CIT Group reported a net loss for the first quarter 2012 of $447 million compared to net income of $66 million for the first quarter of 2011 and includes debt refinancing charges of $620 million related to the prepayment of $6.5 billion of high cost debt, while the year-ago period included debt refinancing charges of $46 million. Pre-tax income excluding debt refinancing charges was $214 million, up from $178 million in the year ago quarter.

CIT said funded new business volume of $2.0 billion increased 51% from the prior-year quarter, while committed new business volume of $2.5 billion increased 46%. Corporate Finance and Vendor Finance each reported double-digit percentage increases in both funded and committed volume from the prior year.

Factoring volume was $6.0 billion, down 2% from the prior-year quarter. Sequential volumes declined reflecting fewer aircraft deliveries in Transportation Finance, and seasonal factors in Vendor Finance and Trade Finance. In addition, CIT Bank purchased a $200 million portfolio of loans secured by aircraft.

CIT noted that its credit metrics further improved, as net charge-offs, non-accrual loans and inflows to non-accruals all declined from the prior-year quarter and sequentially. Net charge-offs were $22 million, down from $140 million in the year-ago quarter and $24 million in the fourth quarter. CIT said the improvement from the prior-year quarter was driven primarily by Corporate Finance.

The first quarter provision for credit losses was $43 million, compared to $122 million in the year-ago quarter and $16 million in the fourth quarter. The decrease from the prior-year quarter reflects improved portfolio credit quality, including a reduction in specific reserves, and the continued reduction in non-accrual loans.

“We made further progress this quarter positioning CIT for profitability and growth,” said John A. Thain, chairman and chief executive officer. “We grew commercial assets and significantly advanced the transformation of our funding profile as we successfully issued unsecured debt and redeemed legacy high cost debt, which caused the majority of our debt to become unsecured. CIT Bank online deposits surpassed $1.1 billion and we expanded our online deposit product offerings. We will continue to focus on improving our core profitability as we work to meet the financing needs of our small business and middle market clients.”

The following highlights on Vendor Finance, Transportation Finance and CIT Bank were excerpted from the news release:

Vendor Finance

Excluding accelerated FSA interest expense, the current period pre-tax loss was primarily attributable to $18 million of adjustments that pertain to prior periods, most of which reduced interest income in our Mexican portfolio. The comparison to the prior-year quarter also reflects improvements due to lower credit costs and improved margin reflecting lower funding costs that were offset by lower net FSA accretion and a decline in end of lease revenue consistent with the smaller portfolio. The sequential quarter decline is also attributable to lower net FSA accretion, increased credit provisions, reflecting lower recoveries and asset growth, higher operating expenses, as well as several smaller items that reduced other income.

Financing and leasing assets, while down from a year ago, rose $0.1 billion during the quarter to $5.1 billion. Funded new business volume was $673 million, a 17% increase from the prior-year quarter but down from the prior quarter, reflecting seasonal trends. Excluding the impact of platforms sold in 2011, volume increased 28% from the prior-year quarter. Essentially all of U.S. funded volume in the current quarter was originated by CIT Bank.
Portfolio credit quality remained stable from the prior quarter and improved significantly from the prior-year quarter with declines in non-accrual loans and delinquencies. Net charge-offs of $6 million improved from $18 million in the prior-year first quarter, but rose from $2 million in the fourth quarter reflecting lower recoveries.

Transportation Finance

Excluding accelerated FSA interest expense, pre-tax earnings rose 70% from the prior-year quarter reflecting an improved finance margin on a larger portfolio and increased railcar utilization and lease rates. Financing and leasing assets grew approximately $1.4 billion from March 31, 2011, and $0.2 billion from December 31, 2011, to $13.5 billion.
Equipment utilization remained strong. Including commitments, at March 31, 2012 all commercial aircraft except for one were leased and rail fleet utilization was over 97%. New business volume of $0.3 billion reflects the addition of two aircraft and approximately 1,500 railcars, and includes $0.1 billion of loans originated by CIT Bank. In addition, CIT Bank purchased a $200 million portfolio of loans secured by aircraft. All remaining 2012 aircraft deliveries have lease commitments.

CIT Bank

CIT Bank continued to expand commercial loans and deposits. Asset origination activity reflected increased volume from the year-ago period in Corporate Finance, Vendor Finance and Transportation Finance. Committed loan volume more than doubled from the year-ago period and rose 18% from the prior quarter to $1.6 billion, of which nearly $1.2 billion was funded. The sequential quarter increase reflected growth in Corporate Finance activity, including volume from Real Estate and Equipment Finance. Additionally, the Bank purchased a $200 million portfolio of loans secured by aircraft.

Total assets were $9.6 billion, up from $6.8 billion at March 31, 2011 and $9.0 billion at December 31, 2011. Loans (including held-for-sale) totaled $6.6 billion, up from $5.2 billion at March 31, 2011 and $6.1 billion at December 31, 2011. Commercial loans of $5.0 billion increased $3.4 billion from a year ago and $1.1 billion during the first quarter. Assets held for sale totaled $1.1 billion, down from $1.6 billion at December 31, 2011 as $0.5 billion of student loans were sold during the first quarter. Cash was $2.6 billion at March 31, 2012 up from $2.5 billion at December 31, 2011. CIT Bank’s preliminary Total Capital ratio was 32.9% and the Tier 1 Leverage ratio was 23.1%.

Total deposits were $6.7 billion at March 31, 2012, up from $6.1 billion at December 31, 2011 and $4.3 billion at March 31, 2011. During the first quarter, CIT Bank placed over $750 million of deposits at an average rate of approximately 1.1% that replaced maturing deposits at higher rates. Deposits originated through online channels exceeded $1.1 billion and, in March 2012, CIT Bank online launched a high yield savings account product to supplement the current range of CD offerings to consumers.

To read the full text of the CIT Group news release: click here.