Toggle SGML Header (+)


Section 1: 8-K (8-K)

cit-8k_20190422.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): April 23, 2019 (April 23, 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 April 23, 2019, reporting the financial results of CIT Group Inc. (the “Company”) as of and for the quarter ended March 31, 2019. 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 First Quarter 2019 Financial Results for the quarter ended March 31, 2019, 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 April 23, 2019 reporting its financial results as of and for the quarter ended March 31, 2019.

    

99.2

Presentation by CIT Group Inc. on  April  23, 2019 regarding its First Quarter 2019 Financial Results.

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, 2018, 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

 

 

John Fawcett

 

 

Executive Vice President & Chief Financial Officer

 

 

 

Dated:  April 23, 2019

 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

cit-ex991_95.htm

 

 

 

Exhibit 99.1

 

CIT Announces First Quarter 2019 Results                  

NEW YORK – April 23, 2019 – CIT Group Inc. (NYSE: CIT) today reported first quarter 2019 results.

Financial Results

First quarter net income available to common shareholders and income from continuing operations available to common shareholders were each $119 million or $1.18 per diluted common share

 

Chairwoman and CEO Commentary

“We posted solid first quarter financial results,” said CIT Chairwoman and Chief Executive Officer Ellen R. Alemany. “We continued to execute on our strategic plan and delivered strong growth in deposits and core loans and leases. In addition, we returned more than $200 million of capital to common shareholders and increased tangible book value per share by 2.5%. Going forward, we remain focused on further unlocking the full potential of CIT.”

 

Strategic Pillars

Grow Core Businesses

Average loans and leases growth of 1% from the prior quarter. Average core loans and leases1 growth of 2% from the prior quarter

Funded volume of $2.7 billion. Commercial Banking volume up 5% from the year-ago quarter

Optimize Balance Sheet

Grew average consumer deposits by 8%. Added more than 48,000 Direct Bank customers

Repurchased 3.7 million common shares at an average price of $49.16

Enhance Operating Efficiency

Continued disciplined expense management

Using technology and digitization to drive greater operating efficiency, enhance customer experience and support growth

Maintain Strong Risk Management

Maintained strong credit quality and disciplined underwriting standards

Credit reserves remain strong at 1.56% of the total portfolio and 1.87% of Commercial Banking

 

1 

Average core loans and leases is a non-GAAP measure. Core portfolios is total loans and leases net of credit balances of factoring clients, Legacy Consumer Mortgages (LCM) and Non-Strategic Portfolios (NSP). See “Non-GAAP Measurements” at the end of this press release and starting on page 17 for a reconciliation of non-GAAP to GAAP financial information.

 

 

1

 


 

 

 

 

Selected Financial Highlights:

 

 

Select Financial Highlights*

 

 

 

 

 

 

 

 

 

 

 

 

1Q19 change from

 

($ in millions)

1Q19

 

 

4Q18

 

 

1Q18

 

 

4Q18

 

 

1Q18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net finance revenue(1)

$

369

 

 

$

374

 

 

$

391

 

 

$

(5

)

 

-1

%

 

$

(21

)

 

-5

%

Non-interest income

 

97

 

 

 

48

 

 

 

105

 

 

 

49

 

NM

 

 

 

(8

)

 

-8

%

Total net revenue(1)

 

466

 

 

 

421

 

 

 

495

 

 

 

45

 

 

11

%

 

 

(29

)

 

-6

%

Operating expenses and loss on debt extinguishment

 

276

 

 

 

274

 

 

 

281

 

 

 

3

 

 

1

%

 

 

(5

)

 

-2

%

Income from continuing operations before credit provision

 

190

 

 

 

148

 

 

 

214

 

 

 

42

 

 

29

%

 

 

(24

)

 

-11

%

Provision for credit losses

 

33

 

 

 

31

 

 

 

69

 

 

 

2

 

 

6

%

 

 

(36

)

 

-52

%

Income from continuing operations before provision for income taxes

 

157

 

 

 

117

 

 

 

145

 

 

 

40

 

 

35

%

 

 

12

 

 

8

%

Provision for income taxes

 

38

 

 

 

25

 

 

 

41

 

 

 

13

 

 

52

%

 

 

(4

)

 

-8

%

Income from continuing operations

 

119

 

 

 

92

 

 

 

104

 

 

 

28

 

 

30

%

 

 

16

 

 

15

%

Loss from discontinued operations, net of taxes

 

(0

)

 

 

0

 

 

 

(7

)

 

 

(0

)

NM

 

 

 

6

 

 

96

%

Net income

 

119

 

 

 

92

 

 

 

97

 

 

 

27

 

 

30

%

 

 

22

 

 

23

%

Preferred stock dividends

 

-

 

 

 

10

 

 

 

-

 

 

 

(10

)

NM

 

 

 

-

 

NM

 

Net income available to common shareholders

$

119

 

 

$

82

 

 

$

97

 

 

$

37

 

 

44

%

 

$

22

 

 

23

%

Income from continuing operations available to common shareholders

$

119

 

 

$

82

 

 

$

104

 

 

$

37

 

 

45

%

 

$

16

 

 

15

%

Noteworthy items(2)

 

-

 

 

 

45

 

 

 

(7

)

 

 

(45

)

 

 

 

 

 

7

 

 

 

 

Income from continuing operations available to common shareholders, excluding noteworthy items(1)(2)

$

119

 

 

$

127

 

 

$

97

 

 

$

(8

)

 

-6

%

 

$

22

 

 

23

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income per common share

$

1.18

 

 

$

0.78

 

 

$

0.74

 

 

$

0.39

 

 

 

 

 

$

0.44

 

 

 

 

Diluted income per common share, excluding noteworthy items

$

1.18

 

 

$

1.21

 

 

$

0.69

 

 

$

(0.03

)

 

 

 

 

$

0.49

 

 

 

 

Average diluted common shares outstanding (in thousands)

 

101,096

 

 

 

105,149

 

 

 

131,588

 

 

 

(4,053

)

 

 

 

 

 

(30,492

)

 

 

 

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

$

52.42

 

 

$

51.15

 

 

$

49.25

 

 

$

1.27

 

 

 

 

 

$

3.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average loans and leases (includes HFS and net of credit balances)

$

36,360

 

 

$

35,878

 

 

$

36,688

 

 

$

483

 

 

 

 

 

$

(328

)

 

 

 

Core average loans and leases (includes HFS and net of credit balances)

 

33,602

 

 

 

33,002

 

 

 

31,269

 

 

 

600

 

 

 

 

 

 

2,333

 

 

 

 

Average earning assets (AEA)(1)

 

46,169

 

 

 

44,113

 

 

 

45,265

 

 

 

2,056

 

 

 

 

 

 

904

 

 

 

 

Volume

 

2,684

 

 

 

3,575

 

 

 

2,656

 

 

 

(891

)

 

 

 

 

 

28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key performance metrics, continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net finance margin(1)

 

3.20

%

 

 

3.39

%

 

 

3.45

%

 

-19bps

 

 

 

 

 

-25bps

 

 

 

 

Net efficiency ratio(1)

 

58.0

%

 

 

59.8

%

 

 

55.6

%

 

NM

 

 

 

 

 

NM

 

 

 

 

Net charge-offs

 

0.43

%

 

 

0.32

%

 

 

0.68

%

 

12bps

 

 

 

 

 

-25bps

 

 

 

 

Return on AEA (ROAEA)(1)

 

1.03

%

 

 

0.75

%

 

 

0.92

%

 

29bps

 

 

 

 

 

12bps

 

 

 

 

Return on tangible common equity (ROTCE)(1)

 

9.67

%

 

 

6.67

%

 

 

6.83

%

 

NM

 

 

 

 

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key performance metrics, continuing operations excluding Noteworthy Items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net finance margin(1)(2)

 

3.20

%

 

 

3.39

%

 

 

3.37

%

 

-19bps

 

 

 

 

 

-17bps

 

 

 

 

Net efficiency ratio(1)(2)

 

58.0

%

 

 

54.1

%

 

 

56.7

%

 

NM

 

 

 

 

 

NM

 

 

 

 

ROAEA(1)(2)

 

1.03

%

 

 

1.15

%

 

 

0.86

%

 

-12bps

 

 

 

 

 

18bps

 

 

 

 

ROTCE(1)(2)

 

9.67

%

 

 

10.12

%

 

 

6.40

%

 

-46bps

 

 

 

 

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)These balances and metrics are non-GAAP measures. See "Non-GAAP Measurements" at the end of this press release and beginning on page 17 for a reconciliation of non-GAAP to GAAP financial information and noteworthy items. TBVPS is detailed on page 15.

 

(2)We exclude noteworthy items due to their episodic nature and size. See "Non-GAAP Measurements" at the end of this press release and beginning on page 17 for a reconciliation of non-GAAP to GAAP financial information and noteworthy items.

 

*Certain balances may not sum due to rounding.

 

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

 

 

2

 


 

 

 

First Quarter Financial Highlights:

Net finance margin2 of 3.20% was down 19 bps from the prior quarter, primarily reflecting higher average deposit rates, lower net yields on operating leases and a higher level of cash and investment securities.

Other non-interest income2 increased $5 million from the prior quarter to $97 million and included an approximately $6 million benefit from the lease accounting standard change.

Operating expenses increased $18 million from the prior quarter to $276 million, which includes $14 million from seasonal annual benefit restarts and the acceleration of expenses related to retirement-eligible employees as well as approximately $9 million due to the adoption of the new lease accounting standard.

Net efficiency ratio2 of 58% was up from 54% in the prior quarter, reflecting seasonal elevated operating expenses and the impact of the new lease accounting standard.

Provision for credit losses was $33 million, up modestly from the prior quarter.

Net charge-offs of $34 million (0.43% of average loans) included $33 million (0.54% of average loans) in the Commercial Banking segment.

Effective tax rate was 24%, including net discrete benefits of $2 million.

Loans and leases to deposit ratio was 92% at CIT Bank and 110% at CIT Group, both reflecting deposit growth in the current quarter.

Book value per share of $57.05 increased 2.4% from the prior quarter. Tangible book value per share of $52.42 increased 2.5% from the prior quarter.

CET1 ratio of 12.0% included the impact of lower risk weightings on high volatility commercial real estate (HVCRE) assets.

ROTCE from continuing operations was 9.7%. ROTCE from continuing operations, normalized for the preferred dividend3, was 9.3%.

 

Noteworthy Items

There were no noteworthy items in the current quarter.

 


 

2 

There were noteworthy items in the prior and year-ago quarters. Please see page 19 for a listing of noteworthy items in those periods. Net efficiency ratio excludes intangible amortization.

3 

ROTCE from continuing operations, normalized for the preferred dividend, is a non-GAAP measure. See “Non-GAAP Measurements” at the end of this press release and starting on page 17 for a reconciliation of non-GAAP to GAAP financial information.

 

 

3

 


 

 

 

Income Statement Highlights:

Net Finance Revenue

 

Net Finance Revenue*

 

 

 

 

 

 

 

 

 

 

 

 

1Q19 change from

 

($ in millions)

1Q19

 

 

4Q18

 

 

1Q18

 

 

4Q18

 

 

1Q18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

517

 

 

$

492

 

 

$

451

 

 

$

24

 

 

5

%

 

$

65

 

 

14

%

Rental income on operating leases

 

218

 

 

 

230

 

 

 

254

 

 

 

(12

)

 

-5

%

 

 

(36

)

 

-14

%

Depreciation on operating lease equipment

 

79

 

 

 

80

 

 

 

76

 

 

 

(0

)

 

0

%

 

 

3

 

 

4

%

Maintenance and other operating lease expenses

 

50

 

 

 

53

 

 

 

57

 

 

 

(3

)

 

-6

%

 

 

(8

)

 

-13

%

Net rental income on operating leases (1)

 

89

 

 

 

97

 

 

 

120

 

 

 

(9

)

 

-9

%

 

 

(31

)

 

-26

%

Interest expense

 

236

 

 

 

216

 

 

 

181

 

 

 

20

 

 

9

%

 

 

55

 

 

31

%

Net finance revenue (2)

$

369

 

 

$

374

 

 

$

391

 

 

$

(5

)

 

-1

%

 

$

(21

)

 

-5

%

Noteworthy items(3)

 

-

 

 

 

-

 

 

 

(9

)

 

 

-

 

 

 

 

 

 

9

 

 

 

 

Net finance revenue, excluding noteworthy items(2)

$

369

 

 

$

374

 

 

$

381

 

 

$

(4

)

 

-1

%

 

$

(12

)

 

-3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average earning assets

$

46,169

 

 

$

44,113

 

 

$

45,265

 

 

$

2,056

 

 

5

%

 

$

904

 

 

2

%

Net finance margin(2)

 

3.20

%

 

 

3.39

%

 

 

3.45

%

 

-19bps

 

 

 

 

 

-25bps

 

 

 

 

Net finance margin, excluding noteworthy items(2)

 

3.20

%

 

 

3.39

%

 

 

3.37

%

 

-19bps

 

 

 

 

 

-17bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)Net rental income on operating leases is a non-GAAP measure, and is reconciled in the table as the combination of GAAP balances, rental income on operating leases less depreciation on operating lease equipment and maintenance and other operating lease expenses. Net rental income on operating leases is used by management to monitor portfolio performance and returns on purchased equipment.

 

(2)These balances and metrics are non-GAAP measures used to measure the profitability of our earning assets. See "Non-GAAP Measurements" at the end of this press release and beginning on page 17 for a reconciliation of non-GAAP to GAAP financial information and noteworthy items.

 

(3)See "Non-GAAP measurements" for a listing of Noteworthy items.

 

*Certain balances may not sum due to rounding.

 

Net finance revenue was $369 million, down from $374 million in the prior quarter.

 

o

The decline was driven by an increase in deposit costs and lower net rental income, partially offset by higher interest income from commercial loans, interest bearing cash and investment securities.

Net finance revenue as a percentage of average earning assets (“net finance margin”) was 3.20%, a 19 bps decrease from 3.39% in the prior quarter.

 

o

Drivers were higher deposit rates, lower net yields on operating leases and the impact from a higher percentage of interest-bearing cash and investment securities.

Compared to the year-ago quarter, net finance revenue excluding noteworthy items decreased $12 million.

 

o

Income in the year-ago quarter from NACCO and the reverse mortgage portfolio, which were both later sold, and higher deposit costs in the current quarter were partially offset by higher interest income from commercial loans, interest-bearing cash and investment securities.

Compared to the year-ago quarter, net finance margin excluding noteworthy items decreased 17 bps.

 

o

Primary drivers were higher deposit rates and a greater portion of earning assets in cash and investment securities, which were partially offset by increases in yields on loans and cash and investment securities from rising interest rates.


 

 

4

 


 

 

 

Other Non-Interest Income

 

Other Non-Interest Income*

 

 

 

 

 

 

 

 

 

 

 

 

1Q19 change from

 

($ in millions)

1Q19

 

 

4Q18

 

 

1Q18

 

 

4Q18

 

 

1Q18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenues

$

31

 

 

$

22

 

 

$

27

 

 

$

9

 

 

42

%

 

$

4

 

 

13

%

Factoring commissions

 

24

 

 

 

26

 

 

 

26

 

 

 

(2

)

 

-8

%

 

 

(2

)

 

-6

%

Gains on leasing equipment, net of impairments

 

17

 

 

 

18

 

 

 

14

 

 

 

(1

)

 

-8

%

 

 

3

 

 

23

%

BOLI income

 

6

 

 

 

6

 

 

 

7

 

 

 

1

 

 

8

%

 

 

(0

)

 

-2

%

Gains on investment securities, net of impairments

 

2

 

 

 

5

 

 

 

3

 

 

 

(3

)

 

-66

%

 

 

(2

)

 

-52

%

Property tax income

 

6

 

 

 

-

 

 

 

-

 

 

 

6

 

NM

 

 

 

6

 

NM

 

Other revenues

 

11

 

 

 

(29

)

 

 

29

 

 

 

40

 

NM

 

 

 

(17

)

 

-60

%

Total other non-interest income

 

97

 

 

 

48

 

 

 

105

 

 

 

49

 

NM

 

 

 

(8

)

 

-8

%

Noteworthy items(2)

 

-

 

 

 

44

 

 

 

-

 

 

 

(44

)

 

 

 

 

 

-

 

 

 

 

Total other non-interest income, excluding noteworthy items(1)

$

97

 

 

$

92

 

 

$

105

 

 

$

5

 

 

5

%

 

$

(8

)

 

-8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)Total other non-interest income, excluding noteworthy items is a non-GAAP measure and is reconciled to the GAAP balance, total other non-interest income, in the table above. Total other non-interest income, excluding noteworthy items is used by management to monitor the underlying level of income.

 

(2)See "Non-GAAP measurements" for a listing of Noteworthy items.

 

*Certain balances may not sum due to rounding.

 

Excluding noteworthy items, which impacted other revenues in the prior quarter, other non-interest income was $97 million, compared to $92 million in the prior quarter.

 

o

Increase in property tax income of $6 million from the adoption of the lease accounting standard, which had an offsetting charge in operating expenses.

 

o

Higher fee revenues from an increase in capital markets activities.

 

o

Lower gains on investment securities, as the sale of the private label MBS portfolio acquired in the OneWest transaction was completed in the prior quarter.

Other non-interest income decreased by $8 million from the year-ago quarter.

 

o

Lower other revenues from reduced gains on derivatives and gains in the year-ago quarter related to the reverse mortgage portfolio that was sold in the second quarter 2018.

 

o

Increase in property tax income from the adoption of the lease accounting standard.

 

o

Increases in capital market fee revenues and gains on sales of rail equipment.

 


 

 

5

 


 

 

 

Operating Expenses

 

Operating Expenses*

 

 

 

 

 

 

 

 

 

 

 

 

1Q19 change from

 

($ in millions)

1Q19

 

 

4Q18

 

 

1Q18

 

 

4Q18

 

 

1Q18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

$

146

 

 

$

130

 

 

$

148

 

 

$

16

 

 

12

%

 

$

(2

)

 

-1

%

Technology

 

33

 

 

 

34

 

 

 

32

 

 

 

(2

)

 

-5

%

 

 

0

 

 

0

%

Professional fees

 

19

 

 

 

20

 

 

 

26

 

 

 

(1

)

 

-5

%

 

 

(7

)

 

-28

%

Insurance

 

14

 

 

 

14

 

 

 

20

 

 

 

0

 

 

3

%

 

 

(6

)

 

-28

%

Net occupancy expense

 

16

 

 

 

17

 

 

 

16

 

 

 

(1

)

 

-8

%

 

 

(0

)

 

-2

%

Advertising and marketing

 

13

 

 

 

11

 

 

 

13

 

 

 

3

 

 

25

%

 

 

0

 

 

2

%

Intangible asset amortization

 

6

 

 

 

6

 

 

 

6

 

 

 

(0

)

 

-2

%

 

 

(0

)

 

-3

%

Property tax expense

 

6

 

 

 

-

 

 

 

-

 

 

 

6

 

NM

 

 

 

6

 

NM

 

Other expenses

 

23

 

 

 

26

 

 

 

20

 

 

 

(3

)

 

-12

%

 

 

3

 

 

15

%

Total operating expenses

 

276

 

 

 

258

 

 

 

281

 

 

 

18

 

 

7

%

 

 

(5

)

 

-2

%

Intangible asset amortization

 

6

 

 

 

6

 

 

 

6

 

 

 

(0

)

 

-2

%

 

 

(0

)

 

-3

%

Operating expenses, excluding intangible asset amortization(1)

$

270

 

 

$

252

 

 

$

275

 

 

$

18

 

 

7

%

 

$

(5

)

 

-2

%

Net efficiency ratio(2)

 

58.0

%

 

 

59.8

%

 

 

55.6

%

 

NM

 

 

 

 

 

NM

 

 

 

 

Net efficiency ratio, excluding noteworthy items and intangible asset amortization(2)

 

58.0

%

 

 

54.1

%

 

 

56.7

%

 

NM

 

 

 

 

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)Operating expenses excluding intangible asset amortization is used by management to compare period over period expenses, absent the strategic nature of the adjustments. Due to their exclusion, these are considered non-GAAP measures, as reconciled to total operating expenses in the table.

 

(2)These metrics are non-GAAP measures. See "Non-GAAP Measurements" at the end of this press release and beginning on page 17 for details on the calculation and description of the use of the metric. See non-GAAP disclosures for reconciliation of total net revenues.

 

*Certain balances may not sum due to rounding.

 

Operating expenses excluding intangible asset amortization was $270 million, an increase from $252 million in the prior quarter.

 

o

The increase was driven by higher employee costs related to annual benefit restarts and the acceleration of expenses related to retirement-eligible employees of $14 million, along with the gross-up of property taxes of $6 million and the expensing of an estimated $3 million in lease origination costs that were previously capitalized due to the adoption of the new lease accounting standard.

Operating expenses excluding intangible asset amortization compared to the year-ago quarter decreased $5 million or 2%.

 

o

The decrease was driven by lower professional fees and insurance costs, partially offset by the gross-up of property taxes and the expensing of lease origination costs that were previously capitalized due to the adoption of the new lease accounting standard.

The net efficiency ratio excluding intangible asset amortization decreased to 58% compared to 60% in the prior quarter.

The net efficiency ratio excluding noteworthy items and intangible asset amortization was 58%, up from 54% in the prior quarter and 57% in the year-ago quarter.

 

o

The increase from the prior quarter was driven by the aforementioned increase in operating expenses.

 

o

The increase from the year-ago quarter was driven by a decline in total net revenue.

 


 

 

6

 


 

 

 

Balance Sheet Highlights:

Average Earning Assets

 

Average Earning Assets*

 

 

 

 

 

 

 

 

 

 

 

 

1Q19 change from

 

($ in millions)

1Q19

 

 

4Q18

 

 

1Q18

 

 

4Q18

 

 

1Q18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing cash

$

2,623

 

 

$

1,791

 

 

$

2,101

 

 

$

832

 

 

46

%

 

$

522

 

 

25

%

Investment securities and securities purchased under agreement to resell

 

7,178

 

 

 

6,426

 

 

 

6,346

 

 

 

752

 

 

12

%