Capmark Financial Group Inc. Issues Quarterly Report as of and for the three months ended March 31, 2013

HORSHAM, Pa.--(BUSINESS WIRE)--Capmark Financial Group Inc. (the “Company”) today issued its Quarterly Report as of and for the three months ended March 31, 2013. The Company reported a net loss of $1.8 million for the three months ended March 31, 2013 and had consolidated total assets of $2.2 billion, consolidated total liabilities of $1.3 billion, and stockholders’ equity of $0.9 billion as of March 31, 2013.

Highlights for the first quarter were:

• The Company realized total proceeds of $180 million from the monetization of loan and REO assets.
• The Company achieved consolidated net gains on loans, investments and real estate of $12 million.
• Capmark Bank made a distribution to Capmark Financial Group Inc. of $157 million.
• The Company paid a cash distribution 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 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.
• The Company recorded an unrealized gain of $14 million on its shares in a collateralized debt obligation which was included in accumulated other comprehensive income on the consolidated balance sheet as of March 31, 2013. The Company received $14 million of cash proceeds when the shares were redeemed subsequent to the end of the first quarter.
• The Company continued to reduce its staffing levels and office locations commensurate with the reduction in assets and operating activities. The Company reduced its staff from 90 employees at year end to 70 at March 31, 2013 and expects to have approximately 55 employees by the end of the second quarter. The Company also plans to reduce its five office locations at March 31, 2013 to three by the end of the second quarter.

Consolidated Balance Sheet

The Company had consolidated total assets of $2.2 billion and $2.9 billion as of March 31, 2013 and December 31, 2012, respectively, primarily comprised of a portfolio of loans, real estate, real estate-related assets and cash and cash equivalents. Assets totaling $1.1 billion and $1.4 billion were held at Capmark Bank and $171.1 million and $253.5 million of assets were associated with discontinued operations as of March 31, 2013 and December 31, 2012, respectively.

The Company had consolidated total liabilities of $1.3 billion and $1.5 billion as of March 31, 2013 and December 31, 2012, respectively. Capmark Bank had liabilities of $0.9 billion and $1.0 billion and liabilities of $84.0 million and $114.7 million were associated with discontinued operations as of March 31, 2013 and December 31, 2012, respectively. Capmark Bank’s liabilities were primarily comprised of Federal Deposit Insurance Corporation (“FDIC”)-insured deposit liabilities as of March 31, 2013 and December 31, 2012.

Total stockholders’ equity was $0.9 billion as of March 31, 2013 as compared to $1.3 billion as of December 31, 2012. The reduction was primarily due to the $451.1 million of cash distributions to holders of the Company’s common stock.

Consolidated Results of Operations

The Company had income from continuing operations before income taxes of $1.7 million in the three months ended March 31, 2013, primarily due to $12.3 million of interest income on loans held for sale and investment securities available for sale and $10.3 million of noninterest income substantially offset by $18.9 million of noninterest expense and $2.0 million of interest expense. Interest income in the three months ended March 31, 2013 included the recognition of $5.5 million of previously deferred interest on loans held for sale. Noninterest income of $10.3 million primarily included $12.1 million of realized gains on full or partial dispositions of loans held for sale partially offset by $1.1 million of net losses from the application of LOCOM to loans held for sale. Noninterest expense of $18.9 million included $8.8 million of compensation and benefits costs and $5.7 million of professional fees, of which $2.0 million was attributable to fees of restructuring and advisory professionals and $0.8 million was attributable to fees associated with the new markets tax credit (“NMTC”) assets. Compensation and benefits costs in the three months ended March 31, 2013 included $1.8 million for severance costs and $1.5 million for long term incentive plans. Interest expense of $2.0 million primarily included $10.2 million of contractual interest expense from deposit liabilities at Capmark Bank offset by $8.4 million from the accretion of the fresh start accounting premium for the deposit liabilities.

Liquidity

As of March 31, 2013, the Company’s continuing operations had $1.2 billion in total cash and cash equivalents (including restricted cash), of which $1.0 billion was held by Capmark Bank and $0.2 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	March 31, 2013		December 31, 2012
Capmark Bank cash and cash equivalents	$	1,025,104	$	1,296,156
Non-Capmark Bank:
Cash and cash equivalents		78,753		182,726
Restricted cash		105,222		75,219
Total cash, cash equivalents and restricted cash attributable to continuing operations	$	1,209,079	$	1,554,101
The following table summarizes the components of restricted cash from continuing operations (in thousands):
Restricted Cash	March 31, 2013		December 31, 2012
Cash from consolidated VIEs	$	77,243	$	49,663
Bankruptcy disputed administrative, priority and convenience class claims escrow		8,865		8,865
Distribution escrow		9,778		7,462
Other		9,336		9,229
Restricted cash from continuing operations	$	105,222	$	75,219

Cash from consolidated variable interest entities (“VIEs”) is from entities that are no longer owned by the Company but continue to be recognized on the Company’s balance sheet because derecognition criteria under GAAP have not been met. The increase in the related restricted cash as of March 31, 2013 as compared to December 31, 2012 was due primarily to the monetization of an underlying asset in an NMTC-related VIE which resulted in cash at the VIE. In the second quarter of 2013, the Company received $40.5 million attributable to that restricted cash.

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. On October 2, 2009, Capmark Bank consented to cease and desist orders (the “C&D Orders”) with the FDIC and the Utah Department of Financial Institutions (“UDFI”). Capmark Bank is prohibited under the C&D Orders from declaring or paying dividends or making any other form of payment representing a reduction in capital to Capmark Financial Group Inc. without the prior written consent or non-objection of the FDIC and the UDFI.

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 also expects that Capmark Bank has sufficient liquidity to meet its needs for cash for the next 12 months, including paying its operating expenses and interest and principal due on maturing deposit liabilities and other liabilities.

The Company paid a cash distribution of $4.50 per share on March 22, 2013 to shareholders of record on March 15, 2013. For U.S. federal income tax purposes, any distribution by the Company to its shareholders will be characterized as a dividend to the extent of the Company’s current or cumulative earnings and profits. Distributions made in excess of earnings and profits are next treated as a return of capital to the extent of the shareholders’ basis.

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 Quarterly Report as of and for the three months ended March 31, 2013 and March 31, 2012 and related supplemental financial information may be found on the Company’s website (www.capmark.com) under the heading “Financial Reporting.”

Investor Conference Call

The Company will hold a conference call for investors to be broadcast live over the Internet on May 16, 2013 at 3:00 p.m. Eastern Time regarding the topics addressed in this news release and the Quarterly Report as of and for the three months ended March 31, 2013 and March 31, 2012 and related supplemental financial information. To listen to the conference call, please go to the Company’s website (www.capmark.com) under the heading “Investor Relations” at least fifteen minutes prior to the scheduled start time to register and download and install any necessary audio software. For those who are unable to listen to the live broadcast, an archived replay will be available on the website for a period of time. Investors who have questions for the Company’s management can participate in the conference call by dialing the following:

• Toll free number: [phone]
• International: [phone]
• Conference ID# 69500595

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 (unaudited)
(in thousands, except share amounts)
	March 31, 2013		December 31, 2012
Assets
Cash and cash equivalents	$	1,103,857	$	1,478,882
Restricted cash (1)		105,222		75,219
Accounts and other receivables (1)		54,485		51,496
Investment securities available for sale		17,600		4,611
Loans held for sale (1)		440,399		591,814
Real estate investments (1)		134,597		154,112
Equity investments		209,105		248,350
Other assets (1)		11,782		13,048
Assets of discontinued operations (1)		171,084		253,518
Total assets	$	2,248,131	$	2,871,050
Liabilities and Equity
Liabilities:
Deposit liabilities		910,380		1,018,601
Other borrowings (1)		200,685		222,062
Other liabilities (1)		111,470		127,457
Liabilities of discontinued operations (1)		83,966		114,719
Total liabilities		1,306,501		1,482,839
Commitments and Contingent Liabilities
Equity:
Common stock, $.001 par value; shares authorized — 110,000,000; shares issued and outstanding —100,242,722 at March 31, 2013 and December 31, 2012		100		100
Capital paid in excess of par value		790,192		1,240,834
Retained earnings		88,524		90,313
Accumulated other comprehensive (loss) income, net of tax		7,493		(4,885	)
Total Capmark Financial Group Inc. stockholders’ equity		886,309		1,326,362
Noncontrolling interests		55,321		61,849
Total equity		941,630		1,388,211
Total liabilities and equity	$	2,248,131	$	2,871,050
____________________

(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.

	March 31, 2013		December 31, 2012			March 31, 2013		December 31, 2012
Assets					Liabilities
Restricted cash	$	77,243	$	49,663	Other borrowings	$	4,865	$	4,903
Accounts and other receivables		864		1,055	Other liabilities		1,651		2,011
Loans held for sale		139,017		181,794	Liabilities of discontinued operations		7,574		13,580
Real estate investments		22,734		22,225	Total liabilities	$	14,090	$	20,494
Other assets		2,037		1,482
Assets of discontinued operations		53,260		65,606
Total assets	$	295,155	$	321,825

CAPMARK FINANCIAL GROUP INC.
Consolidated Statement of Comprehensive Income (Loss) (unaudited)
(in thousands, except per share data)
	Three months ended March 31, 2013			Three months ended March 31, 2012
Net Interest Income
Interest income	$	12,324		$	38,273
Interest expense		2,023			20,000
Net interest income		10,301			18,273
Noninterest Income
Net gains on loans		10,832			21,281
Net gains (losses) on investments and real estate		800			(2,799	)
Other losses, net		(1,489	)		(7,818	)
Equity in income of joint ventures and partnerships		465			3,631
Fee revenue		133			1,877
Net real estate investment and other income		(454	)		2,047
Total noninterest income		10,287			18,219
Net revenue		20,588			36,492
Noninterest Expense
Compensation and benefits		8,760			14,778
Professional fees		5,670			5,877
Occupancy and equipment		658			1,413
Other expenses		3,850			7,495
Total noninterest expense		18,938			29,563
Income from continuing operations before income tax provision		1,650			6,929
Income tax provision (benefit)		159			(344	)
Income from continuing operations after income tax provision		1,491			7,273
Loss from discontinued operations, net of tax (includes gain on sale of $0 and $12,518, respectively)		(8,173	)		(11,219	)
Net loss		(6,682	)		(3,946	)
Plus: Net loss attributable to noncontrolling interests		4,893			26,947
Net (loss) income attributable to Capmark Financial Group Inc.	$	(1,789	)		23,001
Other comprehensive income (loss)
Net unrealized gain (loss) on investment securities		13,310			(211	)
Net foreign currency translation		(932	)		(3,121	)
Other comprehensive income (loss)		12,378			(3,332	)
Comprehensive income (loss) attributable to Capmark Financial Group Inc.	$	10,589		$	19,669
Basic and diluted net income per share from continuing operations	$	0.06		$	0.34
Basic and diluted net (loss) income per share attributable to Capmark Financial Group Inc.		(0.02	)		0.23
Basic weighted average shares outstanding		99,781			99,594
Diluted weighted average shares outstanding		99,787			99,705

CAPMARK FINANCIAL GROUP INC.
Consolidated Statement of Changes in Stockholders’ Equity (unaudited)
(in thousands, except number of shares)
	Three Months Ended March 31, 2013			Year ended December 31, 2012
Common Stock
Number of shares outstanding at beginning of period		100,242,722			100,052,475
Additional shares issued		—			243,767
Treasury shares retired		—			(53,520	)
Number of shares outstanding at end of period		100,242,722			100,242,722
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		1,240,834			2,692,602
Additional shares issued		—			—
Shareholder distributions		(451,092	)		(1,454,296	)
Treasury shares retired		—			(648	)
Stock-based compensation		450			3,176
Balance at end of period		790,192			1,240,834
Retained Earnings (Accumulated Deficit)
Balance at beginning of period		90,313			(31,651	)
Net (loss) income attributable to Capmark Financial Group Inc.		(1,789	)		121,964
Balance at end of period		88,524			90,313
Accumulated Other Comprehensive (Loss) Income, net of tax
Balance at beginning of period		(4,885	)		(1,617	)
Other comprehensive (loss) income		12,378			(3,268	)
Balance at end of period		7,493			(4,885	)
Total Capmark Financial Group Inc. Stockholders’ Equity		886,309			1,326,362
Noncontrolling Interests
Balance at beginning of period		61,849			178,960
Net loss attributable to noncontrolling interests		(4,893	)		(52,288	)
Other comprehensive (loss) income attributable to noncontrolling interests		—			—
Other (includes impact of sale of discontinued operations assets)		(1,635	)		(64,823	)
Balance at end of period		55,321			61,849
Total Equity	$	941,630		$	1,388,211

CAPMARK FINANCIAL GROUP INC.
Consolidated Statement of Cash Flows (unaudited)
(in thousands)
	Three months ended March 31, 2013			Three months ended March 31, 2012
Net Cash Provided By Operating Activities of Continuing Operations	$	125,778		$	532,234
Investing Activities of Continuing Operations
Net (increase) decrease in restricted cash		(30,003	)		33,319
Proceeds from sales of investment securities classified as available for sale		240			—
Repayments of investment securities classified as available for sale		—			569,257
Proceeds from sales of real estate investments		20,315			122,710
Proceeds from sales of/capital distributions from equity investments		39,353			5,338
Other investing activities, net		2			(664	)
Net cash provided by investing activities of continuing operations		29,907			729,960
Financing Activities of Continuing Operations
Repayments of debt		—			(272,473	)
Repayments of other borrowings		(21,377	)		(322,109	)
Repayment of deposit liabilities		(99,819	)		(660,927	)
Distribution to shareholders		(451,092	)		—
Other financing activities, net		(150	)		—
Net cash used in financing activities of continuing operations		(572,438	)		(1,255,509	)
Effect of Foreign Exchange Rates on Cash		(676	)		(6,810	)
Discontinued Operations
Net cash (used in) provided by operating activities of discontinued operations		(4,924	)		7,857
Net cash used in investing activities of discontinued operations		(2,467	)		(30,186	)
Net cash used in financing activities of discontinued operations		(20,517	)		—
Net cash used in discontinued operations		(27,908	)		(22,329	)
Net Decrease in Cash and Cash Equivalents		(445,337	)		(22,454	)
Cash and Cash Equivalents, Beginning of Period(1)(2)		1,568,920			2,737,811
Cash and Cash Equivalents, End of Period(3)(4)	$	1,123,583		$	2,715,357
Supplemental Disclosures of Cash Flow Information:
Income taxes refunded, net		177			3,249
Interest paid		15,413			54,177
____________________

Notes:
(1)	Cash and cash equivalents exclude restricted cash of $150.4 million from continuing and discontinued operations and include non-restricted cash of discontinued operations of $90.0 million, respectively as of December 31, 2012.
(2)	Cash and cash equivalents exclude restricted cash of $232.7 million from continuing and discontinued operations and include non-restricted cash of discontinued operations of $4.4 million, respectively as of December 31, 2011.
(3)	Cash and cash equivalents exclude restricted cash of $182.2 million from continuing and discontinued operations and include non-restricted cash of discontinued operations of $19.7 million, respectively as of March 31, 2013.
(4)	Cash and cash equivalents exclude restricted cash of $174.4 million from continuing and discontinued operations and include non-restricted cash of discontinued operations of $0.7 million, respectively as of March 31, 2012.