CapitalSource announced financial results for the third quarter of 2012. The company reported net income for the quarter of $31 million compared to net income of $388 million in the prior quarter and a net loss of $81 million in the third quarter of 2011. Net income in the prior quarter included the reversal of $347 million of the company’s deferred tax asset valuation allowance. The loss in the third quarter of 2011 was driven by a one-time charge of $114 million resulting from the early retirement of debt.

CapitalSource Bank Segment - Third Quarter 2012 Highlights  

This segment includes CapitalSource’s  commercial lending and banking business activities in CapitalSource Bank.

• Loans and Leases increased $24 million as funded loan and lease production of $623 million, compared to $596 million in the prior quarter, was largely offset by $599 million of loan repayments, sales and other reductions. $163 million of those repayments and sales were the result of portfolio management activities designed to reduce hold sizes and limit credit exposure. Absent those portfolio management activities, loan growth would have been ~3.5% in the quarter. Total loans and leases were $5.4 billion at quarter end, a year-to-date increase of 10% and an 18% increase since September 30, 2011.
• Net Interest Margin was 4.97%, an increase of 2 basis points from the prior quarter, primarily due to a more favorable asset mix and lower cost of funds.
• Capital – The Tier 1 leverage ratio increased 13 basis points to 12.82%, and the total risk-based capital ratio increased 49 basis points to 16.69%.
• Credit Quality – Loan loss provision was $0.3 million, compared to $13 million in the prior quarter. Net charge-offs were $4 million in the quarter, compared to $7 million in the prior quarter. Non-accrual loans decreased to $64 million or 1.21% of loans at quarter end, compared to $102 million or 1.94% of loans at the end of the prior quarter. The allowance for loan and lease losses was $98 million or 1.89% of loans at quarter end, compared to $102 million or 1.96% of loans at the end of the prior quarter.

"In addition to strong operating results, we repurchased 10 million of our shares in the third quarter and an additional 5 million shares in October. Since inception of our buyback plan in December of 2010, we have reduced the total share count by approximately 36% and returned $766 million to shareholders," said James J. Pieczynski, CapitalSource CEO. “A higher than projected level of loan payoffs at the Parent company provided added liquidity and permitted us to nearly complete the previous repurchase authorization this month. As a result, our Board has approved a new buyback plan with an initial authorization of $250 million."

Read the full CapitalSource earnings press release.