The transaction is subject to regulatory approval. The Company will file applications with the California Department of Financial Institutions (DFI) and with the Federal Deposit Insurance Corporation (FDIC) to form a de novo California-chartered industrial bank. CapitalSource has communicated its plans to the FDIC and DFI over recent months and expects to file the required applications within approximately two weeks. The Company further expects the transaction to close in the third quarter, following receipt of regulatory approvals.

"This acquisition of branches and assumption of deposits will give CapitalSource's new bank access to a significant base of deposits with strong growth prospects. Together with CapitalSource's valuable commercial finance lending franchise, this acquisition strengthens our business model and positions us to grow by taking advantage of the attractive lending opportunities now available in the market," commented John K. Delaney, CapitalSource Chairman and CEO.

As part of the asset purchase agreement, the Company's new bank (yet to be named) will acquire high quality assets approximately equal to the deposits assumed including, approximately $3.0 billion of cash and short-term investments and a commercial real estate loan participation interest with a 3/31/08 outstanding principal balance of approximately $2.7 billion.

CapitalSource is not acquiring FIL, Fremont General Corporation, any contingent liabilities, or business operations except the retail branch network.

"We have long sought deposit funding as a way to further diversify and strengthen our funding platform. This transaction will accomplish that objective in an optimal and expeditious way. Forming the new bank and acquiring branches with $5.6 billion in deposits will enhance CapitalSource's liquidity profile, increase our profitability and improve our capital efficiency," said Thomas A. Fink, CapitalSource CFO. "Our business plan envisions the sale of approximately $2.5 billion of CapitalSource loans to the new bank, making this transaction immediately accretive," Fink added.

CapitalSource is acquiring an "A" Participation Interest and is not acquiring the related "B" Participation Interest. The "A" Participation Interest receives 70% of the principal payments from a $5.5 billion pool of commercial real estate loans. As of 3/31/08, the "A" Participation Interest was 48.8% of the $5.5 billion pool. The loans are managed by a subsidiary of iStar Financial, Inc.

"We conducted extensive loan-level diligence on the "A" Participation Interest to be acquired. It is well secured by a diverse portfolio of high-quality commercial real estate assets and will continue to experience accelerated paydowns because it has a preferential principal amortization mechanism. In addition, we view iStar's role as asset manager to be a significant advantage, as we hold iStar in very high regard and view them as a "best-in-class" manager of commercial real estate debt and loan assets," added Delaney.

"We look forward to welcoming FIL's retail banking customers and employees to our new bank. CapitalSource will serve as a dependable source of financial strength for them," concluded CapitalSource CFO Fink. -- CapitalSource Inc.