CapitalSource announced that its net income for the second quarter 2011 was $17 million, compared to net income of $3 million in the prior quarter and net income of $18 million in the second quarter 2010.

In addition, CapitalSource reported that new loans funded in the second quarter 2011 of $543 million were above its expected quarterly range and boosted its total production for the first half of 2011 to nearly $1.2 billion.

“As a result, we now expect full year originations to top $2 billion, which represents a 25% year-over-year increase,” said James J. Pieczynski, CapitalSource co-CEO. “Importantly, there was broad-based participation among our various specialty lending groups in originations this quarter. For the first six months of the year our multifamily, healthcare real estate, lender finance, corporate asset finance, and technology cash flow groups have had the highest production levels.”

Loan Production was $543 million during the quarter compared to $627 million in the prior quarter, resulting in a 4.7% net increase in the loan portfolio balance despite loan pay-offs and charge-offs totaling $350 million during the quarter.

Loan loss provision was a reversal of $1 million for the quarter, compared to an $11 million provision in the prior quarter. Net charge-offs were $23 million in the quarter, compared to net charge-offs of $3 million in the prior quarter, which included recoveries of $12 million.

Non-accrual loans increased to $220 million, or 5.23% of loans, at quarter end compared to $175 million, or 4.35% of loans, at the end of the prior quarter primarily due to the addition of one large loan to non-accrual status. A $107 million non-accrual loan was sold on July 1, 2011, reducing the total non-accrual balance to approximately $112 million. The allowance for loan losses decreased to $109 million, or 2.58% of loans at quarter end compared to $133 million, or 3.31% of loans, at the end of the prior quarter.

To read the full text of the CapitalSource Q2 earnings release click here.