CapitalSource reported Q3/13 net income of $48 million, which included a tax benefit of $12 million in connection with resolution of an IRS examination of three prior tax years. Excluding the tax benefit, net income was $36 million compared to net income of $31 million in the third quarter of 2012.

“The third quarter was an ongoing demonstration of the breadth and depth of our national lending franchise, as loan growth of $174 million raised year-to-date growth to 13.6%,” said James J. Pieczynski, CapitalSource CEO. “Despite continuing competitive pressures, we saw early signs this quarter that pricing is stabilizing with a bias to go higher as interest rates start to move up. We are continuing to execute on all of our core business strategies in anticipation of the merger with PacWest Bancorp, which is still expected to close in the first quarter of next year.”

Highlights from the news release included:

Bank Segment loans and leases increased $174 million or 2.7%. New funded loan and lease production was $604 million, compared to $710 million in the prior quarter and $623 million in the same 2012 quarter. Total loans and leases were $6.5 billion at quarter end, an increase of 23% from $5.3 billion one year ago.

Net interest margin was 4.86%, an increase of 7 basis points from the prior quarter, primarily due to a higher percentage of loans to assets and less MBS premium amortization. Loan yield declined 15 basis points to 6.30%, primarily due to repayments and re-pricing of existing loans and lower yields on new loans.

All key credit quality metrics improved in the quarter and remained at very low levels. Loan and lease loss provision was $2.2 million, compared to $7.1 million in the prior quarter. Non-performing assets decreased by $18 million to $44 million or 0.56% of total assets, compared to 0.80% at the end of the prior quarter. Net charge-offs were $1.7 million in the quarter, compared to $1.9 million in the prior quarter, and were 0.12% as a percentage of average loans for the twelve month period ended September
30, 2013, compared to 0.16% for the twelve month period ended June 30, 2013.

To read the entire CapitalSource news release, click here.