Message from the Founder and Executive Chairman

John K. Delaney
Founder, Executive Chairman and Chairman of the Board

CapitalSource, in our eleventh year as a business, is in the midst of a strategic transformation. The company isn’t changing as much as we are evolving.

The formation of CapitalSource Bank and the commencement of its operations in July 2008 was an important and defining step for our franchise. Establishing CapitalSource Bank marked the realization of a strategy that we had been working towards for quite some time—to pair our market leading commercial lending business with a depository of significant scale.

We have spent considerable time over the past few months evaluating how best to achieve two key strategic priorities—returning parent company capital to the shareholders and converting CapitalSource Bank to a California chartered commercial bank. While pursuing those goals simultaneously would be ideal, the options that potentially allow us to do so involve significant complexity, uncertainty and delay.

As a result, after thorough analysis of our strategic options and with the advice of a financial advisor, our Board has decided to pursue a course of action that is within our control—expeditiously returning parent company capital to shareholders, while extending the timeframe for conversion to a commercial bank charter. We do not anticipate filing an application for bank holding company status for at least 18 months.

Converting to a commercial charter has many longer term benefits, so it remains an important strategic priority. Since our current industrial charter is an extremely efficient operating model, however, this delay should have little or no impact on our profitability and growth projections for CapitalSource Bank over the next two years.

While we are writing a new chapter, our evolution won’t change the fact that we are a leading middle-market commercial lender in the United States. Nor will it change our focus on asset quality, credit performance, or managing the business to achieve high returns on equity. We continue to grow our commercial lending business at CapitalSource Bank, in sectors we know well. We target specific industries where we have deep expertise and strive to achieve a diverse and balanced portfolio anchored in defensive sectors, particularly healthcare.

We view ourselves as an important source of credit to credit-starved, small- and middle-market businesses which are the backbone of our economy. We want clients to think of CapitalSource first because we are highly skilled experts and squarely focused on serving their needs. This isn’t aspirational; discipline, collaboration, and accountability have defined our culture since inception and have helped this goal become a reality.

We decided from the very beginning of our company that we couldn’t control business cycles, but we could control our reactions to them. We continue to adapt; we continue to evolve; and it continues to be a privilege to lead CapitalSource.

PUBLISHED: 08/11

Header photo credit: ( c ) 2008, The Washington Post. Photograph by Nikki Kahn. Reprinted with Permission.