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CapitalSource's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Douglas H. Lowrey

Thank you, Jim. Good afternoon, everyone. The fourth quarter capped a very strong year for CapitalSource Bank. We saw a full-year top line revenue growth as interest income increased 11%, while interest expense declined by 4%. In addition, our pretax income was up 160% year-over-year.

Turning to the fourth quarter, net interest income was 3% higher than last quarter, and the net interest margin held steady at 4.95% despite our earlier expectations for a modest decline. Our loan and lease portfolio increased by $231 million or 5% on production-- funded production of $665 million. Including the loans purchased from the Parent during the fourth quarter, our portfolio growth was $343 million or 7.5% above the prior quarter end. Our credit quality was stable, and a loan loss provision of $4 million was down from $14 million in the third quarter.

We continue to reduce the level of cash and investments as we deployed excess liquidity to support loan growth, while also growing deposits by 5%. Our new and renewed time deposits were added in an average interest rate of 93 basis points, which resulted in a small decline in our overall weighted average interest rate on our deposits. We previously thought that we would have to pay up a bit to raise deposits. But our experience in the fourth quarter has caused us to lower our projections about the potential costs of raising an additional $500 million to $600 million of deposits during 2012 and its impact on our net interest margins.

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