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Guarantor Information
6 Months Ended
Jun. 30, 2011
Guarantor Information [Abstract]  
Guarantor Information
Note 7.   Guarantor Information
 
The following represents the supplemental consolidating condensed financial information as of June 30, 2011 and December 31, 2010 and for the three and six months ended June 30, 2011 and 2010 of (i) CapitalSource Inc., which is the issuer of our 2014 Senior Secured Notes, as well as our Senior Debentures and Subordinated Debentures (together, the “Debentures”), (ii) CapitalSource Finance LLC (“CapitalSource Finance”), which is a guarantor of our 2014 Senior Secured Notes and the Debentures, and (iii) our subsidiaries that are not guarantors of the 2014 Senior Secured Notes or the Debentures. CapitalSource Finance, a wholly owned indirect subsidiary of CapitalSource Inc., has guaranteed our 2014 Senior Secured Notes and the Senior Debentures, fully and unconditionally, on a senior basis and has guaranteed the Subordinated Debentures, fully and unconditionally, on a senior subordinate basis. Separate consolidated financial statements of the guarantor are not presented, as we have determined that they would not be material to investors.
 
For additional information related to our 2014 Senior Secured Notes and Debentures, see Note 10, Borrowings.
 
Consolidating Balance Sheet
June 30, 2011
(Unaudited)
 
 
                                                 
          CapitalSource Finance LLC                    
          Combined
    Combined
    Other
          Consolidated
 
    CapitalSource
    Non-Guarantor
    Guarantor
    Non-Guarantor
          CapitalSource
 
    Inc.     Subsidiaries     Subsidiaries     Subsidiaries     Eliminations     Inc.  
    ($ in thousands)  
 
Assets
                                               
Cash and cash equivalents
  $ —     $ 380,278     $ 1,200,131     $ 857     $ —     $ 1,581,266  
Restricted cash
    —       36,428       64,686       142       —       101,256  
Investment securities:
                                               
Available-for-sale, at fair value
    —       1,448,542       —       24,201       —       1,472,743  
Held-to-maturity, at amortized cost
    —       136,250       —       —       —       136,250  
                                                 
Total investment securities
    —       1,584,792       —       24,201       —       1,608,993  
Loans:
                                               
Loans held for sale
    —       112,153       6,857       237       —       119,247  
Loans held for investment
    —       4,901,771       217,396       363,569       —       5,482,736  
Less deferred loan fees
                                               
and discounts
    —       (61,293 )     (5,690 )     (13,298 )     2,690       (77,591 )
Less allowance for loan losses
    —       (158,432 )     (7,947 )     (32,759 )     —       (199,138 )
                                                 
Loans held for investment, net
    —       4,682,046       203,759       317,512       2,690       5,206,007  
                                                 
Total loans
    —       4,794,199       210,616       317,749       2,690       5,325,254  
Interest receivable
    —       29,035       23,862       (14,780 )     —       38,117  
Investment in subsidiaries
    2,515,652       3,156       1,507,197       1,725,726       (5,751,731 )     —  
Intercompany receivable
    375,000       —       66,103       920,379       (1,361,482 )     —  
Other investments
    —       37,115       13,933       10,617       —       61,665  
Goodwill
    —       173,135       —       —       —       173,135  
Other assets
    70,053       204,355       113,982       183,107       (146,239 )     425,258  
                                                 
Total assets
  $ 2,960,705     $ 7,242,493     $ 3,200,510     $ 3,167,998     $ (7,256,762 )   $ 9,314,944  
                                                 
Liabilities and shareholders’ equity
                                               
Liabilities:
                                               
Deposits
  $ —     $ 4,785,790     $ —     $ —     $ —     $ 4,785,790  
Term debt
    287,300       410,610       —       —       —       697,910  
Other borrowings
    528,909       480,000       443,074       —       —       1,451,983  
Other liabilities
    34,081       115,477       116,527       177,055       (174,229 )     268,911  
Intercompany payable
    —       —       920,379       415,521       (1,335,900 )     —  
                                                 
Total liabilities
    850,290       5,791,877       1,479,980       592,576       (1,510,129 )     7,204,594  
Shareholders’ equity:
                                               
Common stock
    3,232       921,000       —       —       (921,000 )     3,232  
Additional paid-in capital
    3,917,768       (64,036 )     706,074       2,595,280       (3,237,355 )     3,917,731  
(Accumulated deficit) retained earnings
    (1,857,283 )     567,504       984,104       (54,748 )     (1,496,888 )     (1,857,311 )
Accumulated other comprehensive income, net
    46,698       26,148       30,352       34,890       (91,390 )     46,698  
                                                 
Total shareholders’ equity
    2,110,415       1,450,616       1,720,530       2,575,422       (5,746,633 )     2,110,350  
                                                 
Total liabilities and shareholders’ equity
  $ 2,960,705     $ 7,242,493     $ 3,200,510     $ 3,167,998     $ (7,256,762 )   $ 9,314,944  
                                                 
 
Consolidating Balance Sheet
December 31, 2010
 
 
                                                 
          CapitalSource Finance LLC                    
          Combined
    Combined
    Other
          Consolidated
 
    CapitalSource
    Non-Guarantor
    Guarantor
    Non-Guarantor
          CapitalSource
 
    Inc.     Subsidiaries     Subsidiaries     Subsidiaries     Eliminations     Inc.  
    ($ in thousands)  
 
Assets
                                               
Cash and cash equivalents
  $ 94,614     $ 353,666     $ 252,012     $ 120,158     $ —     $ 820,450  
Restricted cash
    —       39,335       85,142       4,109       —       128,586  
Investment securities:
                                               
Available-for-sale, at fair value
    —       1,510,384       —       12,527       —       1,522,911  
Held-to-maturity, at amortized cost
    —       184,473       —       —       —       184,473  
                                                 
Total investment securities
    —       1,694,857       —       12,527       —       1,707,384  
Loans:
                                               
Loans held for sale
    —       171,887       16,202       17,245       —       205,334  
Loans held for investment
    —       5,008,287       284,445       860,144       —       6,152,876  
Less deferred loan fees
                                               
and discounts
    —       (79,877 )     (10,362 )     (18,429 )     2,230       (106,438 )
Less allowance for loan losses
    —       (223,553 )     (29,626 )     (75,943 )     —       (329,122 )
                                                 
Loans held for investment, net
    —       4,704,857       244,457       765,772       2,230       5,717,316  
                                                 
Total loans
    —       4,876,744       260,659       783,017       2,230       5,922,650  
Interest receivable
    —       25,780       18,174       13,439       —       57,393  
Investment in subsidiaries
    2,339,200       3,594       1,561,468       1,623,244       (5,527,506 )     —  
Intercompany receivable
    375,000       9       134,079       301,241       (810,329 )     —  
Other investments
    —       52,066       13,887       5,936       —       71,889  
Goodwill
    —       173,135       —       —       —       173,135  
Other assets
    89,198       249,119       156,557       234,034       (164,988 )     563,920  
                                                 
Total assets
  $ 2,898,012     $ 7,468,305     $ 2,481,978     $ 3,097,705     $ (6,500,593 )   $ 9,445,407  
                                                 
Liabilities and shareholders’ equity
                                               
Liabilities:
                                               
Deposits
  $ —     $ 4,621,273     $ —     $ —     $ —     $ 4,621,273  
Credit facilities
    —       65,606       —       1,902       —       67,508  
Term debt
    285,731       693,523       —       —       —       979,254  
Other borrowings
    523,650       412,000       440,234       —       —       1,375,884  
Other liabilities
    34,658       170,408       121,227       208,816       (187,563 )     347,546  
Intercompany payable
    —       46,850       301,241       441,372       (789,463 )     —  
                                                 
Total liabilities
    844,039       6,009,660       862,702       652,090       (977,026 )     7,391,465  
Shareholders’ equity:
                                               
Common stock
    3,232       921,000       —       —       (921,000 )     3,232  
Additional paid-in capital
    3,911,344       74,588       679,241       2,556,428       (3,310,260 )     3,911,341  
(Accumulated deficit) retained earnings
    (1,870,544 )     457,302       930,076       (114,898 )     (1,272,508 )     (1,870,572 )
Accumulated other comprehensive income, net
    9,941       5,755       9,959       4,087       (19,801 )     9,941  
                                                 
Total CapitalSource Inc. shareholders’ equity
    2,053,973       1,458,645       1,619,276       2,445,617       (5,523,569 )     2,053,942  
Noncontrolling interests
    —       —       —       (2 )     2       —  
                                                 
Total shareholders’ equity
    2,053,973       1,458,645       1,619,276       2,445,615       (5,523,567 )     2,053,942  
                                                 
Total liabilities and shareholders’ equity
  $ 2,898,012     $ 7,468,305     $ 2,481,978     $ 3,097,705     $ (6,500,593 )   $ 9,445,407  
                                                 
 
Consolidating Statement of Operations
Three Months Ended June 30, 2011
(Unaudited)
 
                                                 
          CapitalSource Finance LLC                    
          Combined
    Combined
    Other
          Consolidated
 
    CapitalSource
    Non-Guarantor
    Guarantor
    Non-Guarantor
          CapitalSource
 
    Inc.     Subsidiaries     Subsidiaries     Subsidiaries     Eliminations     Inc.  
    ($ in thousands)  
 
Net interest income:
                                               
Interest income:
                                               
Loans
  $ 10,183     $ 98,409     $ 11,837     $ 10,048     $ (16,830 )   $ 113,647  
Investment securities
    —       11,599       —       1,089       —       12,688  
Other
    —       404       686       —       —       1,090  
                                                 
Total interest income
    10,183       110,412       12,523       11,137       (16,830 )     127,425  
Interest expense:
                                               
Deposits
    —       13,398       —       —       —       13,398  
Borrowings
    23,851       5,054       4,031       12,537       (13,064 )     32,409  
                                                 
Total interest expense
    23,851       18,452       4,031       12,537       (13,064 )     45,807  
                                                 
Net interest (loss) income
    (13,668 )     91,960       8,492       (1,400 )     (3,766 )     81,618  
Provision for loan losses
    —       6,340       (3,258 )     (1,559 )     —       1,523  
                                                 
Net interest (loss) income after provision for loan losses
    (13,668 )     85,620       11,750       159       (3,766 )     80,095  
Operating expenses:
                                               
Compensation and benefits
    667       13,116       15,902       —       (587 )     29,098  
Professional fees
    4,605       1,437       5,093       (221 )     —       10,914  
Other administrative expenses
    1,017       20,445       9,468       5,271       (20,891 )     15,310  
                                                 
Total operating expenses
    6,289       34,998       30,463       5,050       (21,478 )     55,322  
Other income:
                                               
Gain on investments, net
    —       8,413       8       304       —       8,725  
(Loss) gain on derivatives
    —       (358 )     5,559       (5,472 )     —       (271 )
Net (expense) income of real estate owned and other foreclosed assets
    —       (10,589 )     (47 )     281       —       (10,355 )
Other (expense) income, net
    (17 )     6,911       22,243       3,569       (21,735 )     10,971  
Earnings (loss) in subsidiaries
    32,703       (78 )     37,015       42,041       (111,681 )     —  
                                                 
Total other income
    32,686       4,299       64,778       40,723       (133,416 )     9,070  
                                                 
Net income before income taxes
    12,729       54,921       46,065       35,832       (115,704 )     33,843  
Income tax (benefit) expense
    (3,865 )     17,764       —       3,350       —       17,249  
                                                 
Net income
  $ 16,594     $ 37,157     $ 46,065     $ 32,482     $ (115,704 )   $ 16,594  
                                                 
 
Consolidating Statement of Operations
Three Months Ended June 30, 2010
(Unaudited)
 
                                                 
          CapitalSource Finance LLC                    
          Combined
    Combined
    Other
          Consolidated
 
    CapitalSource
    Non-Guarantor
    Guarantor
    Non-Guarantor
          CapitalSource
 
    Inc.     Subsidiaries     Subsidiaries     Subsidiaries     Eliminations     Inc.  
    ($ in thousands)  
 
Net interest income:
                                               
Interest income:
                                               
Loans
  $ 10,191     $ 101,450     $ 13,925     $ 37,434     $ (14,203 )   $ 148,797  
Investment securities
    —       15,334       30       255       —       15,619  
Other
    —       300       2       2       —       304  
                                                 
Total interest income
    10,191       117,084       13,957       37,691       (14,203 )     164,720  
Interest expense:
                                               
Deposits
    —       15,279       —       —       —       15,279  
Borrowings
    24,109       8,430       7,764       18,214       (13,039 )     45,478  
                                                 
Total interest expense
    24,109       23,709       7,764       18,214       (13,039 )     60,757  
                                                 
Net interest (loss) income
    (13,918 )     93,375       6,193       19,477       (1,164 )     103,963  
Provision for loan losses
    —       12,310       (24,316 )     37,268       —       25,262  
                                                 
Net interest (loss) income after provision for loan losses
    (13,918 )     81,065       30,509       (17,791 )     (1,164 )     78,701  
Operating expenses:
                                               
Compensation and benefits
    638       12,572       16,213       —       —       29,423  
Professional fees
    480       643       6,537       837       —       8,497  
Other administrative expenses
    1,230       18,173       11,424       (1,419 )     (13,737 )     15,671  
                                                 
Total operating expenses
    2,348       31,388       34,174       (582 )     (13,737 )     53,591  
Other income:
                                               
Gain on investments, net
    —       8,727       251       1,279       —       10,257  
Gain (loss) on derivatives
    —       837       10,906       (15,357 )     —       (3,614 )
Net expense of real estate owned and other foreclosed assets
    —       (4,745 )     (178 )     (38,252 )     —       (43,175 )
Other (expense) income, net
    (327 )     17,668       4,650       (6,394 )     (13,871 )     1,726  
Earnings (loss) in subsidiaries
    34,157       (3,105 )     60,411       71,077       (162,540 )     —  
                                                 
Total other income
    33,830       19,382       76,040       12,353       (176,411 )     (34,806 )
                                                 
Net income (loss) from continuing
                                               
operations before income taxes
    17,564       69,059       72,375       (4,856 )     (163,838 )     (9,696 )
Income tax benefit
    (776 )     (2,046 )     —       (1,352 )     —       (4,174 )
                                                 
Net income (loss) from continuing operations
    18,340       71,105       72,375       (3,504 )     (163,838 )     (5,522 )
Net income from discontinued operations, net of taxes
    —       —       —       2,166       —       2,166  
Net gain from sale of discontinued operations, net of taxes
    —       —       —       21,696       —       21,696  
                                                 
Net income
  $ 18,340     $ 71,105     $ 72,375     $ 20,358     $ (163,838 )   $ 18,340  
                                                 
 
Consolidating Statement of Operations
Six Months Ended June 30, 2011
(Unaudited)
 
                                                 
          CapitalSource Finance LLC                    
          Combined
    Combined
    Other
          Consolidated
 
    CapitalSource
    Non-Guarantor
    Guarantor
    Non-Guarantor
          CapitalSource
 
    Inc.     Subsidiaries     Subsidiaries     Subsidiaries     Eliminations     Inc.  
    ($ in thousands)  
 
Net interest income:
                                               
Interest income:
                                               
Loans
  $ 20,377     $ 203,463     $ 9,946     $ 30,586     $ (27,225 )   $ 237,147  
Investment securities
    —       26,322       7       4,711       —       31,040  
Other
    —       642       741       7       —       1,390  
                                                 
Total interest income
    20,377       230,427       10,694       35,304       (27,225 )     269,577  
Interest expense:
                                               
Deposits
    —       26,781       —       —       —       26,781  
Borrowings
    48,276       10,764       8,948       23,790       (26,000 )     65,778  
                                                 
Total interest expense
    48,276       37,545       8,948       23,790       (26,000 )     92,559  
                                                 
Net interest (loss) income
    (27,899 )     192,882       1,746       11,514       (1,225 )     177,018  
Provision for loan losses
    —       5,543       36,945       3,844       —       46,332  
                                                 
Net interest (loss) income after provision for loan losses
    (27,899 )     187,339       (35,199 )     7,670       (1,225 )     130,686  
Operating expenses:
                                               
Compensation and benefits
    902       25,144       34,849       —       (1,418 )     59,477  
Professional fees
    5,569       1,896       9,927       710       —       18,102  
Other administrative expenses
    2,173       42,264       20,507       9,650       (42,590 )     32,004  
                                                 
Total operating expenses
    8,644       69,304       65,283       10,360       (44,008 )     109,583  
Other income:
                                               
Gain on investments, net
    —       20,062       30       12,148       —       32,240  
(Loss) gain on derivatives
    —       (1,135 )     4,437       (5,451 )     —       (2,149 )
Net expense of real estate owned and other foreclosed assets
    —       (12,932 )     (236 )     (7,360 )     —       (20,528 )
Other (expense) income, net
    (334 )     11,890       40,969       6,592       (41,619 )     17,498  
Earnings (loss) in subsidiaries
    59,948       (1,176 )     109,300       55,191       (223,263 )     —  
                                                 
Total other income
    59,614       16,709       154,500       61,120       (264,882 )     27,061  
                                                 
Net income before income taxes
    23,071       134,744       54,018       58,430       (222,099 )     48,164  
Income tax expense (benefit)
    3,318       24,544       (10 )     559       —       28,411  
                                                 
Net income
  $ 19,753     $ 110,200     $ 54,028     $ 57,871     $ (222,099 )   $ 19,753  
                                                 
 
Consolidating Statement of Operations
Six Months Ended June 30, 2010
(Unaudited)
 
                                                 
          CapitalSource Finance LLC                    
          Combined
    Combined
    Other
          Consolidated
 
    CapitalSource
    Non-Guarantor
    Guarantor
    Non-Guarantor
          CapitalSource
 
    Inc.     Subsidiaries     Subsidiaries     Subsidiaries     Eliminations     Inc.  
    ($ in thousands)  
 
Net interest income:
                                               
Interest income:
                                               
Loans
  $ 20,041     $ 211,811     $ 24,742     $ 77,434     $ (28,981 )   $ 305,047  
Investment securities
    —       29,639       77       494       —       30,210  
Other
    —       870       3       4       —       877  
                                                 
Total interest income
    20,041       242,320       24,822       77,932       (28,981 )     336,134  
Interest expense:
                                               
Deposits
    —       31,637       —       —       —       31,637  
Borrowings
    53,462       16,619       15,487       33,991       (25,438 )     94,121  
                                                 
Total interest expense
    53,462       48,256       15,487       33,991       (25,438 )     125,758  
                                                 
Net interest (loss) income
    (33,421 )     194,064       9,335       43,941       (3,543 )     210,376  
Provision for loan losses
    —       97,858       (23,524 )     169,868       —       244,202  
                                                 
Net interest (loss) income after provision for loan losses
    (33,421 )     96,206       32,859       (125,927 )     (3,543 )     (33,826 )
Operating expenses:
                                               
Compensation and benefits
    860       25,842       36,904       —       —       63,606  
Professional fees
    1,161       1,245       13,912       2,549       —       18,867  
Other administrative expenses
    2,367       31,065       24,891       12,189       (36,189 )     34,323  
                                                 
Total operating expenses
    4,388       58,152       75,707       14,738       (36,189 )     116,796  
Other (expense) income:
                                               
Gain on investments, net
    —       13,946       147       2,243       —       16,336  
(Loss) gain on derivatives
    —       (705 )     16,137       (23,383 )     —       (7,951 )
Net expense of real estate owned and other foreclosed assets
    —       (9,183 )     (1,002 )     (73,482 )     —       (83,667 )
Other (expense) income, net
    (499 )     31,145       28,105       (4,408 )     (36,142 )     18,201  
(Loss) earnings in subsidiaries
    (155,818 )     (3,619 )     52,275       49,318       57,844       —  
                                                 
Total other (expense) income
    (156,317 )     31,584       95,662       (49,712 )     21,702       (57,081 )
                                                 
Net (loss) income from continuing operations before income taxes
    (194,126 )     69,638       52,814       (190,377 )     54,348       (207,703 )
Income tax (benefit) expense
    (776 )     123       —       17,485       —       16,832  
                                                 
Net (loss) income from continuing operations
    (193,350 )     69,515       52,814       (207,862 )     54,348       (224,535 )
Net income from discontinued operations, net of taxes
    —       —       —       9,489       —       9,489  
Net gain from sale of discontinued operations, net of taxes
    —       —       —       21,696       —       21,696  
                                                 
Net (loss) income
  $ (193,350 )   $ 69,515     $ 52,814     $ (176,677 )   $ 54,348     $ (193,350 )
                                                 
 
Consolidating Statement of Cash Flows
Six Months Ended June 30, 2011
(Unaudited)
 
                                                 
          CapitalSource Finance LLC                    
          Combined
    Combined
    Other
          Consolidated
 
    CapitalSource
    Non-Guarantor
    Guarantor
    Non-Guarantor
          CapitalSource,
 
    Inc.     Subsidiaries     Subsidiaries     Subsidiaries     Eliminations     Inc.  
    ($ in thousands)  
 
Operating activities:
                                               
Net income
  $ 19,753     $ 110,200     $ 54,028     $ 57,871     $ (222,099 )   $ 19,753  
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
                                               
Stock option expense
    —       964       2,062       —       —       3,026  
Restricted stock expense
    —       1,584       1,927       —       —       3,511  
Amortization of deferred loan fees and discounts
    —       (29,609 )     (5,324 )     (5,936 )     —       (40,869 )
Paid-in-kind interest on loans
    —       29,827       372       (395 )     —       29,804  
Provision for loan losses
    —       5,543       36,945       3,844       —       46,332  
Amortization of deferred financing fees and discounts
    14,150       2,783       179       (1,156 )     —       15,956  
Depreciation and amortization
    —       (1,323 )     1,397       —       —       74  
Benefit for deferred income taxes
    21,513       1,488       —       27,353       —       50,354  
Non-cash (gain) loss on investments, net
    —       (30,178 )     112       (5,642 )     —       (35,708 )
Non-cash loss (gain) on foreclosed assets and other property and equipment disposals
    —       11,638       (344 )     6,471       —       17,765  
Unrealized loss (gain) on derivatives and foreign currencies, net
    —       1,650       (4,946 )     5,426       —       2,130  
(Increase) decrease in interest receivable
    —       (3,255 )     (5,688 )     28,219       —       19,276  
Decrease in loans held for sale, net
    —       173,160       11,353       16,437       —       200,950  
Decrease (increase) in intercompany receivable
    —       9       67,976       (619,138 )     551,153       —  
(Increase) decrease in other assets
    (3,735 )     32,909       45,771       15,685       (18,601 )     72,029  
Decrease in other liabilities
    (1,571 )     (54,357 )     (3,386 )     (30,586 )     13,334       (76,566 )
Net transfers with subsidiaries
    (139,081 )     (241,270 )     202,825       (45,584 )     223,110       —  
                                                 
Cash (used in) provided by operating activities
    (88,971 )     11,763       405,259       (547,131 )     546,897       327,817  
Investing activities:
                                               
Decrease in restricted cash
    —       2,907       20,456       3,967       —       27,330  
Decrease (increase) in loans, net
    —       25,878       (96,003 )     435,131       (460 )     364,546  
Reduction of marketable securities, available for sale, net
    —       75,790       —       19,000       —       94,790  
Reduction of marketable securities, held to maturity, net
    —       54,689       —       —       —       54,689  
Reduction (acquisition) of other investments, net
    —       26,269       (71 )     (2,515 )     —       23,683  
Acquisition of property and equipment, net
    —       (6,476 )     (618 )     —       —       (7,094 )
                                                 
Cash provided by (used in) investing activities
    —       179,057       (76,236 )     455,583       (460 )     557,944  
Financing activities:
                                               
Deposits accepted, net of repayments
    —       164,517       —       —       —       164,517  
(Decrease) increase in intercompany payable
    —       (46,850 )     619,138       (25,851 )     (546,437 )     —  
Repayments on credit facilities, net
    —       (66,890 )     —       (1,902 )     —       (68,792 )
Repayments and extinguishment of term debt
    —       (282,985 )     —       —       —       (282,985 )
Borrowings under (repayments of) other borrowings
    —       68,000       (42 )     —       —       67,958  
Proceeds from exercise of options
    804       —       —       —       —       804  
Payment of dividends
    (6,447 )     —       —       —       —       (6,447 )
                                                 
Cash (used in) provided by financing activities
    (5,643 )     (164,208 )     619,096       (27,753 )     (546,437 )     (124,945 )
                                                 
(Decrease) increase in cash and cash equivalents
    (94,614 )     26,612       948,119       (119,301 )     —       760,816  
Cash and cash equivalents as of beginning of period
    94,614       353,666       252,012       120,158       —       820,450  
                                                 
Cash and cash equivalents as of end of period
  $ —     $ 380,278     $ 1,200,131     $ 857     $ —     $ 1,581,266  
                                                 
 
Consolidating Statement of Cash Flows
Six Months Ended June 30, 2010
(Unaudited)
 
                                                 
          CapitalSource Finance LLC                    
          Combined
                         
          Non-
    Combined
    Other
          Consolidated
 
    CapitalSource
    Guarantor
    Guarantor
    Non-Guarantor
          CapitalSource,
 
    Inc.     Subsidiaries     Subsidiaries     Subsidiaries     Eliminations     Inc.  
    ($ in thousands)  
 
Operating activities:
                                               
Net (loss) income
  $ (193,350 )     69,515       52,814       (176,677 )     54,348       (193,350 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
                                               
Stock option expense
    —       876       1,526       —       —       2,402  
Restricted stock expense
    —       1,057       5,084       —       —       6,141  
Gain on extinguishment of debt
    (1,096 )     —       —       —       —       (1,096 )
Amortization of deferred loan fees and discounts
    —       (18,649 )     (13,497 )     (6,625 )     —       (38,771 )
Paid-in-kind interest on loans
    —       2,292       3,005       846       —       6,143  
Provision for loan losses
    —       97,858       (23,524 )     169,868       —       244,202  
Provision for unfunded commitments
    —       (510 )     —       —       —       (510 )
Amortization of deferred financing fees and discounts
    15,186       11,432       209       4,098       —       30,925  
Depreciation and amortization
    —       (2,692 )     1,774       1,441       —       523  
(Benefit) provision for deferred income taxes
    (869 )     4,463       (195 )     21,667       —       25,066  
Non-cash loss (gain) on investments, net
    —       1,660       119       (1,301 )     —       478  
Gain on assets acquired through business combination
    —       (3,724 )     —       —       —       (3,724 )
Non-cash loss on foreclosed assets and other property and equipment disposals
    —       7,189       3,626       46,487       —       57,302  
Unrealized (gain) loss on derivatives and foreign currencies, net
    —       (9,820 )     (26,256 )     22,966       —       (13,110 )
Accretion of discount on commercial real estate “A” participation interest
    —       (8,222 )     —       —       —       (8,222 )
(Increase) decrease in interest receivable
    —       (6,256 )     25,088       1,535       —       20,367  
Decrease (increase) in loans held for sale, net
    —       335       (296 )     7,468       —       7,507  
Increase in intercompany receivable
    —       —       (12,663 )     (10,682 )     23,345       —  
Decrease (increase) in other assets
    1,458       (5,063 )     12,702       9,725       (24,917 )     (6,095 )
Increase (decrease) in other liabilities
    230       (59,362 )     (33,201 )     34,886       21,910       (35,537 )
Net transfers with subsidiaries
    362,424       (50,503 )     (602 )     (253,307 )     (58,012 )     —  
                                                 
Cash provided by (used in) operating activities
    183,983       31,876       (4,287 )     (127,605 )     16,674       100,641  
Investing activities:
                                               
Decrease (increase) in restricted cash
    —       53,056       1,506       (28,437 )     —       26,125  
Decrease in commercial real estate “A” participation interest, net
    —       368,324       —       —       —       368,324  
Decrease (increase) in loans, net
    —       136,280       (83,510 )     286,618       4,113       343,501  
Assets acquired through business combination, net of cash acquired
    —       (98,800 )     —       —       —       (98,800 )
Acquisition of marketable securities, available for sale, net
    —       (542,526 )     —       —       —       (542,526 )
Reduction of marketable securities, held to maturity, net
    —       46,304       —       —       —       46,304  
(Acquisition) reduction of other investments, net
    —       (8,643 )     (116 )     29,111       —       20,352  
Cash received for real estate
    —       —       —       339,643       —       339,643  
(Acquisition) disposal of property and equipment, net
    —       (683 )     (933 )     859       —       (757 )
                                                 
Cash (used in) provided by investing activities
    —       (46,688 )     (83,053 )     627,794       4,113       502,166  
Financing activities:
                                               
Payment of deferred financing fees
    (581 )     (8,021 )     —       4,172       —       (4,430 )
Deposits accepted, net of repayments
    —       86,892       —       —       —       86,892  
Increase in intercompany payable
    —       —       10,682       10,105       (20,787 )     —  
Repayments on credit facilities, net
    (100,054 )     (65,703 )     (7,057 )     (33,882 )     —       (206,696 )
Borrowings of term debt
    —       —       —       14,784       —       14,784  
Repayments and extinguishment of term debt
    —       (472,646 )     —       (237,514 )     —       (710,160 )
(Repayments of) borrowings under other borrowings
    (34,144 )     65,000       (38 )     (263,972 )     —       (233,154 )
Proceeds from exercise of options
    347       —       —       —       —       347  
Payment of dividends
    (6,485 )     —       —       —       —       (6,485 )
                                                 
Cash (used in) provided by financing activities
    (140,917 )     (394,478 )     3,587       (506,307 )     (20,787 )     (1,058,902 )
                                                 
Increase (decrease) in cash and cash equivalents
    43,066       (409,290 )     (83,753 )     (6,118 )     —       (456,095 )
Cash and cash equivalents as of beginning of period
    99,103       760,343       265,977       51,597       —       1,177,020  
                                                 
Cash and cash equivalents as of end of period
  $ 142,169     $ 351,053     $ 182,224     $ 45,479     $ —     $ 720,925