 65.66% 63.76% 54.74% 62.60%
Allowance for loan and lease losses $126.6 $133.4 $151.9 $153.6 $208.4
Net charge offs (last twelve months):
As a % of total average loans 2.09% 2.30% 3.31% 4.62% 4.87%
Net charge offs (last twelve months) $123.7 $134.0 $190.6 $268.5 $290.8
(1) Includes loans held for investment and loans held for sale. Excludes deferred loan fees and discounts and the allowance for loan and lease losses.
(2) Includes loans with an aggregate principal balance of $45.5 million, $63.1 million, $73.7 million, $90.2 million, and $144.7 million as of September 30, 2012, June 30, 2012, March 31, 2012, December 31, 2011, and September 30, 2011, respectively, that were also classified as loans 90 or more days contractually delinquent. Also includes non-performing loans held for sale that had an aggregate principal balance of $2.9 million, $3.1 million, and $118.7 million as of December 31, 2011, September 30, 2011, and June 30, 2011, respectively. As of September 30, 2012, June 30, 2012 and March 31, 2012 there were no non-performing loans classified as held for sale.
(3) Includes loans with an aggregate principal balance of $45.5 million, $63.1 million, $73.7 million, $94.9 million, and $142.8 million as of September 30, 2012, June 30, 2012, March 31, 2012, December 31, 2011, and September 30 2011, respectively, that were also classified as loans 90 or more days contractually delinquent, and loans with an aggregate principal balance of $163.0 million, $203.1 million, $238.2 million, $277.8 million, and $329.7 million as of September 30, 2012, June 30, 2012, March 31, 2012, December 31, 2011, September 30, 2011, respectively, that were also classified as loans on non-accrual status.
(4) Includes loans held for investment and deferred loan fees and discounts. Excludes the allowance for loan and lease losses.
CONTACT: Investor Relations: Dennis Oakes Senior Vice President, Investor Relations & Corporate Communications (212) 321-7212 doakes@capitalsource.com Media Relations: Michael Weiss Director of Communications (301) 841-2918 mweiss@capitalsource.comSource:CapitalSource, Inc.