CapitalSource reported net income for the second quarter of $388 million that included the reversal of $347 million of the company’s deferred tax asset valuation allowance. Excluding the reversal, net income for the quarter was $40 million compared to net income of $25 million in the prior quarter and net income of $17 million in the second quarter of 2011.

“Two years of sustained profitability and predictable earnings at CapitalSource Bank, the substantial decline in parent company loans over that period, and improved parent company credit performance permitted us to reverse $347 million of our deferred tax asset valuation allowance this quarter – six months earlier than expected”, said James J. Pieczynski, CapitalSource CEO.

The company said new fundings in the second quarter of $595.7 million were up from $521.5 sequentially and $548.3 million in the same quarter one-year ago. In its presentation on its lease and loan portfolio, CapitalSource said its Equipment Finance portfolio at the end of Q2/12 was $470.3 million, up from $289.2 million at the end of the same quarter in 2011. The company noted the portfolio included $102 million of operating leases and related equity investments as of June 30, 2012.

“Our national lending franchise continued to produce at a high level in the second quarter – with $250 million of loan growth at the Bank, representing 5% growth in the quarter. Funded production of $596 million was in line with our projection, as was the net interest margin in the quarter at 4.95%,” said Tad Lowrey, CapitalSource Bank chairman and CEO.

“Bank assets increased to $7.1 billion, while deposit costs declined by 7 basis points. Though several favorable one-time items in the first quarter and a higher loan loss provision in the second quarter make some linked quarter comparisons unfavorable, we are very pleased with the overall financial performance at CapitalSource Bank through the first half of 2012 and remain on track for significant year over year earnings and loan growth”, Lowrey added.

To read the full CapitalSource news release click here.