Capmark Financial Group Inc. Announces 2012 Results

Capmark Financial Group Inc. Announces 2012 Results

HORSHAM, Pa.--(BUSINESS WIRE)-- 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 $1.6 billion 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):

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

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:

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.