Exhibit 99.1

News
CapitalSource Inc.

4445 Willard Avenue
Twelfth Floor
Chevy Chase, MD 20815

		FOR IMMEDIATE RELEASE
For information contact:
Investor Relations:		Media Relations:
Dennis Oakes		Michael E. Weiss
Vice President — Investor Relations		Director of Communications
(212) 321-7212		(301) 841-2918

CAPITALSOURCE REPORTS THIRD QUARTER 2008 RESULTS

	§		Profitable quarter on a GAAP and Adjusted Earnings basis
	§		Commenced operation of CapitalSource Bank, ending the quarter with

	o		$5.0 billion in retail deposits in 22 branches
	o		$4.0 billion of total commercial lending assets
	o		$1.8 billion of cash, cash equivalents and marketable securities
	o		Total risk-based capital ratio over 16%

	§		Announced decision to revoke REIT election in 2009
	§		Initial step for commercial bank charter achieved
	§		Federal bank holding company application filed

Chevy Chase, Md., November 5 — CapitalSource Inc. (NYSE: CSE) today announced financial results for the third quarter 2008. GAAP net income for the quarter was $8 million, or $0.03 per diluted share, and Adjusted Earnings for the quarter was $82 million, or $0.30 per diluted share. Total investment income increased from the prior quarter and operating expenses were lower, but overall results for the quarter were negatively impacted by higher provision expense and increased charge offs in large part due to the current unprecedented economic conditions.

CapitalSource Bank ended the quarter with significant liquidity, including $1.8 billion in cash, cash equivalents and marketable securities; $4.0 billion in commercial lending assets; and $5.0 billion of retail deposits in 22 branches. During the quarter, CapitalSource, began taking advantage of the attractive current lending market by resuming the growth of its commercial lending business primarily through its CapitalSource Bank subsidiary. Following the formation of CapitalSource Bank on July 25, 2008, the Company originated approximately $276 million of new loans and is increasingly well positioned to accelerate the pace of new loan originations offering higher-risk adjusted returns given reduced competition, lower leverage and wider spreads.

“CapitalSource Bank is off to a terrific start,” said CapitalSource Chairman and CEO, John K. Delaney. “We are capitalizing on the attractive lending opportunities presented by this market. Consistent with our FDIC approved business plan, we are also pursuing our strategy of converting to a commercial bank and becoming a bank holding company. We have achieved the first step in the process with the State of California approval of our commercial bank charter application. Subsequent approvals are now required and currently pending with the FDIC and the Federal Reserve. Becoming a commercial bank will allow us to offer a wider variety of deposit products and services to our customers,” added Delaney.

Commenting on the quarter’s results, Delaney said, “Despite the extraordinarily challenging economic conditions that necessitated increased and prudent reserves and charge offs, we are pleased with the overall performance of CapitalSource in the third quarter. Our credit performance was consistent with the cautionary guidance we have provided throughout 2008, reflecting a combination of the economic environment and the quarterly variation we have experienced historically. Looking ahead, we expect our pre-bank legacy portfolio will continue to experience higher than normal charge offs due to macro economic conditions and market dislocation. We maintain our view that these increased charge offs will be manageable because of the defensive nature of our portfolio, including our concentration in healthcare, and our strong balance sheet.”

As previously announced, the CapitalSource Board of Directors made the decision on October 30, 2008, to revoke the Company’s REIT election beginning in 2009. Although CapitalSource intends to maintain REIT status through 2008, the Board’s decision means CapitalSource will not be a REIT next year. As a result of the decision, the Company intends to sell its residential mortgage investment portfolio in early 2009.

“Our strategy is transforming CapitalSource in several important ways,” said Chief Financial Officer, Thomas A. Fink. “As a result of the steps we have already taken and the decision to de-REIT in 2009, we have materially improved the financial position of the Company. Beginning in 2009, CapitalSource will have lower overall leverage.” Pro forma for the sale of its residential mortgage investments as of September 30, 2008, CapitalSource’s leverage (defined as total borrowings and deposits net of available cash, divided by equity) was approximately 3.4, less than the Company’s leverage when it elected REIT status in 2006.

“Commencing operations of CapitalSource Bank has brought significant deposits to CapitalSource, which provided approximately 45% of our commercial banking segment funding this quarter,” said Fink. Approximately one-half of CapitalSource’s commercial lending assets, cash, cash equivalents and marketable securities at September 30, 2008 were held in CapitalSource Bank. “We expect CapitalSource Bank to grow in size and deposit funding to increase as a percentage of our total funding,” added Fink.

CapitalSource continues to evaluate alternatives to best position for growth and realize the value of its healthcare net lease business, including an initial public offering of the business. “Our plan to revoke CapitalSource’s REIT election in 2009 does not preclude any transaction with respect to our healthcare net lease business,” added Fink.

Reaffirming the Company’s strategic direction, Delaney said, “CapitalSource Bank is extremely well positioned to be a growing commercially oriented bank in a market that is providing unprecedented lending opportunities. Importantly, we are a source of credit for small-and medium-sized businesses which are the back-bone of the US economy and which have seen their borrowing sources shrink drastically in recent months. Our Bank has capital considerably in excess of the well-capitalized threshold, with a total risk-based capital ratio of over 16%, abundant liquidity and superior asset quality. We are ‘playing offense’ and using our strong cash position to make new loans in this extremely attractive market, but will also consider using our well-capitalized, highly liquid bank to acquire other depositories at attractive prices.”

Commercial Banking

	•		Segment name change, to reflect the commencement of CapitalSource Bank with significant retail banking operations, the fact that CapitalSource Bank currently holds approximately one-half of our commercial lending assets, cash, cash equivalents and marketable securities, and the expectation that our commercial lending business will grow in the future primarily through CapitalSource Bank, we have renamed our “Commercial Finance” segment “Commercial Banking.”
	•		Total commercial lending assets, which include loans, loans held for sale, the commercial real estate “A” Participation Interest, and related accrued interest, was $11.1 billion at the end of the quarter compared to $9.4 billion at the end of the prior quarter. The increase in assets was due to the acquisition of the “A” Participation Interest and new originations during the quarter, offset by loan payoffs and principal repayments.
	•		Total commercial loans remained relatively flat at $9.4 billion. New loans originated in the quarter were approximately $295 million.
	•		“A” Participation Interest was $1.6 billion at the end of the quarter, reflecting principal repayments totaling $207 million and discount accretion of $13 million since it was acquired on July 25, 2008. At the end of the quarter, the “A” Participation Interest represented approximately 36% of the total underlying loan balance, a decrease from approximately 40% at acquisition. During the quarter, the Company recognized $26 million of interest income on the “A” Participation Interest. Under the “A” Participation Interest structure, CapitalSource Bank receives 70% of the total principal collections on the underlying loans. For regulatory reporting purposes, CapitalSource Bank is required to report any delinquencies on the underlying loans in its Call Reports filed with the FDIC. The “A” Participation Interest itself, however, is current and is very well secured by the total underlying collateral pool.
	•		Cash and cash equivalents, which are included in interest earning assets, increased by $1.1 billion to $1.3 billion at the end of the quarter, primarily reflecting the significant liquidity in the form of cash and cash equivalents at CapitalSource Bank.
	•		Marketable securities, which consist of Agency discount and callable notes, were $797 million at the end of the quarter.
	•		Interest income was $227 million for the quarter, an increase of $26 million from the prior quarter. The increase was due primarily to the interest received on the “A” Participation Interest.
	•		Yield on average interest-earning assets was 8.36% for the quarter, a decrease of 139 basis points from the prior quarter, due primarily to the increase in average balances of cash, cash equivalents and marketable securities and the “A” Participation Interest, all of which are lower yielding than commercial loans.
	•		Loan yield was 9.54% for the quarter, a decrease of 54 basis points from the prior quarter, due primarily to lower prepayment-related fee income and an increase in non-accrual loans and charge offs.

	•		Prepayment-related fee income on loans was $3.5 million for the quarter and contributed 15 basis points to yield, a decrease of $7.3 million from the prior quarter when prepayment-related fee income contributed 46 basis points to loan yield.
	•		Deposits were $5.0 billion at September 30, 2008 reflecting deposits acquired during the quarter in the formation of CapitalSource Bank. Deposits provided approximately 45% of total segment funding at the end of the quarter and the average cost of deposits in the quarter was 3.37%.
	•		Cost of funds was 5.20% for the quarter, a decrease of 20 basis points from the prior quarter primarily due to the addition of deposit funding from CapitalSource Bank to the funding mix. Higher financing fee amortization and higher credit spreads during the quarter, partially offset the benefit of approximately two months of deposit funding this quarter. Funding spread to average one-month LIBOR was 2.58%, a decrease of 23 basis points from the prior quarter.
	•		Total risk-based capital ratio, defined as total risk-based capital including qualifying subordinated debt and allowance for loan loss and excluding goodwill and other intangible assets, was 21% at the end of the quarter.

Commercial Banking Credit Metrics

	•		Non-accruals, as a percentage of commercial lending assets, which the Company considers its primary credit metric, were 2.39%, an increase of 19 basis points from the prior quarter.
	•		60 or more days contractually delinquent, as a percentage of commercial lending assets increased 65 basis points to 1.81%.
	•		Net charge offs were $82 million, an increase of $59 million from the prior quarter. As a percentage of commercial lending assets, net charge offs for the trailing twelve months were 121 basis points.
	•		Provision for loan losses was $105 million for the quarter, an increase of $78 million from the prior quarter. The increase was primarily due to higher charge offs in the quarter, an increase in the overall policy reserve levels to reflect current experience and the expectation of higher losses in the current economic environment, as well as some modest change in the portfolio balance and mix.
	•		Allowance for loan losses was $164 million, a net increase of $23 million from the prior quarter. As a percentage of commercial lending assets at quarter end, the allowance for loan losses was 1.48%, a decrease of 2 basis points from the prior quarter.

Healthcare Net Lease Segment

	•		Direct real estate investments were consistent with the prior quarter at approximately $1.0 billion, decreasing $9 million, primarily due to depreciation. No acquisitions or sales occurred during the quarter.
	•		As previously announced, the carve-out and initial public offering of a noncontrolling interest in the healthcare net lease business was delayed due to market conditions. The decision to revoke our REIT election for 2009 does not preclude a transaction in 2009 with respect to our healthcare net lease business, including an IPO of the business as a separate publicly traded healthcare REIT. CapitalSource will continue to explore the most opportune time to realize the growth opportunities and value of this business for our shareholders.

Residential Mortgage Investment Portfolio (“RMIP”)

	•		Mortgage-backed securities, our Agency MBS, declined from $1.6 billion to $1.5 billion, primarily due to principal repayments made during the quarter. No Agency MBS were purchased or sold during the quarter.
	•		Mortgage-related receivables declined from $1.9 billion to $1.8 billion, primarily due to principal repayments during the quarter.
	•		Restricted cash increased by $1.5 billion to $1.6 billion, primarily as a result of the purchase of short-term Treasury Bills and Agency discount notes during the quarter for REIT compliance purposes.
	•		With the decision to revoke the Company’s REIT election in 2009, CapitalSource intends to sell the RMIP in early 2009.

Consolidated Other Income

	•		(Loss) on investments, net was ($29) million, compared to ($5) million in the prior quarter primarily due to write-downs on certain cost-based investments, partially offset by dividends received on other investments.
	•		Gain on derivatives was $3 million, compared to $15 million in the prior quarter, due to a lower level of interest rate volatility in the third quarter and the reduction of the notional amount of derivatives that occurred during the second quarter.
	•		(Loss)gain on the Residential Mortgage Investment Portfolio, net was ($27) million compared to $9 million in the prior quarter, primarily due to a widening of spreads on Agency MBS during the quarter.
	•		Gain on debt extinguishment was $70 million compared to $13 million in the prior quarter as the Company opportunistically purchased portions of its term debt and subordinated debt held by institutional investors at a significant discount to par value during the quarter.
	•		Other income, net was $12 million compared to $8 million in the prior quarter, primarily due to foreign currency gains.

Operating Expenses

•

Total operating expense was $62 million in the quarter, a decrease from $71 million in the prior quarter due primarily to reduced accruals for incentive compensation offset by higher salary expense, rent and other expenses related to CapitalSource Bank. Operating expenses as a percentage of average total assets (excluding direct real estate depreciation) decreased in the quarter to 1.17%, a decrease of 39 basis points from the prior quarter.

Income Tax Rate

•

The full year projected tax rate is unchanged from the prior quarter at 35.0%. Income taxes in the quarter were $58 thousand, compared to $37 million in the prior quarter, due to lower pre-tax GAAP income.

Share Count

•

Weighted average dilutive shares outstanding were 273.0 million shares for the quarter, compared to 236.4 million shares for the prior quarter. The share increase was largely due to the full quarter impact of the equity offering completed on June 27, 2008.

Dividends

•

A regular quarterly cash dividend of $0.05 per common share was paid on September 30, 2008 to common shareholders of record on September 17, 2008. The Company intends to continue paying dividends on its common stock in the fourth quarter of 2008 and in 2009.

CapitalSource will hold an analyst and investor conference call with a simultaneous webcast on November 5, 2008 at 8:30 a.m. (Eastern Time) to discuss the Company’s third quarter 2008 results. To participate, analysts and investors may call (888) 679-8037 from within United States or (617) 213-4849 from outside the United States, utilizing the pass code 41792827. Other interested parties may access a webcast of the conference call at the Investor Relations section of the CapitalSource website at www.capitalsource.com.

A telephonic replay will be available from approximately 10:30 a.m. (Eastern Time) on November 5, 2008 through November 12, 2008. Please call (888) 286-8010 from the United States or (617) 801-6888 from outside the United States with the pass code 89055419. An audio replay will also be available on the Investor Relations section of the CapitalSource website. A transcript of the earnings conference call will also be posted to the Investor Relations section of the CapitalSource website on November 5, 2008.

About CapitalSource

CapitalSource Inc. (NYSE: CSE) is a commercial lender offering focused lending products to clients in the middle market. As of September 30, 2008, CapitalSource had approximately $13.7 billion of commercial assets, including a healthcare net lease portfolio of approximately $1 billion. CapitalSource operates principally through its CapitalSource Bank subsidiary which had approximately $5 billion in deposits and 22 retail banking branches at September 30, 2008. The Company is headquartered in Chevy Chase, MD. For more information about CapitalSource, visit www.capitalsource.com.

Forward Looking Statements

This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including certain plans, expectations, goals, and projections and including statements about growing our commercial lending business and deposits, risk adjusted returns, credit standards, charge offs, economic and market conditions, the strength of our balance sheet and liquidity, our strategy of converting to a commercial bank and becoming a bank holding company and the products and services we could provide, our intentions regarding our REIT status, our dividends, our intention to sell assets, pro forma financial information, our structure and leverage, and our intentions regarding our healthcare net lease business and possible acquisitions, all of which are subject to numerous assumptions, risks, and

uncertainties. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words “anticipate,” “assume,” “intend,” “believe,” “expect,” “estimate,” “plan,” “will,” “look forward,” and similar expressions are generally intended to identify forward-looking statements. All forward-looking statements (including statements regarding future financial and operating results and future transactions and their results) involve risks, uncertainties and contingencies, many of which are beyond our control which may cause actual results, performance, or achievements to differ materially from anticipated results, performance or achievements. Actual results could differ materially from those contained or implied by such statements for a variety of factors, including without limitation: our recently completed bank transaction; changes in economic or market conditions; continued or worsening disruptions in credit and other markets; movements in interest rates and lending spreads; our ability to successfully and cost effectively operate CapitalSource Bank; our ability to successfully grow CapitalSource Bank’s deposits or deploy its capital in favorable lending transactions or acquire assets in accordance with our strategic plan; competitive and other market pressures on product pricing and services; success and timing of other business strategies; the nature, extent, and timing of governmental actions and reforms; changes in tax laws or regulations affecting REITs, extended disruption of vital infrastructure, our ability to successfully operate after revoking our REIT election and to sell certain assets; our ability to successfully convert into a commercial bank and become a bank holding company and thereafter to successfully and cost effectively operate as such; our ability to successfully consummate a transaction with respect to our healthcare net lease business; and other factors described in CapitalSource’s 2007 Annual Report on Form 10- K and documents subsequently filed by CapitalSource with the Securities and Exchange Commission. All forward-looking statements included in this news release are based on information available at the time of the release. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.

CapitalSource Third Quarter 2008 — Financial Supplement

Table of Contents

Consolidated Balance Sheets			9
Consolidated Statements of Income			10
Segment Data			11
Adjusted Earnings Definition			12
Adjusted Earnings Reconciliation			13-15
Selected Financial Data			16-17
Commercial Asset Portfolio			18
Credit Quality Data			19

CapitalSource Inc.
Consolidated Balance Sheets
(Unaudited)
($ in thousands)

		September 30,				June 30,				September 30,
		2008				2008				2007
ASSETS
Cash and cash equivalents		$	1,289,360			$	169,667			$	245,862
Restricted cash			1,796,225				428,955				296,789
Marketable securities, available for sale			797,063				—				—
Mortgage-related receivables, net			1,841,629				1,899,254				2,083,645
Mortgage-backed securities pledged, trading			1,522,960				1,595,217				4,127,657
Receivables under reverse-repurchase agreements			—				—				26,157
Commercial real estate “A” participation interest, net			1,626,602				—				—
Loans held for sale			86,234				98,817				352,030
Loans:
Loans			9,282,358				9,277,472				9,170,459
Less deferred loan fees and discounts			(176,234	)			(169,954	)			(132,673	)
Less allowance for loan losses			(163,855	)			(141,128	)			(111,692	)
Loans, net			8,942,269				8,966,390				8,926,094
Interest receivable			84,592				73,358				121,228
Direct real estate investments, net			998,834				1,007,699				1,031,905
Investments			202,549				287,414				189,988
Goodwill			179,706				5,344				5,344
Other assets			498,013				361,488				345,985
Total assets		$	19,866,036			$	14,893,603			$	17,752,684
LIABILITIES, NONCONTROLLING INTERESTS AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits		$	5,048,251			$	—			$	—
Repurchase agreements			2,870,073				1,541,795				4,030,477
Credit facilities			1,515,261				1,687,242				2,701,685
Term debt			5,412,535				6,562,841				6,550,232
Other borrowings			1,600,223				1,669,195				1,612,258
Other liabilities			359,031				357,765				322,477
Total liabilities			16,805,374				11,818,838				15,217,129
Noncontrolling interests			10,627				15,246				45,490
Shareholders’ equity:
Preferred stock (50,000,000 shares authorized; no shares outstanding)			—				—				—
Common stock ($0.01 par value, 1,200,000,000; 1,200,000,00 and 500,000,000 shares authorized; 276,364,708; 276,139,152 and 208,540,632 shares issued and shares outstanding, respectively)			2,764				2,761				2,085
Additional paid-in capital			3,604,114				3,586,096				2,664,842
Accumulated deficit			(544,274	)			(538,619	)			(181,336	)
Accumulated other comprehensive income, net			(12,569	)			9,281				4,474
Total shareholders’ equity			3,050,035				3,059,519				2,490,065
Total liabilities, noncontrolling interests and shareholders’ equity		$	19,866,036			$	14,893,603			$	17,752,684

CapitalSource Inc.
Consolidated Statements of Income
(Unaudited)
($ in thousands, except per share data)

		Three Months Ended
		September 30,				June 30,				September 30,				Nine Months Ended September 30,
		2008				2008				2007				2008				2007
Net investment income:
Interest income:
Loans		$	239,294			$	222,118			$	272,827			$	707,909			$	757,488
Mortgage-backed securities pledged, trading			20,784				26,857				58,127				103,035				155,893
Investment securities			3,955				2,560				957				8,461				3,122
Other			9,979				2,687				12,132				17,154				28,278
Total interest income			274,012				254,222				344,043				836,559				944,781
Fee income			29,974				41,267				29,338				104,882				124,421
Total interest and fee income			303,986				295,489				373,381				941,441				1,069,202
Operating lease income			28,140				24,210				27,490				80,040				69,934
Total investment income			332,126				319,699				400,871				1,021,481				1,139,136
Interest expense:
Deposits			32,178				—				—				32,178				—
Borrowings			148,318				160,083				232,754				497,346				619,694
Total interest expense			180,496				160,083				232,754				529,524				619,694
Net investment income			151,630				159,616				168,117				491,957				519,442
Provision for loan losses			110,261				31,674				12,353				147,594				44,690
Net investment income after provision for loan losses			41,369				127,942				155,764				344,363				474,752
Operating expenses:
Compensation and benefits			29,473				37,808				38,309				99,070				116,937
Depreciation of direct real estate investments			8,898				8,990				8,924				26,804				23,075
Professional fees			7,839				8,989				7,002				29,762				22,361
Other administrative expenses			15,309				14,855				10,898				44,034				34,525
Total operating expenses			61,519				70,642				65,133				199,670				196,898
Other income (expense):
(Loss) gain on investments, net			(29,488	)			(4,827	)			(1,984	)			(33,174	)			21,181
Gain (loss) on derivatives			2,659				15,098				(15,494	)			(20,354	)			(14,596	)
(Loss) gain on residential mortgage investment portfolio			(26,956	)			9,060				(30,225	)			(73,273	)			(49,769	)
Gain on debt extinguishment			70,057				12,725				—				82,782				—
Other income (expense), net			11,891				8,230				(1,924	)			16,069				20,686
Total other income (expense)			28,163				40,286				(49,627	)			(27,950	)			(22,498	)
Noncontrolling interests expense			(100	)			283				1,182				1,480				3,784
Net income before income taxes			8,113				97,303				39,822				115,263				251,572
Income taxes			58				37,243				11,557				40,377				60,251
Net income		$	8,055			$	60,060			$	28,265			$	74,886			$	191,321
Net income per share:
Basic		$	0.03			$	0.26			$	0.15			$	0.31			$	1.03
Diluted		$	0.03			$	0.25			$	0.15			$	0.31			$	1.02
Adjusted earnings per share:
Diluted		$	0.30			$	0.12			$	0.50			$	0.92			$	1.82
Average shares outstanding:
Basic			272,005,048				235,076,287				191,976,931				242,495,601				185,522,634
Diluted			272,585,479				236,445,230				193,607,986				243,614,848				187,636,502
Dividends declared per share		$	0.05			$	0.60			$	0.60			$	1.25			$	1.78

		Three Months Ended September 30, 2008																Three Months Ended June 30, 2008
										Residential Mortgage				Consolidated												Residential Mortgage				Consolidated
		Commercial Banking				Healthcare Net Lease				Investment				Total				Commercial Banking				Healthcare Net Lease				Investment				Total
Net investment income:
Interest income		$	227,367			$	115			$	46,530			$	274,012			$	201,626			$	347			$	52,249			$	254,222
Fee income			29,753				221				—				29,974				41,260				7				—				41,267
Total interest and fee income			257,120				336				46,530				303,986				242,886				354				52,249				295,489
Operating lease income			—				28,140				—				28,140				—				24,210				—				24,210
Total investment income			257,120				28,476				46,530				332,126				242,886				24,564				52,249				319,699
Interest expense			133,357				10,824				36,315				180,496				108,425				10,859				40,799				160,083
Net investment income			123,763				17,652				10,215				151,630				134,461				13,705				11,450				159,616
Provision for loan losses			105,282				—				4,979				110,261				27,465				—				4,209				31,674
Net investment income after provision for loan losses			18,481				17,652				5,236				41,369				106,996				13,705				7,241				127,942
Other operating expenses.			47,454				11,555				2,510				61,519				57,843				11,380				1,419				70,642
Total other income (expense)			54,813				107				(26,757	)			28,163				33,880				(1,416	)			7,822				40,286
Noncontrolling interests expense			(154	)			54				—				(100	)			(369	)			652				—				283
Net income (loss) before income taxes			25,994				6,150				(24,031	)			8,113				83,402				257				13,644				97,303
Income taxes			58				—				—				58				37,243				—				—				37,243
Net income (loss)		$	25,936			$	6,150			$	(24,031	)		$	8,055			$	46,159			$	257			$	13,644			$	60,060

		Nine Months Ended September 30, 2008																Nine Months Ended September 30, 2007
										Residential Mortgage				Consolidated												Residential Mortgage				Consolidated
		Commercial Banking				Healthcare Net Lease				Investment				Total				Commercial Banking				Healthcare Net Lease				Investment				Total
Net investment income:
Interest income		$	653,376			$	944			$	182,239			$	836,559			$	685,639			$	781			$	258,361			$	944,781
Fee income			104,643				239				—				104,882				124,421				—				—				124,421
Total interest and fee income			758,019				1,183				182,239				941,441				810,060				781				258,361				1,069,202
Operating lease income			—				80,040				—				80,040				—				69,934				—				69,934
Total investment income			758,019				81,223				182,239				1,021,481				810,060				70,715				258,361				1,139,136
Interest expense			355,425				32,479				141,620				529,524				347,211				30,155				242,328				619,694
Net investment income			402,594				48,744				40,619				491,957				462,849				40,560				16,033				519,442
Provision for loan losses			135,718				—				11,876				147,594				44,275				—				415				44,690
Net investment income after provision for loan losses			266,876				48,744				28,743				344,363				418,574				40,560				15,618				474,752
Other operating expenses			158,434				34,108				7,128				199,670				162,008				29,521				5,369				196,898
Total other (expense) income			48,936				(1,309	)			(75,577	)			(27,950	)			28,496				(1,225	)			(49,769	)			(22,498	)
Noncontrolling interests expense			(640	)			2,120				—				1,480				(733	)			4,517				—				3,784
Net income (loss) before income taxes			158,018				11,207				(53,962	)			115,263				285,795				5,297				(39,520	)			251,572
Income taxes			40,377				—				—				40,377				60,251				—				—				60,251
Net income (loss)		$	117,641			$	11,207			$	(53,962	)		$	74,886			$	225,544			$	5,297			$	(39,520	)		$	191,321

CapitalSource Inc.
Adjusted Earnings
(Unaudited)

     We evaluate our performance based on several measures, including adjusted earnings. Adjusted earnings represents net income as determined in accordance with U.S. generally accepted accounting principles (“GAAP”), adjusted for certain items. It is limited in that it excludes real estate depreciation, amortization of deferred financing fees, non-cash equity compensation, realized and unrealized gains and losses on investments in residential mortgage-backed securities and related derivatives, unrealized gains and losses on other derivatives and foreign currencies, net unrealized gains and losses on investments, provision for loan losses, charge offs, recoveries, nonrecurring items and the cumulative effect of changes in accounting principles, each computed in accordance with GAAP. To compensate for these limitations, we encourage investors to review adjusted earnings in connection with net income and cash flows from operating, investing and financing activities in our consolidated financial statements, to help analyze how our business is performing. Adjusted earnings should not be considered as an alternative to net income or cash flows (each computed in accordance with GAAP)

     Management views adjusted earnings and the related per share measures as useful and appropriate supplemental measures of our operating performance in addition to net income and earnings per share because they facilitate evaluation of the company without the effects of certain adjustments in accordance with GAAP that may not necessarily be indicative of current operating performance. The use of adjusted earnings is similar to the practices of other REITs who also publish certain non-GAAP measures to supplement their GAAP measures. Since such reporting practice is common in the REIT industry, we believe it is important for us to also utilize a similar non-GAAP measure as supplemental information to provide investors a means to better compare our operating performance to that of other REITs. Adjusted earnings and other supplemental performance measures are defined in various ways throughout the REIT industry. Investors should consider these differences when comparing our adjusted earnings to other REITs.

CapitalSource Inc.
Adjusted Earnings Reconciliations
(Unaudited)
($ in thousands, except per share data)

Reconciliation of our reported net income to adjusted earnings for the three months ended September 30, 2008, June 30, 2008 and September 30, 2007, and the nine months ended September 30, 2008 and 2007 was as follows:

		Three Months Ended												Nine Months Ended
		September 30, 2008				June 30, 2008				September 30, 2007				September 30, 2008				September 30, 2007
Net income		$	8,055			$	60,060			$	28,265			$	74,886			$	191,321
Add:
Real estate depreciation and amortization (1)			8,183				8,459				8,570				25,402				23,675
Amortization of deferred financing fees (2)			32,865				26,810				7,491				71,628				19,823
Non-cash equity compensation			8,483				12,030				11,336				27,027				31,908
Net realized and unrealized (gains) losses on residential mortgage investment portfolio including related derivatives (3)			(16,229	)			(57,022	)			32,425				(45,857	)			55,805
Unrealized (gain) loss on derivatives and foreign currencies, net			(18,031	)			(33,140	)			16,464				(3,539	)			15,504
Unrealized loss on investments, net			34,148				4,475				8,452				43,280				9,669
Provision for loan losses			110,605				32,028				12,353				148,294				44,690
Recoveries (4)			(344	)			(356	)			—				(700	)			—
Less:
Charge offs			85,515				24,237				27,796				115,828				51,671
Non-recurring items			—				—				—				—				—
Adjusted earnings		$	82,220			$	29,107			$	97,560			$	224,593			$	340,724
Net income per share:
Basic — as reported		$	0.03			$	0.26			$	0.15			$	0.31			$	1.03
Diluted — as reported		$	0.03			$	0.25			$	0.15			$	0.31			$	1.02
Average shares outstanding:
Basic — as reported			272,005,048				235,076,287				191,976,931				242,495,601				185,522,634
Diluted — as reported			272,585,479				236,445,230				193,607,986				243,614,848				187,636,502
Adjusted earnings per share:
Basic		$	0.30			$	0.12			$	0.51			$	0.93			$	1.84
Diluted (5)		$	0.30			$	0.12			$	0.50			$	0.92			$	1.82
Average shares outstanding:
Basic			272,005,048				235,076,287				191,976,931				242,495,601				185,522,634
Diluted (6)			272,585,479				236,445,230				193,607,986				243,614,848				189,120,843

CapitalSource Inc.
Adjusted Earnings Reconciliations
(Unaudited)
($ in thousands, except per share data)

For our Commercial Banking segment, Healthcare Net Lease segment and Residential Mortgage Investment segment, reconciliations of reported net income to adjusted earnings for the three months ended September 30, 2008 and June 30, 2008, were as follows:

		Three Months Ended September 30, 2008
						Healthcare Net				Residential Mortgage
		Commercial Banking				Lease				Investment				Consolidated Total
Net income (loss)		$	25,936			$	6,150			$	(24,031	)		$	8,055
Add:
Real estate depreciation and amortization (1)			—				8,183				—				8,183
Amortization of deferred financing fees (2)			31,109				208				1,548				32,865
Non-cash equity compensation			8,483				—				—				8,483
Net realized and unrealized gains on residential mortgage investment portfolio including related derivatives (3)			—				—				(16,229	)			(16,229	)
Unrealized gain on derivatives and foreign currencies, net			(18,031	)			—				—				(18,031	)
Unrealized loss on investments, net			34,148				—				—				34,148
Provision for loan losses			105,626				—				4,979				110,605
Recoveries (4)			(344	)			—				—				(344	)
Less:
Charge offs			82,459				—				3,056				85,515
Non-recurring items			—				—				—				—
Adjusted earnings		$	104,468			$	14,541			$	(36,789	)		$	82,220
Net income (loss) per share:
Basic — as reported		$	0.10			$	0.02			$	(0.09	)		$	0.03
Diluted — as reported		$	0.10			$	0.02			$	(0.09	)		$	0.03
Average shares outstanding:
Basic — as reported			272,005,048				272,005,048				272,005,048				272,005,048
Diluted — as reported			272,585,479				272,585,479				272,585,479				272,585,479
Adjusted earnings per share:
Basic		$	0.39			$	0.05			$	(0.14	)		$	0.30
Diluted		$	0.38			$	0.05			$	(0.13	)		$	0.30
Average shares outstanding:
Basic			272,005,048				272,005,048				272,005,048				272,005,048
Diluted			272,585,479				272,585,479				272,585,479				272,585,479

		Three Months Ended June 30, 2008
						Healthcare Net				Residential Mortgage
		Commercial Banking				Lease				Investment				Consolidated Total
Net income		$	46,160			$	257			$	13,643			$	60,060
Add:
Real estate depreciation and amortization (1)			—				8,459				—				8,459
Amortization of deferred financing fees (2)			26,432				145				233				26,810
Non-cash equity compensation			12,030				—				—				12,030
Net realized and unrealized gains on residential mortgage investment portfolio including related derivatives (3)			—				—				(57,022	)			(57,022	)
Unrealized gain on derivatives and foreign currencies, net			(33,140	)			—				—				(33,140	)
Unrealized loss on investments, net			4,475				—				—				4,475
Provision for loan losses			27,819				—				4,209				32,028
Recoveries (4)			(356	)			—				—				(356	)
Less:
Charge offs			23,325				—				912				24,237
Non-recurring items			—				—				—				—
Adjusted earnings		$	60,095			$	8,861			$	(39,849	)		$	29,107
Net income per share:
Basic — as reported		$	0.20			$	—			$	0.06			$	0.26
Diluted — as reported		$	0.19			$	—			$	0.06			$	0.25
Average shares outstanding:
Basic — as reported			235,076,287				235,076,287				235,076,287				235,076,287
Diluted — as reported			236,445,230				236,445,230				236,445,230				236,445,230
Adjusted earnings per share:
Basic		$	0.25			$	0.04			$	(0.17	)		$	0.12
Diluted		$	0.25			$	0.04			$	(0.17	)		$	0.12
Average shares outstanding:
Basic			235,076,287				235,076,287				235,076,287				235,076,287
Diluted			236,445,230				236,445,230				236,445,230				236,445,230

CapitalSource Inc.
Adjusted Earnings Reconciliations
(Unaudited)
($ in thousands, except per share data)

For our Commercial Banking segment, Healthcare Net Lease segment and Residential Mortgage Investment segment, reconciliations of reported net income to adjusted earnings for the three months ended September 30, 2007, were as follows:

		Three Months Ended September 30, 2007
						Healthcare Net				Residential Mortgage				Consolidated
		Commercial Banking				Lease				Investment				Total
Net income (loss)		$	52,050			$	3,286			$	(27,071	)		$	28,265
Add:
Real estate depreciation and amortization (1)			—				8,570				—				8,570
Amortization of deferred financing fees (2)			6,474				(198	)			1,215				7,491
Non-cash equity compensation			11,336				—				—				11,336
Net realized and unrealized losses on residential mortgage investment portfolio including related derivatives (3)			—				—				32,425				32,425
Unrealized loss on derivatives and foreign currencies, net			16,464				—				—				16,464
Unrealized loss on investments, net			8,452				—				—				8,452
Provision for loan losses			11,938				—				415				12,353
Recoveries (4)			—				—				—				—
Less:			—
Charge offs			27,796				—				—				27,796
Non-recurring items			—				—				—				—
Adjusted earnings		$	78,918			$	11,658			$	6,984			$	97,560
Net income per share:
Basic — as reported		$	0.27			$	0.02			$	(0.14	)		$	0.15
Diluted — as reported		$	0.27			$	0.02			$	(0.14	)		$	0.15
Average shares outstanding:
Basic — as reported			191,976,931				191,976,931				191,976,931				191,976,931
Diluted — as reported			193,607,986				193,607,986				193,607,986				193,607,986
Adjusted earnings per share:
Basic		$	0.41			$	0.06			$	0.04			$	0.51
Diluted		$	0.41			$	0.06			$	0.04			$	0.50
Average shares outstanding:
Basic			191,976,931				191,976,931				191,976,931				191,976,931
Diluted			193,607,986				193,607,986				193,607,986				193,607,986

CapitalSource Inc.
Selected Financial Data
(Unaudited)

		Three Months Ended
		September 30,				June 30,				September 30,				Nine Months Ended September 30,
		2008				2008				2007				2008				2007
Commercial Banking Segment:
Performance ratios:
Return on average assets			0.81	%			1.78	%			2.06	%			1.40	%			3.24	%
Return on average equity			4.15	%			8.83	%			11.86	%			7.08	%			17.31	%
Adjusted return on average assets			3.24	%			2.32	%			3.12	%			3.30	%			4.21	%
Adjusted return on average equity			16.71	%			11.49	%			17.98	%			16.74	%			22.46	%
Yield on average interest earning assets			8.36	%			9.75	%			11.31	%			9.38	%			11.92	%
Cost of funds			5.20	%			5.40	%			6.41	%			5.34	%			6.21	%
Net finance margin			4.02	%			5.40	%			5.93	%			4.98	%			6.81	%
Operating expenses as a percentage of average total assets			1.47	%			2.24	%			2.09	%			1.88	%			2.33	%
Efficiency ratio (operating expenses / net investment income and other income)			26.57	%			34.36	%			41.22	%			35.09	%			32.97	%
Core lending spread			6.78	%			7.05	%			6.08	%			6.99	%			6.33	%
Leverage ratios:
Total debt and deposits to equity (as of period end)			4.66	x			2.98	x			4.48	x			4.66	x			4.48	x
Equity to total assets (as of period end)			17.50	%			24.79	%			18.07	%			17.50	%			18.07	%
Total risk-based capital			20.99	%			N/A				N/A				20.99	%			N/A
CapitalSource Bank Ratios:
Operating expense as a percentage of deposits			1.56	%			N/A				N/A				1.56	%			N/A
Cash as percent of Assets			18.15	%			N/A				N/A				18.15	%			N/A
Percent of Commercial Lending Assets			44.37	%			N/A				N/A				44.37	%			N/A
Percent of Commercial Loans			25.35	%			N/A				N/A				25.35	%			N/A
Percent of Funding			45.00	%			N/A				N/A				45.00	%			N/A
Average balances ($ in thousands):
Average loans		$	9,387,006			$	9,715,111			$	9,556,672			$	9,649,113			$	8,799,012
Average assets			12,782,858				10,376,831				10,028,102				11,221,432				9,304,091
Average interest earning assets			12,206,770				9,992,540				9,776,438				10,766,220				9,083,745
Average income earning assets			12,206,770				9,992,540				9,776,439				10,766,220				9,083,745
Average borrowings			10,173,193				8,053,850				8,201,972				8,869,384				7,476,024
Average equity			2,480,438				2,097,063				1,741,658				2,212,516				1,742,301
Healthcare Net Lease Segment:
Performance ratios:
Return on average assets			2.28	%			0.10	%			1.17	%			1.38	%			0.74	%
Return on average equity			6.77	%			0.28	%			3.62	%			4.15	%			2.25	%
Adjusted return on average assets			5.39	%			3.29	%			4.15	%			4.59	%			4.09	%
Adjusted return on average equity			16.01	%			9.68	%			12.85	%			13.80	%			12.47	%
Yield on average income earning assets			7.43	%			9.08	%			5.26	%			5.93	%			3.44	%
Cost of funds			7.12	%			7.16	%			7.04	%			7.12	%			7.57	%
Net finance margin			6.44	%			5.02	%			6.11	%			5.93	%			5.77	%
Operating expenses as a percentage of average total assets			4.28	%			4.23	%			3.92	%			4.20	%			4.12	%
Operating expenses (excluding direct real estate depreciation) as a percentage of average total assets			0.98	%			0.89	%			0.74	%			0.90	%			0.90	%
Efficiency ratio (operating expenses / net investment income and other income)			65.07	%			92.60	%			69.87	%			71.90	%			75.05	%
Efficiency ratio (operating expenses excluding direct real estate depreciation) / net investment income and other income)			14.96	%			19.45	%			13.19	%			15.40	%			16.38	%
Leverage ratios:
Total debt to equity (as of period end)			1.58	x			1.63	x			1.53	x			1.58	x			1.53	x
Equity to total assets (as of period end)			35.55	%			34.69	%			36.40	%			35.55	%			36.40	%
Average balances ($ in thousands):
Average assets		$	1,070,651			$	1,079,855			$	1,113,466			$	1,082,274			$	957,238
Average interest earning assets			17,931				26,652				36,742				26,594				30,367
Average income earning assets			1,086,955				1,095,916				1,101,809				1,095,125				939,607
Average borrowings			602,809				608,298				619,944				607,841				532,860
Average equity			360,397				367,297				359,933				359,819				314,184