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Share Name | Share Symbol | Market | Type |
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Bluestem Group Inc (CE) | USOTC:BGRP | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 0.035 | 0.00 | 01:00:00 |
Capmark Financial Group Inc. (the “Company”) today issued its Quarterly Report as of and for the period ended June 30, 2012. The Company had consolidated net income of $133.8 million in the six months ended June 30, 2012, which was driven by $136.4 million of noninterest income primarily from net gains on loans held for sale and $70.9 million of interest income primarily from loans held for sale and offset by $39.7 million of interest expense primarily on the Company’s secured notes (the “Secured Notes”) and Capmark Bank’s brokered certificates of deposit (“Brokered CDs”) and $59.6 million of noninterest expense. Net gains on loans of $137.9 million included $117.1 million of realized gains on full or partial dispositions of loans held for sale and $18.7 million of net recapture of losses from the application of the lower of cost or fair value accounting (“LOCOM”) to loans held for sale.
Business Overview
Highlights from the year-to-date include:
The Company is considering making distributions to shareholders of cash in excess of working capital needs. The timing, amount and form of any distribution have not been determined.1
Balance Sheet
The Company had consolidated assets of $5.9 billion and $8.6 billion as of June 30, 2012 and December 31, 2011, respectively. The assets were primarily comprised of a portfolio of loans, real estate and real estate-related assets and cash and cash equivalents, of which $4.3 billion and $6.2 billion were held at Capmark Bank as of June 30, 2012 and December 31, 2011, respectively. Assets associated with discontinued operations were $422.3 million and $381.9 million as of June 30, 20122 and December 31, 2011, respectively. Assets of the continuing operations also included $64.8 million and $129.3 million of restricted cash, as of June 30, 2012 and December 31, 2011, respectively.
The Company had consolidated liabilities of $3.1 billion and $5.8 billion as of June 30, 2012 and December 31, 2011, respectively. The liabilities included $2.4 billion and $4.3 billion at Capmark Bank as of June 30, 2012 and December 31, 2011, respectively. Liabilities associated with discontinued operations were $158.4 million and $177.8 million as of June 30, 2012 and December 31, 2011, respectively. Capmark Bank’s liabilities were primarily comprised of $2.3 billion and $3.9 billion of FDIC-insured deposit liabilities as of June 30, 2012 and December 31, 2011, respectively. The continuing operations of the Company included $208.4 million and $733.2 million of debt obligations under the Secured Notes as of June 30, 2012 and December 31, 2011, respectively.
Total stockholders’ equity was $2.8 billion and $2.7 billion at June 30, 2012 and December 31, 2011, respectively. Total equity of $2.9 billion and $2.8 billion included $79.7 million and $179.0 million of noncontrolling interests from which the Company does not expect to derive any material value as of June 30, 2012 and December 31, 2011, respectively.
Results of Operations
Capmark Bank
Capmark Bank had income from continuing operations before income taxes of $102.2 million in the three months ended June 30, 2012 primarily due to $101.7 million of net gains on loans and $26.5 million of interest income primarily from loans held for sale, partially offset by $15.1 million of noninterest expense. Net gains on loans of $101.7 million included $80.6 million of realized gains on full or partial dispositions of loans held for sale and $21.1 million of recapture of losses from the application of LOCOM to loans held for sale. The $15.1 million of noninterest expense included $8.3 million of compensation and benefits costs. Capmark Bank had $4.7 million of interest expense comprised of $25.5 million of contractual interest expense from deposit liabilities and FHLB borrowings offset by $20.8 million from the accretion of the fresh start accounting premium for the deposit liabilities and FHLB borrowings.
Capmark Bank had income from continuing operations before income taxes of $127.4 million in the six months ended June 30, 2012 primarily due to $114.0 million of net gains on loans and $57.5 million of interest income primarily from loans held for sale, partially offset by $29.8 million of noninterest expense. Net gains on loans of $114.0 million included $90.2 million of realized gains on full or partial dispositions of loans held for sale and $23.8 million of recapture of losses from the application of LOCOM to loans held for sale. Capmark Bank had $29.8 million of noninterest expense which included $15.8 million of compensation and benefits costs. Capmark Bank’s $10.1 million of interest expense was comprised of $57.3 million of contractual interest expense from deposit liabilities and FHLB borrowings offset by $47.2 million from the accretion of the fresh start accounting premium for the deposit liabilities and FHLB borrowings.
Non-Capmark Bank
The Company’s Non-Capmark Bank operations had a loss from continuing operations before income taxes of $1.2 million in the three months ended June 30, 2012 primarily due to $15.0 million of interest expense and $14.9 million of noninterest expense, substantially offset by $22.7 million of noninterest income and $6.0 million of interest income on loans held for sale and investment securities available for sale. Interest expense of $15.0 million included $8.6 million of contractual interest expense for the Secured Notes and $4.5 million for the accretion of the fresh start accounting discount for the Secured Notes. Noninterest expense of $14.9 million included $6.9 million of compensation and benefits costs and $6.8 million of professional fees, of which $1.8 million was attributable to fees of restructuring professionals. Noninterest income for the Non-Capmark Bank operations of $22.7 million included $16.2 million of realized gains on full or partial dispositions of loans held for sale and $5.2 million of gains associated with foreign currency remeasurement adjustments principally associated with the former Asian Operations segment.
The Company’s Non-Capmark Bank operations had a loss from continuing operations before income taxes of $19.4 million in the six months ended June 30, 2012 primarily due to $29.8 million of noninterest expense and $29.5 million of interest expense, partially offset by $26.6 million of noninterest income and $13.3 million of interest income on loans held for sale and investment securities available for sale. Noninterest expenses of $29.8 million included $14.1 million of compensation and benefits costs and $11.4 million of professional fees, of which $3.0 million was attributable to fees of restructuring professionals. Interest expense of $29.5 million included $21.0 million of contractual interest expense for the Secured Notes and $5.3 million for the accretion of the fresh start accounting discount for the Secured Notes. Noninterest income of $26.6 million included $21.6 million of realized gains on full or partial dispositions of loans held for sale and $5.3 million of gains due to the reduction of the estimate of potential losses on loans held for sale associated with the former new markets tax credits business partially offset by $5.1 million of losses from the application of LOCOM to loans held for sale.
Liquidity
As of June 30, 2012, the Company’s continuing operations had $3.0 billion in total cash and cash equivalents (including restricted cash), of which $2.8 billion was held by Capmark Bank and $206.1 million was held by its other subsidiaries. Of the $206.1 million in cash and cash equivalents held by the Non-Capmark Bank subsidiaries, $64.8 million was restricted under contractual arrangements.
Utilizing cash from monetization activities, the Company redeemed an additional $141.2 million, $125.0 million and $120.4 million of Secured Notes on May 1, 2012, June 29, 2012 and August 1, 2012, respectively. On August 7, 2012, the Company deposited sufficient funds in trust with the indenture trustee to redeem the remaining $88.3 million of B Notes and satisfy and discharge the Secured Notes indenture. An additional $7.1 million and $2.8 million was paid to the holders of the Company’s former unsecured loans and unsecured notes pursuant to the Crystal Ball Settlement Agreement on April 16, 2012 and July 16, 2012, respectively.
The following table summarizes the cash, cash equivalents and restricted cash from continuing operations (in thousands):
Cash, Cash Equivalents and Restricted Cash June 30, 2012 December 31, 2011 Capmark Bank: Cash and cash equivalents $ 2,838,382 $ 2,286,889 Non-Capmark Bank: Cash and cash equivalents – Asian Operations (1) — 90,778 Cash and cash equivalents – Other Non-Capmark Bank 141,346 355,749 Cash and cash equivalents – Total Non-Capmark Bank 141,346 446,527 Restricted cash 64,790 129,264 Total cash, cash equivalents and restricted cash attributable to continuing operations $ 3,044,518 $ 2,862,680Note:
(1) Management determined that the Asian Operations segment met the criteria for inclusion as discontinued operations in the three months ended June 30, 2012 and it is no longer reflected as a business segment of continuing operations.The following table summarizes the components of restricted cash from continuing operations (in thousands):
Restricted Cash June 30, 2012 December 31, 2011 Cash from consolidated VIEs $ 46,014 $ 72,626 Secured Notes interest reserve — 25,000 Bankruptcy disputed administrative, priority and convenience class claims escrow 9,435 18,499 Other 9,341 13,139 Restricted cash from continuing operations $ 64,790 $ 129,264On April 11, 2012, the Company received $9.0 million of cash from the reserves for disputed administrative and priority claims. This amount represents certain disputed administrative and priority claims that were resolved in favor of the Company from the effective date of the plan of reorganization through March 31, 2012.
In June 2012, two subsidiaries of the Company completed the sale of two portfolios of loans held for sale to an unaffiliated financial institution. The aggregate unpaid principal balance of these two portfolios was approximately $911 million for 54 loans held for sale. The majority of the aggregate portfolio was owned by Capmark Bank.
In late July and early August, Capmark Bank distributed approximately $1.57 billion of assets to the Company. The distribution consisted of loans held for sale, real estate investments and related assets with an aggregate fair value of approximately $1.32 billion and approximately $250 million of cash. The FDIC and the Utah Department of Financial Institutions (the “UDFI”) expressed no objection to the distribution. Subsequent to the distribution, Capmark Bank’s assets consist primarily of $2.6 billion of cash, while deposits are approximately $2.2 billion and shareholders’ equity is approximately $400 million.
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 and fully satisfying all obligations under the Secured Notes. 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’s primary sources of liquidity are expected to be (1) principal and interest payments on loans, (2) proceeds from the sale of loans, including discounted payoffs received in connection with loan workout efforts, and (3) proceeds from the sale of real estate, equity investments and other assets in its portfolio. Capmark Bank has cash and cash equivalents in excess of all of its remaining deposit liabilities and other liabilities as well as its expected operating expenses over the next 12 months. Capmark Bank is prohibited under the cease and desist orders with the FDIC and the UDFI from declaring or paying dividends or making any other form of payment representing a reduction in capital to the Company without their prior written consent.
Supplemental Financial Information
The Company’s Quarterly Report as of and for the Period Ended June 30, 2012 and supplemental financial information as required by the Company’s Amended and Restated By-Laws may be found on the Company’s website (www.capmark.com) under the heading “Indenture Reporting.”
Conference Call
The Company will hold a conference call for investors to be broadcast live over the Internet on August 16, 2012 at 1:00 p.m. Eastern Time regarding the topics addressed in this news release and the Quarterly Report as of and for the Period Ended June 30, 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 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 in to one of the following numbers:
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
1
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. The Company currently estimates that earnings and profits available for distribution in 2012 will not be significant. Distributions made in excess of earnings and profits are next treated as a return of capital to the extent of the shareholder’s basis. The actual amount of the Company’s 2012 earnings and profits cannot be determined until the 2012 year is complete, and actual amounts may be significantly different than estimates. If the Company makes a distribution to shareholders in 2012, the Company intends to communicate information regarding the characterization of the distribution in early 2013. The Company does not provide advice on tax matters to its shareholders or to broker/nominees who hold the Company’s shares on behalf of their customers. The information above is provided for information purposes only, is subject to change as more definitive information is obtained by the Company, and does not constitute tax advice. Holders of the Company’s common shares and broker/nominees who hold shares on behalf of such holders are strongly urged to consult with their own tax advisors with regard to the U.S. federal income tax consequences of any distribution that may be paid by the Company. This information is not intended to, and cannot, be used by any taxpayer to avoid penalties that may be imposed under U.S. federal income tax law. 2 Management determined that the Asian Operations segment met the criteria for inclusion as discontinued operations in the three months ended June 30, 2012 and it is no longer reflected as a business segment of continuing operations. CAPMARK FINANCIAL GROUP INC. Consolidated Balance Sheet (unaudited) (in thousands, except share amounts) June 30, 2012 December 31, 2011 Assets Cash and cash equivalents (1) $ 2,979,728 $ 2,733,416 Restricted cash (1) 64,790 129,264 Accounts and other receivables (1) 134,101 106,888 Investment securities available for sale 20,073 595,647 Loans held for sale (1) 1,660,603 3,550,269 Real estate investments (1) 300,406 672,660 Equity investments 313,043 322,600 Other assets (1) 29,178 106,112 Assets of discontinued operations (1) 422,301 381,946 Total assets $ 5,924,223 $ 8,598,802 Liabilities and Equity Liabilities: Debt $ 208,392 $ 807,869 Other borrowings (1) 198,385 652,598 Deposit liabilities 2,335,785 3,860,332 Other liabilities (1) 151,290 261,813 Liabilities of discontinued operations (1) 158,447 177,796 Total liabilities 3,052,299 5,760,408 Commitments and Contingent Liabilities Equity: Common stock, $.001 par value; 110,000,000 shares authorized; 100,052,475 shares issued and outstanding as of June 30, 2012 and December 31, 2011100
100 Capital paid in excess of par value 2,693,502 2,692,602 Retained earnings (accumulated deficit) 102,110 (31,651 ) Accumulated other comprehensive (loss) income, net of tax (3,439 ) (1,617 ) Total Capmark Financial Group Inc. stockholders’ equity 2,792,273 2,659,434 Noncontrolling interests 79,651 178,960 Total equity 2,871,924 2,838,394 Total liabilities and equity $ 5,924,223 $ 8,598,802 (1) The following table presents assets of consolidated variable interest entities (“VIEs”) included in each balance sheet line item that can be used only to settle the obligations of the consolidated VIE and liabilities of the consolidated VIE included in each balance sheet line item for which creditors or other interest holders do not have recourse to the general credit of Capmark Financial Group Inc. and its subsidiaries. June 30, 2012 December 31, 2011 June 30, 2012 December 31, 2011 Assets Liabilities Cash and cash equivalents $ — $ 2,949 Other borrowings $ 6,505 $ 6,079 Restricted cash 46,014 72,626 Other liabilities 4,174 12,315Accounts and other receivables
550 4,757 Liabilities of discontinued operations 23,578 73,482 Loans held for sale 228,560 266,779 Total liabilities $ 34,257 $ 91,876 Real estate investments 55,428 115,850 Other assets 1,171 3,362 Assets of discontinued operations 108,888 240,062 Total assets $ 440,611 $ 706,385 CAPMARK FINANCIAL GROUP INC. Consolidated Statement of Comprehensive Income (unaudited) (in thousands, except per share data) Three months Six months ended ended June 30, 2012 June 30, 2012 Net Interest Income Interest income $ 32,583 $ 70,856 Interest expense 19,669 39,669 Net interest income 12,914 31,187 Noninterest Income Net gains on loans 116,579 137,860 Net gains on investments and real estate (1,765 ) (4,564 ) Other losses, net 5,033 (2,785 ) Equity in income of joint ventures and partnerships (3,190 ) 441 Fee revenue 1,055 2,932 Net real estate investment and other income 489 2,533 Total noninterest income 118,201 136,417 Net revenue 131,115 167,604 Noninterest Expense Compensation and benefits 15,199 29,977 Professional fees 8,698 14,546 Occupancy and equipment 980 2,393 Other expenses 5,186 12,707 Total noninterest expense 30,063 59,623 Income from continuing operations before income tax benefit 101,052 107,981 Income tax benefit (845 ) (1,189 ) Income from continuing operations after income tax benefit 101,897 109,170 Income (loss) from discontinued operations, net of tax (includes gain on sale of $13.3 million for the three months and $25.8 million for the six months) (2,433 ) (13,652 ) Net loss 99,464 95,518 Plus: Net loss attributable to noncontrolling interests 11,296 38,243 Net income attributable to Capmark Financial Group Inc. $ 110,760 $ 133,761 Other comprehensive income (loss) 1,510 (1,822 ) Comprehensive income attributable to Capmark Financial Group Inc. $ 112,270 $ 131,939 Basic income from continuing operations per share $ 1.14 $ 1.48 Diluted income from continuing operations per share 1.13 1.48 Basic and diluted net income per share attributable to Capmark Financial Group Inc. 1.11 1.34 CAPMARK FINANCIAL GROUP INC. Consolidated Statement of Changes in Stockholders’ Equity (unaudited) (in thousands) Six months ended June 30, 2012 Common Stock Balance at beginning of period $ 100 Balance at end of period 100 Capital Paid in Excess of Par Value Balance at beginning of period 2,692,602 Stock-based compensation expense 900 Balance at end of period 2,693,502 Retained Earnings (Accumulated Deficit) Balance at beginning of period (31,651) Net income attributable to Capmark Financial Group Inc. 133,761 Balance at end of period 102,110 Accumulated Other Comprehensive (Loss) Income, net of tax Balance at beginning of period (1,617) Other comprehensive (loss) income (1,822) Balance at end of period (3,439) Total Capmark Financial Group Inc. Stockholders’ Equity 2,792,273 Noncontrolling Interests Balance at beginning of period 178,960 Net loss attributable to noncontrolling interests (38,243) Other comprehensive (loss) income attributable to noncontrolling interests — Other (includes impact of sale of discontinued operations assets) (61,066) Balance at end of period 79,651 Total Equity $ 2,871,924 CAPMARK FINANCIAL GROUP INC. Consolidated Statement of Cash Flows (unaudited) (in thousands) Six months ended June 30, 2012 Net Cash Provided By Operating Activities of Continuing Operations $ 1,981,255 Investing Activities of Continuing Operations Net decrease in restricted cash 64,474 Proceeds from sales of investment securities classified as available for sale 4,058 Repayments of investment securities classified as available for sale 569,629 Proceeds from sales of real estate investments 152,033 Proceeds from sales of/capital distributions from equity investments 11,841 Other investing activities, net (677) Net cash provided by investing activities of continuing operations 801,358 Financing Activities of Continuing Operations Repayments of debt (530,169) Repayments of other borrowings (405,969) Decrease in deposit liabilities (1,477,872) Net cash used in financing activities of continuing operations (2,414,010) Effect of Foreign Exchange Rates on Cash (579) Discontinued Operations Net cash used in operating activities of discontinued operations (11,080) Net decrease in restricted cash of discontinued operations (26,869) Net cash provided by other investing activities of discontinued operations 31,430 Net cash used in financing activities of discontinued operations (25,833) Net increase in Cash and Cash Equivalents 335,672 Cash and Cash Equivalents, Beginning of Period(1) 2,737,811 Cash and Cash Equivalents, End of Period(2) $ 3,073,483 Supplemental Disclosures of Cash Flow Information: Income taxes refunded, net $ 9,247 Interest paid 95,535Notes:
(1) 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. (2) Cash and cash equivalents exclude restricted cash of $142.1 million from continuing and discontinued operations and include non-restricted cash of discontinued operations of $93.8 million, respectively as of June 30, 2012.
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