KFDA - NewsChannel 10 / Amarillo, TX: newschannel10.comCapitalSource posts 3Q loss on reserve buildup

CapitalSource posts 3Q loss on reserve buildup

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CHEVY CHASE, Md. (AP) - Commercial Lender CapitalSource Inc. on Monday posted a third-quarter loss, reversing a year-ago profit, as it set aside more money to cover bad loans and saw a much bigger loss in its investments.

For the three months ended Sept. 30, the company lost $274.2 million, or 87 cents per share, compared with a profit of $13.7 million, or 5 cents per share, in the year-ago period.

The per-share results reflect 5 percent more shares outstanding in the recent quarter, which had the effect of narrowing the per share loss.

Analysts polled by Thomson Reuters, on average, expected a loss of 26 cents per share.

CapitalSource, which operates three segments, including a bank, a commercial finance unit and a health care lease unit, increased its provision for loan losses by 9 percent. It set aside $221.4 million to cover loans that may go bad, up from $203.8 million last year. The increase reflected higher provisions it its commercial lending segment, the company said.

Net interest income fell 5 percent to $188.5 million from $197.5 million in the 2008 quarter. Fee income edged up to $25.3 million from $24.9 million.

The company said its loss on investments jumped 71 percent to $8.5 million, from $5 million last year, as its loss on derivative investments spiked. That increase was partly offset but a gain from paying down debt.

Non-accruing loans, or loans considered past due, rose to 10.5 percent of commercial lending assets, or $994 million, compared with 2.4 percent, or $264 million, in the 2008 quarter.

Net charge-offs, or loans written off as unpaid, rose to $135 million, or 6.2 percent of commercial lending assets, from $82 million, or 1.2 percent, last year.

In afternoon trading, CapitalSource shares dropped 42 cents, or 11.8 percent, to $3.14 with volume spiking to more than three times normal daily trading.

(This version CORRECTS headlines and first paragraph to reflect year-ago profit, year-ago figure in 2nd paragraph and non-accruing loans figures in 8th paragraph; ADDS figures for charge-offs in 9th paragraph.)

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