NewStar Financial, a specialized commercial finance company, reported net income of $6.1 million for the third quarter of 2012 compared to net income of $3.4 million in the third quarter of 2011.

NewStar said total new funded loan origination volume was approximately $180 million in the third quarter compared to $205 million in the prior quarter and $190 million in the third quarter of the prior year. Lower volumes reflected weaker demand for acquisition financing from financial sponsors amid a slowdown in M&A activity and overall business investment.

NewStar noted that asset-based lending and equipment finance businesses originated $23 million in the third quarter, or nearly 20% of new loan volume retained on the balance sheet.

The managed loan portfolio remained steady at $2.4 billion as of September 30, 2012 approximately equal to June 30, 2012 as new funded loan origination offset loan run-off from scheduled amortization and prepayments of existing loans.

Tim Conway, NewStar’s chairman and chief executive officer, said, “Although weaker than expected loan demand and M&A activity slowed our pace of new loan origination in the quarter, I am happy with our overall strong results.” Conway added, “I also remain optimistic that we will have a strong finish to the year as we are already experiencing a significant pick-up in activity that we expect to continue through year-end.”

To read the NewStar news release click here.