CIT Group reported net income of $14 million for the quarter ended June 30, 2016, compared to net income of $115 million for the year-ago quarter. Income from continuing operations for the second quarter was $181 million compared to $115 million in the year-ago quarter.
Net income for the six month period ended June 30, 2016 was $161 million compared to $219 million for the period ended June 30, 2015. Income from continuing operations for the six month period ended June 30, 2016 was $333 million compared to $219 million for the six month period ended June 30, 2015.
The loss of $167 million in discontinued operations relates to Financial Freedom, a reverse mortgage servicing business that was part of the OneWest Bank acquisition in August 2015. As disclosed in CIT’s Form 10-K for fiscal year 2015, CIT determined that there was a material weakness related to the Home Equity Conversion Mortgage (“HECM”) interest curtailment reserve associated with this business. During the current quarter, as a result of the ongoing process to remediate the material weakness and taking into consideration the investigation being conducted by the Office of Inspector General (“OIG”) for the Department of Housing and Urban Development, the Company recorded additional reserves, due to a change in estimate, of $230 million. This review and the related investigation are ongoing and, as a result, the amount of this reserve could change prior to the filing of the current quarter Form 10-Q.
“We are disappointed that the additional charges arising from the legacy Financial Freedom business, which was part of the OneWest Bank acquisition, offset the improved earnings from continuing operations. Despite the impact it had on our financial results, we made good progress this quarter advancing our strategic goals,” said Ellen Alemany, Chief Executive Officer. “We filed the initial Form 10 Registration Statement for C2 Aviation Capital as part of our Commercial Air separation and have advanced to the second round of the bidding process. We entered into a definitive agreement to sell our Canadian Equipment and Corporate Finance Business and we transferred our remaining Business Air assets to held for sale. We remain committed to executing on our strategy to grow our core businesses, reduce operating expenses and improve returns.”
Read the full CIT press release here.