- Advanced Portfolio Optimization
– Sold U.K. platform, Commercial Air separation and remaining
Non-Strategic Portfolio exits progressing; transferred
international business air assets to held for sale;
- Grew Commercial Portfolio –
Financing and leasing assets in Commercial Banking were up 2% from
the prior quarter;
- Maintained Strong Capital
Ratios – Common Equity Tier 1 of 13.1% and Total Capital
Ratio of 13.7%.
CIT Group Inc. (NYSE:CIT) cit.com, a leading provider of
commercial lending and leasing services, today reported net income
of $147 million, $0.73 per diluted share for the first quarter of
2016, compared to net income of $104 million, $0.59 per diluted
share, for the year-ago quarter, which reflects results prior to
the acquisition of OneWest Bank. Income from continuing operations
for the first quarter was $152 million, $0.75 per diluted share,
compared to $104 million, $0.59 per diluted share in the year-ago
quarter.
“Since I recently became CEO and defined our strategy to become
a leading national middle market bank, our team has been very
focused on executing on our plan to improve returns as we grow our
core businesses and maintain strong risk management practices,”
said Ellen Alemany, Chief Executive Officer.
“This year we expect to complete the separation of Commercial
Air and other portfolio optimization initiatives, integrate the
remaining OneWest Bank systems, build out deposit and commercial
treasury services capabilities, execute on initiatives to reduce
operating expenses and return excess capital to shareholders.”
Summary of First Quarter Financial
Results from Continuing Operations
All references in this section relate to continuing operations
and therefore do not include any of the assets or results of
operations of the discontinued operations.
On August 3, 2015, CIT acquired IMB HoldCo LLC, the parent
company of OneWest Bank, which impacts the comparability of current
results to prior periods. The current and prior quarters reflect a
full quarter of OneWest Bank’s results of operations while the
prior-year period does not include any results from OneWest
Bank.
Selected Financial Highlights
(Continuing Operations)
Change from: 1Q16 4Q15
1Q15
Prior
Quarter*
Prior Year*
($ in millions, except per share data) Pre-tax income $ 204 $ 141 $
148 $ 63 $ 57 Net income $ 152 $ 151 $ 104 $ 1 $ 48 Diluted
earnings per share (EPS) $ 0.75 $ 0.75 $ 0.59 $ (0.00) $ 0.16
Pre-tax return on average earning assets (ROAEA)
1.38% 0.95% 1.41% 0.43% -0.03% Return on average earning assets
(ROAEA) 1.02% 1.02% 0.99% 0.00% 0.03% Adjusted return on tangible
common equity (ROTCE) 7.08%
7.08%
5.26%
0.00%
1.82%
Net finance margin 3.74% 3.57% 3.23% 0.16% 0.51% Net efficiency
ratio 49.2% 53.3% 57.1% -4.1% -7.9% Tangible book value per share
(TBVPS) $ 48.39 $ 47.77 $ 46.89 $ 0.62 $ 1.50 CET 1 Ratio(1)
13.1% 12.7% 14.1% 0.4% -1.0% Total Capital Ratio(1) 13.7% 13.2%
14.8% 0.5% -1.1% Net charge-offs as % of AFR 0.65% 0.40%
0.43% 0.25% 0.22% Allowance for loan losses as % of finance
receivables 1.29% 1.14% 1.83% 0.15% -0.55% Average earning
assets $ 59,206 $ 59,141 $ 41,841 $ 65 $ 17,365 Financing and
leasing assets $ 50,286 $ 50,381 $ 35,369 $ (96) $ 14,917 * Certain
balances may not sum due to rounding. (1)Ratios based on the fully
phased-in basis.
Income from continuing operations of $152 million includes net
after-tax benefits of $4 million from discrete items related to our
strategic initiatives. Discrete items include benefits from the
sale of the U.K. Equipment Finance platform and a discrete tax item
related to an international portfolio previously sold, which were
partially offset by restructuring charges resulting from operating
expense reduction initiatives, an impairment on the Non-Strategic
Portfolio and currency translation adjustment (“CTA”) charges. In
addition to these items, income this quarter included higher credit
loss provisions for the oil and gas, and maritime portfolios which
were partially offset by a mark-to-market benefit on the total
return swap (“TRS”).
Tangible book value per share1 increased to $48.39 reflecting
net income for the quarter. Estimated Common Equity Tier 1 and
Total Capital ratios at March 31, 2016 increased to 13.1% and
13.7%, respectively, as calculated under the fully phased-in
Regulatory Capital Rules. Average earning assets2 for the March 31,
2016 quarter were relatively flat at $59.2 billion reflecting
growth in commercial businesses offset by run-off in the
liquidating portfolios. The ROTCE3 of 7.08% was flat from the prior
quarter while the increase from the year-ago quarter reflects the
lower capital levels primarily due to the acquisition of OneWest
Bank.
Income Statement
Highlights:
Net Finance Revenue*
Change from: ($ in millions) 1Q16 4Q15 1Q15
Prior Quarter
Prior Year
Interest income $ 495 $ 510 $ 281 $ (15) $ 214 Rental income
on operating leases 575 551 531 25
45 Finance revenue 1,071 1,061 812 9 259 Interest expense
(286) (287) (271) 0 (15) Depreciation on operating lease equipment
(175) (167) (157) (9) (19) Maintenance and other operating lease
expenses (56) (80) (46) 23 (10)
Net finance revenue $ 553 $ 528 $ 337 $ 25 $ 216 Average
earning assets $ 59,206 $ 59,141 $ 41,841 $ 65 $ 17,365 Net finance
margin 3.74% 3.57% 3.23% 0.16% 0.51% * Certain balances may not sum
due to rounding.
Net finance revenue 4 was $553 million in the current quarter,
compared to $528 million in the prior quarter and $337 million in
the year-ago quarter. Average earning assets were essentially flat
compared to the prior quarter reflecting growth in Rail, Commercial
Finance, Business Capital and other consumer mortgage lending
portfolios offset by run-off in the Legacy Consumer Mortgage
portfolio and the sale of the U.K. Equipment Finance business. The
increase in average earning assets from the year-ago quarter
reflects the acquisition of OneWest Bank.
Net finance revenue as a percentage of average earning assets
(“net finance margin”) increased from both the prior and year-ago
quarters. The increase from the prior quarter was driven primarily
by lower maintenance and other operating lease costs and elevated
collections on remarketed aircraft in Transportation Finance offset
by change in mix of assets resulting from the run-off or sale of
higher yielding assets. The increase from the year-ago quarter
reflects the benefits from the OneWest Bank acquisition.
Other Income*
Change from: ($ in millions) 1Q16 4Q15 1Q15
Prior Quarter
Prior Year
Factoring commissions $ 26 $ 29 $ 30 $ (3) $ (3) Fee
revenues 33 35 23 (2) 10 Gains on sales of leasing equipment 11 17
32 (6) (21) (Losses) gains on loan and portfolio sales 0 (41) 7 42
(6) (Losses) gains on investments (4) (6) 1 2 (5) Gains (losses) on
OREO sales 2 (2) - 4 2 Net gain (losses) on derivatives and foreign
currency exchange 9 2 (10) 8 19 Impairment on assets held for sale
(22) (15) (10) (7) (12) Other revenues 46 12
15 34 31 Total other income $ 101 $ 30 $ 86 $ 71 $ 15
* Certain balances may not sum due to rounding.
Other income of $101 million includes approximately $10 million
of net benefits from international business exits including a $24
million gain on the sale of the U.K. platform recorded in Other
Revenue partially offset by impairment of $11 million in the
Non-Strategic Portfolios in held for sale and the recognition of
CTA losses. In addition, the current quarter includes an $18
million benefit from the mark-to-market on the total return swap
(TRS). The prior quarter included a loss on the sale of the Brazil
platform primarily related to the recognition of $51 million of CTA
losses. The year-ago quarter benefited from the sale of aircraft
and a benefit on the termination of a defaulted contract, which
were partially offset by a CTA charge in the U.K. and additional
impairment charges on the Non-Strategic Portfolios.
Operating Expenses*
Change from: ($ in millions) 1Q16 4Q15 1Q15
Prior Quarter
Prior Year
Compensation and benefits $ (172) $ (152) $ (147) $ (21) $
(26) Technology (30) (33) (22) 2 (8) Professional fees (39) (43)
(20) 5 (19) Net occupancy expense (18) (18) (9) (1) (9) Advertising
and marketing (5) (8) (9) 3 4 Other expenses (57)
(44) (35) (13) (21)
Operating expenses before provision for
severanceand facilities exiting and intangible asset
amortization
(322) (298) (242) (24) (80) Provision for severance and facilities
exiting activities (20) (53) 1 33 (21) Intangible asset
amortization (6) (7) (1) 1 (6)
Total operating expenses $ (349) $ (358) $ (242) $ 9 $ (107)
Net efficiency ratio 49.2% 53.3% 57.1% 4.1% 7.9% * Certain balances
may not sum due to rounding.
Operating expenses excluding restructuring costs and intangible
asset amortization were $322 million in the current quarter.
Expenses reflect the sale of Non-Strategic Portfolios and the
streamlining of the management structure, however these benefits
were partially offset by annual benefit restarts and costs
associated with the strategic initiatives, primarily costs
associated with the OneWest Bank integration and the Commercial Air
separation. The prior quarter reflected lower compensation and
benefits from adjusting accruals related to incentive compensation
and changes to benefit plans. The increase from the prior year
reflects the addition of OneWest Bank. The net efficiency ratio5
improved to 49% reflecting higher other income and to a lesser
extent, an increase in net finance revenue partially offset by
higher operating expenses. Headcount at March 31, 2016 was 4,740
down from 4,900 in the prior quarter reflecting strategic
initiatives and up from 3,360 a year-ago due to the OneWest
addition. Restructuring costs this quarter relate to strategic
initiatives to reduce operating expenses, while the amortization of
intangibles is primarily due to the OneWest Bank acquisition.
Income Taxes
The provision for income taxes of $53 million for the quarter
included $13 million of discrete tax benefits from the resolution
of a tax position on an international portfolio that had been
previously sold. The prior quarter was an income tax benefit of $10
million reflecting $15 million in discrete benefits from the
resolution of a tax position on an international portfolio
previously sold and included a positive impact from the year-end
true up to reflect the full year actual geographic mix of earnings.
The current effective tax rate was 26% and excluding discrete items
was 31% for the quarter. Cash taxes were $2 million compared to net
receipt of $17 million in the prior quarter and net payment of $14
million in the year-ago quarter.
Balance Sheet
Highlights:
Earning Assets*
Change from: ($ in millions) 1Q16 4Q15 1Q15
Prior Quarter
Prior Year
Loans (including assets held for sale) $ 33,475 $ 33,671 $
20,203 $ (197) $ 13,272 Operating lease equipment, net (including
assets held for sale) 16,811 16,710 15,167
101 1,645 Financing and Leasing Assets 50,286 50,381
35,369 (96) 14,917 Interest bearing cash 7,135 6,820 5,393 315
1,742 Investment securities 2,897 2,954 1,347 (57) 1,549
Indemnification asset 389 415 - (25) 389 Securities purchased under
agreements to resell - - 450 - (450) Credit balances of factoring
clients (1,361) (1,344) (1,505) (17)
144 Total Earning Assets $ 59,346 $ 59,226 $ 41,055 $ 120 $
18,291 * Certain balances may not sum due to rounding.
Earning assets at March 31, 2016 rose slightly from the prior
quarter, reflecting growth in interest bearing cash, and financing
and leasing assets previously noted. The increase from the year-ago
quarter principally reflects the assets acquired from OneWest
Bank.
Total cash and investment securities, including non-interest
bearing cash, were $11.0 billion at March 31, 2016, and consisted
of $8.1 billion of cash and $2.9 billion of debt and FHLB stock and
equity securities. Of this total, $1.3 billion was at the bank
holding company, $8.3 billion was at CIT Bank (excluding $0.1
billion of restricted cash), and the remaining $1.1 billion
represented cash at operating subsidiaries and other restricted
balances.
Deposits and Borrowings*
Change from: ($ in millions) 1Q16 4Q15 1Q15
Prior Quarter
Prior Year
Total Deposits $ 32,893 $ 32,782 $ 16,758 $ 111 $ 16,135
Unsecured borrowings $
10,587
$
10,636
$
10,681
$
(49)
$
(93)
Secured borrowings
7,425
7,806
5,856
(380)
1,569
Total Borrowings $ 18,013 $ 18,442 $ 16,537 $ (429) $ 1,476 *
Certain balances may not sum due to rounding.
Deposits rose modestly from the prior quarter. The decline in
unsecured borrowings reflects a modest amount of repurchases, and
the decline in secured borrowings relates to the amortization and
maturities of structured financings. The increase in borrowings
from March 31, 2015 primarily reflected deposits and FHLB
borrowings related to the acquisition of OneWest Bank in the third
quarter of 2015. At March 31, 2016, deposits represented
approximately 65% of CIT’s funding, with unsecured and secured
borrowings comprising 21% and 14% of the funding mix, respectively,
reflecting the ongoing shift from unsecured borrowings to deposit
funding. The weighted average coupon rate on outstanding deposits
and borrowings was 2.22% at March 31, 2016, unchanged from December
31, 2015 and down from 3.04% at March 31, 2015.
Capital* Change
from: ($ in millions, except per share data) 1Q16 4Q15 1Q15
Prior Quarter
Prior Year
Common Stockholders' Equity $ 11,126 $ 10,978 $ 8,759 $ 148
$ 2,367 Tangible Common Equity $ 9,760 $ 9,604 $ 8,172 $ 157 $
1,589 Total risk-based capital(1) $ 9,524 $ 9,289 $ 8,348 $ 235 $
1,176 Risk-weighted assets(1) $ 69,320 $ 70,239 $ 56,340 $ (919) $
12,980 Book value per share (BVPS) $ 55.16 $ 54.61 $ 50.26 $
0.55 $ 4.90 Tangible book value per share (TBVPS) $ 48.39 $ 47.77 $
46.89 $ 0.62 $ 1.50 CET 1 Ratio(1) 13.1% 12.7% 14.1% 0.4% -1.0%
Total Capital Ratio(1) 13.7% 13.2% 14.8% 0.5% -1.1% Tier 1 Leverage
Ratio(1) 13.8% 13.4% 17.1% 0.4% -3.3% * Certain balances may not
sum due to rounding. (1)Balances and ratios based on the fully
phased-in basis.
The sequential increase in common stockholders’ equity and
tangible common equity primarily reflects the current period
earnings, while the acquisition of OneWest Bank was a principal
contributor to the increase from March 31, 2015, primarily due to
the issuance of common shares and the reversal of the valuation
allowance on our Federal deferred tax asset in the third quarter.
The lower increase in tangible common equity from March 31, 2015
also reflects the increase in goodwill and intangibles resulting
from the acquisition of OneWest Bank. While regulatory capital also
increased, the amount was less than the common equity increase
since the majority of the deferred tax asset balance is disallowed
for regulatory capital purposes. As a result, capital ratios
declined from March 31, 2015 as the benefit from the increase in
regulatory capital was more than offset by the increase in the
risk-weighted assets acquired.
All regulatory capital ratios increased from the prior quarter
resulting from current period earnings and a reduction in risk
weighted assets reflecting the mix of assets while the decline from
the prior year reflects the acquisition of OneWest Bank. The ratios
presented are estimated Common Equity Tier 1 and Total Capital
ratios under the fully phased-in Regulatory Capital Rules.
Book value per share and tangible book value per share increased
sequentially, to $55.16 and $48.39, respectively, reflecting
earnings in the first quarter. Both amounts also increased from
March 31, 2015, as the increase in equity outpaced the increase in
shares outstanding.
In April 2016, the Board approved a $0.15 cash dividend payable
on May 27, 2016 to common shareholders of record as of May 13,
2016.
Asset Quality
Asset Quality*
Change from: ($ in millions) 1Q16 4Q15 1Q15
Prior Quarter
Prior Year
Net charge-offs (NCO) $ 51 $ 32 $ 21 $ 19 $ 30 NCO % of AFR
0.65% 0.40% 0.43% 0.25% 0.22% Non-accrual $ 295 $ 268 $ 184 $ 27 $
112 OREO $ 100 $ 122 $ - $ (22) $ 100 Provision for credit losses $
99 $ 58 $ 35 $ 42 $ 65 Total Portfolio Allowance as a % of Finance
Receivables (FR) 1.29% 1.14% 1.83% 0.15% -0.55%
Allowance for loan losses plus principal
loss discountas % of FR (before principal loss discount) /
Commercial
1.87% 1.79% 1.83% 0.08% 0.04% * Certain balances may not sum due to
rounding.
Excluding the impact relating to assets transferred to held for
sale in all periods, net charge-offs were $42 million (0.53% of
average finance receivables), compared to $13 million (0.16%) in
the prior quarter and $10 million (0.20%) in the year-ago quarter.
The current quarter net charge offs includes $15 million in the
energy (oil and gas) portfolio and $11 million related to two
Aerospace loans. Recoveries of $5 million were down slightly from
the prior and year-ago quarters.
Non-accrual loans of $295 million increased over the prior
quarter and the year-ago quarter, primarily due to increases in the
energy portfolio. The provision for credit losses increased over
both the prior quarter and the year-ago quarter and includes $31
million related to the energy portfolio, $14 million related to the
maritime portfolio and discrete charge-offs of $11 million in the
Aerospace loan portfolio noted above.
The allowance for loan losses was $405 million (1.29% of finance
receivables, 1.52% excluding loans subject to loss sharing
agreements with the FDIC) at March 31, 2016, compared to $360
million (1.14% of finance receivables, 1.35% excluding loans
subject to loss sharing agreements with the FDIC) at December 31,
2015 and $357 million (1.83% of finance receivables) at March 31,
2015. The increase from the prior and year-ago quarters is
concentrated in the energy and maritime portfolios, although there
were also modest increases across other industries. Including the
impact of the principal loss discount on credit impaired loans,
which is essentially a reserve for credit losses on the discounted
loans, the commercial loan allowance to finance receivables was
1.87% compared to 1.79% at December 31, 2015. The consumer loans
ratio was 7.86% at March 31, 2016 and 8.62% at December 31, 2015,
respectively, as most of the consumer loans purchased were credit
impaired and are partially covered by loss sharing agreements with
the FDIC. The decrease over prior quarter is driven by the shift in
asset mix as new originations offset the run-off of the purchased
credit impaired portfolio.
CIT’s loans to the oil and gas industry totaled $0.9 billion or
3% of total loans at March 31, 2016 of which 42% are criticized.
The portfolio has loss coverage of 12% of the principal balance
reflecting the purchase accounting discount for loans acquired from
OneWest Bank and the allowance for loan losses. If market
conditions remain the same, the portfolio will likely experience
additional downward credit migration.
Segment Highlights:
We changed our segment reporting effective January 1, 2016,
following the previously announced reorganized management
structure. CIT manages its business and reports its financial
results in four operating segments: Commercial Banking,
Transportation Finance, Consumer and Community Banking, and
Non-Strategic Portfolios (“NSP”), and a fifth non-operating
segment, Corporate and Other.
The following summarizes changes to our segment presentation
from December 31, 2015:
- Commercial Banking (formerly North
America Banking or “NAB”) no longer includes the Consumer Banking
division or the Canadian lending and equipment finance business.
Commercial Banking is comprised of three divisions, Commercial
Finance, Real Estate Finance, and Business Capital. Business
Capital includes the former Equipment Finance and Commercial
Services divisions.
- Transportation Finance (formerly
Transportation & International Finance or “TIF”) no longer
includes the China and the U.K. businesses. Transportation Finance
is comprised of three divisions, Aerospace, Rail, and Maritime
Finance.
- Consumer and Community Banking is a new
segment that includes Legacy Consumer Mortgages (the former LCM
segment) and other banking divisions that were included in the
former NAB segment (Consumer Banking, Mortgage Lending, Wealth
Management, and SBA Lending).
- NSP includes businesses that we no
longer consider strategic, including those in Canada and China and
recently exited U.K., that had been included in the former NAB and
TIF segments. Historic data will also include other businesses and
portfolios that have been sold, such as Mexico and Brazil.
All prior period comparisons are conformed to the current period
presentation.
Commercial Banking
Earnings Summary*
Change from: ($ in millions) 1Q16 4Q15 1Q15
Prior Quarter
Prior Year
Interest income $ 287 $ 286 $ 181 $ 2 $ 106 Rental income on
operating leases 27 26 23 1 4 Interest expense (74) (68) (65) (6)
(9) Depreciation on operating lease equipment (20)
(19) (17) (1) (3) Net finance revenue 221 224
122 (4) 98 Other income 56 69 64 (13) (8) Provision for credit
losses (74) (45) (24) (28) (49) Operating expenses (158)
(146) (131) (12) (27) Income before
income taxes $ 44 $ 102 $ 30 $ (58) $ 14
Select Average
Balances Average finance receivables $ 21,131 $ 21,463 $ 14,986
$ (332) $ 6,145 Average earning assets $ 20,727 $ 20,944 $ 14,357 $
(217) $ 6,371
Statistical Data Pre-tax ROAEA 0.85% 1.95%
0.84% -1.09% 0.01% Net finance margin 4.26% 4.29% 3.41% -0.03%
0.85% New business volume $ 1,581 $ 2,165 $ 1,296 $
(583)
$ 285 Net efficiency ratio 56.8% 49.0% 70.3% -7.8% 13.5% * Certain
balances may not sum due to rounding.
Commercial Banking pre-tax earnings declined from the prior
quarter due to higher credit costs and operating expenses and lower
other income, while the increase from the year-ago quarter also
reflects the addition from OneWest Bank.
Financing and leasing assets (“FLA”), which comprise the
majority of earning assets, were $22.0 billion at March 31, 2016,
up 2% from December 31, 2015, reflecting new business volume and
slower prepayment activity, and up 43% from a year-ago, reflecting
the acquisition of OneWest Bank. New lending and leasing volume was
down from the prior quarter but increased from the year-ago quarter
in all divisions while factored volume was down from both the prior
and year-ago quarters.
Net finance revenue decreased slightly from the prior quarter
due to the decline in average earning assets and higher funding
costs. The increase from the year-ago quarter reflects higher
earning assets and purchase accounting accretion on loans acquired
from OneWest Bank. Net finance margin was 4.26%, down slightly from
the prior quarter and up from the year-ago quarter, benefiting from
purchase accounting accretion on acquired loans and higher yields
on certain new originations.
Other income declined from the prior and year-ago quarters
primarily reflecting lower gains on asset sales, while the decrease
in other income from the year-ago quarter was partially offset by
higher fee income.
Operating expenses increased from the prior quarter, reflecting
higher legal expense in Commercial Finance and discrete items
related to Business Capital. The increase from the year-ago quarter
reflects the acquisition of OneWest Bank.
Net charge-offs were $32 million (0.60% of average finance
receivables), consistent with the prior quarter and up from $19
million (0.52%) in the year-ago quarter. Excluding assets
transferred to held for sale in all periods, net charge-offs were
$30 million in the current quarter, up from $13 million in the
prior quarter and $8 million in the year-ago quarter. The increase
in the current period relates to energy loans. Non-accrual loans
were $215 million (1.00% of finance receivables), compared to $191
million (0.91%) at December 31, 2015, and $105 million (0.69%)
a year-ago. The increase in balance from the prior quarters was
primarily related to loans in the energy sector. The provision for
credit losses increased from the prior periods from new business
volume, increases in reserves related to the energy portfolio and
modest increases across other industries
Transportation Finance
Earnings Summary*
Change from: ($ in millions) 1Q16 4Q15 1Q15
Prior Quarter
Prior Year
Interest income $ 53 $ 50 $ 43 $ 3 $ 10 Rental income on
operating leases 545 518 497 26 48 Interest expense (148) (143)
(151) (5) 3 Depreciation on operating lease equipment (155) (148)
(136) (7) (19) Maintenance and other operating lease expenses
(56) (80) (46) 23 (10) Net
finance revenue 238 197 207 41 31 Other income 19 25 35 (6) (17)
Provision for credit losses (23) (9) (6) (14) (16) Operating
expenses (61) (50) (67) (11) 7
Income before income taxes $ 173 $ 163 $ 169 $ 10 $ 5
Select Average Balances Average finance receivables $ 3,333
$ 3,447 $ 2,929 $ (113) $ 405 Average operating leases $ 16,364 $
15,698 $ 14,618 $ 666 $ 1,746 Average earning assets $ 20,620 $
19,784 $ 18,881 $ 835 $ 1,739
Statistical Data Pre-tax ROAEA
3.36% 3.30% 3.57% 0.06% -0.21% Net finance margin 4.61% 3.98% 4.38%
0.63% 0.23% New business volume $ 246 $ 1,620 $ 420 $ (1,374) $
(174) Net efficiency ratio 23.7% 22.1% 27.7% -1.6% 4.0% * Certain
balances may not sum due to rounding.
Transportation Finance pre-tax earnings were up from the prior
and year-ago quarters, reflecting increased net finance revenue on
higher average earning assets, with the comparison to the prior
quarter also reflecting lower equipment maintenance and operating
lease expenses. The current quarter also reflects a higher credit
provision due to two discrete Aerospace loan charge-offs and
increased reserves in Maritime.
Financing and leasing assets totaled $19.9 billion, essentially
unchanged from December 31, 2015 and up from $17.8 billion at March
31, 2015. Compared to the prior quarter, Rail assets increased,
Aerospace assets decreased and Maritime assets were essentially
unchanged. The increase from the prior year reflects growth in all
three divisions. Assets held for sale increased to $0.8 billion,
reflecting the addition of the international business air
portfolio. New business volume for the quarter totaled $0.2
billion, down significantly from the prior quarter due to only one
aircraft delivery compared to 14 aircraft last quarter and lower
loan volume.
Net finance revenue was up from the prior and year-ago quarters,
reflecting higher rental income driven by higher average operating
lease assets and elevated collections on remarketed aircraft and
loan prepayments. The sequential comparison also included lower
costs associated with the air and rail operating lease portfolios.
Net finance margin was up reflecting the noted net finance revenue
trends and a slight reduction in funding costs from the prior
year. Gross yields in Aerospace were up slightly from the
prior quarter to 11.2%, while gross yields in Rail of 13.7% were
flat with the prior quarter as the impact of lower utilization was
offset by higher interim rents.
Other income declined from the prior and year-ago quarters
reflecting lower gains from equipment sales.
Operating expenses increased from the prior quarter, reflecting
seasonally higher employee costs and approximately $4 million of
costs related to the commercial air separation initiative.
Operating expenses were down from the year-ago quarter.
Net charge-offs, excluding assets transferred to held for sale,
of $13 million (1.53% of average finance receivables) related to
the Aerospace loan portfolio compared to net charge-offs of less
than $1 million (0.09%) in the prior quarter. Non-accrual loans of
$22 million (0.78% of finance receivables) increased from $15
million (0.43%) at December 30, 2015 and $0.1 million a year-ago,
and principally consisted of business aircraft loans in each of the
periods. The provision for credit losses increased from the prior
quarters largely reflecting general reserve increases in Maritime
and the Aerospace loan charge-offs noted above.
Utilization trends were mixed compared to the prior quarter.
Aircraft utilization remained unchanged from year-end with all
aircraft on lease or under a commitment at quarter-end, while Rail
utilization declined from 96% to 94%, reflecting pressures
mostly from the crude, coal and steel industries. All but two
of our aircraft scheduled for delivery in the next 12 months and
40% of the total railcar order-book have lease commitments.
Consumer and Community Banking
Earnings Summary*
Change from: ($ in millions) 1Q16 4Q15 1Q15
Prior
Quarter
Prior Year
Interest income $ 103 $ 110 $ - $ (6) $ 103 Interest expense
(9) (13) - 4 (9) Net finance
revenue 94 96 - (2) 94 Other income 8 5 - 3 8 Provision for credit
losses (3) (4) - 1 (3) Operating expenses (82) (85)
- 3 (82) Income before income taxes $ 17 $ 13
$ - $ 4 $ 17
Select Average Balances Average finance
receivables $ 7,160 $ 7,205 $ - $ (44) $ 7,160 Average earning
assets $ 7,758 $ 7,846 $ - $ (88) $ 7,758
Statistical Data
Pre-tax ROAEA 0.88% 0.68% - 0.20% 0.88% Net finance margin 4.86%
4.91% - -0.05% 4.86% New business volume $ 215 $ 220 $ - $ (6) $
215 Net efficiency ratio 75.8% 78.8% - -3.0% 75.8% * Certain
balances may not sum due to rounding.
This segment includes our consumer banking and lending
businesses, which offers traditional depository and lending
products to consumers and small businesses. In addition, the
segment includes legacy portfolios of certain single family
residential mortgage loans and reverse mortgage loans (collectively
LCM), both of which will run-off over time. In aggregate, these
portfolios total $5.4 billion, approximately $4.8 billion of which
are mostly covered by loss sharing agreements with the FDIC, the
benefit of which is recorded as an indemnification asset whose
current carrying value is approximately $390 million.
Consumer and Community Banking pre-tax earnings increased from
the prior quarter primarily due to an increase in other income
resulting from gains on OREO and lower legal expenses.
Financing and leasing assets totaled $7.2 billion at March 31,
2016, flat with December 31, 2015, as the run-off of the LCM
portfolios offset new volume.
Non-accrual loans were $7 million (0.10% of finance receivables)
at March 31, 2016, slightly up from $5 million (0.07%) at December
31, 2015. The provision reflects reserves established on new
business, in addition to slight credit deterioration in the LCM
portfolio.
Non-Strategic Portfolios (NSP)
Earnings Summary*
Change from: ($ in millions) 1Q16 4Q15 1Q15
Prior Quarter
Prior Year
Interest income $ 25 $ 40 $ 53 $ (15) $ (28) Rental income
on operating leases 4 7 11 (3) (7) Interest expense (15) (22) (38)
8 24 Depreciation on operating lease equipment - -
(4) - 4 Net finance revenue 14 25 22 (10) (8)
Other income 15 (54) (6) 69 21 Provision for credit losses - - (4)
- 4 Operating expenses (12) (26) (37)
14 25 Income (loss) before income taxes $ 17 $ (56) $ (25) $
73 $ 42
Select Average Balances Average earning
assets $ 1,517 $ 1,954 $ 2,718 $ (437) $ (1,202)
Statistical
Data Pre-tax ROAEA 4.38% -11.49% -3.68% 15.86% 8.06% Net
finance margin 3.77% 5.02% 3.24% -1.24% 0.53% New business volume $
44 $ 167 $ 201 $ (123) $ (157) * Certain balances may not sum due
to rounding.
NSP pre-tax earnings reflects the gain of $24 million from the
sale of the U.K. business partially offset by an $11 million
impairment charge on assets held for sale, compared to pre-tax
losses in the prior quarter and year-ago quarter. The pre-tax loss
in the prior quarter reflected the completion of the sale of our
Brazil business and a resulting loss, mainly due to the recognition
of a $51 million CTA loss. The year-ago pre-tax loss was driven by
the higher level of operating expenses reflective of the remaining
businesses at that time. Financing and leasing assets at March 31,
2016 totaled $1.2 billion, down from $1.6 billion at December 31,
2015 and $2.2 billion March 31, 2015. Our remaining businesses
include Canada and China, and these portfolios are classified as
held for sale.
Corporate & Other
Earnings Summary*
Change from: ($ in millions) 1Q16 4Q15 1Q15
Prior Quarter
Prior Year
Interest income $ 27 $ 26 $ 4 $ 1 $ 23 Interest expense
(41) (40) (18) (1) (23) Net
finance revenue (14) (14) (14) 0 (0) Other income 4 (14) (6) 18 10
Operating expenses (37) (53) (6) 16
(31) Loss before income taxes $ (47) $ (81) $ (26) $ 35 $
(20)
Select Average Balances Average earning assets $
8,585 $ 8,614 $ 5,885 $ (28) $ 2,700
Statistical Data
Pre-tax ROAEA -2.17% -3.77% -1.78% 1.60% -0.39% Net finance margin
-0.65% -0.65% -0.93% 0.00% 0.28% * Certain balances may not
sum due to rounding.
Certain items are not allocated to operating segments and are
included in Corporate and Other, including interest expense,
primarily related to corporate liquidity costs, mark-to-market on
certain derivatives, restructuring charges, certain legal costs and
other operating expenses. Interest income increased from both prior
and year-ago quarters primarily related to income generated from
the investment portfolio. Other income included a $18 million
mark-to-market benefit on the TRS derivative in the current
quarter, compared to a small benefit of $1 million in the prior
quarter and a negative mark-to-market adjustment of $1 million in
the year-ago quarter. Operating expenses for the quarter reflect
restructuring charges of $20 million, compared to $53 million in
the prior quarter, reflecting our previously announced
organizational changes, and a net reversal of $1 million in the
year-ago quarter.
Discontinued Operations
Income from discontinued operations, net of taxes, was a loss of
$5 million in the current quarter compared to a loss of $7 million
in the prior quarter. Discontinued operations predominantly relate
to third-party reverse mortgage servicing activity, known as
Financial Freedom, which the Company acquired in the OneWest Bank
acquisition.
Conference Call and Webcast
Chairman and Chief Executive Officer Ellen Alemany and Chief
Financial Officer Carol Hayles will discuss these results on a
conference call and audio webcast today, April 28, at 8:00 a.m.
(EST). Interested parties may access the conference call live by
dialing 888-317-6003 for U.S., 866-284-3684 for Canadian callers or
412-317-6061 for international callers and reference access code
“2728263” or access the audio webcast at cit.com/investor. An audio
replay of the call will be available until 11:59 p.m. (EST) on May
28, 2016, by dialing 877-344-7529 for U.S. callers, 855-669-9658
for Canadian callers or 412-317-0088 for international callers with
the access code “10084072”, or at cit.com/investor.
About CIT
Founded in 1908, CIT (NYSE: CIT) is a financial holding company
with more than $65 billion in assets. Its principal bank
subsidiary, CIT Bank, N.A., (Member FDIC, Equal Housing Lender) has
more than $30 billion of deposits and more than $40 billion of
assets. It provides financing, leasing and advisory services
principally to middle market companies across a wide variety of
industries primarily in North America, and equipment financing and
leasing solutions to the transportation sector. It also offers
products and services to consumers through its Internet bank
franchise and a network of retail branches in Southern California,
operating as OneWest Bank, a division of CIT Bank, N.A. cit.com
Forward-Looking Statements
This press release contains forward-looking statements
within the meaning of applicable federal securities laws that are
based upon our current expectations and assumptions concerning
future events, which are subject to a number of risks and
uncertainties that could cause actual results to differ materially
from those anticipated. The words “expect,” “anticipate,”
“estimate,” “forecast,” “initiative,” “objective,” “plan,” “goal,”
“project,” “outlook,” “priorities,” “target,” “intend,” “evaluate,”
“pursue,” “commence,” “seek,” “may,” “would,” “could,” “should,”
“believe,” “potential,” “continue,” or the negative of any of those
words or similar expressions is intended to identify
forward-looking statements. All statements contained in this press
release, other than statements of historical fact, including
without limitation, statements about our plans, strategies,
prospects and expectations regarding future events and our
financial performance, are forward-looking statements that involve
certain risks and uncertainties. While these statements represent
our current judgment on what the future may hold, and we believe
these judgments are reasonable, these statements are not guarantees
of any events or financial results, and our actual results may
differ materially. Important factors that could cause our actual
results to be materially different from our expectations include,
among others, the risk that CIT is unsuccessful in implementing its
strategy and business plan, the risk that CIT is unable to react to
and address key business and regulatory issues, the risk that CIT
is unable to achieve the projected revenue growth from its new
business initiatives or the projected expense reductions from
efficiency improvements, and the risk that CIT becomes subject to
liquidity constraints and higher funding costs. We describe these
and other risks that could affect our results in Item 1A, “Risk
Factors,” of our latest Annual Report on Form 10-K for the year
ended December 31, 2015, which was filed with the Securities and
Exchange Commission. Accordingly, you should not place undue
reliance on the forward-looking statements contained in this press
release. These forward-looking statements speak only as of the date
on which the statements were made. CIT undertakes no obligation to
update publicly or otherwise revise any forward-looking statements,
except where expressly required by law.
Non-GAAP Measurements
Net finance revenue, net operating lease revenue and average
earning assets are non-GAAP measurements used by management to
gauge portfolio performance. Operating expenses excluding
restructuring costs and intangible amortization is a non-GAAP
measurement used by management to compare period over period
expenses. Net efficiency ratio measures operating expenses (net of
restructuring costs and intangible amortization) to our level of
total net revenues. Total assets from continuing operations is a
non-GAAP measurement used by management to analyze the total asset
change on a more consistent basis. Tangible book value and tangible
book value per share are non-GAAP metrics used to analyze
banks.
_____________________________________
1 Tangible book value and tangible book
value per share are non-GAAP measures. See “Non-GAAP Measurements”
at the end of this press release and page 24 for reconciliation of
non-GAAP to GAAP financial information.
2 Average earning asset components include
interest earning cash, investments, securities and indemnification
assets. See “Non-GAAP Measurements” at the end of this press
release and page 24 for reconciliation of Earning Assets non-GAAP
to GAAP financial information.
3 Adjusted Return on Tangible Common
Equity, which adjusts tangible common equity for the reversal of
the valuation allowance and the amortization of intangibles in the
numerator and the disallowed deferred tax asset related to
regulatory capital in the denominator, is a non-GAAP measure. See
“Non-GAAP Measurements” at the end of this press release and page
24 for reconciliation of non-GAAP to GAAP financial
information.
4 Net finance revenue, net finance margin
and net operating lease revenue are non-GAAP measures. See
“Non-GAAP Measurements” at the end of this press release and page
24 for reconciliation of non-GAAP to GAAP financial
information.
5 Net efficiency ratio is a non-GAAP
measure. See “Non-GAAP Measurements” at the end of this press
release and page 24 for reconciliation of non-GAAP to GAAP
financial information.
CIT GROUP INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Income (dollars in
millions, except per share data) Quarters Ended
March 31, December 31, March 31, 2016
2015 2015 Interest income Interest and fees on
loans $ 464.5 $ 480.1 $ 272.4 Other Interest and dividends
30.9 30.3 8.6 Total interest income 495.4
510.4 281.0 Interest expense Interest on borrowings
(186.9) (187.5) (202.3) Interest on deposits (99.5)
(99.2) (69.0) Total interest expense (286.4)
(286.7) (271.3) Net interest revenue 209.0 223.7 9.7
Provision for credit losses (99.3) (57.6)
(34.6) Net interest revenue, after credit provision 109.7
166.1 (24.9) Non-interest income Rental income on
operating leases 575.4 550.9 530.6 Other income 100.9
30.4 86.4 Total non-interest income 676.3
581.3 617.0 Non-interest expenses Depreciation on operating
lease equipment (175.3) (166.8) (156.8) Maintenance and other
operating lease expenses (56.2) (79.6) (46.1) Operating expenses
(348.5) (357.8) (241.6) Loss on debt extinguishment (1.6)
(2.2) - Total other expenses (581.6)
(606.4) (444.5) Income from continuing operations before
(provision) benefit for income taxes 204.4 141.0 147.6 (Provision)
benefit for income taxes (52.7) 10.2 (44.0)
Income from continuing operations, before attribution of
noncontrolling interests 151.7 151.2 103.6 Net loss attributable to
noncontrolling interests, after tax - - 0.1
Income from continuing operations 151.7 151.2
103.7 Discontinued operation Loss from discontinued operation (7.4)
(11.2) - Benefit for income taxes 2.6 4.5 -
Loss from discontinued operation, net of taxes (4.8)
(6.7) - Net income $ 146.9 $ 144.5 $ 103.7 Basic
income per common share Income from continuing operations $ 0.75 $
0.75 $ 0.59 Loss from discontinued operation, net of taxes
(0.02) (0.03) - Basic income per common share $ 0.73
$ 0.72 $ 0.59 Average number of common shares - basic (thousands)
201,394 200,987 176,260 Diluted income per common share
Income from continuing operations $ 0.75 $ 0.75 $ 0.59 Loss from
discontinued operation, net of taxes (0.02) (0.03)
- Diluted income per common share $ 0.73 $ 0.72 $ 0.59
Average number of common shares - diluted (thousands) 202,136
201,376 177,072
CIT GROUP INC. AND
SUBSIDIARIES Unaudited Consolidated Balance Sheets
(dollars in millions, except per share data) March
31, December 31, March 31, 2016*
2015 2015 Assets Total cash and
deposits $ 8,141.8 $ 8,301.5 $ 6,306.9 Securities purchased under
agreements to resell - - 450.0 Investment securities 2,896.8
2,953.8 1,347.4 Assets held for sale 2,211.2 2,092.4 1,051.9
Loans 31,408.6 31,671.7 19,429.3 Allowance for loan losses
(404.6) (360.2) (356.5) Loans, net of allowance for
loan losses 31,004.0 31,311.5 19,072.8 Operating lease
equipment, net 16,665.7 16,617.0 14,887.8 Indemnification assets
389.4 414.8 - Goodwill 1,195.1 1,198.3 563.6 Intangible assets
170.3 176.3 23.2 Unsecured counterparty receivable 556.3 537.8
537.1 Other assets 3,377.5 3,297.6 2,054.1 Assets of discontinued
operation 489.5 500.5 - Total assets $
67,097.6 $ 67,401.5 $ 46,294.8
Liabilities Deposits $
32,892.7 $ 32,782.2 $ 16,758.1 Credit balances of factoring clients
1,361.0 1,344.0 1,505.3 Other liabilities 3,020.2 3,158.7 2,735.2
Borrowings Unsecured borrowings
10,587.4
10,636.3
10,680.8
Structured financings
4,308.9
4,687.9
5,769.6
FHLB advances 3,116.3 3,117.6 86.7 Total
borrowings 18,012.6 18,441.8 16,537.1
Liabilities of discontinued operation 684.8 696.2
- Total liabilities 55,971.3 56,422.9
37,535.7
Equity Stockholders' equity Common stock 2.1 2.0
2.0 Paid-in capital 8,739.4 8,718.1 8,598.0 Retained earnings
2,673.7 2,557.4 1,692.3 Accumulated other comprehensive loss
(117.4) (142.1) (163.1) Treasury stock, at cost (172.0)
(157.3) (1,370.6) Total common stockholders' equity
11,125.8 10,978.1 8,758.6 Noncontrolling interests 0.5
0.5 0.5 Total equity 11,126.3 10,978.6
8,759.1 Total liabilities and equity $ 67,097.6 $ 67,401.5 $
46,294.8
Book Value Per Common Share Book value per
common share $ 55.16 $ 54.61 $ 50.26 Tangible book value per common
share $ 48.39 $ 47.77 $ 46.89 Outstanding common shares (in
thousands) 201,702 201,022 174,280 * Preliminary
CIT GROUP INC. AND
SUBSIDIARIES Average Balances and Rates (dollars in
millions) Quarters Ended March 31, 2016
December 31, 2015 March 31, 2015
AverageBalance
Rate
AverageBalance
Rate
AverageBalance
Rate Assets Interest bearing deposits $ 7,114.0 0.47%
$ 6,671.6 0.32% $ 5,951.6 0.27% Securities purchased under
agreements to resell - - 25.0 0.49% 575.0 0.49% Investments 2,923.5
3.08% 3,334.9 3.00% 1,497.2 1.04% Loans (including held for sale)
U.S. 32,091.5 5.74% 32,467.3 5.71% 17,908.2 5.36% Non-U.S.
1,291.0 8.18% 1,707.8 9.46% 2,235.3 9.38% Total Loans
33,382.5 5.84% 34,175.1 5.90% 20,143.5 5.84%
Total interest earning assets / interest income 43,420.0
4.74% 44,206.6 4.80% 28,167.3 4.22% Operating lease
equipment, net (including held for sale) U.S. 8,831.3 8.41% 8,534.7
7.58% 7,769.5 9.15% Non-U.S. 7,890.0 8.02% 7,538.7
7.58% 7,420.0 8.08% Total operating lease equipment, net
16,721.3 8.23% 16,073.4 7.58% 15,189.5 8.63% Indemnification assets
401.7 -3.09% 445.8 -0.72% - - Total earning
assets 60,543.0 5.67% 60,725.8 5.51% 43,356.8
5.82% Non-interest earning assets Cash and due from banks 1,331.4
1,636.4 903.6 Allowance for loan losses (371.5) (338.3) (347.7) All
other non-interest bearing assets 5,298.4 5,334.2 3,190.6 Assets of
discontinued operation 495.1 506.9 -
Total
Average Assets $ 67,296.4 $ 67,865.0 $ 47,103.3
Liabilities Borrowings Deposits $ 31,829.1 1.25% $ 31,538.3
1.26% $ 16,275.6 1.70% Borrowings 18,210.4 4.11%
18,805.9 3.99% 17,477.4 4.63% Total interest-bearing
liabilities 50,039.5 2.29% 50,344.2 2.28%
33,753.0 3.22% Non-interest bearing deposits 1,080.2 1,125.9 106.6
Credit balances of factoring clients 1,337.5 1,584.5 1,501.4 Other
non-interest bearing liabilities 3,063.7 3,231.1 2,870.6
Liabilities of discontinued operation 690.2 674.6 - Noncontrolling
interests 0.5 0.5 (3.9) Stockholders' equity 11,084.8
10,904.2 8,875.6
Total Average Liabilities and
Stockholders' Equity $ 67,296.4 $ 67,865.0 $ 47,103.3
CIT GROUP INC. AND SUBSIDIARIES
Select Accounts (dollars in millions)
Quarters Ended March 31, December 31, March
31, 2016 2015 2015 OTHER
INCOME Fee revenues $ 32.7 $ 34.7 $ 22.6 Factoring commissions
26.4 29.1 29.5 Gains on sales of leasing equipment 11.2 16.9 32.0
Net gain (losses) on derivatives and foreign currency exchange 9.3
1.8 (9.7) Gain (loss) on OREO sales 1.7 (2.2) - (Loss) gains on
loan and portfolio sales 0.3 (41.3) 6.6 (Losses) gains on
investments (4.1) (5.6) 0.7 Impairment on assets held for sale
(22.1) (14.9) (10.1) Other revenues 45.5 11.9
14.8 Total other income $ 100.9 $ 30.4 $ 86.4
OPERATING
EXPENSES Compensation and benefits $ (172.2) $ (151.5) $
(146.5) Professional fees (38.8) (43.4) (19.5) Technology (30.4)
(32.7) (22.3) Net occupancy expense (18.4) (17.9) (9.4) Advertising
and marketing (5.4) (8.1) (9.1) Other expenses (56.6)
(44.0) (35.2)
Operating expenses, before provision for
severance and facilities exitingand intangible asset
amortization
(321.8) (297.6) (242.0) Provision for
severance and facilities exiting activities (20.3) (53.0) 1.0
Intangible asset amortization (6.4) (7.2)
(0.6) Total operating expenses $ (348.5) $ (357.8) $ (241.6)
March 31, December 31, March 31,
2016*
2015 2015 TOTAL CASH AND INVESTMENT
SECURITIES Total cash and deposits $ 8,141.8 $ 8,301.5 $
6,306.9 Securities purchased under agreements to resell - - 450.0
Investment securities 2,896.8 2,953.8 1,347.4
Total cash and investment securities $ 11,038.6 $ 11,255.3 $
8,104.3
OTHER ASSETS Current and deferred federal and
state tax assets $ 1,197.4 $ 1,252.5 $ 460.7 Deposits on commercial
aerospace equipment 774.3 696.0 750.6 Tax credit investments and
investments in unconsolidated subsidiaries 237.9 223.9 75.2
Property, furniture and fixtures 192.1 197.2 123.4
Other counterparty receivables
179.6 59.0 25.2 Tax receivables, other than income taxes 105.7 98.2
101.9 Other real estate owned and repossessed assets 105.4 127.3
0.6 Fair value of derivative financial instruments 97.4 140.7 199.4
Other 487.7 502.8 317.1 Total other assets $
3,377.5 $ 3,297.6 $ 2,054.1
OTHER LIABILITIES
Equipment maintenance reserves $ 1,042.2 $ 1,012.4 $ 965.2 Accrued
expenses and accounts payable 563.6 628.1 385.6 Current and
deferred taxes payable 354.5 363.1 340.9 Fair value of derivative
financial instruments 196.5 103.0 67.5 Security and other deposits
179.9 263.0 379.7 Accrued interest payable 161.0 209.6 171.7
Valuation adjustment relating to aerospace commitments 73.1 73.1
117.1 Other liabilities 449.4 506.4 307.5
Total other liabilities $ 3,020.2 $ 3,158.7 $ 2,735.2 * Preliminary
CIT GROUP INC. AND SUBSIDIARIES
Financing and Leasing Assets (dollars in millions)
March 31, December 31, March 31,
2016 2015 2015 Commercial Banking
Commercial Finance Loans $ 9,329.4 $ 9,118.6 $ 6,552.0
Assets held for sale 203.4 313.6 87.6
Financing and leasing assets 9,532.8 9,432.2
6,639.6
Real Estate Finance Loans 5,348.5 5,300.6 1,813.9
Assets held for sale 14.4 57.0 - Financing and
leasing assets 5,362.9 5,357.6 1,813.9
Business Capital Loans 6,759.3 6,510.0 6,693.0 Operating
lease equipment, net 292.6 259.0 225.4 Assets held for sale
11.9 44.3 - Financing and leasing assets
7,063.8 6,813.3 6,918.4
Total Segment Loans
21,437.2 20,929.2 15,058.9 Operating lease equipment, net 292.6
259.0 225.4 Assets held for sale 229.7 414.9
87.6 Financing and leasing assets 21,959.5 21,603.1
15,371.9
Transportation Finance Aerospace
Loans 1,031.9 1,762.3 1,750.8 Operating lease equipment, net
9,594.3 9,765.2 8,822.7 Assets held for sale 723.8
34.7 234.5 Financing and leasing assets 11,350.0
11,562.2 10,808.0
Rail Loans 118.1 120.9 126.7
Operating lease equipment, net 6,778.8 6,592.8 5,800.1 Assets held
for sale 0.4 0.7 1.0 Financing and leasing
assets 6,897.3 6,714.4 5,927.8
Maritime
Finance Loans 1,636.7 1,658.9 1,066.6 Assets held for sale
30.5 19.5 19.1 Financing and leasing assets
1,667.2 1,678.4 1,085.7
Total Segment
Loans 2,786.7 3,542.1 2,944.1 Operating lease equipment, net
16,373.1 16,358.0 14,622.8 Assets held for sale 754.7
54.9 254.6 Financing and leasing assets 19,914.5
19,955.0 17,821.5
Consumer and Community
Banking Other Consumer Banking Loans 1,879.5 1,770.0 -
Assets held for sale 2.6 3.9 - Financing and
leasing assets 1,882.1 1,773.9 -
Legacy
Consumer Mortgages Loans 5,305.2 5,430.4 - Assets held for sale
48.0 41.2 - Financing and leasing assets
5,353.2 5,471.6 -
Total Segment Loans
7,184.7 7,200.4 - Assets held for sale 50.6 45.1
- Financing and leasing assets 7,235.3 7,245.5
-
Non-Strategic Portfolios Loans - - 1,426.3
Operating lease equipment, net - - 39.6 Assets held for sale
1,176.2 1,577.5 709.7 Financing and leasing assets
1,176.2 1,577.5 2,175.6
Total financing and
leasing assets $ 50,285.5 $ 50,381.1 $ 35,369.0
CIT GROUP INC. AND SUBSIDIARIES
Credit Metrics (dollars in millions)
Quarters Ended
March 31, 2016 December 31, 2015
March 31, 2015 Gross Charge-offs to Average Finance
Receivables Transportation Finance(1) $ 19.6 2.35% $ 0.9 0.10%
$ - - Commercial Banking(2) 35.8 0.68% 37.0 0.69% 22.6 0.60%
Consumer and Community Banking 0.7 0.04% (0.3) -0.02% - -
Non-Strategic Portfolios - - 0.2 - 4.0 1.10%
Total CIT $ 56.1 0.71% $ 37.8 0.47% $ 26.6 0.55%
Quarters Ended
March 31, 2016 December 31, 2015
March 31, 2015 Net Charge-offs to Average Finance
Receivables Transportation Finance(1) $ 19.6 2.35% $ 0.8 0.09%
$ - - Commercial Banking(2) 31.8 0.60% 31.8 0.59% 19.3 0.52%
Consumer and Community Banking (0.1) -0.01% (0.9) -0.05% - -
Non-Strategic Portfolios - - 0.2 - 1.6 0.44%
Total CIT $ 51.3 0.65% $ 31.9 0.40% $ 20.9 0.43%
Non-accruing Loans to Finance
Receivables(3) March 31, 2016 December 31,
2015 March 31, 2015 Transportation Finance $ 21.7 0.78%
$ 15.4 0.43% $ 0.1 0.00% Commercial Banking 215.2 1.00% 191.1 0.91%
104.6 0.69% Consumer and Community Banking 7.1 0.10% 5.2 0.07% - -
Non-Strategic Portfolios(3) 51.1
(3)
56.0
(3)
78.8 5.52%
Total CIT $ 295.1 0.94% $ 267.7 0.85% $
183.5 0.94%
PROVISION AND ALLOWANCE
COMPONENTS Provision for Credit Losses Quarters
Ended March 31, December 31, March 31,
2016 2015 2015 Specific allowance - impaired
loans $ 21.8 $ 0.9 $ 2.4 Non-specific allowance 26.2 24.8 11.3 Net
charge-offs 51.3 31.9 20.9 Totals $ 99.3 $
57.6 $ 34.6
Allowance for Loan Losses March
31, December 31, March 31, 2016
2015 2015 Specific allowance - impaired loans $ 40.2
$ 27.8 $ 14.8 Non-specific allowance 364.4 332.4
341.7 Totals $ 404.6 $ 360.2 $ 356.5 Allowance for
loan losses as a percentage of total finance receivables 1.29%
1.14% 1.83% Allowance for loan losses as a percent of finance
receivables/Commercial 1.61% 1.43% 1.83%
Allowance for loan losses plus principal
loss discount as a percent of financereceivables (before the
principal loss discount)/Commercial
1.87% 1.79% 1.83%
Allowance for loan losses plus principal
loss discount as a percent of financereceivables (before the
principal loss discount)/Consumer
7.86% 8.62% - In certain instances, we use the term finance
receivables synonymously with “Loans”, as presented on the balance
sheet. 1) Transportation Finance charge-offs related to the
transfer of receivables to assets held for sale for the quarter
ended March 31, 2016 totaled $7 million, and none in the other
quarters presented. 2) Commercial Banking charge-offs related to
the transfer of receivables to assets held for sale for the
quarters ended March 31, 2016, December 31, 2015 and March 31, 2015
totaled $2 million, $19 million and $11 million, respectively. 3)
Non-accrual loans include loans held for sale. NSP non-accrual
loans reflected loans held for sale; since portfolio loans were
insignificant, no % is displayed.
CIT GROUP INC. AND SUBSIDIARIES Segment Results
(dollars in millions) Quarters Ended March 31,
December 31, March 31, 2016 2015
2015 Commercial Banking Total interest income $ 287.1
$ 285.5 $ 181.3 Total interest expense (73.6) (68.1) (64.8)
Provision for credit losses (73.5) (45.4) (24.4) Rental income on
operating leases 27.1 25.8 23.1 Other income 55.5 68.9 63.6
Depreciation on operating lease equipment (20.0) (18.8) (17.2)
Operating expenses (158.4) (146.0) (131.3)
Income before provision for income taxes $ 44.2 $ 101.9 $ 30.3
Funded new business volume $ 1,581.4 $ 2,164.7 $ 1,296.2 Average
Earning Assets $ 20,727.0 $ 20,944.0 $ 14,356.5 Average Finance
Receivables $ 21,130.8 $ 21,463.2 $ 14,985.5
Transportation
Finance Total interest income $ 52.7 $ 49.8 $ 42.7 Total
interest expense (148.1) (143.4) (150.6) Provision for credit
losses (22.7) (8.6) (6.4) Rental income on operating leases 544.5
518.2 496.7 Other income 18.8 24.8 35.4 Depreciation on operating
lease equipment (155.3) (148.0) (136.0) Maintenance and other
operating lease expenses (56.2) (79.6) (46.1) Operating expenses /
loss on debt extinguishment (60.7) (50.2)
(67.2) Income before provision for income taxes $ 173.0 $ 163.0 $
168.5 Funded new business volume $ 245.9 $ 1,619.5 $ 419.5 Average
Earning Assets $ 20,619.5 $ 19,784.2 $ 18,880.8 Average Finance
Receivables $ 3,333.4 $ 3,446.7 $ 2,928.8
Consumer and Community
Banking Total interest income $ 103.2 $ 109.5 $ - Total
interest expense (8.9) (13.2) - Provision for credit losses (3.1)
(3.6) - Other income 8.1 5.3 - Operating expenses (82.2)
(84.7) - Income before provision for income taxes $
17.1 $ 13.3 $ - Funded new business volume $ 214.5 $ 220.3 $ -
Average Earning Assets $ 7,757.8 $ 7,845.9 $ - Average Finance
Receivables $ 7,160.4 $ 7,204.8 $ -
Non-Strategic Portfolios
Total interest income $ 25.0 $ 39.6 $ 52.8 Total interest expense
(14.5) (22.0) (38.0) Provision for credit losses - - (3.8) Rental
income on operating leases 3.8 6.9 10.8 Other income 14.5 (54.4)
(6.2) Depreciation on operating lease equipment - - (3.6) Operating
expenses (12.2) (26.2) (37.0) Income
(loss) before provision for income taxes $ 16.6 $ (56.1) $ (25.0)
Funded new business volume $ 44.3 $ 167.0 $ 201.4 Average Earning
Assets $ 1,516.8 $ 1,953.8 $ 2,718.4 Average Finance Receivables $
- $ - $ 1,457.6
Corporate and Other Total interest income $
27.4 $ 26.0 $ 4.2 Total interest expense (41.3) (40.0) (17.9) Other
income 4.0 (14.2) (6.4) Operating expenses / loss on debt
extinguishment (36.6) (52.9) (6.1) Loss before
provision for income taxes $ (46.5) $ (81.1) $ (26.2) Average
Earning Assets $ 8,585.3 $ 8,613.5 $ 5,885.4
Total CIT Total
interest income $ 495.4 $ 510.4 $ 281.0 Total interest expense
(286.4) (286.7) (271.3) Provision for credit losses (99.3) (57.6)
(34.6) Rental income on operating leases 575.4 550.9 530.6 Other
income 100.9 30.4 86.4 Depreciation on operating lease equipment
(175.3) (166.8) (156.8) Maintenance and other operating lease
expenses (56.2) (79.6) (46.1) Operating expenses / loss on debt
extinguishment (350.1) (360.0) (241.6) Income
from continuing operations before provision for income taxes $
204.4 $ 141.0 $ 147.6 Funded new business volume $ 2,086.1 $
4,171.5 $ 1,917.1 Average Earning Assets $ 59,206.4 $ 59,141.4 $
41,841.1 Average Finance Receivables $ 31,624.6 $ 32,114.7 $
19,371.9
CIT GROUP INC. AND
SUBSIDIARIES Segment Margin (dollars in millions)
Quarters Ended March 31, December 31,
March 31, 2016 2015 2015 Commercial
Banking Total Segment AEA $ 20,727.0 $ 20,944.0 $
14,356.5 Net Finance Revenue 220.6 224.4 122.4 Gross yield 6.06%
5.95% 5.69% Net Finance Margin 4.26% 4.29% 3.41%
Average Earning
Assets (AEA) Commercial Finance $ 9,545.4 $ 9,979.3 $ 6,706.4
Real Estate Finance 5,334.6 5,159.2 1,777.7 Business Capital
5,847.0 5,805.5 5,872.4
Net Finance Revenue Commercial
Finance 90.6 98.5 44.0 Real Estate Finance 54.4 51.4 10.0 Business
Capital 75.6 74.5 68.4
Gross yield Commercial Finance 5.03%
5.08% 4.41% Real Estate Finance 5.44% 5.23% 3.94% Business Capital
8.32% 8.07% 7.69%
Net Finance Margin Commercial Finance
3.80% 3.95% 2.62% Real Estate Finance 4.08% 3.99% 2.25% Business
Capital 5.17% 5.13% 4.66%
Transportation Finance
Total Segment
AEA $ 20,619.5 $ 19,784.2 $ 18,880.8 Net Finance Revenue 237.6
197.0 206.7 Gross yield 11.59% 11.48% 11.43% Net Finance Margin
4.61% 3.98% 4.38%
Average Earning Assets (AEA) Aerospace $
12,050.9 $ 11,594.3 $ 11,907.7 Rail 6,882.4 6,599.3 5,923.9
Maritime Finance 1,686.2 1,590.6 1,049.2
Net Finance Revenue
Aerospace $ 119.6 $ 92.8 $ 101.7 Rail
100.2
89.0 96.2 Maritime Finance
17.8
15.2 8.8
Gross yield Aerospace 11.18% 11.07% 10.41% Rail
13.73% 13.71% 14.64% Maritime Finance 5.75% 5.24% 5.00%
Net
Finance Margin Aerospace 3.97% 3.20% 3.42% Rail 5.82% 5.39%
6.50% Maritime Finance 4.25% 3.82% 3.35%
Consumer and
Community Banking Total Segment AEA $ 7,757.8 $ 7,845.9
$ - Net Finance Revenue 94.3 96.3 - Gross yield 5.32% 5.58% - Net
Finance Margin 4.86% 4.91% -
Average Earning Assets (AEA)
Other Consumer Banking $ 1,941.8 $ 1,840.5 $ - Legacy Consumer
Mortgages 5,816.0 6,005.4 -
Net Finance Revenue Other
Consumer Banking $ 34.0 $ 28.4 $ - Legacy Consumer Mortgages 60.3
67.9 -
Gross yield Other Consumer Banking 3.65% 3.78% -
Legacy Consumer Mortgages 5.87% 6.13% -
Net Finance Margin
Other Consumer Banking 7.00% 6.17% - Legacy Consumer Mortgages
4.15% 4.52% -
Non-Strategic Portfolios AEA $ 1,516.8
$ 1,953.8 $ 2,718.4 Net Finance Revenue 14.3 24.5 22.0 Gross yield
7.59% 9.52% 9.36% Net Finance Margin 3.77% 5.02% 3.24%
Gross Yield includes interest income and rental income as a % of
AEA.
Net Finance Margin (NFM) reflects Net Finance Revenue divided by
AEA.
CIT GROUP INC. AND SUBSIDIARIES
Non-GAAP Disclosures (dollars in millions)
Non-GAAP financial measures disclosed by
management are meant to provide additional information and insight
relative to business trendsto investors and, in certain cases, to
present financial information as measured by rating agencies and
other users of financial information.These measures are not in
accordance with, or a substitute for, GAAP and may be different
from, or inconsistent with, non-GAAP financialmeasures used by
other companies.
Quarters Ended March 31, December 31, March
31, Total Net Revenues(1) 2016 2015
2015 Interest income $ 495.4 $ 510.4 $ 281.0 Rental income
on operating leases 575.4 550.9 530.6 Finance
revenue 1,070.8 1,061.3 811.6 Interest expense (286.4) (286.7)
(271.3) Depreciation on operating lease equipment (175.3) (166.8)
(156.8) Maintenance and other operating lease expenses
(56.2) (79.6) (46.1)
Net finance revenue (NFR)
552.9 528.2 337.4 Other income 100.9 30.4 86.4
Total net revenues $ 653.8 $ 558.6 $ 423.8
NFR as
a % of AEA 3.74% 3.57% 3.23%
Net
Operating Lease Revenues(2) Rental income on operating
leases $ 575.4 $ 550.9 $ 530.6 Depreciation on operating lease
equipment (175.3) (166.8) (156.8) Maintenance and other operating
lease expenses (56.2) (79.6) (46.1)
Net
operating lease revenue $ 343.9 $ 304.5 $ 327.7
March
31, December 31, March 31, Earning
Assets(3) 2016 2015 2015 Loans $
31,408.6 $ 31,671.7 $ 19,429.3 Operating lease equipment, net
16,665.7 16,617.0 14,887.8 Assets held for sale 2,211.2 2,092.4
1,051.9 Credit balances of factoring clients (1,361.0) (1,344.0)
(1,505.3) Interest bearing cash 7,135.0 6,820.3 5,393.4 Investment
securities 2,896.8 2,953.8 1,347.4 Securities purchased under
agreements to resell - - 450.0 Indemnification assets 389.4
414.8 - Total earning assets $ 59,345.7 $ 59,226.0 $
41,054.5
Average Earning Assets (for the
respective quarters)
$ 59,206.4 $ 59,141.4 $ 41,841.1
Quarters Ended March
31, December 31, March 31, Adjusted Operating
Expenses 2016 2015 2015 Operating expenses
$ (348.5) $ (357.8) $ (241.6) Provision for severance and
facilities exiting activities 20.3 53.0 (1.0) Intangible assets
amortization 6.4 7.2 0.6 Operating expenses
exclusive of restructuring costs and intangible assets
amortization(4) $ (321.8) $ (297.6) $ (242.0)
Operating expenses (exclusive of
restructuring costs and intangibleassets amortization) as a % of
AEA
(2.17%) (2.01%) (2.31%)
Total Net
Revenue $ 653.8 $ 558.6 $ 423.8 Operating expenses exclusive of
restructuring costs and intangible assets amortization(4) $ (321.8)
$ (297.6) $ (242.0) Net Efficiency Ratio(5) 49.2% 53.3% 57.1%
March 31, December 31, March 31,
2016 2015 2015 Continuing Operations Total
Assets(6) Total Assets $ 67,097.6 $ 67,401.5 $ 46,294.8
Assets of discontinued operation (489.5) (500.5)
- Continuing operations total assets $ 66,608.1 $ 66,901.0 $
46,294.8
March 31, December 31,
March 31, Tangible Book Value(7) 2016
2015 2015 Total common stockholders' equity $
11,125.8 $ 10,978.1 $ 8,758.6 Less: Goodwill (1,195.1) (1,198.3)
(563.6) Intangible assets (170.3) (176.3)
(23.2)
Tangible book value
9,760.4 9,603.5 8,171.8 Less: Disallowed deferred tax asset
(873.9) (904.5) (358.3)
Adjusted Tangible common equity(8)
$ 8,886.5 $ 8,699.0 $ 7,813.5
Average adjusted tangible common
equity
$
8,825.1
$
8,675.5
$
7,917.7
(1) Total net revenues are the combination of net finance
revenue and other income and is an aggregation of all sources of
revenue for the Company. Total net revenues are used by management
to monitor business performance. (2) Total net operating lease
revenues are the combination of rental income on operating leases
less depreciation on operating lease equipment and maintenance and
other operating lease expenses. Total net operating lease revenues
are used by management to monitor portfolio performance. (3)
Earning assets are utilized in certain revenue and earnings ratios.
Earning assets are net of credit balances of factoring clients.
This net amount represents the amounts we fund. (4) Operating
expenses exclusive of restructuring costs and intangible
amortization is a non-GAAP measure used by management to compare
period over period expenses. (5) Net efficiency ratio is a non-GAAP
measurement used by management to measure operating expenses
(before restructuring costs and intangible amortization) to the
level of total net revenues. (6) Total assets from continuing
operations is a non-GAAP measurement used by management to analyze
the total asset change on a more consistent basis. (7) Tangible
book value is a non-GAAP measure, which represents an adjusted
common shareholders’ equity balance that has been reduced by
goodwill and intangible assets. Tangible book value is used to
compute a per common share amount, which is used to evaluate our
use of equity.
(8) Return on average tangible common
equity is adjusted to remove the impact of intangible amortization,
goodwill impairment and the impact from valuation allowance
reversals from income from continuing operations, while the average
tangible equity is reduced for disallowed deferred tax assets.
Return on average tangible common equity is another metric used to
evaluate our use of equity.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160428005607/en/
CIT Media Relations:Matt Klein, 973-597-2020Vice
President, Media RelationsMatt.Klein@cit.comorCIT Investor
Relations:Barbara Callahan, 973-740-5058Senior Vice
PresidentBarbara.Callahan@cit.com
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