CapitalSource 2Q profit falls 29 percent

The financial services company earned $60.1 million, or 25 cents per share, in the second quarter, down from $84.3 million, or 45 cents per share, in the same period last year.

Excluding the effects of various one-time items, earnings per share came to 12 cents per share. Wall Street analysts anticipated a higher per-share profit of 23 cents, according to a poll by Thomson Financial. Analyst estimates typically ignore one-time items in their forecasts.

Interest income fell to $254.2 million from $311.2 million in the year-ago period, the company said, and its core lending spread slipped 0.07 percentage points during the quarter to 7.05 percent.

CapitalSource--primarily a commercial lender before its recent acquisition--said commercial loans totaled about $9.4 billion at the end of the April-to-June period, down about $331.4 million from the first quarter of 2008.

The mortgage market crisis has been taking its toll on a variety of loans, including those made to businesses--many of which, like consumers, are struggling with falling property values and rising costs.

CapitalSource made a provision for loan losses of $31.7 million during the second quarter, up from $17.4 million in last year's second quarter.

Within the last 10 days, CapitalSource began operating the 22 retail bank branches it acquired from Fremont, which filed for bankruptcy protection in June.

"We are now extremely well positioned to grow our market leading commercial lending business ... while maintaining our uncompromising and historically strong credit standards," Chairman and Chief Executive John K. Delaney said in a statement.

CapitalSource shares fell 2 cents to $11.20 in midday trading.