CapitalSource Reports Fourth Quarter And Full Year 2013 Results

  • Net Income of $58 Million or $0.29 Per Share in 4Q, Includes Gains on Asset Sales of $23 million or $0.12 Per Share
  • 4Q Loan Growth of $312 Million (4.8%) at CapitalSource Bank Resulted in 2013 Loan Growth of 19.0%
  • 4Q Net Interest Income of $91 Million at CapitalSource Bank was 9% Higher Than 4Q'12
  • Full Year Net Income of $141 Million at CapitalSource Bank was 15% Higher than the Prior Year
  • Net Interest Margin of 4.76% at CapitalSource Bank in 4Q / Full Year NIM of 4.87%
  • CapitalSource Bank Credit Metrics Remained at Very Low Levels - Year End NPAs at 60 bps of Total Assets

LOS ANGELES, Jan. 23, 2014 (GLOBE NEWSWIRE) -- CapitalSource Inc. (NYSE:CSE) today announced financial results for the fourth quarter and full year 2013. The Company reported fourth quarter net income of $58 million or $0.29 per diluted share, compared to net income of $48 million or $0.24 per diluted share in the prior quarter and net income of $47 million or $0.22 per diluted share in the fourth quarter of 2012. Net income for 2013 was $164 million or $0.82 per diluted share, compared to net income of $491 million or $2.13 per diluted share for 2012, which included $347 million or $1.49 per diluted share related to the reversal of a substantial portion of the Company's deferred tax asset valuation allowance in the second quarter of 2012.

"2013 was an outstanding year of growth and profitability for CapitalSource Bank. Our national lending franchise once again outperformed our expectations - originating over $2.5 billion of new loans which resulted in 19% loan growth," said James J. Pieczynski, CapitalSource CEO. "Our strong financial performance last year will be greatly enhanced by the planned merger with PacWest Bancorp. We are very pleased that CapitalSource shareholders overwhelmingly approved the merger at a special meeting on January 13, and we look forward to receiving the required regulatory approvals so the transaction can close before the end of the first quarter."

"Our intense focus on profitable loan growth, maintaining an industry-leading net interest margin, expense management, and tight credit underwriting and monitoring clearly produced the intended results last year," said Tad Lowrey, CapitalSource Bank Chairman and CEO. "2013 net income at the Bank was 15% higher than the prior year; Bank assets grew by more than $700 million or 10% and surpassed $8 billion; operating expenses were down modestly, despite the strong growth; full-year net interest margin was 4.87%; and all key credit metrics were at very low levels at year-end. Non-performing assets, for example, were only 60 basis points of total assets," added Lowrey.

"Unrestricted cash at the Parent Company increased to $411 million at the end of the fourth quarter, as loan sales and payoffs reduced the Parent loan portfolio to just $86 million at year-end. In addition, $37 million of investment securities were sold in the quarter, resulting in a gain of $23 million or $0.12 per share. The investment securities were capital assets and the gains were not taxed due to a corresponding release from the Company's valuation allowance," said John Bogler, CFO. "Full-year consolidated operating expenses declined by $16 million or 9%, which is a notable achievement given our strong loan growth and reflects the scalability of our operating structure. The balance sheet at CapitalSource Bank strengthened throughout 2013 and we ended the year with very strong capital levels, despite 19% loan growth. Our Tier 1 leverage ratio was 13.88% and our risk-based capital ratio was 16.29% at year end."

CAPITALSOURCE BANK SEGMENT

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

Fourth Quarter 2013 Highlights
  • Net Income was $37.6 million, a decrease of $0.8 million from the prior quarter, due primarily to increases in loan and lease loss provision and REO related expenses partially offset by a $5 million increase in loan fee income. Net income for 2013 increased 15% to $140.7 million, compared to $122.7 million for 2012.  
  • Loans and Leases increased $312 million or 4.8%. New funded loan and lease production was $644 million, compared to $604 million in the prior quarter. Total loans and leases were $6.9 billion at year end, an increase of 19% in 2013.  
  • Bank Assets increased $146 million or 1.8% from the prior quarter. Total Bank assets were $8.1 billion at year end, an increase of 9.6% in 2013.  
  • Net Interest Margin was 4.76%, a decrease of 10 basis points from the prior quarter, primarily due to higher MBS premium amortization in the investment portfolio, partially offset by increased portfolio loan mix. 4Q loan yield declined 5 basis points to 6.25%, while full year NIM was 4.87%.  
  • Capital - The Tier 1 leverage ratio increased 33 basis points to 13.88%, while the total risk-based capital ratio increased 1 basis point to 16.29%.  
  • Credit Quality - All key credit quality metrics remained at very low levels. Loan and lease loss provision was $4.4 million, compared to $2.2 million in the prior quarter. Non-performing assets increased by $4 million to $49 million or 0.60% of total assets, compared to 0.56% at the end of the prior quarter. Net charge-offs were $0.5 million in the quarter, compared to $1.7 million in the prior quarter, and were 0.10% of average loans for the full year.

Fourth Quarter 2013 Details
  Quarter Ended
        12/31/13 vs 9/30/13 12/31/13 vs 12/31/12
  12/31/2013 9/30/2013 12/31/2012 $ % $ %
($ in thousands)              
Interest income $107,482 $107,810 $98,544 $(328) —% $8,938 9%
Interest expense 16,358 16,106 15,122 (252) (2) (1,236) (8)
Loan and lease loss provision 4,428 2,230 1,447 (2,198) (99) (2,981) (206)
Non-interest income 21,496 16,039 18,243 5,457 34 3,253 18
Non-interest expense 43,837 42,101 44,262 (1,736) (4) 425 1
Income tax expense 26,789 25,015 22,008 (1,774) (7) (4,781) (22)
Net income 37,566 38,397 33,948 (831) (2) 3,618 11

Net Interest Margin was 4.76%, a decrease of 10 basis points from the prior quarter due primarily to higher MBS premium amortization in the investment portfolio, partially offset by increased portfolio loan mix.
  Quarter Ended
  12/31/2013   9/30/2013
Net Interest Margin Average Balance Interest Income/Expense Average Yield/Cost   Average Balance Interest Income/Expense Average Yield/Cost
($ in thousands)              
Loans $6,490,933 $102,318 6.25% (1) $6,326,704 $100,461 6.30%
Investment securities 978,790 4,647 1.88   1,044,070 6,922 2.63
Cash and other interest-earning assets 132,740 517 1.55 (2) 109,515 427 1.55
Total interest-earning assets 7,602,463 107,482 5.61   7,480,289 107,810 5.72
Deposits 6,090,152 13,681 0.89   5,963,151 13,407 0.89
Borrowings 590,489 2,677 1.80   632,608 2,699 1.69
Total interest-bearing liabilities 6,680,641 16,358 0.97   6,595,759 16,106 0.97
Net interest income / spread   $91,124 4.64%     $91,704 4.75%
Net interest margin     4.76%       4.86%

(1) Loan yield for the quarter included 45 basis points of fee and discount accretion, compared to 39 basis points in the prior quarter

(2) Other interest earning assets included short term investments and FHLB stock totaling $70.2 million with an average yield of 2.66%, compared to 2.17% in the prior quarter

Non-Interest Expense was $44 million, an increase of $2 million from the prior quarter due primarily to higher accrual for incentive compensation and higher OREO expense, partially offset by an FDIC assessment adjustment. For 2013, non-interest expense declined $0.3 million.

Income Tax Expense was $27 million for the quarter, compared to $25 million in the prior quarter. The effective tax rate for the quarter was 41.6%, compared to 39.5% in the prior quarter.

Cash and Investments decreased by $150 million to $1.0 billion, as available liquidity was redeployed to partially fund loan growth. The portfolio yield increased by 12 basis points due to the lower mix of cash and cash equivalents. 
Cash and Investments 12/31/2013 9/30/2013
($ in thousands) Balance Yield Duration (Years) Balance Yield Duration (Years)
Cash and cash equivalents and restricted cash $87,312 0.14% 0.0 $180,261 0.13% 0.0
Agency MBS 784,240 2.28% 3.7 838,182 2.33% 4.3
Non-agency MBS 20,203 4.71% 1.8 22,206 4.72% 1.7
CMBS 74,369 2.30% 0.8 74,403 2.32% 1.0
CLO 47,337 2.62% 5.1 47,860 2.66% 5.3
Asset-backed securities 3,169 11.37% 1.4 3,599 11.36% 1.5
SBA Asset-backed securities 15,533 3.12% 5.9 15,708 3.12% 5.9
  $1,032,163 2.20% 3.2 $1,182,219 2.08% 3.4

Loans and Leases increased $312 million or 4.8% from the prior quarter. For 2013, loans and leases increased $1.1 billion or 19.0%. The largest concentrations of new loans funded in the quarter were commercial real estate, equipment finance, healthcare real estate and technology cash flow.
  Quarter Ended
Loan and Lease Roll Forward (1) 12/31/2013 9/30/2013 12/31/2012
($ in thousands)      
Beginning balance $6,585,818 $6,410,398 $5,362,665
New loans or commitment increases funded 643,907 603,808 843,208
Existing loans and leases      
Principal repayments, net (2) (327,658) (385,177) (381,240)
Leased equipment depreciation (3,854) (3,646) (3,036)
Transfers to held for sale, net (10,569)
Loan sales (3) (3,256) (27,218) (15,810)
Transfers to foreclosed assets (118) (1,120)
Charge-offs, net (508) (1,660) (977)
Loans purchased from the Parent Company 3,131
Ending balance - Net principal 6,897,580 6,585,818 5,803,690
Deferred fees and discounts (45,452) (45,614) (47,729)
Ending balance - Net book $6,852,128 $6,540,204 $5,755,961

(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.

(2) Includes principal repayments on existing loans, changes in revolving lines of credit (repayments and draws), increases in existing term loans and other organic changes within the loan portfolio.

(3) Consists of loans that were both transferred to HFS and sold within the period reported. 
  Quarter Ended Full Year
Loan and Lease Portfolio Detail 12/31/2013 9/30/2013 12/31/2012 Change (%)
($ in thousands)        
Healthcare Asset Based $169,518 $132,855 $159,143 7%
Equipment Finance(1) 771,851 681,153 609,350 27%
Lender Finance & Timeshare 1,041,044 928,284 844,776 23%
Insurance Premium Finance 30,390 38,783 17,236 76%
Other Asset Based 8,147 66,138 63,501 (88)%
Total Asset Based 2,020,950 1,847,213 1,694,006 19%
General Cash Flow 290,752 272,502 187,637 55%
Technology Cash Flow 711,294 672,461 612,892 16%
Healthcare Cash Flow 492,395 517,475 377,694 30%
Security Cash Flow 358,635 320,463 306,134 17%
Professional Practice 142,767 159,095 176,480 (19)%
Total Cash Flow 1,995,843 1,941,996 1,660,837 20%
General Commercial Real Estate 1,032,420 942,623 634,561 63%
Multifamily 777,675 843,721 903,048 (14)%
Healthcare Real Estate 771,029 731,789 671,060 15%
Small Business 299,663 278,476 240,178 25%
Total Real Estate 2,880,787 2,796,609 2,448,847 18%
Total - Net Principal 6,897,580 6,585,818 5,803,690 19%
Deferred fees and discounts (45,452) (45,614) (47,729)  
Total - Net Book $6,852,128 $6,540,204 $5,755,961 19%

(1) Includes $154 million of operating leases and related equity investments as of December 31, 2013, $142 million as of September 30, 2013 and $137 million as of December 31, 2012 which are included in Other Assets and Other Investments, respectively.

Deposits were $6.1 billion at quarter end, an increase of $76 million or 1% from the prior quarter. For 2013, deposits grew by $548 million or 10%. The weighted average interest rate on total deposits at December 31, 2013 increased 1 basis point from the end of the prior quarter to 0.90%. The weighted average rate of new and renewing time deposits in the quarter was 0.91%, compared to 0.93% in the prior quarter.

FHLB Borrowings were $625 million, an increase of $35 million from the prior quarter. The ending balance includes $50 million of overnight advances used to fund loans closing near the end of the quarter. Excluding the overnight advances, the weighted average rate of FHLB term borrowings was 1.80% as of December 31, 2013, compared to 1.78% at the end of the prior quarter and the average remaining maturity was 2.5 years, compared to 2.6 years at the end of the prior quarter.

Allowance for Loan and Lease Losses was $109 million or 1.63% of the loan portfolio as detailed below. Net quarterly provision was $4.4 million, compared to $2.2 million in the prior quarter, due to higher general reserves attributable to higher loan growth and new specific reserves.
  Quarter Ended
Allowance for Loan and Lease Losses 12/31/2013
($ in thousands) General Specific Total % Loans
Beginning balance $104,742 $807 $105,549  
Loan and lease loss provision 1,470 2,958 4,428  
Charge-offs, net (508) (508)  
Ending balance $106,212 $3,257 $109,469 1.63%
   
   
  Quarter Ended
  9/30/2013
  General Specific Total % Loans
Beginning balance $103,997 $982 $104,979  
Loan and lease loss provision 745 1,485 2,230  
Charge-offs, net (1,660) (1,660)  
Ending balance $104,742 $807 $105,549 1.65%

Charge-offs were $0.5 million, compared to $1.7 million in the prior quarter. TTM charge-offs were $6.3 million or 0.10% of average loans, compared to 0.12% in the prior quarter.

Non-performing Assets were $49 million or 0.60% of total assets, an increase of $4 million from the prior quarter but unchanged from one year ago. Non-accrual loans were $47 million, an increase of $6 million from the prior quarter due primarily to the addition of one non-accrual loan and an increase of $5 million from one year ago.
Non-performing Assets 12/31/2013 9/30/2013
  Balance % of Total Assets Balance % of Total Assets
($ in thousands)        
Non-accrual loans - current $43,332 0.54% $37,589 0.47%
Non-accrual loans - delinquent 30-89 days 1,363 0.02 727 0.01
Non-accrual loans - delinquent 90+ days 1,899 0.02 1,959 0.03
Total non-accrual loans 46,594 0.58 40,275 0.51
REO and foreclosed assets 1,988 0.02 4,098 0.05
Total non-performing assets $48,582 0.60% $44,373 0.56%

Troubled Debt Restructurings were $17 million, compared to $20 million at the end of the prior quarter, all of which were current and on non-accrual in both quarters.

OTHER COMMERCIAL FINANCE SEGMENT

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

Fourth Quarter 2013 Details

Net Income was $21 million, compared to $9 million in the prior quarter, due primarily to the increase in gain on sale of investments.
  Quarter Ended
        12/31/13 vs. 9/30/13 12/31/13 vs. 12/31/12
  12/31/2013 9/30/2013 12/31/2012 $ % $ %
($ in thousands)              
Interest income $6,077 $4,598 $16,050 1,479 32 (9,973) (62)
Interest expense 2,449 2,538 3,750 89 4 1,301 35
Loan and lease loss (recovery) / provision (165) (3,299) 7,428 (3,134) (95) 7,593 102
Non-interest income 23,992 3,401 7,998 20,591 605 15,994 200
Non-interest expense 6,076 9,510 11,118 3,434 36 5,042 45
Income tax expense (benefit) 757 (10,176) (11,857) (10,933) (107) (12,614) (106)
Net income 20,952 9,426 13,609 11,526 122 7,343 54

Interest Income was $6 million, an increase of $1 million from the prior quarter, due primarily to the recapture of non-accrual interest on a loan that paid off during the quarter.

Non-Interest Income was $24 million, compared to $3 million in the prior quarter due primarily to an increase in gain on sale of investments.

Non-Interest Expense was $6 million, a decrease of $3 million from the prior quarter due primarily to lower merger related expenses and gains in OREO and foreclosed assets related activities.

Unrestricted Cash at quarter end was $411 million, an increase of $116 million from the prior quarter. The largest sources of cash were loan sales and principal collections of $68 million, proceeds from the sale of investments of $37 million and tax payments from the Bank to the Parent Company of $28 million. The principal uses of cash in the quarter were operating expenses, the quarterly dividend payment on common stock and interest on trust preferred securities. There were no share repurchases during the quarter pursuant to the terms of the merger agreement with PacWest.

Loans decreased by $55 million from the prior quarter to $86 million as detailed below.
  Quarter Ended
Loan and Lease Roll Forward 12/31/2013 9/30/2013 12/31/2012
($ in thousands)      
Beginning balance $142,090 $259,364 $687,576
Existing loans and leases      
Principal repayments, net (1) (52,762) (72,010) (58,285)
Transfers to held for sale, net (3,446) (22,698)
Loan sales (2) (854) (39,188) (63,019)
Transfers to foreclosed assets
Net recoveries / (charge-offs) 1,631 (2,630) (17,255)
Loans sold to the Bank (3,131)
Ending balance - Net principal 86,974 142,090 526,319
Deferred fees and discounts (1,042) (1,509) (5,713)
Ending Balance - Net book $85,932 $140,581 $520,606

(1) Includes principal repayments on existing loans, changes in revolving lines of credit (repayments and draws), increases in existing term loans and other organic changes within the loan portfolio.

(2) Consists of loans that were both transferred to HFS and sold within the period reported.

Allowance for Loan and Lease Losses increased by $1 million to $11 million or 12.86% of loans. Despite the portfolio reduction and the resolution of problem loans in the fourth quarter, the remaining loans have a higher percentage of both non-accrual and less favorable risk ratings than the previous quarter. 

Non-performing Assets were $65 million, a decline of $20 million (23%) from the prior quarter due to loan resolutions and sales resulting in a $20 million decline in non-accrual loans, and were $30 million (32%) lower than one year ago. All collections on non-accrual loans are applied to the outstanding principal balance.
Non-performing Assets 12/31/2013 9/30/2013
  Balance % of Total Assets Balance % of Total Assets
($ in thousands)        
Non-accrual loans current $28,456 3.37% $45,982 5.41%
Non-accrual loans - delinquent 30-89 days 54 0.01 1
Non-accrual loans - delinquent 90+ days 25,736 3.04 28,492 3.35
Total non-accrual loans 54,246 6.42 74,475 8.76
Accruing loans - delinquent 90+ days
REO and foreclosed assets 10,836 1.28 10,401 1.22
Total non-performing assets $65,082 7.70% $84,876 9.98%

Troubled Debt Restructurings were $38 million, all of which were on non-accrual and $10 million of which were delinquent as to payment status. At September 30, 2013 troubled debt restructurings were $61 million, $55 million of which were on non-accrual and $10 million of which were delinquent as to payment status.

CONSOLIDATED

Fourth Quarter 2013 Details

Net Income was $58 million or $0.29 per diluted share, compared to net income of $48 million or $0.24 per diluted share in the prior quarter and $47 million or $0.22 per diluted share in the fourth quarter of 2012 - as detailed below. Pretax income increased to $86 million compared to $63 million in the prior quarter, due primarily to an increase in the gain on sale of investments and loan sales. Pretax income for 2013 increased by 20% to $246 million, compared to $206 million for 2012. 
  Quarter Ended
        12/31/13 vs. 9/30/13 12/31/13 vs. 12/31/12
  12/31/2013 9/30/2013 12/31/2012 $ % $ %
($ in thousands)              
Interest income $113,258 $112,718 $114,921 $540 1% $(1,663) (1)%
Interest expense 18,807 18,644 18,872 (163) (1) 65 1
Loan and lease loss provision / (recovery) 4,263 (1,069) 8,875 (5,332) (499) 4,612 52
Non-interest income 42,076 15,708 20,549 26,368 168 21,527 105
Non-interest expense 46,114 47,614 49,423 1,500 3 3,309 7
Income tax expense 28,227 14,839 11,224 (13,388) (90) (17,003) (151)
Net income 57,923 48,398 47,076 9,525 20 10,847 23

Interest Income was $113 million, unchanged from the prior quarter. Interest income for 2013 was $448 million compared to $468 million for 2012 - a decrease of 4%, due primarily to declining loan yields and $435 million of run-off in the Parent Company loan portfolio.

Net Interest Margin was 4.72%, a decrease of 5 basis points from the prior quarter due primarily to higher MBS amortization in the investment portfolio partially offset by increased portfolio loan mix. Net interest income was $94 million, unchanged from the prior quarter.

Non-Interest Income was $42 million, compared to $16 million in the prior quarter due primarily to an increase in gains on investment and loan sales and increased loan fee income.

Non-Interest Expense was $46 million, a decrease of $2 million from the prior quarter due primarily to lower merger-related costs. For 2013, operating expenses were $170 million, compared to $186 million for 2012, and non-operating expenses were $19 million, including pre-close merger-related costs of $5 million and operating lease expenses which grew to $14 million, compared to $10 million for 2012 as total operating leases increased by $18 million to $132 million.
  Quarter Ended
Non-Interest Expense 12/31/2013 9/30/2013
($ in thousands)    
Compensation and benefits $28,351 $26,618
Professional fees 1,648 (49)
Occupancy expenses 3,689 3,434
FDIC fees and assessments 290 1,642
General depreciation and amortization 1,574 1,590
Loan servicing expense 1,429 925
Other administrative expenses 5,759 6,129
Total operating expenses 42,740 40,289
Leased equipment depreciation 3,854 3,646
Expense from real estate owned and other foreclosed assets, net (321) (768)
Other non-interest expense, net (includes merger-related costs) (159) 4,447
Total non-interest expense $46,114 $47,614

Loans and Leases increased $257 million from the prior quarter as detailed below. 
  Quarter Ended
Loan and Lease Roll Forward (1) 12/31/2013 9/30/2013 12/31/2012
($ in thousands)      
Beginning balance $6,727,908 $6,669,762 $6,050,241
New loans or commitment increases funded 643,907 603,808 843,208
Existing loans and leases      
Principal repayments, net (2) (380,420) (457,187) (439,525)
Leased equipment depreciation (3,854) (3,646) (3,036)
Transfers to held for sale, net (14,015) (22,698)
Loan sales (3) (4,110) (66,406) (78,829)
Transfers to foreclosed assets (118) (1,120)
Net recoveries / (charge-offs) 1,123 (4,290) (18,232)
Ending balance - Net principal 6,984,554 6,727,908 6,330,009
Deferred fees and discounts (46,030) (46,407) (53,628)
Ending balance - Net book $6,938,524 $6,681,501 $6,276,381

(1) Includes operating leases and equity investments related to operating leases which are included in Other Assets and Other Investments.

(2) Includes principal repayments on existing loans, changes in revolving lines of credit (repayments and draws), increases in existing term loans and other organic changes within the loan portfolio.

(3) Consists of loans that were both transferred to HFS and sold within the period reported.

Allowance for Loan and Lease Losses was $121 million, or 1.78% of the loan portfolio, compared to $115 million or 1.76% at the end of the prior quarter. Net charge-offs as a percentage of average loans for the twelve month period ended December 31, 2013 were 0.27%, compared to 0.59% for the twelve month period ended September 30, 2013.
  Quarter Ended
Allowance for Loan and Lease Losses 12/31/2013
($ in thousands) General Specific Total % Loans
Beginning balance $113,374 $1,760 $115,134  
Loan and lease loss provision / (recovery) 2,936 1,327 4,263  
Recoveries, net 1,123 1,123  
Ending balance $116,310 $4,210 $120,520 1.78%
         
  Quarter Ended
  9/30/2013
  General Specific Total % Loans
Beginning balance $112,543 $7,950 $120,493  
Loan and lease loss provision / (recovery) 831 (1,900) (1,069)  
Charge-offs, net (4,290) (4,290)  
Ending balance $113,374 $1,760 $115,134 1.76%

Non-performing Assets were $114 million, a decline of $16 million from the prior quarter due primarily to a $14 million decrease in non-accrual loans and a decline of $30 million (21%) from one year ago. All collections on non-accrual loans are applied to the outstanding principal balance. 
Non-performing Assets 12/31/2013 9/30/2013
  Balance % of Total Assets Balance % of Total Assets
($ in thousands)        
Non-accrual loans - current $71,788 0.81% $83,571 0.95%
Non-accrual loans - delinquent 30-89 days 1,417 0.01 728 0.01
Non-accrual loans - delinquent 90+ days 27,635 0.31 30,451 0.35
Total non-accrual loans 100,840 1.13 114,750 1.31
Accruing loans - delinquent 90+ days
REO and foreclosed assets 12,824 0.15 14,499 0.17
Total non-performing assets $113,664 1.28% $129,249 1.48%

Troubled Debt Restructurings were $55 million, all of which were on non-accrual and $10 million of which were delinquent as to payment status. At September 30, 2013 troubled debt restructurings were $81 million, $75 million of which were on non-accrual and $10 million of which were delinquent as to payment status.

Deferred Tax Asset, net, decreased by $19 million during the quarter to $252 million, with the decline largely due to the utilization of the Federal NOLs.

Consolidated Tax Expense was $28.2 million, which equates to an effective tax rate of 32.8%. Tax expense for the quarter includes a tax benefit of $9 million from the release of valuation allowance in connection with the disposition of certain investment securities during the quarter.

Book Value Per Share was $8.31 at the end of the quarter, an increase of $0.22 from the prior quarter. Total shareholders' equity was $1.6 billion at the end of the quarter, an increase of $43 million from the prior quarter.

Tangible Book Value Per Share was $7.43 at the end of the quarter, an increase of $0.22 from the end of the prior quarter.

Average Diluted Shares Outstanding were 199.0 million shares for the quarter, compared to 198.5 million shares for the prior quarter. Total outstanding shares at December 31, 2013 were 196.9 million, which was 128 million or 39% lower than outstanding shares in December of 2010 when the Company initiated a share repurchase program. The share repurchase program was terminated in 2013 in connection with the planned merger with PacWest Bancorp. The average purchase price for the 136 million shares purchased between December 2010 and March 2013 was $6.83.

Quarterly Cash Dividend of $0.01 per common share was paid on December 27, 2013 to common shareholders of record on December 13, 2013.

Pending Merger with PacWest Bancorp - CapitalSource Inc. stockholders overwhelmingly approved the Agreement and Plan of Merger ("Merger Agreement"), dated July 22, 2013, with PacWest Bancorp at a special meeting held on January 13, 2014 in Los Angeles, California. The Merger was also approved by the California Department of Business Oversight (DBO) on December 17, 2013. Before the transaction can close, regulatory approval must be received from the Federal Reserve Board (FRB) and the Federal Deposit Insurance Corporation (FDIC) and other conditions of the Merger must be met.

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 December 31, 2013 (the "Call Report") with the Federal Deposit Insurance Corporation ("FDIC") on or before January 30, 2014. 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 $8.9 billion and total deposits of $6.1 billion as of December 31, 2013. 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 our expectations regarding pending merger between the Company and PacWest, 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: the ability to complete the pending merger between the Company and PacWest, including obtaining regulatory approvals, or any future transaction, successfully integrate the companies following completion of the merger or achieve expected beneficial synergies and/or operating efficiencies, in each case within expected time-frames or at all; the possibility that regulatory approvals may not be received on expected time frames or at all; the possibility that personnel changes in connection with the merger may not proceed as planned; the possibility that the cost of additional capital may be more than expected; changes in the Company's stock price before completion of the merger, including as a result of the financial performance of PacWest prior to closing; the reaction to the merger of the companies' customers, employees and counterparties; and other factors described in CapitalSource's 2012 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 Fourth Quarter 2013 - Financial Supplement
CapitalSource Inc.
Consolidated Balance Sheets
 ($ in thousands)
     
  December 31, December 31,
  2013 2012
  (Unaudited)  
     
ASSETS
Cash and cash equivalents  $ 176,889  $ 180,803
Interest-bearing deposits in other banks 15,391 108,285
Other short-term investments 263,519 9,998
Restricted cash 58,653 104,044
Investment securities:    
Available-for-sale, at fair value 870,482 1,079,025
Held-to-maturity, at amortized cost 74,369 108,233
Total investment securities 944,851 1,187,258
Loans held for sale 22,719
Loans held for investment 6,830,519 6,192,858
Less deferred loan fees and discounts  (46,030)  (53,628)
Total loans held for investment 6,784,489 6,139,230
Less allowance for loan and lease losses  (120,520)  (117,273)
Total loans held for investment, net 6,663,969 6,021,957
Interest receivable 26,068 29,112
Other investments 52,124 60,363
Goodwill 173,135 173,135
Deferred tax asset, net 252,268 362,283
Other assets 278,623 289,048
Total assets  $ 8,905,490  $ 8,549,005
     
     
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:    
Deposits  $ 6,127,690  $ 5,579,270
Term debt 177,188
Other borrowings 1,037,156 1,005,738
Other liabilities 104,017 161,637
Total liabilities 7,268,863 6,923,833
     
     
Shareholders' equity:    
Preferred stock (50,000,000 shares authorized; no shares outstanding)
Common stock ($0.01 par value, 1,200,000,000 shares authorized; 196,855,283 and 209,551,674 shares issued and outstanding, respectively) 1,969 2,096
Additional paid-in capital 3,038,218 3,157,533
Accumulated deficit  (1,402,690)  (1,559,107)
Accumulated other comprehensive (loss) income, net  (870) 24,650
Total shareholders' equity 1,636,627 1,625,172
Total liabilities and shareholders' equity  $ 8,905,490  $ 8,549,005
 
 
CapitalSource Fourth Quarter 2013 - Financial Supplement
CapitalSource Inc.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
($ in thousands, except per share data)
           
  Three Months Ended Year Ended
  December 31, 2013 September 30, 2013 December 31, 2012 December 31, 2013 December 31, 2012
Net interest income:          
Interest income:          
Loans and leases  $ 107,329  $  104,211  $ 105,960  $ 415,375  $ 428,397
Investment securities 5,306 8,003 8,493 30,242 38,230
Other 623 504 468 1,859 1,587
Total interest income 113,258 112,718 114,921 447,476 468,214
Interest expense:          
Deposits 13,681 13,407 12,366 51,941 51,035
Borrowings 5,126 5,237 6,506 22,147 28,372
Total interest expense 18,807 18,644 18,872 74,088 79,407
Net interest income 94,451 94,074 96,049 373,388 388,807
Loan and lease loss provision / (recovery) 4,263 (1,069) 8,875 20,531 39,442
Net interest income after loan and lease loss provision / (recovery) 90,188 95,143 87,174 352,857 349,365
Non-interest income:          
Loan fees 10,247 5,921 6,662 23,546 18,561
Leased equipment income 5,551 5,194 4,298 20,590 14,113
Gain on investments, net 23,860 2,123 6,453 28,965 7,382
Gain (loss) on derivatives, net 835 (1,566) (174) 1,061 (823)
Other non-interest income, net 1,583 4,036 3,310 8,388 10,613
Total non-interest income 42,076 15,708 20,549 82,550 49,846
Non-interest Expense:          
Compensation and benefits 28,351 26,618 28,083 107,676 105,430
Professional fees 1,648 (49) 3,656 4,824 12,814
Occupancy expenses 3,689 3,434 3,438 14,577 16,840
FDIC fees and assessments 290 1,642 1,538 5,068 5,957
General depreciation and amortizations 1,574 1,590 1,398 6,261 5,934
Loan servicing expense 1,429 925 1,782 6,566 13,011
Other administrative expenses 5,759 6,129 6,826 24,754 26,499
Total operating expenses 42,740 40,289 46,721 169,726 186,485
Leased equipment depreciation 3,854 3,646 3,036 14,427 9,919
Expense from real estate owned and other foreclosed assets, net (321) (768) 211 821 6,790
Gain on extinguishment of debt (8,059)
Other non-interest expense, net (159) 4,447 (545) 4,104 (1,453)
Total non-interest expense 46,114 47,614 49,423 189,078 193,682
Net income before income taxes 86,150 63,237 58,300 246,329 205,529
Income tax expense (benefit) 28,227 14,839 11,224 82,037 (285,081)
Net income 57,923 48,398 47,076 164,292 490,610
           
Other comprehensive (loss) income, net of tax          
Unrealized (loss) gain on available-for-sale securities, net of tax (19,772) (4,285) 2,793 (25,521) 5,595
Unrealized loss on foreign currency translation, net of tax (351)
Other comprehensive (loss) income (19,772) (4,285) 2,793 (25,521) 5,244
Comprehensive income  $  38,151  $ 44,113  $ 49,869  $ 138,771  $ 495,854
           
Net income per share:          
Basic  $ 0.30  $ 0.25  $ 0.23  $ 0.84  $ 2.19
Diluted  $ 0.29  $ 0.24  $ 0.22  $ 0.82  $ 2.13
Average shares outstanding:          
Basic 193,956,110 193,099,993 208,438,784 195,189,983 223,928,583
Diluted 199,047,159 198,456,994 213,482,389 200,451,899 230,154,989
Dividends declared per share  $ 0.01  $  0.01  $ 0.51  $ 0.04  $ 0.54
 
 
CapitalSource Inc.
Segment Balance Sheets
(Unaudited)
($ in thousands)
                 
  December 31, 2013 September 30, 2013
  CAPITALSOURCE BANK OTHER COMMERCIAL FINANCE INTERCOMPANY ELIMINATIONS CONSOLIDATED CAPITALSOURCE BANK OTHER COMMERCIAL FINANCE INTERCOMPANY ELIMINATIONS CONSOLIDATED
ASSETS                
                 
Cash and cash equivalents and restricted cash  $ 87,312  $ 427,140 $ —  $ 514,452  $ 180,261  $ 310,831 $  —  $ 491,092
Investment securities:                
Available-for-sale 870,482 870,482 879,696 31,876 911,572
Held-to-maturity 74,369 74,369 122,262 122,262
Loans 6,698,093 85,932 464 6,784,489 6,408,385 144,054 716 6,553,155
Allowance for loan and lease losses (109,469) (11,051) (120,520) (105,549) (9,585) (115,134)
Loans, net of allowance for loan and lease losses 6,588,624 74,881 464 6,663,969 6,302,836 134,469 716 6,438,021
Receivables due from affiliates 2,117 8,276 (10,393) 1,253 7,120 (8,373)
Other assets 455,842 335,235 (8,859) 782,218 446,933 366,067 (21,028) 791,972
Total assets  $ 8,078,746  $ 845,532 $ (18,788)  $ 8,905,490  $ 7,933,241  $ 850,363 $  (28,685)  $ 8,754,919
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
                 
Liabilities:                
Deposits  $ 6,127,690  $ — $  —  $ 6,127,690  $ 6,051,411 $  — $  —  $ 6,051,411
Borrowings 625,000 412,156 1,037,156 590,000 411,599 1,001,599
Balance due to affiliates 8,276 2,117 (10,393) 7,120 1,253 (8,373)
Other liabilities 81,877 34,256 (12,116) 104,017 86,903 46,423 (24,631) 108,695
Total liabilities 6,842,843 448,529 (22,509) 7,268,863 6,735,434 459,275 (33,004) 7,161,705
                 
Shareholders' equity:                
Common stock 921,000 1,969 (921,000) 1,969 921,000 1,969 (921,000) 1,969
Additional paid-in capital/retained earnings/deficit 315,773 395,904 923,851 1,635,528 273,357 370,217 928,769 1,572,343
Accumulated other comprehensive income, net (870) (870) 870 (870) 3,450 18,902 (3,450) 18,902
Total shareholders' equity 1,235,903 397,003 3,721 1,636,627 1,197,807 391,088 4,319 1,593,214
                 
Total liabilities and shareholders' equity  $ 8,078,746  $ 845,532 $  (18,788)  $ 8,905,490  $ 7,933,241  $ 850,363 $  (28,685)  $ 8,754,919
CapitalSource Inc.
Segment Statements of Operations
(Unaudited)
($ in thousands)
                 
  Three Months Ended December 31, 2013 Three Months Ended September 30, 2013
Net interest income: CAPITALSOURCE BANK OTHER COMMERCIAL FINANCE INTERCOMPANY ELIMINATIONS CONSOLIDATED CAPITALSOURCE BANK OTHER COMMERCIAL FINANCE INTERCOMPANY ELIMINATIONS CONSOLIDATED
Interest income:                
Loans and leases $102,318 $5,312 $(301) $107,329 $100,461 $3,440 $310 $104,211
Investment securities 4,647 659 5,306 6,922 1,081 8,003
Other 517 106 623 427 77 504
Total interest income 107,482 6,077 (301) 113,258 107,810 4,598 310 112,718
Interest expense:                
Deposits 13,681 13,681 13,407 13,407
Borrowings 2,677 2,449 5,126 2,699 2,538 5,237
Total interest expense 16,358 2,449 18,807 16,106 2,538 18,644
Net interest income 91,124 3,628 (301) 94,451 91,704 2,060 310 94,074
Loan and lease loss provision / (recovery) 4,428 (165) 4,263 2,230 (3,299) (1,069)
Net interest income after loan and lease loss provision / (recovery) 86,696 3,793 (301) 90,188 89,474 5,359 310 95,143
Non-interest income:                
Loan fees 10,114 133 10,247 5,643 278 5,921
Leased equipment income 5,551 5,551 5,194 5,194
Other non-interest income, net 5,831 23,859 (3,412) 26,278 5,202 3,123 (3,732) 4,593
Total non-interest income, net 21,496 23,992 (3,412) 42,076 16,039 3,401 (3,732) 15,708
Non-interest expense:                
Compensation and benefits 28,646 (295) 28,351 27,421 (803) 26,618
Professional fees 1,019 629 1,648 984 (1,033) (49)
Leased equipment depreciation 3,854 3,854 3,646 3,646
Expense of real estate owned and other foreclosed assets, net 1,212 (1,533) (321) 6 (774) (768)
Other non-interest expense, net 9,106 7,275 (3,799) 12,582 10,044 12,120 (3,997) 18,167
Total non-interest expense, net 43,837 6,076 (3,799) 46,114 42,101 9,510 (3,997) 47,614
Net income (loss) before income taxes 64,355 21,709 86 86,150 63,412 (750) 575 63,237
Income tax expense (benefit) 26,789 757 681 28,227 25,015 (10,176) 14,839
Net income $37,566 $20,952 $(595) $57,923 $38,397 $9,426 $575 $48,398
                 
  Twelve Months Ended December 31, 2013 Twelve Months Ended December 31, 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 $390,858 $22,477 $2,040 $415,375 $359,233 $72,662 $(3,498) $428,397
Investment securities 26,389 3,853 30,242 32,396 5,834   38,230
Other 1,638 221 1,859 1,454 133   1,587
Total interest income 418,885 26,551 2,040 447,476 393,083 78,629 (3,498) 468,214
Interest expense:                
Deposits 51,941 51,941 51,035   51,035
Borrowings 10,744 11,403 22,147 11,061 17,311   28,372
Total interest expense 62,685 11,403 74,088 62,096 17,311 79,407
Net interest income 356,200 15,148 2,040 373,388 330,987 61,318 (3,498) 388,807
Loan and lease loss provision 16,866 3,665 20,531 16,192 23,250   39,442
Net interest income after loan and lease loss provision 339,334 11,483 2,040 352,857 314,795 38,068 (3,498) 349,365
Non-interest income:                
Loan fees 22,772 774 23,546 16,089 2,472   18,561
Leased equipment income 20,590 20,590 14,113   14,113
Other non-interest income, net 22,822 32,489 (16,897) 38,414 30,293 12,050 (25,171) 17,172
Total non-interest income, net 66,184 33,263 (16,897) 82,550 60,495 14,522 (25,171) 49,846
Non-interest expense:                
Compensation and benefits 107,619 57 107,676 102,417 3,013 105,430
Professional fees 4,214 610 4,824 5,628 7,186 12,814
Leased equipment depreciation 14,427 14,427 9,919 9,919
Expense of real estate owned and other foreclosed assets, net 1,203 (382) 821 2,169 4,621 6,790
Loss on extinguishment of debt (8,059) (8,059)
Other non-interest expense, net 40,786 37,185 (16,641) 61,330 48,436 44,583 (26,231) 66,788
Total non-interest expense, net 168,249 37,470 (16,641) 189,078 168,569 51,344 (26,231) 193,682
Net income (loss) before income taxes 237,269 7,276 1,784 246,329 206,721 1,246 (2,438) 205,529
Income tax expense (benefit) 96,593 (15,237) 681 82,037 84,055 (370,209) 1,073 (285,081)
Net income $140,676 $22,513 $1,103 $164,292 $122,666 $371,455 $(3,511) $490,610
 
CapitalSource Inc.
Selected Financial Data
(Unaudited)
           
  Three Months Ended Year Ended
  December 31, 2013 September 30, 2013 December 31, 2012 December 31, 2013 December 31, 2012
CapitalSource Bank Segment:          
           
Performance ratios:          
Return on average assets 1.86% 1.94% 1.84% 1.82% 1.73%
Return on average equity 12.28% 12.94% 12.53% 12.07% 11.73%
Return on average tangible equity 14.33% 15.17% 14.93% 14.18% 14.06%
Yield on average interest earning assets 5.61% 5.72% 5.72% 5.72% 5.90%
Cost of interest bearing liabilities 0.97% 0.97% 0.98% 0.97% 1.04%
Deposits 0.89% 0.89% 0.89% 0.88% 0.95%
Borrowings 1.80% 1.69% 1.83% 1.77% 1.88%
Net interest spread 4.64% 4.75% 4.74% 4.75% 4.86%
Net interest margin 4.76% 4.86% 4.84% 4.87% 4.97%
Operating expenses as a percentage of average total assets 1.95% 1.97% 2.22% 1.99% 2.21%
Efficiency ratio (1) 35.91% 37.26% 41.32% 37.65% 41.10%
Loan yield 6.25% 6.30% 6.80% 6.41% 7.01%
Capital ratios:          
Tier 1 leverage 13.88% 13.55% 13.06% 13.88% 13.06%
Total risk-based capital 16.29% 16.28% 16.50% 16.29% 16.50%
Tangible common equity to tangible assets 13.44% 13.20% 12.89% 13.44% 12.89%
Average balances ($ in thousands):          
Average loans  $ 6,490,933  $ 6,326,704  $ 5,342,683  $ 6,096,284  $ 5,121,261
Average assets 8,000,439 7,872,206 7,327,136 7,735,485 7,094,631
Average interest earning assets 7,602,463 7,480,289 6,859,237 7,317,119 6,663,700
Average deposits 6,090,152 5,963,151 5,557,241 5,870,561 5,400,247
Average borrowings 590,489 632,608 597,772 606,110 587,301
Average equity 1,213,335 1,177,526 1,077,507 1,165,041 1,045,760
           
Other Commercial Finance Segment:          
           
Performance ratios:          
Yield on average interest earning assets 7.02% 5.21% 8.19% 6.43% 8.42%
Cost of interest bearing liabilities 2.36% 2.45% 2.49% 2.56% 2.60%
Net interest spread 4.66% 2.76% 5.70% 3.87% 5.82%
Net interest margin 4.19% 2.34% 6.28% 3.67% 6.57%
Loan yield 19.06% 6.68% 8.41% 8.23% 8.75%
Average balances ($ in thousands):          
Average loans  $ 110,583  $ 204,258  $ 676,349  $  273,102  $ 830,316
Average assets 858,339 888,371 1,335,561 940,388 1,368,522
Average interest earning assets 343,484 350,057 779,581 413,152 933,521
Average borrowings 411,708 410,686 600,328 445,530 665,937
Average equity 394,126 382,778 625,945 409,804 570,693
           
Consolidated CapitalSource Inc.: (2)          
           
Performance ratios:          
Return on average assets 2.60% 2.20% 2.17% 1.90% 5.80%
Return on average equity 14.26% 12.27% 10.97% 10.41% 30.25%
Return on average tangible equity 15.98% 13.81% 12.22% 11.70% 33.88%
Yield on average interest earning assets 5.65% 5.71% 5.99% 5.79% 6.16%
Cost of interest bearing liabilities 1.05% 1.06% 1.11% 1.07% 1.19%
Net interest spread 4.60% 4.65% 4.88% 4.72% 4.97%
Net interest margin 4.72% 4.77% 5.00% 4.83% 5.12%
Efficiency ratio (1) 32.21% 37.96% 41.14% 38.44% 43.50%
Operating expenses as a percentage of average total assets 1.94% 1.85% 2.16% 1.96% 2.21%
Leverage ratios:          
Equity to total assets (as of period end) 18.38% 18.20% 19.01% 18.38% 19.01%
Tangible common equity to tangible assets 16.76% 16.54% 17.33% 16.76% 17.33%
Average balances ($ in thousands):          
Average loans  $ 6,602,120  $ 6,531,395  $ 6,018,343  $ 6,369,520  $  5,952,699
Average assets 8,822,143 8,732,982 8,642,344 8,649,453 8,456,527
Average interest earning assets 7,946,551 7,830,778 7,638,130 7,730,404 7,598,342
Average borrowings 1,002,197 1,043,295 1,198,100 1,051,639 1,253,237
Average deposits 6,090,152 5,963,151 5,557,241 5,870,561 5,400,247
Average equity 1,611,659 1,564,289 1,706,761 1,578,241 1,621,874
   
(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)
           
  December 31, 2013 September 30, 2013 June 30, 2013 March 31, 2013 December 31, 2012
           
Loans 30-89 days contractually delinquent:          
As a % of total loans(1) 0.03% 0.01% 0.01% 0.71% 0.40%
Loans 30-89 days contractually delinquent  $ 2.4  $ 0.7  $ 0.4  $ 43.7  $ 24.5
           
Loans 90 or more days contractually delinquent:          
As a % of total loans(1) 0.41% 0.46% 0.78% 0.69% 0.63%
Loans 90 or more days contractually delinquent  $ 27.6  $ 30.5  $ 50.3  $ 43.0  $ 39.1
           
Loans on non-accrual:(2)          
As a % of total loans(1) 1.49% 1.75% 2.41% 2.40% 1.94%
Loans on non-accrual  $ 100.8  $ 114.8  $ 156.1  $ 148.6  $ 119.7
           
Impaired loans:(3)          
As a % of total loans(4) 1.49% 1.80% 2.51% 2.41% 3.29%
Impaired loans  $ 100.8  $ 117.4  $ 162.4  $ 148.9  $ 201.7
           
Allowance for loan and lease losses:          
As a % of total loans(4) 1.78% 1.76% 1.86% 1.92% 1.91%
As a % of non-accrual loans 119.52% 100.33% 77.20% 79.58% 97.96%
Allowance for loan and lease losses  $ 120.5  $ 115.1  $ 120.5  $ 118.3  $ 117.3
           
Net charge offs (last twelve months):          
As a % of total average loans 0.27% 0.59% 0.79% 1.24% 1.27%
Net charge offs (last twelve months)  $ 17.3  $ 36.7  $ 48.2  $ 74.4  $ 75.8
           
(1) Includes loans held for investment, loans held for sale and deferred loan fees and discounts. Excludes allowance for loan and lease losses.
(2) Includes loans with an aggregate principal balance of $27.6 million, $30.5 million, $50.3 million, $43.0 million, and $39.1 million as of December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013, and December 31, 2012, 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 $3.5 million,$8.3 million and $2.4 million, as of September 30, 2013, March 31, 2013 and December 31, 2012, respectively. As of December 31, 2013 and June 30, 2013 there were no non-performing loans classified as held for sale.
(3) Includes loans with an aggregate principal balance of $27.6 million, $30.5 million, $50.3 million, $43.0 million, and $38.1 million as of December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013, and December 31, 2012, respectively, that were also classified as loans 90 or more days contractually delinquent, and loans with an aggregate principal balance of $100.8 million, $111.3 million, $156.1 million, $140.4 million, and $117.3 million as of December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013 and December 31, 2012, 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.com

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March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX