CIT Group reported net income of $115 million for the quarter ended June 30, 2015, compared to net income of $247 million for the second quarter of 2014. Net income for the six month period ended June 30, 2015 was $219 million compared to $364 million for the period ended June 30, 2014. The three and six month periods ended June 30, 2014 included $52 million and $54 million of income from a discontinued operation, respectively.

“I am very pleased that we received regulatory approval for our acquisition of OneWest, which is on track to close next week,” said John A. Thain, Chairman and Chief Executive Officer. “This transaction will expand our commercial banking franchise, enhance our suite of products, and further diversify our deposit base and lower our funding costs through an established network of retail branches in Southern California.

“Our quarterly results reflect growth across our transportation businesses and the continuing competitive environment, particularly for middle market lending. We remain focused on increasing shareholder value as we meet the financial needs of our customers.”

Segment Highlights

Transportation & International Finance

Pre-tax earnings were $157 million, up from $148 million in the year-ago quarter and unchanged from the prior quarter. The increase from the year-ago quarter primarily reflected higher gains on asset sales and a lower provision for credit losses. The second quarter results reflects lower provision for credit losses and operating expenses offset by reduced gains on asset sales, as compared to the prior quarter.

Financing and leasing assets at June 30, 2015 were $19.3 billion, up from $18.8 billion at March 31, 2015 and $18.4 billion at June 30, 2014. The annual increase reflects growth in all transportation divisions, partially offset by a reduction in International Finance. Assets held for sale totaled $0.7 billion and largely consists of the U.K. equipment finance portfolio and certain commercial aircraft. New business volume for the quarter was $0.8 billion and consisted of $0.4 billion of operating lease equipment, including the delivery of three new aircraft and approximately 1,900 new railcars, and the funding of $0.4 billion of finance receivables, the majority of which was in Maritime Finance.

Net finance revenue was $218 million, compared to $222 million in the year-ago quarter and $215 million in the prior quarter, reflecting asset growth offset by yield compression. Net finance margin was 4.57%, down from 4.91% in the year-ago quarter, as lower yields in Aerospace reflecting lower utilization and lease re-pricings, were partially offset by slightly higher yields in Rail. NFM was unchanged from the prior quarter as lower funding costs offset yield compression. Gross yields in Aerospace decreased to 11.2% from 11.4% in the prior quarter, while gross yields in Rail of 14.8% were unchanged sequentially.

Other income was $17 million, up from $10 million in the year-ago quarter and down from $34 million in the prior quarter, driven by variation in gains on asset sales, predominantly in commercial aircraft.

Non-accrual loans of $58 million (1.55% of finance receivables) increased from $39 million (1.10%) at March 31, 2015 and from $41 million (1.26%) a year ago, primarily in International Finance. There was a slight net benefit in provision for credit losses compared to provisions of $8 million in the year-ago quarter and $11 million in the prior quarter, with the current quarter provision reflecting recoveries in China and minimal losses elsewhere. Net charge-offs reflected a $3 million net recovery this quarter (0.29% of finance receivables) compared to net charge-offs of $13 million (1.48%) in the year-ago quarter and $2 million (0.17%) in the prior quarter. Net charge-offs in the year-ago quarter include $9 million related to assets transferred to held for sale.

Operating expenses were $78 million, up from $76 million a year ago and down from $82 million in the prior quarter reflecting lower employee costs.

Utilization was essentially unchanged from the prior quarter in air and rail, with over 97% of aircraft and 98% of rail equipment leased or under a commitment at quarter-end. During the quarter, we ordered approximately 1,400 freight rail cars delivering through 2017. All of our aircraft scheduled for delivery in the next 12 months and approximately 60% of the total railcar order-book have lease commitments.

North American Commercial Finance

Pre-tax earnings were $47 million, compared to $93 million in the year-ago quarter and $36 million in the prior quarter. The decrease from the year-ago quarter reflects higher credit costs and operating expenses, lower interest recoveries, and the impact of portfolio re-pricing. The increase from the prior quarter reflects lower credit costs, higher capital market fees, and higher net finance revenue.

Financing and leasing assets were $16.3 billion, up slightly from March 31, 2015, and up $650 million (4%) from June 30, 2014. The increase from the year-ago quarter primarily reflects the acquisition of Direct Capital and growth in Real Estate Finance. New lending and leasing volume was $1.6 billion, slightly higher than the year-ago quarter and up from $1.4 billion in the prior quarter. Factored volume declined 7% and 10% from year-ago and prior quarter levels, respectively.

Net finance revenue of $133 million decreased from $146 million in the year-ago quarter reflecting lower levels of loan prepayments and interest recoveries. Net finance revenue increased from $128 million in the prior quarter due to both slightly higher average earning assets and yields, notably in Equipment Finance. Net finance margin was 3.60% compared to 4.13% in the year-ago quarter and 3.52% in the prior quarter. The changes in net finance margin from the comparable periods reflect the items affecting the net finance revenues cited above. Other income of $69 million was essentially unchanged from the year-ago quarter and up from $66 million in the prior quarter, reflecting higher capital markets fees and higher gains partially offset by lower factoring commissions. Operating expenses were $135 million, up from $120 million in the year-ago quarter, primarily reflecting the acquisition of Direct Capital, and were unchanged from the prior quarter.

Non-accrual loans of $111 million (0.70% of finance receivables) declined from $116 million (0.73%) at March 31, 2015, and from $132 million (0.86%) a year ago. Provision for credit losses of $19 million was up from $3 million in the year-ago quarter and down from $24 million in the prior quarter. The current quarter includes a charge-off on one energy-related account partially offset by a decrease in non-specific reserves. Net charge-offs were $26 million (0.66% of average finance receivables), compared to $9 million (0.23%) in the year-ago quarter and $19 million (0.49%) in the prior quarter. Net charge-offs include $1 million related to assets moved to held for sale in the current quarter compared to $3 million in the year-ago quarter and $11 million in the prior quarter.

To read the full CIT press release, click here.