CIT Group swung to a profit in the second quarter as the Livingston, N.J., company continued its transition from a specialty lender to a more traditional commercial bank.

The $50 billion-asset CIT posted net income of $157 million in the quarter, compared with a $23 million loss in the year-earlier period. Its earnings per share of 85 cents were 20 cents better than the mean of analysts’ estimates compiled by FactSet Research Systems.

The results included numerous one-time items tied to Chairwoman and CEO Ellen Alemany’s strategy to shrink the balance sheet and shift the business model following the departure of former CEO John Thain.

“We made significant progress in advancing our strategic plan in the second quarter as we position CIT to be a leading bank serving the middle market and small businesses nationwide,” said CEO Ellen Alemany.

CIT’s total assets declined 20% from just three months earlier due to some of the changes. The items included: $100 million of debt-extinguishment costs tied to the reduction of $5.8 billion of unsecured debt, reducing earnings by 54 cents; a $100 million gain from the $10.4 billion sale of Commercial Air in April, which generated 54 cents of earnings; a $19 million benefit from the resolution of legacy tax items, which boosted earnings by 11 cents a share.

“We made significant progress in advancing our strategic plan in the second quarter as we position CIT to be a leading bank serving the middle market and small businesses nationwide,” Alemany said in a news release Tuesday.

Net interest revenue was little changed at $264.6 million. Total loans fell 5% to $37.1 billion.

Total deposits of $31 billion represented about 78% of CIT’s funding sources, an increase from 69% in the first quarter. Alemany is building up CIT’s deposits as a way to provide a lower cost of funding for business loans.

Noninterest income fell 7% to $335.8 million on lower rental income from operating lease equipment. Noninterest expenses increased 39% to $591.1 million on the debt-extinguishment costs and other items.

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Andy Peters

Andy Peters

Andy Peters writes about regional banks, consumer finance and debt collections for American Banker.