CIT Group reported a net loss for the quarter ended June 30, 2012 of $71 million compared to a net loss of $50 million for the second quarter of 2011. CIT said results included debt refinancing charges of $286 million related to the prepayment of $4.2 billion of high cost debt, while the year-ago period included debt refinancing charges of $163 million related to the prepayment of $2.5 billion of high cost debt.

Pre-tax income excluding debt refinancing charges was $245 million, up from $134 million in the year ago quarter. Net loss for the six months ended June 30, 2012 was $517 million and included debt refinancing charges of $906 million, compared to net income of $16 million in the comparable 2011 period.

CIT said funded new business volume of $2.4 billion increased 38% from the prior-year quarter, while committed new business volume of $2.7 billion increased 31% with meaningful improvements in Corporate Finance, Vendor Finance and Transportation Finance. Volume increased sequentially in Transportation Finance, reflecting both lending and leasing activities, and in Vendor Finance. Trade Finance factoring volume of $5.9 billion declined modestly from the first quarter of 2012 and by approximately 4% from the prior-year quarter.

“We continue to make progress towards our long term targets. Our results this quarter, while impacted by the repayment of high cost debt, reflect our efforts to grow our businesses as we meet the financing needs of our small business and middle market clients,” said John Thain, chairman and chief executive officer. “CIT Bank reached two significant milestones – $2 billion of internet deposits and $10 billion of assets – and will continue to play an important role in our growth strategy.”

The company said net charge-offs were $17 million, or 0.33% as a percentage of average finance receivables, down from $55 million (0.95%) in the year-ago quarter and $22 million (0.44%) in the prior quarter. Net charge-offs in our commercial segments were 0.42% of average finance receivables in the current quarter, improved from 1.38% in the year-ago quarter and 0.56% in the prior quarter. The reduction from the prior-year quarter reflects improvements in Corporate Finance and Vendor Finance, while the sequential quarter decline was almost entirely attributable to Transportation Finance.

The second quarter provision for credit losses was $9 million, compared to $84 million in the year-ago quarter and $43 million in the prior quarter. The declines from both periods reflect the lower charge-offs and a reduction in non-specific reserves in the current quarter.

Non-accrual loans were $455 million, or 2.26% of finance receivables at June 30, 2012, down from $1.1 billion (4.77%) at June 30, 2011 and $482 million (2.35%) at March 31, 2012. Non-accrual loans as a percentage of finance receivables in the commercial segments was 2.80% at June 30, 2012, improved from 6.96% at June 30, 2011 and 3.03% at March 31, 2012 reflecting broad-based improvement across the commercial segments. The sequential quarter improvement was largely attributable to improvements in Corporate Finance, reflecting the repayment and sale of loans, and Vendor Finance.

Vendor Finance

Financing and leasing assets of $5.1 billion were up slightly from March 31, 2012 and down approximately $100 million from a year ago as asset sales and the run-off from liquidating portfolios exceeded new business volume. Funded new business volume was $762 million, up approximately 20% from the prior-year quarter and 13% sequentially. Essentially all U.S. funded volume in the current quarter was originated by CIT Bank.

Portfolio credit quality improved from the prior-year quarter and sequentially with declines in non-accrual loans and delinquencies. Net charge-offs of approximately $8 million improved from $17 million in the prior-year quarter, but rose modestly sequentially due in part to lower recoveries.

Transportation Finance

Excluding accelerated FSA interest expense, pre-tax earnings rose 82% from the prior-year quarter and 60% sequentially reflecting improved finance revenue on higher portfolio assets, and lower funding and credit costs. Equipment utilization remained strong with over 99% of commercial air and 98% of rail equipment on lease or under a commitment at June 30, 2012.

Financing and leasing assets grew approximately $1.6 billion from June 30, 2011, and $0.3 billion from March 31, 2012, to $13.8 billion. New business volume of $640 million reflects the addition of 6 aircraft and over 2,000 railcars in our operating lease portfolio, and over $100 million of loans. All of the current quarter’s loan volume and over 85% of the rail volume was originated by CIT Bank. All remaining 2012 aircraft deliveries have lease commitments.

To read the full CIT Group news release click here.