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Section 1: 8-K (8-K)

cit-8k_20190125.htm

 

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

 

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 29, 2019 (January 29, 2019)

CIT GROUP INC.

 

(Exact name of registrant as specified in its charter)

 

Delaware

001-31369

65-1051192

(State or other

(Commission

(IRS Employer

jurisdiction of

File Number)

Identification No.)

incorporation)

 

 

 

11 West 42nd Street 

 

New York, New York 10036 

 

(Address of registrant's principal executive office)

Registrant's telephone number, including area code: (212) 461-5200

 

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

[ ] Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

[ ] If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


 


 

Section 2 – Financial Information

Item 2.02.  Results of Operations and Financial Condition.

This Current Report on Form 8-K includes as an exhibit a press release, dated January 29, 2019, reporting the financial results of CIT Group Inc. (the “Company”) as of and for the quarter and full year ended December 31, 2018. The press release is attached as Exhibit 99.1. This press release includes certain non-GAAP financial measures.  A reconciliation of those measures to the most directly comparable GAAP measures is included as a table to the press release.  The information reported under this Item 2.02, including Exhibit 99.1, shall be considered furnished, not filed, for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Section 7 – Regulation FD

Item 7.01.  Regulation FD Disclosure.

In addition, this Form 8-K includes a copy of the Company’s presentation to analysts and investors of its financial results for the quarter and full year ended December 31, 2018, which is attached as Exhibit 99.2.  The information included in Exhibit 99.2 shall be considered furnished, not filed, for purposes of the Exchange Act.  The Company also provides supplementary financial information on its website, which is not incorporated by reference in this Form 8-K.

Section 9 – Financial Statements and Exhibits

Item 9.01.   Financial Statements and Exhibits.

(d)

Exhibits.

 

    

99.1     

Press release issued by CIT Group Inc. on January 29, 2019 reporting its financial results as of and for the quarter and full year ended December 31, 2018.

    

99.2

Presentation by CIT Group Inc. on January 29, 2019 regarding its financial results for the quarter and full year ended December 31, 2018.

Forward-Looking Statements

This Form 8-K 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 Form 8-K, 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 (i) CIT is unsuccessful in implementing its strategy and business plan, (ii) CIT is unable to react to and address key business and regulatory issues, (iii) CIT is unable to achieve the projected revenue growth from its new business initiatives or the projected expense reductions from efficiency improvements, (iv) CIT becomes subject to liquidity constraints and higher funding costs, or (v) the parties to a transaction do not receive or satisfy regulatory or other approvals or conditions on a timely basis or approvals are subject to conditions that are not anticipated. 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, 2017, which was filed with the Securities and Exchange Commission. Accordingly, you should not place undue reliance on the forward-looking statements contained in this Form 8-K. 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.

 


 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

  

CIT GROUP INC.

 

(Registrant)

 

 

 

 

By:

       

 

 

 

 

 

/s/ John Fawcett

 

 

Executive Vice President & Chief Financial Officer

 

 

 

Dated:  January 29, 2019

 

 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

cit-ex991_66.htm

1

 

 

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE                                   

 

CIT Announces Fourth Quarter and Full Year 2018 Results

 

Financial Results:

 

Fourth quarter net income available to common shareholders and income from continuing operations available to common shareholders were each $82 million or $0.78 per diluted common share

 

 

Excluding noteworthy items, fourth quarter income from continuing operations available to common shareholders1 of $127 million or $1.21 per diluted common share

 

 

Full year net income available to common shareholders of $428 million or $3.61 per diluted common share; income from continuing operations available to common shareholders of $453 million or $3.82 per diluted common share

 

 

Excluding noteworthy items, full year income from continuing operations available to common shareholders of $480 million or $4.04 per diluted common share

 

o

Income from continuing operations excluding noteworthy items per common diluted share grew more than 30% in 2018

 

o

Tangible book value per common share grew 3% compared to year-end 2017

 

Highlights:

 

Delivered on our 2018 financial targets through steady execution of our strategic plan:

 

o

Grew average loans and leases in the core portfolios2

 

o

Achieved operating expense goal3

 

o

Reduced CET1 ratio

 

o

Reached return on tangible common equity (ROTCE)4 goal

 

 

Increased full year average loans and leases by 1%, notwithstanding the divestiture of non-core portfolios. Average loans and leases in the core portfolios for the full year 2018 increased 6%

 

o

Driven by strong growth in our digitally-enabled equipment finance platforms

 

 

Grew full year average consumer deposits in the direct bank by 25%; added over 60,000 customers in 2018

 

 

Continued to simplify, de-risk and return capital in 2018:

 

o

Sold European railcar leasing business, reverse mortgage servicing business and related portfolio

 

o

Improved funding profile through reduction of senior unsecured debt and structured financings and termination of our remaining total return swap

 

o

Repurchased $1.6 billion in common shares

 

 

Received a non-objection from our regulators to repurchase up to $450 million of common stock through Sept. 30, 2019 and to increase our quarterly dividend by 40% to 35 cents per common share starting in 2Q19, which is subject to CIT Board approval

 

1 

Income from continuing operations available to common shareholders excluding noteworthy items is a non-GAAP measure. See “Non-GAAP Measurements” at the end of this press release and starting on page 26 for reconciliation of non-GAAP to GAAP financial information.

2 

Core portfolios is total loans and leases net of credit balances of factoring clients, NACCO, legacy consumer mortgages (LCM) and non-strategic portfolios (NSP).

3 

Full year operating expenses excludes noteworthy items and intangible asset amortization.

4 

The calculation of ROTCE excludes noteworthy items and is based on non-GAAP income from continuing operations. See “Non-GAAP Measurements” at the end of this press release and starting on page 26 for reconciliation of non-GAAP financial information.


2

 

 

NEW YORK – Jan. 29, 2019 – CIT Group Inc. (NYSE: CIT) today reported fourth quarter net income available to common shareholders of $82 million or $0.78 per diluted common share, compared to a net loss available to common shareholders of $98 million or $0.74 per diluted common share for the year-ago quarter. Income from continuing operations available to common shareholders for the fourth quarter was $82 million or $0.78 per diluted common share, compared to a loss available to common shareholders of $93 million or $0.70 per diluted common share in the year-ago quarter.

 

Income from continuing operations available to common shareholders excluding noteworthy items for the fourth quarter was $127 million or $1.21 per diluted common share, compared to $130 million or $0.99 per diluted common share in the year-ago quarter, as lower net finance revenue and lower other non-interest income were offset by lower operating expenses and a lower effective income tax rate. The increase in income from continuing operations excluding noteworthy items per diluted common share reflects the decline in the average number of diluted common shares outstanding due to significant share repurchases over the past four quarters.

 

Net income available to common shareholders for the full year was $428 million or $3.61 per diluted common share, compared to net income available to common shareholders of $458 million or $2.80 per diluted common share for the prior year. Income from continuing operations available to common shareholders for the full year was $453 million or $3.82 per diluted common share, compared to income available to common shareholders of $250 million or $1.52 per diluted common share in the prior year.

 

Income from continuing operations available to common shareholders excluding noteworthy items for the full year was $480 million or $4.04 per diluted common share, compared to $504 million or $3.07 per diluted common share in the prior year, as a decline in net finance revenue (reflecting the sale of NACCO and the reverse mortgage portfolio) and an increase in the provision for credit losses were partially offset by lower operating expenses, higher other non-interest income and a lower effective income tax rate. The increase in income from continuing operations excluding noteworthy items per diluted common share reflects the decline in the average number of diluted common shares outstanding due to significant share repurchases over the past four quarters.

 

“2018 was a pivotal year. We successfully executed on our multi-year strategic plan, delivered on our financial targets and achieved significant earnings per share growth,” said CIT Chairwoman and Chief Executive Officer Ellen R. Alemany. “Through steady implementation of our plan we completed two complex divestitures, significantly reduced operating expenses, grew our core assets by 6 percent, increased deposits, repurchased $1.6 billion of common stock and achieved our 2018 return on tangible common equity goal.”

 

Alemany continued, “We enter 2019 stronger and ready to build on our momentum and continue to create shareholder value. The investments we have made in our operations and technology, paired with our decades of industry expertise, are a source of strength in the marketplace. We are committed to further improving profitability


3

 

 

through thoughtful asset growth, further capital optimization, improved risk-adjusted returns, and enhanced operating efficiency.”

 

Return on average common equity from continuing operations available to common shareholders in the current quarter was 5.8%. Return on Tangible Common Equity (ROTCE) from continuing operations in the current quarter was 6.7%. ROTCE from continuing operations excluding noteworthy items3 in the current quarter was 10.1%, in line with our 2018 financial target. Tangible book value per common share at Dec. 31, 2018 was $51.15. The preliminary Common Equity Tier 1 Capital ratio decreased from the prior quarter end and remained strong at 12.0%, and the preliminary Total Capital ratio decreased to 14.8% at Dec. 31, 2018.

 

Financial results for the fourth quarter in continuing operations included noteworthy items related to our strategic initiatives:

 

$52 million (after tax) ($0.50 per diluted common share) net charge related to the termination of our Dutch total return swap facility.

 

$19 million (after tax) ($0.18 per diluted common share) gain on the sale of NACCO, our European railcar leasing business, which closed in October 2018.

 

$12 million (after tax) ($0.11 per diluted common share) in debt extinguishment costs related to the redemption of $434 million in unsecured senior debt and $465 million of Rail-related secured debt.

 



4

 

 

Selected Financial Highlights

 

Select Financial Highlights*

 

 

 

 

 

 

 

 

 

 

 

 

4Q18 change from

 

 

 

 

 

 

 

 

 

 

2018 change* from

 

($ in millions)

4Q18

 

 

3Q18

 

 

4Q17

 

 

3Q18

 

 

 

4Q17

 

 

2018

 

 

2017

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net finance revenue(1)

$

374

 

 

$

389

 

 

$

399

 

 

$

(15

)

 

-4

%

 

 

$

(25

)

 

-6

%

 

$

1,543

 

 

$

1,606

 

 

$

(63

)

Non-interest income

 

48

 

 

 

86

 

 

 

137

 

 

 

(39

)

 

-45

%

 

 

 

(90

)

 

-65

%

 

 

374

 

 

 

364

 

 

 

10

 

Total net revenue

 

421

 

 

 

476

 

 

 

537

 

 

 

(54

)

 

-11

%

 

 

 

(115

)

 

-21

%

 

 

1,917

 

 

 

1,970

 

 

 

(54

)

Non-interest expenses

 

274

 

 

 

267

 

 

 

561

 

 

 

7

 

 

3

%

 

 

 

(288

)

 

-51

%

 

 

1,109

 

 

 

1,664

 

 

 

(556

)

Income (loss) from continuing operations before credit provision

 

148

 

 

 

209

 

 

 

(25

)

 

 

(61

)

 

-29

%

 

 

 

173

 

NM

 

 

 

808

 

 

 

306

 

 

 

502

 

Provision for credit losses

 

31

 

 

 

38

 

 

 

30

 

 

 

(7

)

 

-18

%

 

 

 

1

 

 

3

%

 

 

171

 

 

 

115

 

 

 

56

 

Income (loss) from continuing operations before provision (benefit) for income taxes

 

117

 

 

 

171

 

 

 

(55

)

 

 

(54

)

 

-32

%

 

 

 

172

 

NM

 

 

 

637

 

 

 

192

 

 

 

445

 

Provision (benefit) for income taxes

 

25

 

 

 

41

 

 

 

28

 

 

 

(16

)

 

-40

%

 

 

 

(3

)

 

-10

%

 

 

165

 

 

 

(68

)

 

 

233

 

Income (loss) from continuing operations

 

92

 

 

 

129

 

 

 

(83

)

 

 

(38

)

 

-29

%

 

 

 

175

 

NM

 

 

 

472

 

 

 

259

 

 

 

213

 

Income (loss) from discontinued operations, net of taxes

 

0

 

 

 

2

 

 

 

(5

)

 

 

(2

)

 

-95

%

 

 

 

5

 

NM

 

 

 

(25

)

 

 

209

 

 

 

(234

)

Net income (loss)

 

92

 

 

 

132

 

 

 

(88

)

 

 

(40

)

 

-30

%

 

 

 

180

 

NM

 

 

 

447

 

 

 

468

 

 

 

(21

)

Preferred stock dividends

 

10

 

 

 

-

 

 

 

10

 

 

 

10

 

NM

 

 

 

 

(0

)

 

-3

%

 

 

19

 

 

 

10

 

 

 

9

 

Net income available to common shareholders

$

82

 

 

$

132

 

 

$

(98

)

 

$

(49

)

 

-37

%

 

 

$

180

 

NM

 

 

$

428

 

 

$

458

 

 

$

(30

)

Income (loss) from continuing operations available to common shareholders

$

82

 

 

$

129

 

 

$

(93

)

 

$

(47

)

 

-36

%

 

 

$

175

 

NM

 

 

$

453

 

 

$

250

 

 

$

204

 

Income from continuing operations available to common shareholders, excluding noteworthy items(2)

$

127

 

 

$

131

 

 

$

130

 

 

$

(4

)

 

-3

%

 

 

$

(3

)

 

-2

%

 

$

480

 

 

$

504

 

 

$

(24

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income (loss) per common share

$

0.78

 

 

$

1.15

 

 

$

(0.74

)

 

$

(0.37

)

 

 

 

 

 

$

1.52

 

 

 

 

 

$

3.61

 

 

$

2.80

 

 

 

0.81

 

Diluted income per common share, excluding noteworthy items(2)

$

1.21

 

 

$

1.17

 

 

$

0.95

 

 

$

0.04

 

 

 

 

 

 

$

0.26

 

 

 

 

 

$

3.94

 

 

$

3.39

 

 

 

0.56

 

Tangible book value per common share (TBVPS)(1)

$

51.15

 

 

$

50.02

 

 

$

49.58

 

 

$

1.14

 

 

 

 

 

 

$

1.58

 

 

 

 

 

$

51.15

 

 

$

49.58

 

 

 

1.58

 

Average diluted common shares outstanding (in thousands)

 

105,149

 

 

 

114,007

 

 

 

131,343

 

 

 

(8,858

)

 

 

 

 

 

 

(26,194

)

 

 

 

 

 

118,777

 

 

 

163,950

 

 

 

(45,173

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital adequacy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CET1 Ratio(3)

 

12.0

%

 

 

12.4

%

 

 

14.4

%

 

-42bps

 

 

 

 

 

 

NM

 

 

 

 

 

 

12.0

%

 

 

14.4

%

 

NM

 

Total Capital Ratio(3)

 

14.8

%

 

 

15.1

%

 

 

16.2

%

 

-30bps

 

 

 

 

 

 

NM

 

 

 

 

 

 

14.8

%

 

 

16.2

%

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset quality

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net charge-offs as a % of average loans

 

0.32

%

 

 

0.35

%

 

 

0.26

%

 

-3bps

 

 

 

 

 

 

6bps

 

 

 

 

 

 

0.39

%

 

 

0.39

%

 

-1bps

 

Allowance for loan losses as a % of loans

 

1.59

%

 

 

1.57

%

 

 

1.48

%

 

2bps

 

 

 

 

 

 

11bps

 

 

 

 

 

 

1.59

%

 

 

1.48

%

 

11bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key performance metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net finance margin(1)

 

3.39

%

 

 

3.43

%

 

 

3.59

%

 

-4bps

 

 

 

 

 

 

-19bps

 

 

 

 

 

 

3.41

%

 

 

3.43

%

 

-2bps

 

Net finance margin, excluding noteworthy items(2)

 

3.39

%

 

 

3.36

%

 

 

3.51

%

 

3bps

 

 

 

 

 

 

-12bps

 

 

 

 

 

 

3.35

%

 

 

3.49

%

 

-14bps

 

Loans and leases to deposit ratio

 

121

%

 

 

126

%

 

 

130

%

 

NM

 

 

 

 

 

 

NM

 

 

 

 

 

 

121

%

 

 

130

%

 

NM

 

CIT Bank Loans and leases to deposit ratio

 

101

%

 

 

101

%

 

 

104

%

 

76bps

 

 

 

 

 

 

NM

 

 

 

 

 

 

101

%

 

 

104

%

 

NM

 

Return on average common equity (available to common shareholders, continuing operations)

 

5.81

%

 

 

8.62

%

 

 

-5.29

%

 

NM

 

 

 

 

 

 

NM

 

 

 

 

 

 

7.30

%

 

 

3.53

%

 

NM

 

Return on tangible common equity (available to common shareholders, continuing operations)(1)

 

6.67

%

 

 

9.66

%

 

 

8.42

%

 

NM

 

 

 

 

 

 

NM

 

 

 

 

 

 

8.20

%

 

 

7.72

%

 

48bps

 

Return on tangible common equity (available to common shareholders, continuing operations), excluding noteworthy items(1)(2)

 

10.12

%

 

 

9.78

%

 

 

8.47

%

 

34bps

 

 

 

 

 

 

NM

 

 

 

 

 

 

8.66

%

 

 

8.24

%

 

42bps

 

Return on AEA, applicable to common shareholders(1)

 

0.75

%

 

 

1.16

%

 

 

-0.88

%

 

-41bps

 

 

 

 

 

 

NM

 

 

 

 

 

 

0.95

%

 

 

0.98

%

 

-3bps

 

Return on AEA, excluding noteworthy items(1)(2)

 

1.15

%

 

 

1.17

%

 

 

1.12

%

 

-2bps

 

 

 

 

 

 

3bps

 

 

 

 

 

 

1.04

%

 

 

1.21

%

 

-17bps

 

Net efficiency ratio(1)

 

59.8

%

 

 

54.1

%

 

 

49.6

%

 

NM

 

 

 

 

 

 

NM

 

 

 

 

 

 

54.6

%

 

 

56.4

%

 

NM

 

Net efficiency ratio, excluding noteworthy items(2)

 

54.1

%

 

 

53.9

%

 

 

53.4

%

 

23bps

 

 

 

 

 

 

73bps

 

 

 

 

 

 

54.6

%

 

 

56.3

%

 

NM

 

Headcount

 

3,678

 

 

 

3,757

 

 

 

3,909

 

 

 

(79

)

 

 

 

 

 

 

(231

)

 

 

 

 

 

3,678

 

 

 

3,909

 

 

 

(231

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)Net finance revenue; tangible book value per common share; net finance margin; return on tangible common equity; return on tangible common equity, excluding noteworthy items, return on AEA; return on AEA, excluding noteworthy items; and net efficiency ratio are non-GAAP measures. See "Non-GAAP Measurements" at the end of this press release and beginning on page 26 for a reconciliation of non-GAAP to GAAP financial information and noteworthy items.

 

(2)Excludes noteworthy items.  See "Non-GAAP Measurements" at the end of this press release and beginning on page 26 for a reconciliation of non-GAAP to GAAP financial information and noteworthy items.

 

(3)Ratios on fully phased-in basis.

 

* Certain balances may not sum due to rounding.

 

 

Unless otherwise indicated, all references below relate to continuing operations.

 



5

 

 

Income Statement Highlights:

Income from continuing operations available to common shareholders excluding noteworthy items5 was $127 million down from $131 million in the prior quarter, primarily reflecting lower net finance revenue and other non-interest income and the semi-annual preferred dividend paid in the current quarter, partially offset by a decline in operating expenses and credit costs and a lower effective income tax rate.

 

Net Finance Revenue

Net Finance Revenue*

 

 

 

4Q18 change from

 

($ in millions)

4Q18

 

 

3Q18

 

 

4Q17

 

 

3Q18

 

 

 

4Q17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

492

 

 

$

474

 

 

$

448

 

 

$

18

 

 

4

%

 

 

$

44

 

 

10

%

Rental income on operating leases

 

230

 

 

 

264

 

 

 

253

 

 

 

(35

)

 

-13

%

 

 

 

(23

)

 

-9

%

Depreciation on operating lease equipment

 

79

 

 

 

78

 

 

 

74

 

 

 

1

 

 

2

%

 

 

 

5

 

 

7

%

Maintenance and other operating lease expenses

 

53

 

 

 

57

 

 

 

58

 

 

 

(4

)

 

-7

%

 

 

 

(5

)

 

-9

%

Net rental income on operating leases

 

97

 

 

 

130

 

 

 

120

 

 

 

(32

)

 

-25

%

 

 

 

(23

)

 

-19

%

Interest expense

 

216

 

 

 

214

 

 

 

169

 

 

 

2

 

 

1

%

 

 

 

47

 

 

28

%

Net finance revenue(1)

$

374

 

 

$

389

 

 

$

399

 

 

$

(15

)

 

-4

%

 

 

$

(25

)

 

-6

%

Average earning assets(1)

$

44,113

 

 

$

45,377

 

 

$

44,562

 

 

$

(1,264

)

 

-3

%

 

 

$

(449

)

 

-1

%

Net finance margin(1)

 

3.39

%

 

 

3.43

%

 

 

3.59

%

 

-4bps

 

 

 

 

 

 

-19bps

 

 

 

 

Excluding Noteworthy Items(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net finance revenue

$

374

 

 

$

381

 

 

$

391

 

 

$

(7

)

 

-2

%

 

 

$

(17

)

 

-4

%

Average earning assets

$

44,113

 

 

$

45,377

 

 

$

44,562

 

 

$

(1,264

)

 

-3

%

 

 

$

(449

)

 

-1

%

Net finance margin

 

3.39

%

 

 

3.36

%

 

 

3.51

%

 

3bps

 

 

 

 

 

 

-12bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)See "Non-GAAP Measurements" at the end of this press release and beginning on page 26 for a reconciliation of non-GAAP to GAAP financial information and noteworthy items.

 

* Certain balances may not sum due to rounding.

 

Net finance revenue6 was $374 million, down from $389 million in the prior quarter. Net finance revenue in the prior quarter included a $9 million benefit from the suspension of depreciation expense related to NACCO because its assets were included in assets held for sale. Excluding noteworthy items, net finance revenue6 was $374 million, down from $381 million in the prior quarter, as lower net operating lease income, driven by a lease prepayment in Rail in the prior quarter and the sale of NACCO early in the current quarter, and an increase in deposit costs were partially offset by higher income from commercial loans and higher net purchase accounting accretion in the Consumer Banking segment.

 

Net finance revenue as a percentage of average earning assets (“net finance margin6”) excluding noteworthy items was 3.39%, a 3 bps increase from 3.36% in the prior quarter. The increase in net finance margin excluding noteworthy items reflects higher yields on commercial loans and investments, cash representing a smaller portion of average earning assets and higher net purchase accounting accretion, partially offset by a decrease in lease yields and higher deposit costs.

 

Net finance revenue in the year-ago quarter included a $9 million benefit from the suspension of depreciation expense related to NACCO because its assets were included in assets held for sale. Excluding noteworthy items, net finance revenue decreased $17 million or 4% compared to the year-ago quarter, primarily due to lower average

 

5 

Income from continuing operations available to common shareholders excluding noteworthy items is a non-GAAP measure. See “Non-GAAP Measurements” at the end of this press release and starting on page 26 for reconciliation of non-GAAP to GAAP financial information.

6 

Net finance revenue, net finance revenue excluding noteworthy items, net finance margin and net finance margin excluding noteworthy items are non-GAAP measures. See “Non-GAAP Measurements” at the end of this press release and starting on page 26 for reconciliation of non-GAAP to GAAP financial information.


6

 

 

earning assets from the NACCO and reverse mortgage portfolio sales and higher funding costs, partially offset by higher income on loans in the Commercial Banking segment and on investment securities.

 

Net finance margin excluding noteworthy items decreased 12 bps compared to the year-ago quarter, reflecting lower net rental income and higher funding costs, partially offset by increases in yields on loans and cash and investments.

 

Other Non-interest Income

Other Non-Interest Income*

 

 

 

4Q18 change from

 

($ in millions)

4Q18

 

 

3Q18

 

 

4Q17

 

 

3Q18

 

 

 

4Q17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenues

$

22

 

 

$

28

 

 

$

30

 

 

$

(7

)

 

-23

%

 

 

$

(9

)

 

-29

%

Factoring commissions

 

26

 

 

 

27

 

 

 

27

 

 

 

(1

)

 

-4

%

 

 

 

(1

)

 

-2

%

Gains on leasing equipment, net of impairments

 

18

 

 

 

14

 

 

 

9

 

 

 

4

 

 

32

%

 

 

 

9

 

 

98

%

Gains on investment securities, net of impairments

 

5

 

 

 

4

 

 

 

11

 

 

 

1

 

 

31

%

 

 

 

(7

)

 

-59

%

BOLI income

 

6

 

 

 

7

 

 

 

6

 

 

 

(1

)

 

-9

%

 

 

 

0

 

 

3

%

Other revenues

 

(29

)

 

 

7

 

 

 

54

 

 

 

(36

)

NM

 

 

 

 

(83

)

NM

 

Total other non-interest income

$

48

 

 

$

86

 

 

$

137

 

 

$

(39

)

 

-45

%

 

 

$

(90

)

 

-65

%