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®
Investor PresentationInvestor PresentationFourth Quarter & Full Year 2007Fourth Quarter & Full Year 2007
February 21, 2008February 21, 2008
Investor PresentationFourth Quarter 2007
2
®Legal NoticesLegal Notices
This presentation contains “forward-looking statements” within the meaning of the Private SecuritiesLitigation Reform Act of 1995, including certain plans, expectations, goals, and projections, which aresubject to numerous assumptions, risks, and uncertainties. All statements contained in thispresentation that are not clearly historical in nature are forward-looking, and the words “project,”“anticipate,” “believe,” “expect,” “estimate,” “plan,” and similar expressions are generally intended toidentify forward-looking statements. All forward-looking statements (including statements regardingfuture financial and operating results, market conditions, business opportunities, dividendprojections, operating expenses, growth, competition, liquidity and credit performance) involve risks,uncertainties and contingencies, many of which are beyond our control which may cause actualresults, performance, or achievements to differ materially from anticipated results, performance orachievements. Actual results could differ materially from those contained or implied by suchstatements for a variety of factors, including without limitation: changes in economic conditions;continued disruptions in credit and other markets; movements in interest rates; competitivepressures on product pricing and services; success and timing of other business strategies; thenature, extent, and timing of governmental actions and reforms; extended disruption of vitalinfrastructure; and other factors described in reports filed by CapitalSource with the Securities andExchange Commission. All forward-looking statements included in this presentation are based oninformation available at the time of the release. We are under no obligation to (and expresslydisclaim any such obligation to) update or alter our forward-looking statements, whether as a resultof new information, future events or otherwise.
Investor PresentationFourth Quarter 2007
3
®Presentation IndexPresentation Index
FY 2007 and 4Q 2007 highlightsFY 2007 and 4Q 2007 highlights
CEO and CFO key pointsCEO and CFO key points
Credit PerformanceCredit Performance
4Q Asset Growth4Q Asset Growth
Key MetricsKey Metrics Commercial Finance Segment
Healthcare Net Lease Segment
4Q Consolidated4Q Consolidated –– Other IncomeOther Income
Funding and LiquidityFunding and Liquidity
DividendsDividends
What Investors Should Expect in 2008What Investors Should Expect in 2008
Supplemental InformationSupplemental Information
Investor PresentationFourth Quarter 2007
4
®FY 2007 HighlightsFY 2007 Highlights
Full year Adjusted Earnings of $448.2 millionFull year Adjusted Earnings of $448.2 million
5% higher than 2006
Assets Under Management at year end of $20.9 billionAssets Under Management at year end of $20.9 billion
Up 23% for the year
Commercial loans at year end of $9.9 billionCommercial loans at year end of $9.9 billion
Up $2 billion or 26% for the year
Direct Real Estate investments at $1.0 billionDirect Real Estate investments at $1.0 billion
Up $295 million or 41% for the year
New loans being originated at higher spreadsNew loans being originated at higher spreads
Competitors leaving the middle marketCompetitors leaving the middle market
Credit stable throughout 2007 and improved from year endCredit stable throughout 2007 and improved from year end20062006
Investor PresentationFourth Quarter 2007
5
®4Q 2007 Highlights4Q 2007 Highlights
Regular cash dividend of $0.60 paid in 4Q 2007Regular cash dividend of $0.60 paid in 4Q 2007
Strong and stable credit performanceStrong and stable credit performance
Charge-offs significantly lower than 3Q
Other-key credit metrics in-line with historic ranges
No funding issues throughout capital markets disruptionNo funding issues throughout capital markets disruption
Increased Liquidity by $500 million: $3.4 billion of undrawn committed creditfacility capacity as of December 31, 2007
Completed two term financings, totaling $835 million
Prepayment related fee income of $12.4 million (49bps of Yield)Prepayment related fee income of $12.4 million (49bps of Yield)
Consolidated adjusted ROE increased to 16.35%Consolidated adjusted ROE increased to 16.35%
Investor PresentationFourth Quarter 2007
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®
Continued strong credit performanceContinued strong credit performance
No funding or financing issues, throughout capital marketsNo funding or financing issues, throughout capital marketsdisruptiondisruption
Expect to pay $0.60 per share quarterly cash dividend in 2008Expect to pay $0.60 per share quarterly cash dividend in 2008
Attractive new lending opportunitiesAttractive new lending opportunities –– price, terms andprice, terms andstructurestructure –– in current market conditionsin current market conditions
Nearly 60% of business (Healthcare, Security Finance andNearly 60% of business (Healthcare, Security Finance andRediscount Finance) expected to be relatively unaffected inRediscount Finance) expected to be relatively unaffected ineconomic downturneconomic downturn
Return to broad distribution model securitization marketReturn to broad distribution model securitization marketplannedplanned
CEOCEO’’s Key Pointss Key Points
Investor PresentationFourth Quarter 2007
7
®CFOCFO’’s Key Pointss Key Points
Business performed very well against back drop of difficult markBusiness performed very well against back drop of difficult marketetconditionsconditions
Modest growth shows disciplineModest growth shows discipline
$238.3 M in Commercial Finance
Flat Healthcare Net Lease
Average coupon as spread to LIBOR increased 6bpsAverage coupon as spread to LIBOR increased 6bps
Cost of Funds higher as a spread to LIBOR was up 55bps from 3QCost of Funds higher as a spread to LIBOR was up 55bps from 3Q
Higher costs on new financings
Volatile short term market (LIBOR, Prime, CP) negatively impacted margin
Wider spreads on new assets to offset impact of higher spreads oWider spreads on new assets to offset impact of higher spreads on newn newfinancings over timefinancings over time
Running the business at lower leverageRunning the business at lower leverage
8.5% higher share count in 4Q
Residential Mortgage Investment segment performed wellResidential Mortgage Investment segment performed well –– no fundingno fundingissuesissues
Investor PresentationFourth Quarter 2007
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®
Portfolio Credit Trends Since 2Q06:
2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07
Delinquent Loans (60+ Days)as a % of commerical loans 1.31% 0.84% 1.12% 0.85% 1.09% 0.74% 0.75%as a % of commerical assets 1.27% 0.81% 1.03% 0.77% 0.97% 0.67% 0.68%
Loans on Non-accrualas a % of commerical loans 2.01% 2.39% 2.34% 1.78% 1.97% 1.76% 1.73%as a % of commerical assets 1.94% 2.31% 2.14% 1.63% 1.77% 1.59% 1.57%
Allowance for Loan Lossas a % of commerical loans 1.41% 1.40% 1.54% 1.45% 1.43% 1.16% 1.41%as a % of commerical assets 1.36% 1.35% 1.41% 1.33% 1.28% 1.05% 1.28%
Net Charge Offs (Annualized)as a % of commerical loans 0.74% 1.22% 0.66% 0.51% 0.63% 1.15% 0.25%as a % of commerical assets 0.72% 1.18% 0.63% 0.47% 0.57% 1.04% 0.22%
Credit PerformanceCredit Performance
NonNon--accruals declined 3bps from 3Q to 1.57% of commercialaccruals declined 3bps from 3Q to 1.57% of commercialassetsassets Lowest level since 1Q’05
ChargeCharge--offs declined to 22bps of commercial assetsoffs declined to 22bps of commercial assets
ChargeCharge--offs for the full year 2007 were 0.58% of commercialoffs for the full year 2007 were 0.58% of commercialassetsassets 5 bps lower than full year 2006
Note: Commercial Assets includes commercial loans, loans held for sale, receivables under reverse-repurchase agreements anddirect real estate investments.
Investor PresentationFourth Quarter 2007
9
®4Q Asset Growth / Interest & Investment Income4Q Asset Growth / Interest & Investment Income
Assets under management $20.9 billionAssets under management $20.9 billion
+184.3 M from 3Q
Total commercial loans at $9.9 billionTotal commercial loans at $9.9 billion
+ $238.3 M from 3Q
Total commercial assets under management at $14.8 billionTotal commercial assets under management at $14.8 billion
+ $340.5 M from 3Q
Commercial Finance Interest Income of $242.5 millionCommercial Finance Interest Income of $242.5 million
- $6.9 M from 3Q
Commercial Finance Net investment income of $146.1 millionCommercial Finance Net investment income of $146.1 million
- $0.1 M from 3Q
Investor PresentationFourth Quarter 2007
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®
$2.0$2.4
$2.8$3.3
$3.8$4.3
$4.7$5.1
$5.5$6.0
$6.4
$7.2 $7.3$7.9
$8.9$9.6 $9.9$1.1
$1.1 $1.1
$8.6
$0.8
$0.7$0.3$0.2
$0.2
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
$10.0
$11.0
$12.0
3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07
Portfolio GrowthPortfolio Growth
Note: Data As of December 31, 2007(1) Includes loans, loans held for sale and receivables under repurchase agreements.(2) Includes Direct Real Estate investments, and excludes related accumulated depreciation.
$in
Billi
ons
Loans – Commercial Finance Segment (1) Gross Assets - Healthcare Net Lease Segment(2)
Investor PresentationFourth Quarter 2007
11
®4Q Commercial Finance Segment4Q Commercial Finance Segment –– Key MetricsKey Metrics
11.12% yield on average interest earnings assets11.12% yield on average interest earnings assets
Down 19 bps from 3Q
Lower LIBOR, offset by greater prepayment fee income
6.44% cost of funds6.44% cost of funds
Up 3 bps from 3Q
Higher borrowing spread to LIBOR due to short-term market “noise” and wider credit spreads
Borrowing spread to average 1 month LIBOR at 1.53% (+55 bps from 3Q)
Provision for loan loss at $33.3 millionProvision for loan loss at $33.3 million
Up $21.4 million from 3Q
4.39x leverage (total debt to equity ratio)4.39x leverage (total debt to equity ratio)
Down from 4.48x in 3Q
5.79% net finance margin5.79% net finance margin
Down 32 bps from 3Q
The Commercial Finance segment contributed $88.5 million to adjuThe Commercial Finance segment contributed $88.5 million to adjustedstedearnings in 4Qearnings in 4Q(1)(1)
(1) See the last slide for a reconciliation of GAAP Net Income to Adjusted Earnings
Investor PresentationFourth Quarter 2007
12
®Healthcare Net Lease SegmentHealthcare Net Lease Segment
CapitalSource begins reporting the Healthcare Net Lease segmentCapitalSource begins reporting the Healthcare Net Lease segmentseparatelyseparately Due to the significant growth and development of the business.
The Healthcare Net Lease segment is similar to other publicly traded healthcareproperty REITs and is in the business of investing in income-producing healthcarefacilities, principally long-term care facilities.
Direct Real Estate investments totaling $1.0 billion for 4QDirect Real Estate investments totaling $1.0 billion for 4Q Down $14.3 million from 3Q
Primarily due to depreciation and the sale of one property
Direct Real Estate investments increased $295.3 millionDirect Real Estate investments increased $295.3 million Up 40.9% in 2007
Operating Lease Income of $27.1 million for 4QOperating Lease Income of $27.1 million for 4Q Down $0.4 million from 3Q
Operating Lease Income more than tripled in 2007 to $97.0 millioOperating Lease Income more than tripled in 2007 to $97.0 millionn(from $30.7 million in 2006)(from $30.7 million in 2006)
The Healthcare Net Lease segment contributed $11.6 to adjustedThe Healthcare Net Lease segment contributed $11.6 to adjustedearnings in 4Qearnings in 4Q
Investor PresentationFourth Quarter 2007
13
®4Q Consolidated4Q Consolidated -- Other IncomeOther Income
Net gain (loss) on investments was a loss of ($0.2) million, comNet gain (loss) on investments was a loss of ($0.2) million, compared to a losspared to a lossof ($2.0) million in 3Qof ($2.0) million in 3Q Due to write-downs in certain cost-based investments, partially offset by dividends
received and realized gains on cost-based investments
Other Income net of Expenses was $4.3 million, compared to a losOther Income net of Expenses was $4.3 million, compared to a losssof ($3.4) in 3Qof ($3.4) in 3Q Primarily due to increases in income relating to equity interests in certain non-
consolidated entities and an increase in fees arising from HUD mortgage originatingservices, partially offset by increased foreign currency exchange losses
Gain (loss) on residential mortgage investment portfolio of ($25Gain (loss) on residential mortgage investment portfolio of ($25.4) million,.4) million,compared to a loss of ($30.2) M in 3Qcompared to a loss of ($30.2) M in 3Q Primarily due to the net change in the fair value of Agency MBS and related derivatives
Gain (loss) on derivatives of ($31.6) million, compared to a losGain (loss) on derivatives of ($31.6) million, compared to a losssof ($15.5 M) in 3Qof ($15.5 M) in 3Q Primarily due to the unrealized net change in the fair value of swaps used in hedging
certain assets and liabilities to minimize the Company’s exposure to interest ratemovements. The Company does not apply hedge accounting to these swaps. As aresult, movements in the net fair value of hedging instruments are reported in OtherIncome (Expense), while changes in the fair value of hedged exposures are not
Investor PresentationFourth Quarter 2007
14
®4Q and FY 20074Q and FY 2007 -- Funding and LiquidityFunding and Liquidity
DRIP 4QDRIP 4Q -- $207.0 million raised / 12.1 million shares issued$207.0 million raised / 12.1 million shares issued
DRIP Full Year 2007DRIP Full Year 2007 -- $714.5 million raised / 37.1 million shares issued$714.5 million raised / 37.1 million shares issued
$400 million term financing of loans from the Company$400 million term financing of loans from the Company’’s portfolios portfoliocompleted on October 11, 2007.completed on October 11, 2007.
Completed as a single tranche in a private placement and rated A by Fitch Ratings andA2 by Moody’s Investor Service.
One-year replenishment period during which principal collected can be invested inadditional loan collateral.
The note bears interest (excluding fees) at a floating commercial paper rate plus 1.10%and is pre-payable by the Company at any time
$435 million term financing of loans from the Company$435 million term financing of loans from the Company’’s portfolios portfoliocompleted on November 16, 2007completed on November 16, 2007
Private placement of multiple tranches rated AAA through A by Fitch Ratings and Aaathrough A2 by Moody’s Investor Service.
Tranches were priced at a weighted average interest rate (excluding fees) ofone-month LIBOR plus 1.05%.
Investor PresentationFourth Quarter 2007
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®Funding OverviewFunding Overview
Funding StrategyFunding Strategy Manage the business with low leverage Do not fund illiquid assets with short term liabilities Diversify funding sources
Funding SourcesFunding Sources
Committed credit facilities(1):
$5.6 Billion capacity for core business, with $3.4 Billion undrawn to fund growth
Match funded term securitizations(1):
$5.2 Billion for commercial finance business
$2.0 Billion for mortgage – related receivables
Unsecured debt(1):
$1.9 Billion
Supported by BBB- Investment Grade ratings by S&P and Fitch
Equity and subordinate capital(1):
$3.6 Billion
Senior Debt-to-Subordinate Capital Leverage in “core” lending business ofapproximately 2.2x
Repurchase agreements:
Fund a liquid portfolio of Fannie/Freddie guaranteed securities(1) Data as of December 31, 2007.
Investor PresentationFourth Quarter 2007
16
®DividendsDividends
$0.60 $0.60$0.60$0.60$0.58
$0.49 $0.49 $0.49$0.55
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
1Q'06 2Q'06 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 4Q'07 1Q'08 (1)
(1) Dividend declared February 20, 2008. Payable on or about March 31, 2008.
Investor PresentationFourth Quarter 2007
17
®What Investors Should Expect in 2008What Investors Should Expect in 2008
CapitalSource is entering 2008 with a strong market positionCapitalSource is entering 2008 with a strong market positionand positive outlook on the yearand positive outlook on the year
Disciplined and focused loan growth, especially with keyDisciplined and focused loan growth, especially with keycompetitors continuing to exit the marketcompetitors continuing to exit the market
Cash dividend of $0.60 per share declared for the first quarterCash dividend of $0.60 per share declared for the first quarterand projecting a quarterly cash dividend of $0.60 per share forand projecting a quarterly cash dividend of $0.60 per share forthe balance of 2008the balance of 2008
Continued credit stability in line with historical rangesContinued credit stability in line with historical ranges
Ongoing focus on maintaining strong liquidity and balance sheetOngoing focus on maintaining strong liquidity and balance sheet
Quarterly variation, consistent with historical patters, inQuarterly variation, consistent with historical patters, inPrepayment Related Fee Income, Equity Gains and OtherPrepayment Related Fee Income, Equity Gains and OtherIncomeIncome
®
Supplemental InformationSupplemental Information
Investor PresentationFourth Quarter 2007
19
®CapitalSource OverviewCapitalSource Overview
Commercial Finance Business Focused on the Middle MarketCommercial Finance Business Focused on the Middle Market
Large Scale, BroadLarge Scale, Broad--Based Lending PlatformBased Lending Platform Approximately 560 employees, including approximately 370 investment
professionals(1)(2)
National scale with 24 offices in the U.S.
Large, Diverse Commercial PortfolioLarge, Diverse Commercial Portfolio $14.8 Billion in commercial assets under management; 1,214 loans to 759 borrowers(1)
Direct origination platform
Market Leadership Position in Three Major Business LinesMarket Leadership Position in Three Major Business Lines Corporate Finance Healthcare & Specialty Finance
Structured Finance
Seasoned, Proven Management TeamSeasoned, Proven Management Team
Balanced, Diversified, Tax Advantaged EnterpriseBalanced, Diversified, Tax Advantaged Enterprise “Hybrid REIT” structure blending asset based loans, corporate loans, commercial &
healthcare real estate loans and investments
(1) As of December 31, 2007(2) Investment professionals include Credit Committee, Development Officers, Investment
Officers, Loan Officers, Underwriting Officers, Loan Analysts, Attorneys and relatedsupport staff
Investor PresentationFourth Quarter 2007
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®Key Business AttributesKey Business Attributes
Focused Asset StrategyFocused Asset Strategy Multiple lending groups compete on service, expertise and industry insight Non-commodity products Superior risk adjusted returns and credit outcomes
““InIn--SourcedSourced”” Business ModelBusiness Model Origination Forensic accounting/underwriting Credit approval Syndication Servicing Audit Asset management
Operational Scale and ExpertiseOperational Scale and Expertise Focused direct origination teams with deep experience Multiple resources applied to each loan (e.g., in-house lending team,
legal, credit committee)(1) Data as of September 30, 2007(2) Commercial Lending & Investment Segment only.(3) Consolidated results.(4) See the last slide for a reconciliation of GAAP Net Income to Adjusted Earnings
“End-to-End” control ofthe credit process
Investor PresentationFourth Quarter 2007
21
®Key Business Attributes (Continued)Key Business Attributes (Continued)
Diversified Funding PlatformDiversified Funding Platform Multiple sources Focus on committed and matched funding Investment grade ratings
Strong Shareholder AlignmentStrong Shareholder Alignment Management, Directors and certain of their Affiliates beneficially own
more than 35% of outstanding shares (1)
Farallon and Madison Dearborn Partners have recently added to theirpositions, further demonstrating their confidence in the firm
Compelling Financial ModelCompelling Financial Model High asset quality - 88% of loan assets are senior loans (1)
Modest leverage – 4.39x debt-to-equity ratio (1)(2)
High risk-adjusted returns – 18.8% Adjusted ROE full year 2007 (1)(3)(4)
(1) Data as of December 31, 2007(2) Commercial Finance segment only.(3) Consolidated results.(4) See the last slide for a reconciliation of GAAP Net Income to Adjusted Earnings
Investor PresentationFourth Quarter 2007
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®
Captive In-House Audit,Due Diligence and Loan
Approval Functions
CapitalAnalyticsCapitalAnalyticsFee BusinessesFee Businesses
Asset Management Businessand Servicing Businesses to
Lever Platform Expertise
Asset-Based & CorporateLending to Security,
Homeland Defense & PublicSafety Companies
Security FinanceSecurity Finance
First Mortgage DebtSecured by All Real Estate
Asset Types
Commercial Real EstateCommercial Real Estate
Asset-Based Lending toMiddle Market Finance
Companies
Rediscount FinanceRediscount Finance
Senior Secured Debtto Finance Leveraged
Buy-Outs
Corporate Finance Healthcare CreditHealthcare Credit
Asset-Based & CorporateLending to
Healthcare Companies
First Mortgage Debt,Mezzanine Debt,
& Sale Leasebacks onHealthcare Properties
Healthcare Real EstateHealthcare Real Estate
Diversified Commercial Finance PlatformDiversified Commercial Finance Platform
Investor PresentationFourth Quarter 2007
23
®
52%
28%
11%
9%
28%
36%
36%
Commercial Finance and Healthcare Net Lease PortfolioCommercial Finance and Healthcare Net Lease Portfolio
PortfolioPortfolio(1)(1) by Product Mixby Product MixPortfolioPortfolio(1)(1) by Lending Groupsby Lending Groups
CorporateFinance
StructuredFinance
Healthcare&
SpecialtyFinance
Senior SecuredLoans
First Mortgage
Mezzanine
Note: Data As of December 31, 2007(1) Commercial Finance and Healthcare Net Lease segments. Commercial Finance segment includes loans, loans held for sale and receivables
under repurchase agreements.
DirectReal
Estate
True Diversification Across Products and BusinessesTrue Diversification Across Products and Businesses……..
Investor PresentationFourth Quarter 2007
24
®Adjusted Earnings ReconciliationsAdjusted Earnings Reconciliations
December 31,2007
September 30,2007
December 31,2006
December31, 2007
December31, 2006
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,034.00)$ 28,265.00$ 60,340.00$ 176,287$ 279,276$Add:Real estate depreciation and amortization (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8,557 8,570 4,118 31,785 10,323Amortization of deferred financing fees (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9,961 7,491 9,012 29,783 30,842Non-cash equity compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12,581 11,336 8,301 44,488 33,294Net realized and unrealized losses on residential mortgage investment
portfolio including related derivatives (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25,571 32,425 1,749 81,022 5,862Unrealized loss (gain) on derivatives and foreign currencies, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35,728 16,464 (1,274) 51,233 (1,470)Unrealized loss on investments, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,946 8,452 2,014 12,615 7,524Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33,952 12,353 30,529 78,641 81,662Recoveries
(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - -
Less:Charge offs (5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,008 27,796 5,234 57,679 16,510Non-recurring items (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .- - - - 4,725Cumulative effect of accounting change, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .- - - - 370
Adjusted earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,254$ 97,560$ 109,555$ 448,175$ 425,708$
Net income per share:Basic - as reported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.07)$ 0.15$ 0.35$ 0.92$ 1.68$Diluted - as reported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.07)$ 0.15$ 0.34$ 0.91$ 1.65$
Average shares outstanding:Basic - as reported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .210,021,621 191,976,931 174,862,656 191,697,254 166,273,730Diluted - as reported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .210,021,621 193,607,986 178,691,422 193,282,656 169,220,007
Adjusted earnings per share:Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.52$ 0.51$ 0.63$ 2.34$ 2.56$Diluted (7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.51$ 0.50$ 0.61$ 2.32$ 2.51$
Average shares outstanding:Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .210,021,621 191,976,931 174,862,656 191,697,254 166,273,730Diluted (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .211,609,633 193,607,986 181,202,240 194,792,918 171,551,972
Three Months Ended Year Ended
($ in thousands, except per share data)
(5) To the extent we experience losses on loans for which we specifically provided a reserve prior to January 1, 2006, there will be no adjustment to earnings. Allcharge offs incremental to previously established allocated reserves will be deducted from net income.
(6) Represents the write-off of a $4.7 million net deferred tax liability recorded in connection with our conversion to a REIT for the year ended December 31, 2006.
(7) Adjusted to reflect the impact of adding back noncontrolling interests expense of $1.4 million for the three months ended December 31, 2006 and $3.1 million and$4.7 million for the years ended December 31, 2007 and 2006, respectively, to adjusted earnings due to the application of the if-converted method on non-managingmember units, which are considered dilutive to adjusted earnings per share, but are antidilutive to GAAP net income per share for these periods.
(8) Adjusted to include average non-managing member units of 2,510,818 for the three months ended December 31, 2006 and 1,113,259 and 2,331,965 for theyears ended December 31, 2007 and 2006, respectively, which are considered dilutive to adjusted earnings per share, but are antidilutive to GAAP net income pershare for these periods.
(1) Depreciation and amortization for direct real estate investments only. Excludes depreciation for corporate leasehold improvements, fixed assets and other non-real estate items.(2) Includes amortization of deferred financing fees and other non-cash interest expense.
(3) Includes adjustments to reflect the realized gains and losses and the period change in fair value of residential mortgage-backed securities and related derivativeinstruments.(4) Includes all recoveries on loans during the period.
CommercialFinance
HealthcareNet Lease
CommercialFinance
HealthcareNet Lease
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706$ 4,245$ 52,050$ 3,286$Add:
Real estate depreciation and amortization (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .- 8,557 - 8,570
Amortization of deferred financing fees (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9,007 172 6,474 (198)
Non-cash equity compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12,581 - 11,336 -
Net realized and unrealized losses on residential mortgageinvestmentportfolio including related derivatives (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .- - - -
Unrealized loss (gain) on derivatives and foreign currencies, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35,728 - 16,464 -
Unrealized loss on investments, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,946 - 8,452 -
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33,302 - 11,938 -
Recoveries (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - -
Less:
Charge offs (5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,818 - 27,796 -
Non-recurring items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .- - - -
Cumulative effect of accounting change, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .- - - -
Adjusted earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88,451$ 12,975$ 78,917$ 11,658$
Net income per share:
Basic - as reported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00$ 0.02$ 0.27$ 0.02$Diluted - as reported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00$ 0.02$ 0.27$ 0.02$
Average shares outstanding:
Basic - as reported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .210,021,621 210,021,621 191,976,931 191,976,931
Diluted - as reported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .210,021,621 210,021,621 193,607,986 193,607,986
Adjusted earnings per share:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.42$ 0.06$ 0.41$ 0.06$Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.42$ 0.06$ 0.41$ 0.06$
Average shares outstanding:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .210,021,621 210,021,621 191,976,931 191,976,931
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .211,609,633 211,609,633 193,607,986 193,607,986
Three Months EndedDecember 31, 2007
Three Months EndedSeptember 30, 2007
($ in thousands, except per share data)
(4) Includes all recoveries on loans during the period.(5) To the extent we experience losses on loans for which we specifically provided a reserve prior to January 1, 2006, there will be noadjustment to earnings. All charge offs incremental to previously established allocated reserves will be deducted from net income.
(1) Depreciation and amortization for direct real estate investments only. Excludes depreciation for corporate leasehold improvements, fixedassets and other non-real estate items.(2) Includes amortization of deferred financing fees and other non-cash interest expense.(3) Includes adjustments to reflect the realized gains and losses and the period change in fair value of residential mortgage-backed securitiesand related derivative instruments.
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