CIT Group reported Q2/16 net income of $14 million compared to net income of $115 million for the year-ago quarter. Income from continuing operations for Q2/16 was $181 million compared to $115 million in Q2/15.

CIT noted a net loss of $167 million in discontinued operations that relates to Financial Freedom, a reverse mortgage servicing business that was part of the OneWest Bank acquisition in August 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.

“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.”

The following was excerpted from the CIT news release:

• Financing and leasing assets of $49.7 billion were up 39% from $35.8 billion a year earlier. The net operating lease component of $16.9 billion was up from $15.1 billion in Q2/15.
• Total Transportation Finance – Aerospace, Rail and Maritime Finance – at quarter-end June 30, 2016 was $19.96 billion compared to $18.267 billion at the end of the same period in 2015.
• Transportation Finance funded new business volume in Q2/16 of $461 million was down from $743.8 million for the same quarter in 2015.