CapitalSource Inc. of Chevy Chase, Md., said Thursday that it swung to a $104 million loss in the first quarter, from a $5.2 million profit a year earlier, as credit quality worsened dramatically.

The net loss at the company's CapitalSource Bank, which was launched last summer, narrowed to $94,000, from $18.2 million in the fourth quarter. The bank's provision decreased by roughly half from the fourth quarter, to $24.9 million.

The bank was started with $5.6 billion of deposits, 22 branches, and some assets purchased from an industrial loan bank owned by Fremont General Corp. in Brea, Calif. Including the commercial finance business, the parent company's provision for loan losses was $155.2 million, compared with $5.6 million a year earlier. However, the provision decreased 65% from the fourth quarter.

The $15.7 billion-asset company's nonaccrual loans rose 280% from a year earlier, to $179.3 million, or 5.88% of total loans. The nonaccruals included $23 million from the bank. The bank's loans grew 7.4% from a quarter earlier, to $2.9 billion.

CapitalSource gave no update on the application it filed in the fourth quarter to become a bank holding company.

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