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Section 1: 8-K (8-K)

cit-8k_20190723.htm
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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): July 23, 2019 (July 23, 2019)

CIT GROUP INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

Delaware

 

001-31369

 

65-1051192

(State or other jurisdiction

 

(Commission File Number)

 

(IRS Employer

of incorporation)

 

 

 

Identification No.)

 

11 W. 42nd Street
New York, New York 10036

(Address of registrant’s principal executive office)

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

Not Applicable

_________________________________________________________________________________________

(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:

 

 

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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

CIT

New York Stock Exchange

 

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). 

 

Emerging growth company  

 

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 July 23, 2019, reporting the financial results of CIT Group Inc. (the “Company”) as of and for the quarter ended June 30, 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 Second Quarter 2019 Financial Results for the quarter ended June 30, 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 July 23, 2019 reporting its financial results as of and for the quarter ended June 30, 2019.

    

99.2

Presentation by CIT Group Inc. on  July 23, 2019 regarding its Second 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:  July 23, 2019

 

 

 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

cit-ex991_16.htm

 

 

 

Exhibit 99.1

 

CIT Announces Second Quarter 2019 Results                

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

Financial Results

Net income available to common shareholders of $128 million or $1.33 per diluted common share

Income from continuing operations available to common shareholders of $127 million or $1.32 per diluted common share

 

Chairwoman and CEO Commentary

“We posted another quarter of solid financial performance and increased tangible book value per share by 3.6 percent in the second quarter,” said CIT Chairwoman and Chief Executive Officer Ellen R. Alemany. “We continued to advance our strategic plan and delivered growth in core loans and leases, additional optimization of our balance sheet and improved operating efficiency. We remain committed to continued execution of our strategic plan and creating long-term shareholder value.”

 

Strategic Pillars

Grow Core Businesses

Average loans and leases up slightly from the prior and year-ago quarters. Average core loans and leases1 up 1% from the prior quarter and 8% from the year-ago quarter

Continued strong origination levels across all core portfolios

Optimize Balance Sheet

Deposits constitute 85% of total average fundings, up from 77% in the year-ago quarter; further reduced wholesale debt

Repurchased 3.2 million common shares at an average price of $49.64

Enhance Operating Efficiency

Continued disciplined expense management

Net efficiency ratio2 of 56%

Maintain Strong Risk Management

Maintained strong credit quality and disciplined underwriting standards

Credit reserves remain strong at 1.56% of total portfolio and 1.89% of Commercial Banking portfolio

 

1 

Average core loans and leases is a non-GAAP measure. Core portfolios are total loans and leases net of credit balances of factoring clients, NACCO assets held for sale, 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  

2 

Net efficiency ratio excludes intangible asset amortization and is a non-GAAP measure. 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 this metric.

 

 

1

 


 

 

 

 

Selected Financial Highlights:

 

 

Select Financial Highlights*

 

 

 

 

 

 

 

 

 

 

 

 

2Q19 change from

 

($ in millions)

2Q19

 

 

1Q19

 

 

2Q18

 

 

1Q19

 

 

2Q18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net finance revenue(1)

$

361

 

 

$

369

 

 

$

389

 

 

$

(9

)

 

-2

%

 

$

(28

)

 

-7

%

Non-interest income

 

106

 

 

 

97

 

 

 

135

 

 

 

9

 

 

10

%

 

 

(29

)

 

-22

%

Total net revenue(1)

 

467

 

 

 

466

 

 

 

524

 

 

 

1

 

 

0

%

 

 

(58

)

 

-11

%

Operating expenses and loss on debt extinguishment

 

268

 

 

 

276

 

 

 

287

 

 

 

(8

)

 

-3

%

 

 

(19

)

 

-7

%

Income from continuing operations before credit provision

 

199

 

 

 

190

 

 

 

238

 

 

 

9

 

 

5

%

 

 

(39

)

 

-16

%

Provision for credit losses

 

29

 

 

 

33

 

 

 

33

 

 

 

(4

)

 

-13

%

 

 

(4

)

 

-13

%

Income from continuing operations before provision for income taxes

 

170

 

 

 

157

 

 

 

205

 

 

 

13

 

 

8

%

 

 

(35

)

 

-17

%

Provision for income taxes

 

33

 

 

 

38

 

 

 

57

 

 

 

(4

)

 

-12

%

 

 

(24

)

 

-42

%

Income from continuing operations

 

137

 

 

 

119

 

 

 

147

 

 

 

18

 

 

15

%

 

 

(11

)

 

-7

%

Income (loss) from discontinued operations, net of taxes

 

1

 

 

 

(0

)

 

 

(21

)

 

 

1

 

NM

 

 

 

21

 

NM

 

Net income

 

138

 

 

 

119

 

 

 

127

 

 

 

19

 

 

16

%

 

 

11

 

 

9

%

Preferred stock dividends

 

9

 

 

 

-

 

 

 

9

 

 

 

9

 

NM

 

 

 

-

 

 

0

%

Net income available to common shareholders

$

128

 

 

$

119

 

 

$

117

 

 

$

9

 

 

8

%

 

$

11

 

 

9

%

Income from continuing operations available to common shareholders

$

127

 

 

$

119

 

 

$

138

 

 

$

8

 

 

7

%

 

$

(11

)

 

-8

%

Noteworthy items(2)

 

-

 

 

 

-

 

 

 

(13

)

 

 

-

 

 

 

 

 

 

13

 

 

 

 

Income from continuing operations available to common shareholders, excluding noteworthy items¹⁾⁽²

$

127

 

 

$

119

 

 

$

125

 

 

$

8

 

 

7

%

 

$

3

 

 

2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income per common share

$

1.33

 

 

$

1.18

 

 

$

0.94

 

 

$

0.15

 

 

 

 

 

$

0.39

 

 

 

 

Diluted income per common share, excluding noteworthy items

$

1.33

 

 

$

1.18

 

 

$

0.95

 

 

$

0.15

 

 

 

 

 

$

0.38

 

 

 

 

Average diluted common shares outstanding (in thousands)

 

96,483

 

 

 

101,096

 

 

 

124,686

 

 

 

(4,613

)

 

 

 

 

 

(28,203

)

 

 

 

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

$

54.29

 

 

$

52.42

 

 

$

49.41

 

 

$

1.87

 

 

 

 

 

$

4.88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

36,658

 

 

$

36,360

 

 

$

36,534

 

 

$

297

 

 

 

 

 

$

123

 

 

 

 

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

 

34,014

 

 

 

33,602

 

 

 

31,568

 

 

 

412

 

 

 

 

 

 

2,446

 

 

 

 

Average earning assets (AEA)(1)

 

46,148

 

 

 

46,169

 

 

 

46,230

 

 

 

(22

)

 

 

 

 

 

(82

)

 

 

 

Volume

 

3,411

 

 

 

2,684

 

 

 

2,861

 

 

 

727

 

 

 

 

 

 

550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key performance metrics, continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net finance margin(1)

 

3.13

%

 

 

3.20

%

 

 

3.37

%

 

-7bps

 

 

 

 

 

-24bps

 

 

 

 

Net efficiency ratio(1)

 

56.1

%

 

 

58.0

%

 

 

49.9

%

 

NM

 

 

 

 

 

NM

 

 

 

 

Net charge-offs

 

0.40

%

 

 

0.43

%

 

 

0.21

%

 

-4bps

 

 

 

 

 

19bps

 

 

 

 

Return on AEA (ROAEA)(1)

 

1.10

%

 

 

1.03

%

 

 

1.19

%

 

7bps

 

 

 

 

 

-9bps

 

 

 

 

Return on tangible common equity (ROTCE)(1)

 

10.34

%

 

 

9.67

%

 

 

9.44

%

 

67bps

 

 

 

 

 

90bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key performance metrics, continuing operations excluding Noteworthy Items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net finance margin(1)(2)

 

3.13

%

 

 

3.20

%

 

 

3.29

%

 

-7bps

 

 

 

 

 

-16bps

 

 

 

 

Net efficiency ratio(1)(2)

 

56.1

%

 

 

58.0

%

 

 

53.8

%

 

NM

 

 

 

 

 

NM

 

 

 

 

ROAEA(1)(2)

 

1.10

%

 

 

1.03

%

 

 

1.08

%

 

7bps

 

 

 

 

 

3bps

 

 

 

 

ROTCE(1)(2)

 

10.34

%

 

 

9.67

%

 

 

8.56

%

 

67bps

 

 

 

 

 

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

 


 

 

 

Second Quarter Financial Highlights:

Net finance margin of 3.13% was down 7 bps from the prior quarter, primarily reflecting higher average deposit costs, partially offset by lower borrowings.

Other non-interest income increased $9 million from the prior quarter to $106 million, primarily driven by an increase in gains on the sale of loans in Commercial Banking.

Operating expenses, excluding intangible asset amortization, decreased $8 million from the prior quarter to $262 million, driven by lower advertising and marketing costs and lower employee costs.

Net efficiency ratio of 56% improved from 58% in the prior quarter, reflecting the decrease in operating expenses.

Provision for credit losses was $29 million, down from $33 million in the prior quarter.

Net charge-offs of $31 million (0.40% of average loans) included $30 million (0.49% of average loans) in the Commercial Banking segment. Non-accrual loans declined by $26 million to 0.86% of loans.

Effective tax rate of 20% was positively impacted by $9 million in net discrete tax benefits that were primarily from audit settlements with certain state and local tax authorities. Excluding the net discrete tax benefits, the effective tax rate would have been 25%.

Loans and leases to deposit ratio was 93% at CIT Bank and 109% at CIT Group, both relatively unchanged from the prior quarter.

Book value per share of $59.01 increased 3.4% from the prior quarter. Tangible book value per share of $54.29 increased 3.6% from the prior quarter.

CET1 ratio decreased to 11.6% and reflected the increase in risk-weighted assets from the expiration of a loss share agreement between CIT Bank and the FDIC at the end of the prior quarter.

ROTCE from continuing operations was 10.3%. ROTCE from continuing operations, normalized for the preferred dividend3, was 10.7%.

 

Noteworthy Items

There were no noteworthy items in the current quarter.

 


 

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*

 

 

 

 

 

 

 

 

 

 

 

 

2Q19 change from

 

($ in millions)

2Q19

 

 

1Q19

 

 

2Q18

 

 

1Q19

 

 

2Q18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

516

 

 

$

517

 

 

$

474

 

 

$

(1

)

 

0

%

 

$

42

 

 

9

%

Net operating lease revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income on operating leases

 

213

 

 

 

218

 

 

 

261

 

 

 

(5

)

 

-2

%

 

 

(48

)

 

-18

%

Depreciation on operating lease equipment

 

77

 

 

 

79

 

 

 

77

 

 

 

(3

)

 

-3

%

 

 

(0

)

 

-1

%

Maintenance and other operating lease expenses

 

48

 

 

 

50

 

 

 

64

 

 

 

(2

)

 

-3

%

 

 

(15

)

 

-24

%

Total net operating lease revenue(1)

 

88

 

 

 

89

 

 

 

121

 

 

 

(1

)

 

-1

%

 

 

(33

)

 

-27

%

Interest expense

 

243

 

 

 

236

 

 

 

205

 

 

 

7

 

 

3

%

 

 

38

 

 

18

%

Net finance revenue (2)

$

361

 

 

$

369

 

 

$

389

 

 

$

(9

)

 

-2

%

 

$

(28

)

 

-7

%

Noteworthy items(3)

 

-

 

 

 

-

 

 

 

(9

)

 

 

-

 

 

 

 

 

 

9

 

 

 

 

Net finance revenue, excluding noteworthy items(2)

$

361

 

 

$

369

 

 

$

380

 

 

$

(9

)

 

-2

%

 

$

(20

)

 

-5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average earning assets

$

46,148

 

 

$

46,169

 

 

$

46,230

 

 

$

(22

)

 

0

%

 

$

(82

)

 

0

%

Net finance margin(2)

 

3.13

%

 

 

3.20

%

 

 

3.37

%

 

-7bps

 

 

 

 

 

-24bps

 

 

 

 

Net finance margin, excluding noteworthy items(2)

 

3.13

%

 

 

3.20

%

 

 

3.29

%

 

-7bps

 

 

 

 

 

-16bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)Net operating lease revenue is a non-GAAP measure, and is reconciled in the table as a combination of GAAP balances, rental income on operating leases less depreciation on operating lease equipment and maintenance and other operating lease expenses. Net operating lease revenue 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 $361 million, down from $369 million in the prior quarter.

 

o

Increase in deposit costs.

 

o

Acceleration of the premium amortization on agency mortgage-backed securities (MBS) within the investment portfolio of $6 million due to higher actual and forecasted prepayment speeds.

 

o

Lower borrowing costs.

Net finance margin (net finance revenue as a percentage of average earning assets) was 3.13%, a 7 bps decrease from 3.20% in the prior quarter.

 

o

Increase in deposit costs, primarily from growth in online deposits in the prior quarter.

 

o

Acceleration of the premium amortization on agency MBS within the investment portfolio of 5 bps due to higher actual and forecasted prepayment speeds.

 

o

Lower borrowings.

 

o

Higher yields on loans.

Compared to the year-ago quarter, net finance revenue excluding noteworthy items decreased $20 million.

 

o

Higher deposit costs in the current quarter.

 

o

Income in the year-ago quarter from NACCO (sold in 4Q18) and the reverse mortgage portfolio (sold during the year-ago quarter).

 

o

Higher interest income from commercial loans.

 

o

Lower borrowing costs.

 

 

4

 


 

 

 

 

o

No current quarter offset of interest income from the indemnification asset related to the loss share agreement that expired at the end of the prior quarter.

 

Compared to the year-ago quarter, net finance margin excluding noteworthy items decreased 16 bps.

 

o

Higher deposit rates.

 

o

Lower net yields in Rail.

 

o

Increased loan yields.

 

o

Lower borrowings.

 

o

No current quarter offset of interest income from the indemnification asset related to the loss share agreement that expired at the end of the prior quarter.

 

Other Non-Interest Income

 

Other Non-Interest Income*

 

 

 

 

 

 

 

 

 

 

 

 

2Q19 change from

 

($ in millions)

2Q19

 

 

1Q19

 

 

2Q18

 

 

1Q19

 

 

2Q18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenues

$

28

 

 

$

31

 

 

$

27

 

 

$

(3

)

 

-10

%

 

$

1

 

 

4

%

Factoring commissions

 

24

 

 

 

24

 

 

 

24

 

 

 

(0

)

 

-1

%

 

 

0

 

 

1

%

Gains on leasing equipment, net of impairments

 

17

 

 

 

17

 

 

 

14

 

 

 

0

 

 

2

%

 

 

3

 

 

18

%

BOLI income

 

7

 

 

 

6

 

 

 

7

 

 

 

1

 

 

13

%

 

 

1

 

 

9

%

Gains on investment securities, net of impairments

 

2

 

 

 

2

 

 

 

4

 

 

 

1

 

 

31

%

 

 

(2

)

 

-43

%

Property tax income

 

6

 

 

 

6

 

 

 

-

 

 

 

(0

)

 

-5

%

 

 

6

 

NM

 

Other revenues

 

23

 

 

 

11

 

 

 

61

 

 

 

11

 

 

99

%

 

 

(38

)

 

-63

%

Total other non-interest income

 

106

 

 

 

97

 

 

 

135

 

 

 

9

 

 

10

%

 

 

(29

)

 

-22

%

Noteworthy items(1)

 

-

 

 

 

-

 

 

 

(29

)

 

 

-

 

 

 

 

 

 

29

 

 

 

 

Total other non-interest income, excluding noteworthy items(2)

$

106

 

 

$

97

 

 

$

106

 

 

$

9

 

 

10

%

 

$

-

 

 

0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

(2)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.

 

*Certain balances may not sum due to rounding.

 

Other non-interest income was $106 million, compared to $97 million in the prior quarter.

 

o

Higher other revenues from increased net gains on sale of loans and income on customer derivatives in Commercial Finance.

 

o

Lower fee revenues from a decrease in capital markets activities.

Excluding noteworthy items, which impacted other revenues in the year-ago quarter, other non-interest income was unchanged from the year-ago quarter.

 

o

Higher net gains on sale of loans, driven by the sale of a loan in Commercial Finance.

 

o

Higher gains on sale of leasing equipment.

 

o

Lower other revenues from reduced income on derivatives.

 

o

Increase in property tax income from the adoption of the lease accounting standard in 2019.

 

 

5

 


 

 

 

 

Operating Expenses

 

Operating Expenses*

 

 

 

 

 

 

 

 

 

 

 

 

2Q19 change from

 

($ in millions)

2Q19

 

 

1Q19

 

 

2Q18

 

 

1Q19

 

 

2Q18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

$

141

 

 

$

146

 

 

$

143

 

 

$

(5

)

 

-3

%

 

$

(2

)

 

-1

%

Technology

 

35

 

 

 

33

 

 

 

33

 

 

 

2

 

 

6

%

 

 

2

 

 

6

%

Professional fees

 

17

 

 

 

19

 

 

 

21

 

 

 

(2

)

 

-11

%

 

 

(4

)

 

-20

%

Insurance

 

14

 

 

 

14

 

 

 

19

 

 

 

(1

)

 

-6

%

 

 

(5

)

 

-26

%

Net occupancy expense

 

15

 

 

 

16

 

 

 

16

 

 

 

(1

)

 

-6

%

 

 

(1

)

 

-6

%

Advertising and marketing

 

6

 

 

 

13

 

 

 

13

 

 

 

(7

)

 

-56

%

 

 

(8

)

 

-57

%

Intangible asset amortization

 

6

 

 

 

6

 

 

 

6

 

 

 

-

 

 

0

%

 

 

(0

)

 

-3

%

Property tax expense

 

6

 

 

 

6

 

 

 

-

 

 

 

(0

)

 

-6

%

 

 

6

 

NM

 

Other expenses

 

30

 

 

 

23

 

 

 

17

 

 

 

6

 

 

27

%

 

 

13

 

 

74

%

Total operating expenses

 

268

 

 

 

276

 

 

 

268

 

 

 

(8

)

 

-3

%

 

 

0

 

 

0

%

Intangible asset amortization

 

6

 

 

 

6

 

 

 

6

 

 

 

-

 

 

0

%

 

 

(0

)

 

-3

%

Operating expenses, excluding noteworthy items and intangible asset amortization(1)

$

262

 

 

$

270

 

 

$

262

 

 

$

(8

)

 

-3

%

 

$

1

 

 

0

%

Net efficiency ratio(2)

 

56.1

%

 

 

58.0

%

 

 

49.9

%

 

NM

 

 

 

 

 

NM

 

 

 

 

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

 

56.1

%

 

 

58.0

%

 

 

53.8

%

 

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 the exclusion of intangible amortization, this is considered a non-GAAP measure, 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 $262 million, a decrease from $270 million in the prior quarter.

 

o

Lower advertising and marketing costs.

 

o

Lower professional fees.

 

o

Lower employee costs, as the prior quarter was elevated due to annual benefit restarts and the acceleration of expenses related to retirement-eligible employees.

 

o

Increase in other expenses.

Operating expenses excluding intangible asset amortization was unchanged compared to the year-ago quarter.

 

o

Lower advertising and marketing costs.

 

o

Lower insurance costs.

 

o

Lower professional fees.

 

o

The gross-up of property taxes and the expensing of lease origination costs previously capitalized due to the adoption of the new lease accounting standard.

 

o

A $5 million reversal of a non-income tax-related reserve in the year-ago quarter.

The net efficiency ratio excluding intangible asset amortization improved to 56% compared to 58% in the prior quarter.

 

o

Driven primarily by the aforementioned decrease in operating expenses.

 

 

6

 


 

 

 

The net efficiency ratio excluding noteworthy items and intangible asset amortization increased from 54% in the year-ago quarter.

 

o

Driven by a decline in net finance revenue.


Balance Sheet Highlights:

Average Earning Assets

 

Average Earning Assets*

 

 

 

 

 

 

 

 

 

 

 

 

2Q19 change from

 

($ in millions)

2Q19

 

 

1Q19

 

 

2Q18

 

 

1Q19

 

 

2Q18