CapitalSource announced financial results for the fourth quarter and the full year 2011. The Company reported net income for the quarter of $9 million, compared to net loss of $81 million in the prior quarter and net income of $6 million in the fourth quarter of 2010. Loss on extinguishment of debt, severance costs and tax expense resulting primarily from a decrease in deferred tax assets at CapitalSource Bank reduced fourth quarter net income by a total of $24 million.  et loss for the full year 2011 was $52 million compared to a net loss of $109 million for the full year 2010. The full year 2011 net loss was caused by a third quarter charge of $114 million or due to the early retirement of debt.

Equipment Finance Portfolio

The company’s equipment finance portfolio grew 88.4% for the full year 2011 increasing from $234.5 million on December 31, 2010 to $441.8 million as of December 31, 2011. This increase includes $107 million of operating leases and equity investments related to operating leases as of December 31, 2011 and $45 million as of September 30, 2011, which are included in Other Assets and Other Investments on the balance sheet.

CapitalSource Bank Segment Results - This segment includes commercial lending and banking business activities in CapitalSource Bank.

Fourth Quarter 2011 Highlights:

- Net Income was $27 million, an increase of $2 million from the prior quarter primarily due to a decrease in quarterly loan loss provision and partially offset by an increase in non-interest expense.

- Loans and Leases, excluding loans purchased from the Parent in the quarter, increased $231 million or 5%. Funded loan and lease production was $665 million during the quarter compared to $647 million in the prior quarter. Funded loan and lease production increased 24% for the full year.

- Credit Quality - Loan loss provision was $4 million for the quarter, compared to $14 million in the prior quarter. Net charge-offs were $28 million in the quarter, compared to $4 million in the prior quarter. Non-accrual loans were $121 million or 2.47% of loans at quarter end, compared to $108 million or 2.37% of loans at the end of the prior quarter. The allowance for loan and lease losses was $95 million or 1.98% of loans at quarter end, compared to $119 million or 2.63% of loans at the end of the prior quarter.

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