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 email@example.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
Capmark Financial Group Inc. Announces 2012 Results
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