Capmark Financial Group Inc. Announces 2012 Results

  Capmark Financial Group Inc. Announces 2012 Results

Business Wire

HORSHAM, Pa. -- March 28, 2013

Capmark Financial Group Inc. (the “Company”) today issued its Report as of and
for the periods ended December 31, 2012 and December 31, 2011. The Company
reported net income of $122 million for the year ended December 31, 2012 and
had consolidated total assets of $2.9 billion, consolidated total liabilities
of $1.5 billion, and stockholders’ equity of $1.3 billion as of December 31,
2012.

In 2012, the Company made significant progress in monetizing its assets,
repaying debt, streamlining its operations and distributing cash to
shareholders. Total monetization proceeds, debt repayments and shareholder
distributions were all in excess of the amounts originally projected for 2012
in the financial projections distributed in connection with the Company’s plan
of reorganization.

Highlights for 2012 were:

  *The Company realized total proceeds of $3.8 billion from the monetization
    of loan and REO assets, including the completion of three portfolio sale
    transactions.
  *The Company achieved consolidated net gains on loans, investments and real
    estate of $168 million.
  *The Company completed the sale of its remaining real estate assets in
    Japan.
  *The Company substantially reduced total assets to $2.9 billion at year end
    2012 as compared to $8.6 billion at year end 2011, primarily as a result
    of asset dispositions, debt repayments and shareholder distributions. Year
    end 2012 assets included $592 million of loans, $195 million of real
    estate and $1.48 billion of cash (most of which was held by Capmark Bank).
  *The Company received asset distributions from Capmark Bank totaling
    approximately $1.69 billion, consisting of loans and REO assets of $1.32
    billion (at fair value) and cash of $368 million (the “Asset
    Distribution”). Approximately $910 million of the loans and REO
    transferred from Capmark Bank to the Company were monetized in 2012.
  *The Company fully repaid the $1.25 billion of secured debt securities
    issued at emergence from bankruptcy (the “Secured Notes”).
  *The Company made aggregate distributions to shareholders of $14.50 per
    share or $1.45 billion and ended the year with $1.3 billion of
    stockholders’ equity.
  *Capmark Bank transferred $827 million of deposits to an unaffiliated bank,
    which included all of Capmark Bank’s deposits maturing after August 2013
    (the “Brokered CD transaction”).
  *Capmark Bank repaid $1.9 billion of deposit liabilities and fully repaid
    its borrowings with the Federal Home Loan Bank of Seattle.
  *The Company paid an additional $112 million to prepetition creditors
    including $65 million under the settlement agreement with the Japanese
    lenders, $22 million under the settlement agreement with the creditors of
    Crystal Ball Holdings of Bermuda Limited and $25 million from the disputed
    claims reserve.
  *The Company substantially completed the wind down of its LIHTC business
    and Asian operations and substantially reduced the operations of Capmark
    Bank by transferring its loan and REO assets, together with the majority
    of its staff, to other subsidiaries of the Company.
  *The Company reduced its headcount from 220 employees at December 31, 2011
    to 90 employees at December 31, 2012 and closed 5 offices in 2012.

Highlights for 2013 year-to-date:

  *Capmark Bank made a distribution to the Company of $157 million on
    February 28, 2013.
  *The Company paid a cash distribution to shareholders of $4.50 per share on
    March 22, 2013 to shareholders of record on March 15, 2013, bringing
    aggregate distributions to shareholders since emergence from bankruptcy to
    $19.00 per share.
  *The Company paid an additional $68 million to prepetition creditors
    including $21 million under the settlement agreement with the Japanese
    lenders, $3 million under the settlement agreement with creditors of
    Crystal Ball Holdings of Bermuda Limited and $44 million from the disputed
    claims reserve.

Consolidated Balance Sheet

The Company had consolidated total assets of $2.9 billion and $8.6 billion as
of December 31, 2012 and 2011, respectively, primarily comprised of a
portfolio of loans, real estate, real estate-related assets and cash and cash
equivalents. Capmark Bank had assets of $1.4 billion and $6.2 billion as of
the same dates. Assets totaling $253.5 million and $381.9 million were
associated with discontinued operations as of December 31, 2012 and 2011,
respectively.

The Company had consolidated total liabilities of $1.5 billion and $5.8
billion as of December 31, 2012 and 2011, respectively. Capmark Bank had
liabilities of $1.0 billion and $4.3 billion as of the same dates, primarily
comprised of $1.0 billion and $3.9 billion of Federal Deposit Insurance
Corporation (“FDIC”) insured deposit liabilities. The deposit liabilities of
Capmark Bank decreased during 2012 due to repayment of maturing deposits and
the Brokered CD Transaction. The Non-Capmark Bank debt decreased due to the
repayment of the Secured Notes and the determination that the Asian Operations
met the criteria for inclusion in discontinued operations. Liabilities of the
continuing operations of the Company also included $219.8 million and $256.6
million of other borrowings as of December 31, 2012 and 2011, respectively,
recognized on the Company’s balance sheet as a result of accounting for
certain transfers of financial assets as financings under Accounting Standards
Codification (“ASC”) 860, Transfers and Servicing (“ASC 860”). These
obligations are non-recourse from the Company’s perspective. The Company also
had liabilities of $114.7 million and $177.8 million associated with
discontinued operations as of December 31, 2012 and 2011, respectively.

Total stockholders’ equity was $1.3 billion at December 31, 2012 compared to
$2.7 billion at December 31, 2011. The decrease is due primarily to the $1.45
billion of cash distributions to holders of the Company’s common stock.

Consolidated Results of Operations

Capmark Bank

Capmark Bank had income from continuing operations before income taxes of
$165.5 million in the year ended December 31, 2012 primarily due to $169.1
million of net gains on loans and $66.0 million of interest income primarily
from loans held for sale, partially offset by $43.1 million of noninterest
expense, $15.4 million of interest expense primarily on brokered certificates
of deposit and a $12.4 million net loss on the Brokered CD Transaction. Net
gains on loans included a $51.3 million gain on the Asset Distribution, which
is eliminated in the consolidated results of operations. Net gains on loans
also included $93.4 million of realized gains on full or partial dispositions
of other loans held for sale and $24.4 million of recapture of losses from the
application of lower of cost or fair value accounting (“LOCOM”) to loans held
for sale. The $43.1 million of noninterest expense included $24.9 million of
compensation and benefits costs, of which $10.7 million was for long-term
incentive plans and $2.1 million was for retention programs. The $15.4 million
of interest expense for Capmark Bank was comprised of $86.5 million of
contractual interest expense from deposit liabilities and FHLB borrowings
offset by $71.1 million from the accretion of the fresh start accounting
premium for the deposit liabilities and FHLB borrowings.

Non-Capmark Bank

The Company’s Non-Capmark Bank operations had income from continuing
operations before income taxes of $3.7 million in the year ended December 31,
2012 primarily due to $85.0 million of noninterest income and $43.0 million of
interest income on loans held for sale and investment securities available for
sale, substantially offset by $91.0 million of noninterest expense and $33.3
million of interest expense. Noninterest income of $85.0 million primarily
included $70.1 million of realized gains on full or partial dispositions of
loans held for sale and $6.4 million of gains due to the reduction of the
estimate of potential losses on loans held for sale associated with the former
new markets tax credit (“NMTC”) program partially offset by $15.3 million of
losses from the application of LOCOM to loans held for sale. The noninterest
income also included $31.3 million of equity in income of joint ventures and
partnerships primarily due to unrealized gains on equity investments resulting
from increases in the fair value of assets held by real estate investment
funds and joint ventures. The $91.0 million of noninterest expense included
$38.7 million of compensation and benefits costs and $29.2 million of
professional fees, of which $7.8 million was attributable to fees of
restructuring and advisory professionals and $5.1 million was attributable to
fees associated with the former NMTC business. Compensation and benefits costs
in the year ended December 31, 2012 included $9.3 million for long-term
incentive plans and $4.0 million for retention programs. The $33.3 million of
interest expense included $23.4 million of contractual interest expense for
the Secured Notes and $5.7 million for the accretion of the fresh start
accounting discount for the Secured Notes.

Liquidity

As of December 31, 2012, the Company’s continuing operations had $1.6billion
in total cash and cash equivalents (including restricted cash), of which $1.3
billion was held by Capmark Bank and $0.3 billion was held by its other
subsidiaries. The following table summarizes the cash, cash equivalents and
restricted cash from continuing operations (in thousands):

                                                               
Cash, Cash Equivalents and Restricted Cash         December 31,   December 31,
                                                   2012           2011
Capmark Bank:
Cash and cash equivalents                          $ 1,296,156    $ 2,286,889
Non-Capmark Bank:
Cash and cash equivalents – Asian Operations (1)   —              90,778
Cash and cash equivalents – Other Non-Capmark      182,726        355,749
Bank
Cash and cash equivalents – Total Non-Capmark      182,726        446,527
Bank
Restricted cash                                    75,219         129,264
Total cash, cash equivalents and restricted cash   $ 1,554,101    $ 2,862,680
attributable to continuing operations

    
Note:
      Management determined that the Asian Operations segment met the criteria
(1)   for inclusion as discontinued operations as of June 30, 2012 and it is
      no longer reflected as a business segment of continuing operations.
      

The following table summarizes the components of restricted cash from
continuing operations (in thousands):

                                                               
Restricted Cash                                    December 31,   December 31,
                                                   2012           2011
Cash from consolidated VIEs                        $ 49,663       $ 72,626
Secured Notes interest reserve                     —              25,000
Bankruptcy disputed administrative, priority and   8,865          18,499
convenience class claims escrow
Distribution escrow                                7,462          —
Other                                              9,229          13,139
Restricted cash from continuing operations         $ 75,219       $ 129,264
                                                                  

The Company’s primary sources of liquidity are expected to be (1)proceeds
from the sale of loans, including discounted payoffs received in connection
with loan workout efforts, (2) proceeds from the sale of real estate, (3)
principal and interest payments on loans, (4) distributions received from
equity investments and (5) sales of other assets in its portfolio.

Capmark Bank has cash and cash equivalents in excess of all of its remaining
deposit liabilities and other liabilities as well as its expected operating
expenses over the next 12 months. Capmark Bank is prohibited under cease and
desist orders with the FDIC and the Utah Department of Financial Institutions
(together, the “Bank Regulators”) from declaring or paying dividends or making
any other form of payment representing a reduction in capital to the Company
without the prior written consent or non-objection of the Bank Regulators.

The Company expects to generate sufficient liquidity to meet its needs for
cash in its Non-Capmark Bank operations over the next 12 months, including
paying its operating expenses.

The Company paid cash distributions to the holders of the Company’s common
stock as follows:

                                     
                                        Distribution
Record Date         Distribution Paid   Amount Per Share
October 5, 2012     October 12, 2012    $6.00
December 17, 2012   December 20, 2012   $8.50
March 15, 2013      March 22, 2013      $4.50
                                        

The Company will consider making additional distributions to shareholders of
cash in excess of working capital needs and expects to make a distribution in
the second quarter of 2013, however the specific timing and amount of any
distribution have not been determined.

Supplemental Financial Information

The Company’s Report as of and for the periods ended December 31, 2012 and
December 31, 2011 and related supplemental financial information may be found
on the Company’s website (www.capmark.com) under the heading “Financial
Reporting.”

Investor Meeting

The Company will hold an investor meeting on April 2, 2013 at 12:00 p.m.
Eastern Time in New York, NY to discuss, among other items, the Report as of
and for the periods ended December 31, 2012 and December 31, 2011.
Pre-registration is required to attend the investor meeting in person and
space is limited. If you have any questions regarding the investor meeting,
contact investor.relations@capmark.com. The materials to be discussed at the
investor meeting will be made available at www.capmark.com under the heading
“Investor Relations” prior to the meeting.

The investor meeting will be broadcast live over the internet for those unable
to attend the meeting. To listen to the investor meeting, please go to
www.capmark.com under the heading “Investor Relations” at least fifteen
minutes prior to the scheduled start time to download and install any
necessary audio software. Investors may also listen to the investor meeting by
dialing in to the following number, but phone participants will be unable to
submit questions during the Q&A session following management’s presentation:

  *Toll Free: (866) 618-6997
  *Conference ID # 24422288

Forward-Looking Statements

Certain statements in this release may constitute forward-looking statements.
These statements are based on management’s current expectations and beliefs
but are subject to a number of factors and uncertainties that could cause
actual results to differ materially from those described in the
forward-looking statements. Such forward-looking statements are made only as
of the date of this release. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in the
Company’s expectations with regard thereto or changes in events, conditions,
or circumstances on which any such statement is based.

About Capmark®:

Capmark is a real estate finance company focused on the management of its
commercial real estate-related assets and businesses with a view to maximizing
their value. Capmark is headquartered in Horsham, Pennsylvania and operates
principally in North America. For more information, visit www.capmark.com.

                                                               
CAPMARK FINANCIAL GROUP INC.
Consolidated Balance Sheet
(in thousands, except share amounts)
                                                                  
                                                   December 31,   December 31,
                                                   2012           2011
Assets
Cash and cash equivalents(1)                       $ 1,478,882    $ 2,733,416
Restricted cash (1)                                75,219         129,264
Accounts and other receivables (1)                 51,496         106,888
Investment securities available for sale           4,611          595,647
Loans held for sale (1)                            591,814        3,550,269
Real estate investments (1)                        154,112        672,660
Equity investments                                 248,350        322,600
Other assets (1)                                   13,048         106,112
Assets of discontinued operations (1)              253,518        381,946
Total assets                                       $ 2,871,050    $ 8,598,802
Liabilities and Equity
Liabilities:
Debt                                               —              807,869
Other borrowings (1)                               222,062        652,598
Deposit liabilities                                1,018,601      3,860,332
Other liabilities (1)                              127,457        261,813
Liabilities of discontinued operations (1)         114,719        177,796
Total liabilities                                  1,482,839      5,760,408
Commitments and Contingent Liabilities
Equity:
Common stock, $.001 par value; shares authorized
— 110,000,000; shares issued and outstanding       100            100
—100,242,722 at December 31, 2012 and
100,052,475 at December 31, 2011
Capital paid in excess of par value                1,240,834      2,692,602
Retained earnings (accumulated deficit)            90,313         (31,651)
Accumulated other comprehensive (loss) income,     (4,885)        (1,617)
net of tax
Total Capmark Financial Group Inc. stockholders’   1,326,362      2,659,434
equity
Noncontrolling interests                           61,849         178,960
Total equity                                       1,388,211      2,838,394
Total liabilities and equity                       $ 2,871,050    $ 8,598,802


(1) The following table presents assets of consolidated variable interest
entities (“VIEs”) included in each balance sheet line item that can be used
only to settle the obligations of the consolidated VIE and liabilities of the
consolidated VIE included in each balance sheet line item for which creditors
or other interest holders do not have recourse to the general credit of
Capmark Financial Group Inc. and its subsidiaries.

                                                               
                December      December                     December   December
                31,           31,                          31,        31,
                2012          2011                         2012       2011
Assets                                      Liabilities
Cash and cash   $  —          $ 2,949       Other          $ 4,903    $ 6,079
equivalents                                 borrowings
Restricted         49,663       72,626      Other            2,011      12,315
cash                                        liabilities
Accounts and                                Liabilities
other              1,055        4,757       of              13,580    73,482
receivables                                 discontinued
                                            operations
Loans held         181,794      266,779     Total          $ 20,494   $ 91,876
for sale                                    liabilities
Real estate        22,225       115,850
investments
Other assets       1,482        3,362
Assets of
discontinued      65,606      240,062
operations
Total assets    $  321,825    $ 706,385

                                                               
CAPMARK FINANCIAL GROUP INC.
Consolidated Statement of Comprehensive Income (Loss)
(in thousands, except per share data)
                                                                  
                                                                  Three months
                                                   Year ended     ended
                                                   December 31,   December 31,
                                                   2012           2011
Net Interest Income
Interest income                                    $  108,985     $  46,370
Interest expense                                     48,675        27,820
Net interest income                                  60,310        18,550
Noninterest Income
Net gains (losses) on loans                           179,019        (21,904)
Net losses on investments and real estate             (10,733)       (6,565)
Other (losses) gains, net                             (12,226)       2,193
Equity in income of joint ventures and                25,452         12,405
partnerships
Fee revenue                                           3,527          1,755
Net real estate investment and other income          (333)         (738)
Total noninterest income                             184,706       (12,854)
Net revenue                                          245,016       5,696
Noninterest Expense
Compensation and benefits                             63,580         14,337
Professional fees                                     32,034         28,898
Occupancy and equipment                               9,498          1,225
Other expenses                                       27,599        7,645
Total noninterest expense                            132,711       52,105
Income (loss) from continuing operations before       112,305        (46,409)
income tax benefit
Income tax benefit                                   (1,700)       (3,511)
Income (loss) from continuing operations after        114,005        (42,898)
income tax benefit
Loss from discontinued operations, net of tax
(includes gain on sale of $33,147 and $1,278         (44,329)      (11,923)
respectively)
Net income (loss)                                     69,676         (54,821)
Plus: Net loss attributable to noncontrolling        52,288        23,170
interests
Net income (loss) attributable to Capmark          $  121,964     $  (31,651)
Financial Group Inc.
Other comprehensive income (loss)
Net unrealized gain on investment securities          2,300          1,250
Net foreign currency translation                     (5,568)       (2,867)
Other comprehensive income (loss)                    (3,268)       (1,617)
Comprehensive income (loss) attributable to        $  118,696     $  (33,268)
Capmark Financial Group Inc.
Basic and diluted net income (loss) per share -    $  1.67        $  (0.21)
continuing operations
Basic and diluted net loss per share -                (0.45)         (0.13)
discontinued operations
Basic and diluted net income (loss) per share        1.22          (0.34)
attributable to Capmark Financial Group Inc.
Basic weighted average shares outstanding             99,607         92,890
Diluted weighted average shares outstanding           99,734         92,890

                                                               
CAPMARK FINANCIAL GROUP INC.
Consolidated Statement of Changes in Stockholders’ Equity
(in thousands)
                                                                  
                                                                  Three months
                                                  Year ended      ended
                                                  December 31,    December 31,
                                                  2012            2011
Common Stock
Balance at beginning of period                    $ 100           $  100
Additional shares issued                           —               —
Balance at end of period                           100             100
Capital Paid in Excess of Par Value
Balance at beginning of period                      2,692,602        2,690,800
Additional shares issued                            —                —
Shareholder distributions                           (1,454,296)      —
Treasury stock retired                              (648)            —
Stock-based compensation                           3,176           1,802
Balance at end of period                           1,240,834       2,692,602
Retained Earnings (Accumulated Deficit)
Balance at beginning of period                      (31,651)         —
Net income (loss) attributable to Capmark          121,964         (31,651)
Financial Group Inc.
Balance at end of period                           90,313          (31,651)
Accumulated Other Comprehensive (Loss) Income,
net of tax
Balance at beginning of period                      (1,617)          —
Other comprehensive (loss) income                  (3,268)         (1,617)
Balance at end of period                           (4,885)         (1,617)
Total Capmark Financial Group Inc.                 1,326,362       2,659,434
Stockholders’ Equity
Noncontrolling Interests
Balance at beginning of period                      178,960          469,414
Net loss attributable to noncontrolling             (52,288)         (23,170)
interests
Other comprehensive (loss) income attributable      —                —
to noncontrolling interests
Other (includes impact of sale of discontinued     (64,823)        (267,284)
operations assets)
Balance at end of period                           61,849          178,960
Total Equity                                      $ 1,388,211     $  2,838,394

                                                               
CAPMARK FINANCIAL GROUP INC.
Consolidated Statement of Cash Flows
(in thousands)
                                                                  
                                                                  Three months
                                                  Year ended      ended
                                                  December 31,    December 31,
                                                  2012            2011
Operating Activities of Continuing Operations
Net income (loss)                                 $ 69,676        $  (54,821)
Net loss from discontinued operations              (44,329)        (11,923)
Net income (loss) from continuing operations        114,005          (42,898)
Adjustments to reconcile net income (loss) from
continuing operations to net cash provided by
operating activities of continuing operations:
Net (gains) losses                                  (156,060)        24,327
Net accretion of fresh start accounting             (65,242)         (23,954)
adjustments
Equity in net gains of investees and cash           (22,970)         (9,612)
return on investment
Stock-based compensation expense                    3,380            1,801
Other, net                                          9,430            (1,760)
Net change in assets and liabilities which
provided (used) cash:
Accounts and other receivables                      91,306           28,100
Other assets                                        90,493           9,883
Other liabilities                                   (108,017)        (42,245)
Current taxes payable                               111              201
Funding advances for loans held for sale            —                (5,985)
Proceeds from sales of/payments from loans held    3,075,582       742,215
for sale
Net cash provided by operating activities of       3,032,018       680,073
continuing operations
Investing Activities of Continuing Operations
Net decrease in restricted cash                     54,045           351,264
Proceeds from sales of investment securities        18,916           —
classified as available for sale
Repayments of investment securities classified      570,657          106,431
as available for sale
Proceeds from sales of real estate investments      281,577          67,982
Proceeds from sales of/capital distributions        101,463          20,572
from equity investments
Other investing activities, net                    (1,689)         (734)
Net cash provided by investing activities of       1,024,969       545,515
continuing operations
Financing Activities of Continuing Operations
Repayments of debt                                  (738,959)        (550,310)
Repayments of other borrowings                      (427,810)        —
Transfer of deposit liabilities                     (874,026)        —
Repayment of deposit liabilities                    (1,909,451)      (37,752)
Distribution to shareholders                        (1,454,296)      —
Other financing activities, net                    2,348           (589)
Net cash used in financing activities of           (5,402,194)     (588,651)
continuing operations
Effect of Foreign Exchange Rates on Cash           (89)            (955)
Discontinued Operations
Net cash (used in) provided by operating            (18,192)         9,204
activities of discontinued operations
Net cash provided by investing activities of        259,613          66,927
discontinued operations
Net cash used in financing activities of           (65,016)        —
discontinued operations
Net cash provided by discontinued operations        176,405          76,131
Net (Decrease) Increase in Cash and Cash            (1,168,891)      712,113
Equivalents
Cash and Cash Equivalents, Beginning of            2,737,811       2,025,698
Period(1)
Cash and Cash Equivalents, End of Period(1)(2)    $ 1,568,920     $  2,737,811

                                                               
CAPMARK FINANCIAL GROUP INC.
Consolidated Statement of Cash Flows (Continued)
(in thousands)
                                                                  
                                                                  Three months
                                                   Year ended     ended
                                                   December 31,   December 31,
                                                   2012           2011
Supplemental Disclosures of Cash Flow
Information:
Income taxes refunded, net                         $   11,248     $   372
Interest paid                                          143,276        46,386
Non-cash Investing and Financing Activities:
Transfer of loans held for sale to real estate         20,309         79,517
Transfer of real estate to loans held for sale         14,549         —

    
Notes:
      Cash and cash equivalents exclude restricted cash of $232.7 million from
(1)   continuing and discontinued operations and include non-restricted cash
      of discontinued operations of $4.4 million, respectively as of December
      31, 2011.
      
      Cash and cash equivalents exclude restricted cash of $150.4 million from
(2)   continuing and discontinued operations and include non-restricted cash
      of discontinued operations of $90.0 million, respectively as of December
      31, 2012.

Contact:

Capmark Financial Group Inc.
Thomas L. Fairfield, 215-328-1555
 
Press spacebar to pause and continue. Press esc to stop.