Asset liquidity is further enhanced by our ability to sell or syndicate portfolio assets in secondary markets, which also enables us to manage credit exposure, and to pledge assets to access secured borrowing facilities through the Federal Home Loan Banks (“FHLB”) and FRB.
The acquisition price of the OneWest Transaction included a cash portion of $1.9 billion, which was paid from available liquidity at the BHC on August 3, 2015.
As a result of our continued funding and liability management initiatives, the weighted average coupon rates on outstanding deposits and long-term borrowings was 3.04% at June 30, 2015, down from 3.11% at December 31, 2014, reflecting a higher proportion of deposits to total funding sources. The following table reflects our funding mix:
The higher deposit base is reflective of the growth in CIT Bank assets. The unsecured notes outstanding in dollar amount declined compared to December 31, 2014, reflecting the $1.2 billion February 2015 debt maturity. The percentage of secured funding declined compared to December 31, 2014 reflecting amortization of secured transactions as well as reduced utilization of FHLB facilities. These proportions will fluctuate in the future depending upon our funding activities.
We continued to grow deposits during 2015 to fund our bank lending and leasing activities. The weighted average coupon rate of total deposits was 1.74%, up from 1.69% at December 31, 2014. The following table details our deposits by type:
Long-term borrowings consist of unsecured and secured debt and totaled $16.4 billion at June 30, 2015, down from $18.5 billion at December 31, 2014, reflecting the repayment of $1.2 billion of maturing unsecured notes in the first quarter of 2015. The remaining decline was due to net repayments of secured borrowings. The weighted average coupon rate of long-term borrowings at June 30, 2015 was 4.41%, up from 4.32% at December 31, 2014, reflecting the change in mix.
There were no borrowings outstanding under the Revolving Credit Facility at either June 30, 2015 or December 31, 2014. The amount available to draw upon was approximately $1.4 billion at June 30, 2015, with the remaining amount of approximately $0.1 billion utilized for issuance of letters of credit.
The Revolving Credit Facility has a $1.5 billion total commitment amount that matures on January 27, 2017. The total commitment amount consists of a $1.15 billion revolving loan tranche and a $350 million revolving loan tranche that can also be utilized for issuance of letters of credit. The applicable margin charged under the facility is 2.50% for LIBOR-based loans and 1.50% for Base Rate loans. Improvement in CIT’s long-term senior unsecured debt ratings to either BB by S&P or Ba2 by Moody’s would result in a reduction in the applicable margin to 2.25% for LIBOR-based loans and to 1.25% for Base Rate loans. A downgrade in CIT’s long-term senior unsecured debt ratings to B+ by S&P and B1 by Moody’s would result in an
Table of Contents
increase in the applicable margin to 2.75% for LIBOR-based loans and to 1.75% for Base Rate loans. In the event of a one notch downgrade by only one of the agencies, no change to the margin charged under the facility would occur.
The Revolving Credit Facility is unsecured and is guaranteed by eight of the Company’s domestic operating subsidiaries. The facility was amended to modify the covenant requiring a minimum guarantor asset coverage ratio and the criteria for calculating the ratio. The amended covenant requires a minimum guarantor asset coverage ratio ranging from 1.25:1.0 to the current requirement of 1.5:1.0 depending on the Company’s long-term senior unsecured debt rating. As of June 30, 2015, the last reported asset coverage ratio was 2.63x.
Senior Unsecured Notes
At June 30, 2015, unsecured notes outstanding totaled $10.7 billion, compared to $11.9 billion at December 31, 2014. The weighted average coupon rate of unsecured long-term borrowings at June 30, 2015 was 5.03%, up slightly from 5.00% at December 31, 2014. The decline in outstanding balance and slight increase in rate reflect the repayment of $1.2 billion of maturing 4.75% notes.
SeeNote 7 — Long-term Borrowings inItem 1. Consolidated Financial Statements for further detail.
Secured
Secured borrowings totaled $5.7 billion at June 30, 2015, compared to $6.5 billion at December 31, 2014. The weighted average coupon rate of secured long-term borrowings at June 30, 2015 was 3.23%, up from 3.09% at December 31, 2014, reflecting lower FHLB borrowings.
As part of our liquidity management strategy, we may pledge assets to secure financing transactions (which include securitizations), to secure advances from the FHLB or for other purposes as required or permitted by law. Our secured financing transactions do not meet accounting requirements for sale treatment and are recorded as secured borrowings, with the assets remaining on-balance sheet pursuant to GAAP. The debt associated with these transactions is collateralized by receivables, leases, investment securities and/or equipment. Certain related cash balances are restricted.
CIT Bank secured borrowings totaled $1.4 billion and $1.9 billion at June 30, 2015 and December 31, 2014, respectively, which were secured by $2.0 billion and $2.4 billion of pledged assets at June 30, 2015 and December 31, 2014. Non-bank secured borrowings were $4.3 billion and $4.7 billion at June 30, 2015 and December 31, 2014, respectively, and were secured by assets of $7.4 billion and $8.3 billion, respectively.
FHLB Advances
CIT Bank is a member of the FHLB and may borrow under lines of credit that are secured by a blanket lien on the subsidiary’s assets and collateral pledged, including real estate assets. At June 30, 2015, $147 million of advances were outstanding and $161 million of collateral was pledged. The outstanding amounts were repaid and collateral was released in July 2015. At December 31, 2014, $255 million of advances were outstanding and $310 million of collateral was pledged.
SeeNote 7 — Long-Term Borrowings inItem 1. Consolidated Financial Statements for a table displaying our consolidated secured financings and pledged assets.
GSI Facilities
Two financing facilities between two wholly-owned subsidiaries of CIT and Goldman Sachs International (“GSI”) are structured as total return swaps (“TRS”), under which amounts available for advances are accounted for as derivatives. Pursuant to applicable accounting guidance, only the unutilized portion of the TRS is accounted for as a derivative and recorded at its estimated fair value. The size of the CIT Financial Ltd. (“CFL”) facility is $1.5 billion and the CIT TRS Funding B.V. (“BV”) facility is $625 million.
At June 30, 2015, a total of $1,783.3 million of assets and secured debt totaling $1,185.5 million issued to investors was outstanding under the GSI Facilities. After adjustment to the amount of actual qualifying borrowing base under terms of the GSI Facilities, this secured debt provided for usage of $1,002.8 million of the maximum notional amount of the GSI Facilities. The remaining $1,122.2 million of the maximum notional amount represents the unused portion of the GSI Facilities and constitutes the notional amount of derivative financial instruments. Unsecured counterparty receivable of $538 million at June 30, 2015 is owed to CIT from GSI for debt discount, return of collateral posted to GSI and settlements resulting from market value changes to asset-backed securities underlying the structures.
The CFL Facility was structured as a TRS to satisfy the specific requirements to obtain this funding commitment from GSI. Under the terms of the GSI Facilities, CIT raises cash from the issuance of ABS to investors designated by GSI under the total return swap, equivalent to the face amount of the ABS less an adjustment for any original issue discount (“OID”) which equals the market price of the ABS. CIT is also required to deposit a portion of the face amount of the ABS with GSI as additional collateral prior to funding ABS through the GSI Facilities.
Amounts deposited with GSI can increase or decrease over time depending on the market value of the ABS and / or changes in the ratings of the ABS. CIT and GSI engage in periodic settlements based on the timing and amount of coupon, principal and any other payments actually made by CIT on the ABS. Pursuant to the terms of the TRS, GSI is obligated to return those same amounts to CIT plus a proportionate amount of the initial deposit. Simultaneously, CIT is obligated to pay GSI (1) principal in an amount equal to the contractual market price times the amount of principal reduction on the ABS and (2) interest equal to LIBOR times the adjusted qualifying borrowing base of the ABS. On a quarterly basis, CIT pays the fixed facility fee of
70 CIT GROUP INC
Table of Contents
2.85% per annum times the maximum facility commitment amount.
Valuation of the derivatives related to the GSI Facilities is based on several factors using a discounted cash flow (DCF) methodology, including:
n | | CIT’s funding costs for similar financings based on the current market environment; |
n | | Forecasted usage of the long-dated GSI Facilities through the final maturity date in 2028; and |
n | | Forecasted amortization, due to principal payments on the underlying ABS, which impacts the amount of the unutilized portion. |
Based on the Company’s valuation, a liability of $31.9 million and $24.5 million was recorded at June 30, 2015 and December 31, 2014, respectively. The change in value of $6.4 million and $7.4 million was recognized as a reduction to Other Income for the quarter and six months ended June 30, 2015, respectively. The change in value of $11.4 million and $9.7 million was recognized as a benefit to Other Income for the quarter and six months ended June 30, 2014, respectively.
Interest expense related to the GSI Facilities is affected by the following:
n | | A fixed facility fee of 2.85% per annum times the maximum facility commitment amount, |
n | | A variable amount based on one-month or three-month USD LIBOR times the “utilized amount” (effectively the “adjusted qualifying borrowing base”) of the total return swap, and |
n | | A reduction in interest expense due to the recognition of the payment of any OID from GSI on the various asset-backed securities. |
SeeNote 8 — Derivative Financial Instruments inItem 1. Consolidated Financial Statements for further information.
Debt Ratings
Debt ratings can influence the cost and availability of short-and long-term funding, the terms and conditions on which such funding may be available, the collateral requirements, if any, for borrowings and certain derivative instruments, the acceptability of our letters of credit, and the number of investors and counterparties willing to lend to the Company. A decrease, or potential decrease, in credit ratings could impact access to the capital markets and/or increase the cost of debt, and thereby adversely affect the Company’s liquidity and financial condition.
Our debt ratings at June 30, 2015, as rated by Standard & Poor’s Ratings Services (“S&P”), Fitch Ratings, Inc. (“Fitch”), Moody’s Investors Service (“Moody’s”) and Dominion Bond Rating Service (“DBRS”) are presented in the following table.
Debt Ratings as of June 30, 2015
| | S&P
| | Fitch
| | Moody’s
| | DBRS
|
|---|
| Issuer / Counterparty Credit Rating | | BB- | | BB+ | | NR | | BB |
| Revolving Credit Facility Rating | | BB- | | BB+ | | B1 | | BBB (Low) |
| Series C Notes / Senior Unsecured Debt Rating | | BB- | | BB+ | | B1 | | BB |
| Outlook | | Positive | | Stable | | Stable | | Positive |
NR — Not Rated
In March 2015, Moody’s affirmed CIT Group’s Ba3 corporate family rating but downgraded the senior unsecured rating from Ba3 to B1 with a stable ratings outlook. Concurrently, Moody’s transitioned its ratings analysis of CIT Group to Moody’s bank methodology from Moody’s finance company rating methodology. Because Moody’s does not assign corporate family ratings under the bank rating framework, CIT’s Ba3 corporate family rating was withdrawn.
Rating agencies indicate that they base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, level and quality of earnings, and the current operating, legislative and regulatory environment, including implied government support. In addition, rating agencies themselves have been subject to scrutiny arising from the financial crisis and could make or be required to make substantial changes to their ratings policies and practices, particularly in response to legislative and regulatory changes, including as a result of provisions in Dodd-Frank. Potential changes in rating methodology as well as in the legislative and regulatory environment and the timing of those changes could impact our ratings, which as noted above could impact our liquidity and financial condition.
A debt rating is not a recommendation to buy, sell or hold securities, and the ratings are subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating.
Tax Implications of Cash in Foreign Subsidiaries
Cash held by foreign subsidiaries totaled $1.3 billion, including cash available to the BHC and restricted cash, at June 30, 2015, compared to $1.8 billion at December 31, 2014.
Other than in a limited number of jurisdictions, Management does not intend to indefinitely reinvest foreign earnings.
Item 2. Management’s Discussion and Analysis andItem 3.Quantitative and Qualitative Disclosures about Market Risk 71
Table of Contents
Contractual Payments and Commitments
The following tables summarize significant contractual payments and contractual commitment expirations at June 30, 2015. Certain amounts in the payments table are not the same as the respective balance sheet totals, because this table is based on contractual amounts and excludes items such as issue discounts and FSA discounts. Actual cash flows could vary materially from those depicted in the payments table as further explained in the table footnotes.
Payments for the Twelve Months Ended June 30(1) (dollars in millions)
| | | | Total
| | 2016
| | 2017
| | 2018
| | 2019
| | 2020+
|
|---|
Secured borrowings(2) | | | | $ | 5,700.1 | | | $ | 1,811.8 | | | $ | 966.2 | | | $ | 714.6 | | | $ | 505.5 | | | $ | 1,702.0 | |
| Senior unsecured | | | | | 10,751.4 | | | | – | | | | 1,250.0 | | | | 3,950.0 | | | | 2,750.0 | | | | 2,801.4 | |
Total Long-term borrowings | | | | | 16,451.5 | | | | 1,811.8 | | | | 2,216.2 | | | | 4,664.6 | | | | 3,255.5 | | | | 4,503.4 | |
| Deposits | | | | | 17,268.9 | | | | 7,252.5 | | | | 1,949.0 | | | | 2,494.8 | | | | 1,296.1 | | | | 4,276.5 | |
| Credit balances of factoring clients | | | | | 1,373.3 | | | | 1,373.3 | | | | – | | | | – | | | | – | | | | – | |
| Lease rental expense | | | | | 161.9 | | | | 30.5 | | | | 28.9 | | | | 26.0 | | | | 24.4 | | | | 52.1 | |
Total contractual payments | | | | $ | 35,255.6 | | | $ | 10,468.1 | | | $ | 4,194.1 | | | $ | 7,185.4 | | | $ | 4,576.0 | | | $ | 8,832.0 | |
(1) | | Projected payments of debt interest expense and obligations relating to postretirement programs are excluded. |
(2) | | Includes non-recourse secured borrowings, which are generally repaid in conjunction with the pledged receivable maturities. |
Commitment Expiration by Twelve Month Periods Ended June 30 (dollars in millions)
| | | | Total
| | 2016
| | 2017
| | 2018
| | 2019
| | 2020+
|
|---|
| Financing commitments | | | | $ | 5,239.4 | | | $ | 1,082.1 | | | $ | 675.8 | | | $ | 1,044.6 | | | $ | 1,043.5 | | | $ | 1,393.4 | |
Aerospace equipment purchase commitments(1) | | | | | 10,639.5 | | | | 1,033.4 | | | | 755.6 | | | | 1,479.6 | | | | 2,462.3 | | | | 4,908.6 | |
| Rail and other equipment purchase commitments | | | | | 1,568.6 | | | | 1,009.3 | | | | 559.3 | | | | – | | | | – | | | | – | |
| Letters of credit | | | | | 385.6 | | | | 72.5 | | | | 47.1 | | | | 36.9 | | | | 173.9 | | | | 55.2 | |
| Deferred purchase agreements | | | | | 1,400.4 | | | | 1,400.4 | | | | – | | | | – | | | | – | | | | – | |
| Guarantees, acceptances and other recourse obligations | | | | | 1.3 | | | | 1.3 | | | | – | | | | – | | | | – | | | | – | |
Liabilities for unrecognized tax obligations(2) | | | | | 41.8 | | | | 5.0 | | | | 36.8 | | | | – | | | | – | | | | – | |
| Total contractual commitments | | | | $ | 19,276.6 | | | $ | 4,604.0 | | | $ | 2,074.6 | | | $ | 2,561.1 | | | $ | 3,679.7 | | | $ | 6,357.2 | |
(1) | | Aerospace commitments are net of amounts on deposit with manufacturers. |
(2) | | The balance cannot be estimated past 2017; therefore the remaining balance is reflected in 2017. |
Financing commitments increased from $4.7 billion at December 31, 2014 to $5.2 billion at June 30, 2015. This includes commitments that have been extended to and accepted by customers or agents, but on which the criteria for funding have not been completed of $751 million at June 30, 2015. Also included are Commercial Services credit line agreements, with an amount available at June 30, 2015 of $394 million, net of amount of receivables assigned to us. These are cancellable by CIT only after a notice period.
At June 30, 2015, substantially all our undrawn financing commitments were senior facilities, with approximately 80% secured by equipment or other assets and the remainder comprised of cash flow or enterprise value facilities. Most of our undrawn and available financing commitments are in the Corporate Finance division of NACF. The top ten undrawn commitments totaled $380 million at June 30, 2015.
The table above includes approximately $1.5 billion of undrawn financing commitments at June 30, 2015 that were not in compliance with contractual obligations, and therefore CIT does not have the contractual obligation to lend.
SeeNote 13 — Commitments inItem 1. Consolidated Financial Statements for further detail.
Capital Management
CIT manages its capital position to ensure that it is sufficient to: (i) support the risks of its businesses, (ii) maintain a “well-capitalized” status under regulatory requirements, and (iii) provide flexibility to take advantage of future investment opportunities. Capital in excess of these requirements is available to distribute to shareholders.
CIT uses a complement of capital metrics and related thresholds to measure capital adequacy and takes into account the existing regulatory capital framework. CIT
72 CIT GROUP INC
Table of Contents
further evaluates capital adequacy through the enterprise stress testing and economic capital (“ECAP”) approaches, which constitute our internal capital adequacy assessment process (“ICAAP”).
Beginning January 1, 2015, CIT reports regulatory capital ratios in accordance with the Basel III Final Rule and determines risk weighted assets under the Standardized Approach. CIT’s capital management is discussed in more detail in its Form 10-K for the year ended December 31, 2014, see the “Regulation” section ofItem 1. Business Overview for further detail regarding regulatory matters, including“Basel III”, “Capital Requirements” and“Leverage Requirements” and“Capital Management” section inPart Two, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Return of Capital
Capital returned during the six months ended June 30, 2015 totaled $446 million, including repurchases of $393 million of our common stock and over $53 million in dividends.
The Board authorized an additional $200 million share repurchase program in April 2015, of which $139 million remained at June 30, 2015. During the quarter, we repurchased 1.3 million of our shares at an average price of $45.87 for an aggregate purchase price of $61 million. For the six months ended June 30, 2015, we repurchased 8.6 million of our shares at an average price of $45.50 for an aggregate purchase price of $393 million. During July 2015, we repurchased an additional 2 million shares for an aggregate purchase price of $91 million. The repurchases were effected via open market purchases and through plans designed to comply with Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended.
Our 2015 common stock dividends were as follows:
Declaration Date
| | | | Payment Date
| | | | Per Share Dividend
|
|---|
| January | | | | February 28, 2015 | | | | $ | 0.15 | |
| April | | | | May 29, 2015 | | | | $ | 0.15 | |
| July | | | | August 28, 2015 | | | | $ | 0.15 | |
Regulatory Capital Guidelines
Basel III and the New Standardized Risk-based Approach. The Company, as well as the Bank, became subject to the Basel III Final Rule effective January 1, 2015.
Among other matters, the Basel III Final Rule: (i) introduces a new capital measure called “Common Equity Tier 1” (“CET1”) and related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specifies that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised requirements; (iii) mandates that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; and (iv) expands the scope of the deductions from and adjustments to capital as compared to existing regulations. For most banking organizations, the most common form of Additional Tier 1 capital is non-cumulative perpetual preferred stock and the most common form of Tier 2 capital is subordinated notes, which will be subject to the Basel III Final Rule specific requirements. The Company does not currently have either of these forms of capital outstanding.
The Basel III Final Rule provides for a number of deductions from and adjustments to CET1. These include, for example, goodwill, other intangible assets, and deferred tax assets (“DTAs”) that arise from net operating loss and tax credit carryforwards net of any related valuation allowance. Also, mortgage servicing rights, DTAs arising from temporary differences that could not be realized through net operating loss carrybacks and significant investments in non-consolidated financial institutions must be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such items, in the aggregate, exceed 15% of CET1. The non-DTA related deductions (goodwill, intangibles, etc.) may be reduced by netting with any associated deferred tax liabilities (“DTLs”). As for the DTA deductions, the netting of any remaining DTL must be allocated in proportion to the DTAs arising from net operating losses and tax credit carryforwards and those arising from temporary differences.
Implementation of some of these deductions to CET1 began on January 1, 2015, and will be phased-in over a 4-year period (beginning at 40% on January 1, 2015 and adding 20% per year thereafter until January 1, 2018).
In addition, under the Basel I general risk-based capital rules, the effects of certain components of accumulated other comprehensive income (“AOCI”) included in shareholders’ equity (for example, mark-to-market of securities held in the available-for-sale (“AFS”) portfolio) under U.S. GAAP are reversed for the purpose of determining regulatory capital ratios. Pursuant to the Basel III Final Rule, the effects of these AOCI items are not excluded; however, non-advanced approaches banking organizations, including the Company and CIT Bank, may make a one-time permanent election to continue to exclude the AOCI items currently excluded under Basel I. Both the Company and CIT Bank have elected to exclude AOCI items from regulatory capital ratios. The Basel III Final Rule also precludes certain hybrid securities, such as trust preferred securities, from inclusion in bank holding companies’ Tier 1 capital. The Company does not have any hybrid securities outstanding at June 30, 2015.
The Basel III Final Rule prescribed a new approach for risk weightings for BHCs and banks that follow the
Item 2. Management’s Discussion and Analysis andItem 3.Quantitative and Qualitative Disclosures about Market Risk 73
Table of Contents
Standardized approach, which applies to CIT. This approach expands the risk-weighting categories from the current four Basel I-derived categories (0%, 20%, 50% and 100%) to a larger and more risk-sensitive number of categories, depending on the nature of the exposure, ranging from 0% for U.S. government and agency securities, to as high as 1,250% for such exposures as credit-enhancing interest-only strips or unsettled security/commodity transactions.
Per the Basel III Final Rule, the minimum capital ratios for CET1, Tier 1 capital, and Total capital are 4.5%, 6.0% and 8.0%, respectively. In addition, the Basel III Final Rule introduces a new “capital conservation buffer”, composed entirely of CET1, on top of these minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. This buffer will be implemented beginning January 1, 2016 at the 0.625% level and increase by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019.
CIT will be required to maintain risk-based capital ratios at January 1, 2019 as follows:
| | | | Minimum Capital Requirements – January 1, 2019
|
|---|
| | | | Tier 1 Common
Equity
| | Tier 1 Capital
| | Total Capital
|
|---|
| Stated minimum ratios | | | | | 4.5 | % | | | 6.0 | % | | | 8.0 | % |
| Capital conservation buffer | | | | | 2.5 | % | | | 2.5 | % | | | 2.5 | % |
| Effective minimum ratios | | | | | 7.0 | % | | | 8.5 | % | | | 10.5 | % |
With respect to CIT Bank, the Basel III Final Rule revises the “prompt corrective action” (“PCA”) regulations adopted pursuant to Section 38 of the Federal Deposit Insurance Act, by: (i) introducing a CET1 ratio requirement at each PCA category (other than critically undercapitalized), with the required CET1 ratio being 6.5% for well-capitalized status; (ii) increasing the minimum Tier 1 capital ratio requirement for each category, with the minimum Tier 1 capital ratio for well-capitalized status being 8% (as compared to the current 6%); and (iii) eliminating the current provision that provides that a bank with a composite supervisory rating of 1 may have a 3% leverage ratio and still be adequately capitalized. The Basel III Final Rule does not change the total risk-based capital requirement for any PCA category. Both the Company and CIT Bank are subject to a minimum Tier 1 Leverage ratio of 4%.
As non-advanced approaches banking organizations, the Company and CIT Bank will not be subject to the Basel III Final Rule’s countercyclical buffer or the supplementary leverage ratio.
The Company and CIT Bank have met all capital requirements under the Basel III Final Rule, including the capital conservation buffer, as if such requirements were currently effective. The following table presents CIT’s and CIT Bank’s estimated capital ratios as of June 30, 2015 calculated under the fully phased-in Basel III Final Rule — Standardized approach.
Preliminary Basel III Capital Ratios — Fully Phased-in Standardized Approach(1) As of June 30, 2015 (dollars in millions)
| | | | CIT
| | CIT Bank
|
|---|
| | | | Estimated
| | Requirement
| | Estimated
| | Requirement
|
|---|
CIT |
| Capital | | | | | | | | | | | | | | | | | | |
| CET1 | | | | $ | 8,019.9 | | | | | | | $ | 2,605.2 | | | | | |
| Tier 1 | | | | | 8,019.9 | | | | | | | | 2,605.2 | | | | | |
| Total | | | | | 8,408.9 | | | | | | | | 2,865.5 | | | | | |
| Risk-weighted assets | | | | | 55,665.3 | | | | | | | | 20,766.6 | | | | | |
| Adjusted quarterly average assets | | | | | 45,352.6 | | | | | | | | 21,312.2 | | | | | |
| Capital ratios | | | | | | | | | | | | | | | | | | |
| CET1 | | | | | 14.4 | % | | | 7.0 | %(2) | | | 12.5 | % | | | 7.0 | %(2) |
| Tier 1 | | | | | 14.4 | % | | | 8.5 | %(2) | | | 12.5 | % | | | 8.5 | %(2) |
| Total | | | | | 15.1 | % | | | 10.5 | %(2) | | | 13.8 | % | | | 10.5 | %(2) |
| Leverage | | | | | 17.7 | % | | | 4.0 | % | | | 12.2 | % | | | 4.0 | % |
(1) | | Basel III Final Rule calculated under the Standardized Approach on a fully phased-in basis that will be required effective January 1, 2019. |
(2) | | Required ratios under the Basel III Final Rule include the post-transition minimum capital conservation buffer effective January 1, 2019. |
74 CIT GROUP INC
Table of Contents
Capital Composition and Ratios
The Company is subject to various regulatory capital requirements. We compute capital ratios in accordance with Federal Reserve capital guidelines for assessing adequacy of capital. At June 30, 2015, the regulatory capital guidelines applicable to the Company were based on the Basel III Final Rule. The ratios presented in the following table for June 30, 2015 are calculated under the current rules. At December 31, 2014, the regulatory capital guidelines that were applicable to the Company were based on the Capital Accord of the Basel Committee on Banking Supervision (Basel I). The ratios were not significantly impacted by the change.
Tier 1 Capital and Total Capital Components(1) (dollars in millions)
| Tier 1 Capital | | Partially
Phased-in
Basis
June 30,
2015 | | Fully
Phased-in
Basis
June 30,
2015 | | December 31,
2014 |
| Total stockholders’ equity | | $ | 8,807.1 | | | $ | 8,807.1 | | | $ | 9,068.9 | |
| Effect of certain items in accumulated other comprehensive loss excluded from Tier 1 Capital and qualifying noncontrolling interests | | | 59.2 | | | | 59.2 | | | | 53.0 | |
| Adjusted total equity | | | 8,866.3 | | | | 8,866.3 | | | | 9,121.9 | |
Less: Goodwill(1) | | | (485.2 | ) | | | (485.2 | ) | | | (571.3 | ) |
| Disallowed deferred tax assets | | | (339.7 | ) | | | (339.7 | ) | | | (416.8 | ) |
Disallowed intangible assets(2) | | | (8.6 | ) | | | (21.5 | ) | | | (25.7 | ) |
| Investment in certain subsidiaries | | | NA | | | | NA | | | | (36.7 | ) |
Other Tier 1 components(3) | | | – | | | | – | | | | (4.1 | ) |
| Common Equity Tier 1 Capital | | | 8,032.8 | | | | 8,019.9 | | | | 8,067.3 | |
| Tier 1 Capital | | | 8,032.8 | | | | 8,019.9 | | | | 8,067.3 | |
Tier 2 Capital | | | | | | | | | | | | |
Qualifying reserve for credit losses and other reserves(4) | | | 389.0 | | | | 389.0 | | | | 381.8 | |
| Less: Investment in certain subsidiaries | | | NA | | | | NA | | | | (36.7 | ) |
| Total qualifying capital | | $ | 8,421.8 | | | $ | 8,408.9 | | | $ | 8,412.4 | |
| Risk-weighted assets | | $ | 55,396.0 | | | $ | 55,665.3 | | | $ | 55,480.9 | |
BHC Ratios | | | | | | | | | | | | |
| Common Equity Tier 1 Capital Ratio | | | 14.5 | % | | | 14.4 | % | | | NA | |
| Tier 1 Capital Ratio | | | 14.5 | % | | | 14.4 | % | | | 14.5 | % |
| Total Capital Ratio | | | 15.2 | % | | | 15.1 | % | | | 15.2 | % |
| Tier 1 Leverage Ratio | | | 17.7 | % | | | 17.7 | % | | | 17.4 | % |
CIT Bank Ratios | | | | | | | | | | | | |
| Common Equity Tier 1 Capital Ratio | | | 12.6 | % | | | 12.5 | % | | | NA | |
| Tier 1 Capital Ratio | | | 12.6 | % | | | 12.5 | % | | | 13.0 | % |
| Total Capital Ratio | | | 13.8 | % | | | 13.8 | % | | | 14.2 | % |
| Tier 1 Leverage Ratio | | | 12.2 | % | | | 12.2 | % | | | 12.2 | % |
(1) | | The June 30, 2015 presentations reflects the risk-based capital guidelines under Basel III, which became effective on January 1, 2015, on a partially phased-in basis, and under the fully phased-in basis. The December 31, 2014 reflects the risk-based capital guidelines under then effective Basel I. |
(2) | | Goodwill and disallowed intangible assets adjustments also reflect the portion included within assets held for sale. |
(3) | | Includes the Tier 1 capital charge for nonfinancial equity investments under Basel I. |
(4) | | “Other reserves” represents additional credit loss reserves for unfunded lending commitments, letters of credit, and deferred purchase agreements, all of which are recorded in Other Liabilities. |
NA – Balance is not applicable under the respective guidelines.
Item 2. Management’s Discussion and Analysis andItem 3.Quantitative and Qualitative Disclosures about Market Risk 75
Table of Contents
The change in common stockholders’ equity from December 31, 2014 was primarily driven by net income, less the impact of share repurchases and dividends.
The reconciliation of balance sheet assets to risk-weighted assets is presented below:
Risk-Weighted Assets (dollars in millions)
| | | | June 30,
2015
| | December 31,
2014
|
|---|
| Balance sheet assets | | | | $ | 46,657.2 | | | $ | 47,880.0 | |
| Risk weighting adjustments to balance sheet assets | | | | | (7,260.7 | ) | | | (8,647.8 | ) |
| Off balance sheet items | | | | | 15,999.5 | | | | 16,248.7 | |
| Risk-weighted assets | | | | $ | 55,396.0 | | | $ | 55,480.9 | |
The risk weighting adjustments at June 30, 2015, reflect Basel III guidelines, whereas the December 31, 2014 risk weighting adjustments followed Basel I guidelines. The 2015 off balance sheet items primarily reflect commitments to purchase aircraft and railcars ($10.5 billion related to aircraft and $1.4 billion related to railcars), unused lines of credit ($2.0 billion credit equivalent, largely related to Corporate Finance division) and deferred purchase agreements ($1.4 billion related to the Commercial Services division). SeeNote 13 — Commitments inItem 1. Consolidated Financial Statements for further detail on commitments.
Tangible Book Value and Tangible Book Value per Share(1)
Tangible book value represents common equity less goodwill and other intangible assets. A reconciliation of CIT’s total common stockholders’ equity to tangible book value, a non-GAAP measure, follows:
Tangible Book Value and per Share Amounts (dollars in millions, except per share amounts)
| | | | June 30,
2015
| | December 31,
2014
|
|---|
| Total common stockholders’ equity | | | | $ | 8,807.1 | | | $ | 9,068.9 | |
| Less: Goodwill | | | | | (565.9 | ) | | | (571.3 | ) |
| Intangible assets | | | | | (21.4 | ) | | | (25.7 | ) |
| Tangible book value | | | | $ | 8,219.8 | | | $ | 8,471.9 | |
| Book value per share | | | | $ | 50.91 | | | $ | 50.13 | |
| Tangible book value per share | | | | $ | 47.51 | | | $ | 46.83 | |
(1) | | Tangible book value and tangible book value per share are non-GAAP measures. |
Book value and Tangible book value (“TBV”) were down as the 2015 earnings were offset by the impact of share repurchases, the value of which reduces book value while held in treasury. Book value per share and TBV per share increased reflecting the decline in outstanding shares.
The Bank is a state-chartered commercial bank headquartered in Salt Lake City, Utah, that is subject to regulation and examination by the FDIC and the UDFI and is our principal bank subsidiary. The Bank originates and funds lending and leasing activity in the U.S. Asset growth during the quarter reflected lending and leasing volume. Deposits grew in support of the increased business and investment activities. The Bank’s capital and leverage ratios are included in the tables that follow and remained well above required levels.
As noted earlier in the Overview section, on August 3, 2015, CIT Bank merged with and into OneWest Bank under the CIT Bank, N.A. name. CIT Bank, N.A., is regulated by the OCC.
As detailed in the following Condensed Balance Sheet table, total assets increased about 4% to $21.9 billion from December 31, 2014. Cash and deposits with banks was down as balances were used to invest in higher earning securities, consisting of approximately $500 million of U.S. Government Agency notes.
Commercial loans totaled $15.7 billion at June 30, 2015, up 5% from December 31, 2014, as new business volumes, which represented nearly all of the new U.S. volumes for NACF and TIF, were partially offset by collections. The portfolio of operating lease equipment, which totaled $2.2 billion, was comprised primarily of railcars and some aircraft.
76 CIT GROUP INC
Table of Contents
CIT Bank deposits were $17.3 billion at June 30, 2015, up 9% from December 31, 2014, supporting the asset growth and other debt reduction. Deposits continued to grow and online deposits exceeded $10 billion during the quarter. The weighted average interest rate was 1.69%, compared to 1.63% at December 31, 2014.
Borrowings at June 30, 2015 mainly consisted of debt related to secured borrowing transactions, the 2014 acquisition of Direct Capital and FHLB advances. Borrowings declined 25% from Dec 31, 2014 as deposits replaced maturities and paydowns.
The following presents condensed financial information for CIT Bank.
Condensed Balance Sheets(dollars in millions)
| | | | June 30,
2015
| | December 31,
2014
|
|---|
ASSETS: | | | | | | | | | | |
| Cash and deposits with banks | | | | $ | 2,978.6 | | | $ | 3,684.9 | |
| Investment securities | | | | | 785.4 | | | | 285.2 | |
| Assets held for sale | | | | | 132.4 | | | | 22.8 | |
| Commercial loans | | | | | 15,711.9 | | | | 14,982.8 | |
| Allowance for loan losses | | | | | (283.8 | ) | | | (269.5 | ) |
| Operating lease equipment, net | | | | | 2,163.6 | | | | 2,026.3 | |
| Goodwill | | | | | 167.8 | | | | 167.8 | |
| Other assets | | | | | 247.4 | | | | 215.7 | |
Total Assets | | | | $ | 21,903.3 | | | $ | 21,116.0 | |
LIABILITIES AND EQUITY: | | | | | | | | | | |
| Deposits | | | | $ | 17,318.7 | | | $ | 15,877.9 | |
| Long-term borrowings | | | | | 1,391.9 | | | | 1,862.5 | |
| Other borrowings | | | | | – | | | | 303.1 | |
| Other liabilities | | | | | 413.1 | | | | 356.1 | |
Total Liabilities | | | | | 19,123.7 | | | | 18,399.6 | |
Total Equity | | | | | 2,779.6 | | | | 2,716.4 | |
Total Liabilities and Equity | | | | $ | 21,903.3 | | | $ | 21,116.0 | |
Capital Ratios |
| Common Equity Tier 1 Capital | | | | | 12.6 | % | | | NA | |
| Tier 1 Capital Ratio | | | | | 12.6 | % | | | 13.0 | % |
| Total Capital Ratio | | | | | 13.8 | % | | | 14.2 | % |
| Tier 1 Leverage ratio | | | | | 12.2 | % | | | 12.2 | % |
NA – Not applicable under Basel I guidelines. | | | | | | | | | | |
Financing and Leasing Assets by Segment (dollars in millions) |
| North American Commercial Finance | | | | $ | 13,116.6 | | | $ | 12,518.8 | |
| Transportation & International Finance | | | | | 4,891.3 | | | | 4,513.1 | |
| Total | | | | $ | 18,007.9 | | | $ | 17,031.9 | |
We compute capital ratios in accordance with Federal Reserve capital guidelines for assessing adequacy of capital. At June 30, 2015, the regulatory capital guidelines applicable to the Bank were based on the Basel III Final Rule. The ratios presented in the previous table for June 30, 2015 are calculated under the current rules. At December 31, 2014, the regulatory capital guidelines that were applicable to the Bank were based on the Capital Accord of the Basel Committee on Banking Supervision (Basel I). The ratios were not significantly impacted by the change.
Item 2. Management’s Discussion and Analysis andItem 3.Quantitative and Qualitative Disclosures about Market Risk 77
Table of Contents
Condensed Statements of Operations (dollars in millions)
| | | | Quarters Ended
| | Six Months Ended |
|---|
| | | | June 30, | | March 31, | | June 30, | | June 30,
|
|---|
| | | | 2015
| | 2015
| | 2014
| | 2015
| | 2014
|
|---|
| Interest income | | | | $ | 203.3 | | | $ | 197.5 | | | $ | 169.8 | | | $ | 400.8 | | | $ | 327.6 | |
| Interest expense | | | | | (76.9 | ) | | | (74.1 | ) | | | (55.1 | ) | | | (151.0 | ) | | | (106.5 | ) |
| Net interest revenue | | | | | 126.4 | | | | 123.4 | | | | 114.7 | | | | 249.8 | | | | 221.1 | |
| Provision for credit losses | | | | | (21.9 | ) | | | (32.1 | ) | | | (14.6 | ) | | | (54.0 | ) | | | (39.4 | ) |
| Net interest revenue, after credit provision | | | | | 104.5 | | | | 91.3 | | | | 100.1 | | | | 195.8 | | | | 181.7 | |
| Rental income on operating leases | | | | | 69.1 | | | | 70.1 | | | | 53.9 | | | | 139.2 | | | | 99.7 | |
| Other income | | | | | 23.8 | | | | 28.7 | | | | 23.0 | | | | 52.5 | | | | 50.0 | |
| Total net revenue, net of interest expense and credit provision | | | | | 197.4 | | | | 190.1 | | | | 177.0 | | | | 387.5 | | | | 331.4 | |
| Operating expenses | | | | | (118.6 | ) | | | (101.4 | ) | | | (82.5 | ) | | | (220.0 | ) | | | (167.9 | ) |
| Depreciation on operating lease equipment | | | | | (29.1 | ) | | | (28.6 | ) | | | (22.7 | ) | | | (57.7 | ) | | | (40.9 | ) |
| Income before provision for income taxes | | | | | 49.7 | | | | 60.1 | | | | 71.8 | | | | 109.8 | | | | 122.6 | |
| Provision for income taxes | | | | | (12.1 | ) | | | (25.0 | ) | | | (30.4 | ) | | | (37.1 | ) | | | (48.2 | ) |
Net income | | | | $ | 37.6 | | | $ | 35.1 | | | $ | 41.4 | | | $ | 72.7 | | | $ | 74.4 | |
New business volume | | | | $ | 1,995.7 | | | $ | 1,450.2 | | | $ | 2,049.3 | | | $ | 3,445.9 | | | $ | 3,709.7 | |
The Bank’s results benefited from growth in AEA. The provision for credit losses for 2015 reflects higher reserve build due to increased assets and asset composition. The decline from the prior quarter is primarily due to a decrease in the non-specific reserve, as credit metrics remain at or near cyclical lows. Net charge-offs as a percentage of average finance receivables were 0.63%, compared to 0.21% in the year-ago quarter and 0.41% in the prior quarter. Year to date, net charge-offs were 0.52%, compared to 0.33% in 2014.
Other income was down from the year-ago and prior quarters, reflecting lower gains on asset sales and fee revenue. Operating expenses increased from the year-ago and prior quarters, reflecting the continued growth of both assets and deposits in the Bank, along with the additional employee costs associated with the third quarter 2014 acquisition of Direct Capital. As a % of AEA, operating expenses were 2.67%, up from 2.18% in the year-ago quarter and 2.34% in the prior quarter.
The provision for income taxes decreased in the quarter due to the previously mentioned favorable resolution of an uncertain tax position.
Net Finance Revenue (dollars in millions)
| | | | Quarters Ended
| | Six Months Ended |
|---|
| | | | June 30, | | March 31, | | June 30, | | June 30,
|
|---|
| | | | 2015
| | 2015
| | 2014
| | 2015
| | 2014
|
|---|
| Interest income | | | | $ | 203.3 | | | $ | 197.5 | | | $ | 169.8 | | | $ | 400.8 | | | $ | 327.6 | |
| Rental income on operating leases | | | | | 69.1 | | | | 70.1 | | | | 53.9 | | | | 139.2 | | | | 99.7 | |
| Finance revenue | | | | | 272.4 | | | | 267.6 | | | | 223.7 | | | | 540.0 | | | | 427.3 | |
| Interest expense | | | | | (76.9 | ) | | | (74.1 | ) | | | (55.1 | ) | | | (151.0 | ) | | | (106.5 | ) |
| Depreciation on operating lease equipment | | | | | (29.1 | ) | | | (28.6 | ) | | | (22.7 | ) | | | (57.7 | ) | | | (40.9 | ) |
| Maintenance and other operating lease expenses* | | | | | (1.3 | ) | | | (1.2 | ) | | | (1.8 | ) | | | (2.5 | ) | | | (3.6 | ) |
| Net finance revenue | | | | $ | 165.1 | | | $ | 163.7 | | | $ | 144.1 | | | $ | 328.8 | | | $ | 276.3 | |
| Average Earning Assets (“AEA”) | | | | $ | 17,571.4 | | | $ | 17,108.8 | | | $ | 14,792.4 | | | $ | 17,358.8 | | | $ | 14,329.9 | |
As a % of AEA: |
| Interest income | | | | | 4.63 | % | | | 4.62 | % | | | 4.59 | % | | | 4.62 | % | | | 4.57 | % |
| Rental income on operating leases | | | | | 1.57 | % | | | 1.64 | % | | | 1.46 | % | | | 1.60 | % | | | 1.39 | % |
| Finance revenue | | | | | 6.20 | % | | | 6.26 | % | | | 6.05 | % | | | 6.22 | % | | | 5.96 | % |
| Interest expense | | | | | (1.75 | )% | | | (1.73 | )% | | | (1.49 | )% | | | (1.74 | )% | | | (1.49 | )% |
| Depreciation on operating lease equipment | | | | | (0.66 | )% | | | (0.67 | )% | | | (0.61 | )% | | | (0.66 | )% | | | (0.57 | )% |
| Maintenance and other operating lease expenses* | | | | | (0.03 | )% | | | (0.03 | )% | | | (0.05 | )% | | | (0.03 | )% | | | (0.05 | )% |
| Net finance revenue | | | | | 3.76 | % | | | 3.83 | % | | | 3.90 | % | | | 3.79 | % | | | 3.85 | % |
* | | Amounts included in CIT Bank operating expenses. |
78 CIT GROUP INC
Table of Contents
NFR increased from the year-ago period, reflecting the growth in financing and leasing assets, and was flat sequentially. NFM was down slightly from the year-ago and prior quarter, reflecting some pressure on loan yields. The operating lease portfolio contributed $39 million to NFR in the second quarter of 2015, down from $40 million in the prior quarter and up from $29 million in the year-ago quarter.
NFR and NFM are key metrics used by management to measure the profitability of our lending and leasing assets. NFR includes interest and fee income on our loans and capital leases, interest and dividend income on cash and investments, rental revenue from our leased equipment, depreciation and maintenance and other operating lease expenses, as well as funding costs. Since our asset composition includes an increasing level of operating lease equipment (12% of AEA for the quarter ended June 30, 2015), NFM is a more appropriate metric for the Bank than net interest margin (“NIM”) (a common metric used by other banks), as NIM does not fully reflect the earnings of our portfolio because it includes the impact of debt costs on all our assets but excludes the net revenue (rental income less depreciation and maintenance and other operating lease expenses) from operating leases.
Item 2. Management’s Discussion and Analysis andItem 3.Quantitative and Qualitative Disclosures about Market Risk 79
Table of Contents
SELECT DATA AND AVERAGE BALANCESThe following table sets forth selected consolidated financial information regarding our results of operations, balance sheets and certain ratios.
Select Data (dollars in millions)
| | | | At or for the Quarters Ended
| | Six Months Ended |
|---|
| | | | June 30, | | March 31, | | June 30, | | June 30,
|
|---|
| | | | 2015
| | 2015
| | 2014
| | 2015
| | 2014
|
|---|
Select Statement of Operations Data |
| Net interest revenue | | | | $ | 18.6 | | | $ | 9.7 | | | $ | 47.6 | | | $ | 28.3 | | | $ | 77.9 | |
| Provision for credit losses | | | | | (18.4 | ) | | | (34.6 | ) | | | (10.2 | ) | | | (53.0 | ) | | | (46.9 | ) |
| Total non-interest income | | | | | 595.2 | | | | 617.0 | | | | 613.3 | | | | 1,212.2 | | | | 1,176.3 | |
| Total other expenses | | | | | (442.3 | ) | | | (444.5 | ) | | | (431.7 | ) | | | (886.8 | ) | | | (865.6 | ) |
| Income from continuing operations | | | | | 115.3 | | | | 103.7 | | | | 195.2 | | | | 219.0 | | | | 310.1 | |
| Net income | | | | | 115.3 | | | | 103.7 | | | | 246.9 | | | | 219.0 | | | | 364.1 | |
Per Common Share Data | | | | | | | | | | | | | | | | | | | | | | |
| Diluted income per common share – continuing operations | | | | $ | 0.66 | | | $ | 0.59 | | | $ | 1.02 | | | $ | 1.24 | | | $ | 1.60 | |
| Diluted income per common share | | | | $ | 0.66 | | | $ | 0.59 | | | $ | 1.29 | | | $ | 1.24 | | | $ | 1.88 | |
| Book value per common share | | | | $ | 50.91 | | | $ | 50.26 | | | $ | 46.42 | | | | | | | | | |
| Tangible book value per common share | | | | $ | 47.51 | | | $ | 46.89 | | | $ | 44.16 | | | | | | | | | |
| Dividends declared per common share | | | | $ | 0.15 | | | $ | 0.15 | | | $ | 0.10 | | | $ | 0.30 | | | $ | 0.20 | |
| Dividend payout ratio | | | | | 22.8 | % | | | 25.6 | % | | | 7.7 | % | | | 24.1 | % | | | 10.7 | % |
Performance Ratios |
| Return on average common stockholders’ equity | | | | | 5.2 | % | | | 4.7 | % | | | 11.3 | % | | | 5.0 | % | | | 8.3 | % |
| Net finance revenue as a percentage of average earning assets | | | | | 4.02 | % | | | 4.00 | % | | | 4.35 | % | | | 4.01 | % | | | 4.18 | % |
| Return on average continuing operations total assets | | | | | 0.99 | % | | | 0.88 | % | | | 1.75 | % | | | 0.93 | % | | | 1.40 | % |
| Total ending equity to total ending assets | | | | | 18.9 | % | | | 18.9 | % | | | 19.5 | % | | | | | | | | |
Balance Sheet Data |
| Loans including receivables pledged | | | | $ | 19,649.3 | | | $ | 19,429.3 | | | $ | 18,604.4 | | | | | | | | | |
| Allowance for loan losses | | | | | (350.9 | ) | | | (356.5 | ) | | | (341.0 | ) | | | | | | | | |
| Operating lease equipment, net | | | | | 15,109.6 | | | | 14,887.8 | | | | 14,788.3 | | | | | | | | | |
| Goodwill | | | | | 565.9 | | | | 563.6 | | | | 403.1 | | | | | | | | | |
| Total cash and interest bearing deposits | | | | | 5,465.3 | | | | 6,306.9 | | | | 6,427.6 | | | | | | | | | |
| Investments securities and securities purchased under agreements to resell | | | | | 2,442.9 | | | | 1,797.4 | | | | 823.1 | | | | | | | | | |
| Assets of discontinued operation | | | | | – | | | | – | | | | 1.0 | | | | | | | | | |
| Total assets | | | | | 46,657.2 | | | | 46,416.0 | | | | 44,152.7 | | | | | | | | | |
| Deposits | | | | | 17,267.8 | | | | 16,758.1 | | | | 13,939.0 | | | | | | | | | |
| Long-term borrowings | | | | | 16,441.6 | | | | 16,658.3 | | | | 17,545.5 | | | | | | | | | |
| Liabilities of discontinued operation | | | | | – | | | | – | | | | 0.9 | | | | | | | | | |
| Total common stockholders’ equity | | | | | 8,807.1 | | | | 8,758.6 | | | | 8,617.6 | | | | | | | | | |
Credit Quality |
| Non-accrual loans as a percentage of finance receivables | | | | | 1.01 | % | | | 0.94 | % | | | 1.02 | % | | | | | | | | |
| Net charge-offs as a percentage of average finance receivables | | | | | 0.48 | % | | | 0.43 | % | | | 0.45 | % | | | 0.46 | % | | | 0.60 | % |
| Allowance for loan losses as a percentage of finance receivables | | | | | 1.79 | % | | | 1.83 | % | | | 1.83 | % | | | | | | | | |
Financial Ratios |
| Common Equity Tier 1 Capital Ratio | | | | | 14.5 | % | | | 14.2 | % | | | NA | | | | | | | | | |
| Tier 1 Capital Ratio | | | | | 14.5 | % | | | 14.2 | % | | | 16.0 | % | | | | | | | | |
| Total Capital Ratio | | | | | 15.2 | % | | | 14.9 | % | | | 16.7 | % | | | | | | | | |
NA – Not applicable under Basel I guidelines.
80 CIT GROUP INC
Table of Contents
Quarterly Average Balances(1)and Associated Income (dollars in millions)
| | | | June 30, 2015
| | March 31, 2015
| | June 30, 2014
|
|---|
| | | | Average
Balance
| | Revenue /
Expense
| | Average
Rate (%)
| | Average
Balance
| | Revenue /
Expense
| | Average
Rate (%)
| | Average
Balance
| | Revenue /
Expense
| | Average
Rate (%)
|
|---|
| Interest bearing deposits | | | | $ | 4,829.4 | | | $ | 3.4 | | | | 0.28 | % | | $ | 5,951.6 | | | $ | 4.0 | | | | 0.27 | % | | $ | 4,620.9 | | | $ | 4.5 | | | | 0.39 | % |
| Securities purchased under agreements to resell | | | | | 675.0 | | | | 1.0 | | | | 0.59 | % | | | 575.0 | | | | 0.7 | | | | 0.49 | % | | | – | | | | – | | | | – | |
| Investments | | | | | 1,510.6 | | | | 4.6 | | | | 1.22 | % | | | 1,497.2 | | | | 3.9 | | | | 1.04 | % | | | 2,035.8 | | | | 3.9 | | | | 0.77 | % |
Loans (including held for sale)(2)(3) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. | | | | | 18,130.4 | | | | 226.1 | | | | 5.41 | % | | | 17,908.2 | | | | 220.0 | | | | 5.36 | % | | | 16,339.2 | | | | 226.9 | | | | 6.03 | % |
| Non-U.S. | | | | | 2,161.3 | | | | 48.7 | | | | 9.01 | % | | | 2,235.3 | | | | 52.4 | | | | 9.38 | % | | | 3,510.0 | | | | 74.5 | | | | 8.49 | % |
Total loans(2) | | | | | 20,291.7 | | | | 274.8 | | | | 5.83 | % | | | 20,143.5 | | | | 272.4 | | | | 5.84 | % | | | 19,849.2 | | | | 301.4 | | | | 6.50 | % |
Total interest earning assets / interest income(2)(3) | | | | | 27,306.7 | | | | 283.8 | | | | 4.39 | % | | | 28,167.3 | | | | 281.0 | | | | 4.22 | % | | | 26,505.9 | | | | 309.8 | | | | 4.92 | % |
Operating lease equipment, net
(including held for sale)(4) |
U.S.(4) | | | | | 7,859.0 | | | | 175.4 | | | | 8.93 | % | | | 7,769.5 | | | | 177.8 | | | | 9.15 | % | | | 7,741.5 | | | | 172.5 | | | | 8.91 | % |
Non-U.S.(4) | | | | | 7,422.2 | | | | 149.1 | | | | 8.04 | % | | | 7,420.0 | | | | 149.9 | | | | 8.08 | % | | | 6,921.8 | | | | 140.8 | | | | 8.14 | % |
Total operating lease equipment, net(4) | | | | | 15,281.2 | | | | 324.5 | | | | 8.49 | % | | | 15,189.5 | | | | 327.7 | | | | 8.63 | % | | | 14,663.3 | | | | 313.3 | | | | 8.55 | % |
Total earning assets(2) | | | | | 42,587.9 | | | | 608.3 | | | | 5.91 | % | | | 43,356.8 | | | | 608.7 | | | | 5.82 | % | | | 41,169.2 | | | | 623.1 | | | | 6.25 | % |
| Non-interest earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash due from banks | | | | | 952.7 | | | | | | | | | | | | 903.6 | | | | | | | | | | | | 1,213.1 | | | | | | | | | |
| Allowance for loan losses | | | | | (358.0 | ) | | | | | | | | | | | (347.7 | ) | | | | | | | | | | | (350.4 | ) | | | | | | | | |
| All other non-interest earning assets | | | | | 3,285.5 | | | | | | | | | | | | 3,317.1 | | | | | | | | | | | | 2,546.5 | | | | | | | | | |
| Assets of discontinued operation | | | | | – | | | | | | | | | | | | – | | | | | | | | | | | | 931.2 | | | | | | | | | |
Total Average Assets | | | | $ | 46,468.1 | | | | | | | | | | | $ | 47,229.8 | | | | | | | | | | | $ | 45,509.6 | | | | | | | | | | |
| Borrowings | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | | $ | 16,934.9 | | | $ | 72.2 | | | | 1.71 | % | | $ | 16,382.2 | | | $ | 69.0 | | | | 1.68 | % | | $ | 13,608.5 | | | $ | 56.1 | | | | 1.65 | % |
Long-term borrowings(5) | | | | | 16,540.3 | | | | 193.0 | | | | 4.67 | % | | | 17,603.9 | | | | 202.3 | | | | 4.60 | % | | | 18,226.2 | | | | 206.1 | | | | 4.52 | % |
| Total interest-bearing liabilities | | | | | 33,475.2 | | | | 265.2 | | | | 3.17 | % | | | 33,986.1 | | | | 271.3 | | | | 3.19 | % | | | 31,834.7 | | | | 262.2 | | | | 3.29 | % |
| Credit balances of factoring clients | | | | | 1,428.6 | | | | | | | | | | | | 1,501.4 | | | | | | | | | | | | 1,301.7 | | | | | | | | | |
| Other non-interest bearing liabilities | | | | | 2,776.7 | | | | | | | | | | | | 2,870.6 | | | | | | | | | | | | 2,863.2 | | | | | | | | | |
| Liabilities of discontinued operation | | | | | – | | | | | | | | | | | | – | | | | | | | | | | | | 793.9 | | | | | | | | | |
| Noncontrolling interests | | | | | 0.5 | | | | | | | | | | | | (3.9 | ) | | | | | | | | | | | 8.4 | | | | | | | | | |
| Stockholders’ equity | | | | | 8,787.1 | | | | | | | | | | | | 8,875.6 | | | | | | | | | | | | 8,707.7 | | | | | | | | | |
Total Average Liabilities and Stockholders’ Equity | | | | $ | 46,468.1 | | | | | | | | | | | $ | 47,229.8 | | | | | | | | | | | $ | 45,509.6 | | | | | | | | | | |
| Net revenue spread | | | | | | | | | | | | | 2.74 | % | | | | | | | | | | | 2.63 | % | | | | | | | | | | | 2.96 | % |
| Impact of non-interest bearing sources | | | | | | | | | | | | | 0.59 | % | | | | | | | | | | | 0.59 | % | | | | | | | | | | | 0.66 | % |
Net revenue/yield on earning assets(2) | | | | | | | | $ | 343.1 | | | | 3.33 | % | | | | | | $ | 337.4 | | | | 3.22 | % | | | | | | $ | 360.9 | | | | 3.62 | % |
(1) – (5) – | | See following page for footnote explanation. |
Item 2. Management’s Discussion and Analysis andItem 3.Quantitative and Qualitative Disclosures about Market Risk 81
Table of Contents
Year to Date Average Balances(1)and Associated Income (dollars in millions)
| | | | June 30, 2015
| | June 30, 2014
|
|---|
| | | | Average
Balance
| | Revenue /
Expense
| | Average
Rate (%)
| | Average
Balance
| | Revenue /
Expense
| | Average
Rate (%)
|
|---|
| Interest bearing deposits | | | | $ | 5,390.1 | | | $ | 7.4 | | | | 0.27 | % | | $ | 4,955.8 | | | $ | 9.1 | | | | 0.37 | % |
| Securities purchased under agreements to resell | | | | | 650.0 | | | | 1.7 | | | | 0.52 | % | | | – | | | | – | | | | – | |
| Investments | | | | | 1,526.2 | | | | 8.5 | | | | 1.11 | % | | | 2,269.6 | | | | 8.1 | | | | 0.71 | % |
Loans (including held for sale)(2)(3) | | | | | | | | | | | | | | | | | | | | | | | | | | |
| U.S. | | | | | 18,016.6 | | | | 446.1 | | | | 5.39 | % | | | 16,087.1 | | | | 441.3 | | | | 5.97 | % |
| Non-U.S. | | | | | 2,203.2 | | | | 101.1 | | | | 9.18 | % | | | 3,622.5 | | | | 153.5 | | | | 8.47 | % |
Total loans(2) | | | | | 20,219.8 | | | | 547.2 | | | | 5.83 | % | | | 19,709.6 | | | | 594.8 | | | | 6.46 | % |
Total interest earning assets / interest income(2)(3) | | | | | 27,786.1 | | | | 564.8 | | | | 4.29 | % | | | 26,935.0 | | | | 612.0 | | | | 4.77 | % |
Operating lease equipment, net
(including held for sale)(4) |
U.S.(4) | | | | | 7,821.1 | | | | 353.2 | | | | 9.03 | % | | | 7,556.7 | | | | 328.7 | | | | 8.70 | % |
Non-U.S.(4) | | | | | 7,424.1 | | | | 299.0 | | | | 8.05 | % | | | 6,733.0 | | | | 276.1 | | | | 8.20 | % |
Total operating lease equipment, net(4) | | | | | 15,245.2 | | | | 652.2 | | | | 8.56 | % | | | 14,289.7 | | | | 604.8 | | | | 8.46 | % |
Total earning assets(2) | | | | | 43,031.3 | | | | 1,217.0 | | | | 5.85 | % | | | 41,224.7 | | | | 1,216.8 | | | | 6.10 | % |
| Non-interest earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash due from banks | | | | | 930.3 | | | | | | | | | | | | 989.6 | | | | | | | | | |
| Allowance for loan losses | | | | | (352.3 | ) | | | | | | | | | | | (354.3 | ) | | | | | | | | |
| All other non-interest earning assets | | | | | 3,301.5 | | | | | | | | | | | | 2,460.5 | | | | | | | | | |
| Assets of discontinued operation | | | | | – | | | | | | | | | | | | 2,167.6 | | | | | | | | | |
Total Average Assets | | | | $ | 46,910.8 | | | | | | | | | | | $ | 46,488.1 | | | | | | | | | |
| Borrowings | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | | $ | 16,644.3 | | | $ | 141.2 | | | | 1.70 | % | | $ | 13,213.3 | | | $ | 108.0 | | | | 1.63 | % |
Long-term borrowings(5) | | | | | 17,131.2 | | | | 395.3 | | | | 4.61 | % | | | 18,497.8 | | | | 426.1 | | | | 4.61 | % |
| Total interest-bearing liabilities | | | | | 33,775.5 | | | | 536.5 | | | | 3.18 | % | | | 31,711.1 | | | | 534.1 | | | | 3.37 | % |
| Credit balances of factoring clients | | | | | 1,459.2 | | | | | | | | | | | | 1,299.8 | | | | | | | | | |
| Other non-interest bearing liabilities | | | | | 2,836.4 | | | | | | | | | | | | 2,862.6 | | | | | | | | | |
| Liabilities of discontinued operation | | | | | – | | | | | | | | | | | | 1,852.0 | | | | | | | | | |
| Noncontrolling interests | | | | | (2.0 | ) | | | | | | | | | | | 10.3 | | | | | | | | | |
| Stockholders’ equity | | | | | 8,841.7 | | | | | | | | | | | | 8,752.3 | | | | | | | | | |
Total Average Liabilities and Stockholders’ Equity | | | | $ | 46,910.8 | | | | | | | | | | | $ | 46,488.1 | | | | | | | | | |
| Net revenue spread | | | | | | | | | | | | | 2.67 | % | | | | | | | | | | | 2.73 | % |
| Impact of non-interest bearing sources | | | | | | | | | | | | | 0.60 | % | | | | | | | | | | | 0.69 | % |
Net revenue/yield on earning assets(2) | | | | | | | | $ | 680.5 | | | | 3.27 | % | | | | | | $ | 682.7 | | | | 3.42 | % |
(1) | | The average balances presented are derived based on month end balances during the year. Tax exempt income was not significant in any of the years presented. Average rates are impacted by FSA accretion and amortization. |
(2) | | The rate presented is calculated net of average credit balances for factoring clients. |
(3) | | Non-accrual loans and related income are included in the respective categories. |
(4) | | Operating lease rental income is a significant source of revenue; therefore, we have presented the rental revenues net of depreciation and net of Maintenance and other operating lease expenses. |
(5) | | Interest and average rates include FSA accretion, including amounts accelerated due to redemptions or extinguishments, and accelerated original issue discount on debt extinguishment related to the GSI facility. |
Interest income on interest bearing deposits, securities purchased under agreements to resell and investment securities was not significant in any of the quarters presented. Investments are typically a combination of high quality debt, primarily U.S. Treasury securities, U.S. Government Agency securities, and supranational and foreign government securities. Revenues were up reflecting a change in investment composition.
82 CIT GROUP INC
Table of Contents
Finance revenue was down slightly from the year-ago quarter and relatively flat for the six months. Pressure on yields continued to offset the benefit of higher assets during the quarter. Loan yields are down in most divisions, reflecting new business yields that are generally below yields on maturing loans.
Net operating lease revenue was primarily generated from the commercial air and rail portfolios. Net operating lease revenue increased compared to the year-ago quarter, benefiting from higher assets and rail yields. On average, lease renewal rates in the rail portfolio re-priced slightly higher than the prior year quarter, while the commercial aircraft portfolio has been re-pricing slightly lower. The slight decline from the prior quarter resulted mostly from lower rental rates.
Interest expense was relatively flat and down relative to average earning assets for the quarter and year to date periods. The weighted average coupon rate of outstanding deposits and long-term borrowings was 3.04% at June 30, 2015, compared to 3.20% at June 30, 2014 and unchanged from March 31, 2015. Compared to the prior year, although rates were generally up, the higher proportion of deposit funding decreased the total funding weighted average coupon rate.
Deposits have increased, both in dollars and proportion of total CIT funding. The weighted average rate of total CIT deposits was 1.74%, 1.64% and 1.67% at June 30, 2015 and 2014 and March 31, 2015, respectively. Deposits represented 51% of the total deposits and long-term borrowing at June 30, 2015, while unsecured debt was 32% and secured debt was 17%. These proportions were fairly consistent with the prior quarter and compared to 44%, 39% and 17%, respectively, at June 30, 2014. These proportions will fluctuate in the future depending upon our funding activities. Deposits and long-term borrowings are also discussed inFunding and Liquidity.
The weighted average coupon rate of long-term borrowings at June 30, 2015 was 4.41%, compared to 4.44% at June 30, 2014 and 4.39% at March 31, 2015. Long-term borrowings consist of unsecured and secured debt. The weighted average coupon rate of unsecured long-term borrowings at June 30, 2015 was 5.03%, up slightly from June 30, 2014, due to the 2015 first quarter maturity, and flat with March 31, 2015. The weighted average coupon rate of secured long-term borrowings at June 30, 2015 was 3.23%, compared to 3.17% at June 30, 2014 and flat with March 31, 2015.
The average long-term borrowings balances presented below were derived based on daily balances and the average rates are based on a 30 days per month day count convention.
Average Daily Long-term Borrowings Balances and Rates (dollars in millions)
| | | | Quarters Ended
|
|---|
| | | | June 30, 2015
| | March 31, 2015
| | June 30, 2014
|
|---|
| | | | Average
Balance
| | Interest
| | Average
Rate
| | Average
Balance
| | Interest
| | Average
Rate
| | Average
Balance
| | Interest
| | Average
Rate
|
|---|
Revolving Credit Facility(1) | | | | $ | – | | | $ | 3.2 | | | | – | | | $ | – | | | $ | 3.2 | | | | – | | | $ | – | | | $ | 3.2 | | | | – | |
| Senior Unsecured Notes | | | | | 10,732.7 | | | | 138.1 | | | | 5.15 | % | | | 11,332.5 | | | | 145.1 | | | | 5.12 | % | | | 12,231.9 | | | | 156.3 | | | | 5.11 | % |
| Secured borrowings | | | | | 5,810.4 | | | | 51.7 | | | | 3.56 | % | | | 6,277.5 | | | | 54.0 | | | | 3.44 | % | | | 5,686.2 | | | | 46.6 | | | | 3.28 | % |
Long-term Borrowings | | | | $ | 16,543.1 | | | $ | 193.0 | | | | 4.67 | % | | $ | 17,610.0 | | | $ | 202.3 | | | | 4.60 | % | | $ | 17,918.1 | | | $ | 206.1 | | | | 4.60 | % |
| | | | Six Months Ended
| | |
|---|
| | | | June 30, 2015
| | June 30, 2014
| | |
|---|
| | | | Average
Balance
| | Interest
| | Average
Rate
| | Average
Balance
| | Interest
| | Average
Rate
| | | | | | |
|---|
Revolving Credit Facility(1) | | | | $ | – | | | $ | 6.4 | | | | – | | | $ | – | | | $ | 7.5 | | | | – | | | | | | | | | | | | | |
| Senior Unsecured Notes | | | | | 11,032.6 | | | | 283.2 | | | | 5.13 | % | | | 12,615.2 | | | | 325.0 | | | | 5.15 | % | | | | | | | | | | | | |
| Secured borrowings | | | | | 6,043.9 | | | | 105.7 | | | | 3.50 | % | | | 5,872.7 | | | | 93.6 | | | | 3.19 | % | | | | | | | | | | | | |
Long-term Borrowings | | | | $ | 17,076.5 | | | $ | 395.3 | | | | 4.63 | % | | $ | 18,487.9 | | | $ | 426.1 | | | | 4.61 | % | | | | | | | | | | | | |
(1) | | Interest expense and average rate includes Facility commitment fees and amortization of Facility deal costs. |
CRITICAL ACCOUNTING ESTIMATESThe preparation of financial statements in conformity with GAAP requires management to use judgment in making estimates and assumptions that affect reported amounts of assets and liabilities, reported amounts of income and expense and the disclosure of contingent assets and liabilities. The following estimates, which are based on relevant information available at the end of each period, include inherent risks and uncertainties related to judgments and assumptions made. We consider the estimates to be critical in applying our accounting policies, due to the existence of uncertainty at the time the estimate is made,
Item 2. Management’s Discussion and Analysis andItem 3.Quantitative and Qualitative Disclosures about Market Risk 83
Table of Contents
the likelihood of changes in estimates from period to period and the potential impact on the financial statements.
Management believes that the judgments and estimates utilized in the following critical accounting estimates are reasonable. We do not believe that different assumptions are more likely than those utilized, although actual events may differ from such assumptions. Consequently, our estimates could prove inaccurate, and we may be exposed to charges to earnings that could be material.
n | | Allowance for Loan Losses |
n | | Fair Value Determination |
n | | Liabilities for Uncertain Tax Positions |
n | | Realizability of Deferred Tax Assets |
There have been no significant changes to the methodologies and processes used in developing estimates relating to these items from those described in our 2014 Annual Report on Form 10-K.
INTERNAL CONTROLS WORKING GROUPThe Internal Controls Working Group (“ICWG”), which reports to the Disclosure Committee, is responsible for monitoring and improving internal controls over external financial reporting. The ICWG is chaired by the Controller and is comprised of executives in Finance, Risk, Operations, Human Resources, Information Technology and Internal Audit. SeeItem 4. Controls and Procedures for more information.
NON-GAAP FINANCIAL MEASUREMENTSThe SEC adopted regulations that apply to any public disclosure or release of material information that includes a non-GAAP financial measure. The accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosure about Market Risk contain certain non-GAAP financial measures. Due to the nature of our financing and leasing assets, which include a higher proportion of operating lease equipment than most BHCs, certain financial measures commonly used by other BHCs are not as meaningful for our Company. Therefore, management uses certain non-GAAP financial measures to evaluate our performance. We intend our non-GAAP financial measures to provide additional information and insight regarding operating results and financial position of the business and in certain cases to provide financial information that is presented to 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 financial measures used by other companies. See footnotes below the tables for additional explanation of non-GAAP measurements.
Total Net Revenues(1)and Net Operating Lease Revenues(2) (dollars in millions)
| | | | Quarters Ended
| | Six Months Ended |
|---|
| | | | June 30, | | March 31, | | June 30, | | June 30,
|
|---|
| | | | 2015
| | 2015
| | 2014
| | 2015
| | 2014
|
|---|
Total Net Revenue | |
| Interest income | | | | $ | 283.8 | | | $ | 281.0 | | | $ | 309.8 | | | $ | 564.8 | | | $ | 612.0 | |
| Rental income on operating leases | | | | | 531.7 | | | | 530.6 | | | | 519.6 | | | | 1,062.3 | | | | 1,011.5 | |
| Finance revenue | | | | | 815.5 | | | | 811.6 | | | | 829.4 | | | | 1,627.1 | | | | 1,623.5 | |
| Interest expense | | | | | (265.2 | ) | | | (271.3 | ) | | | (262.2 | ) | | | (536.5 | ) | | | (534.1 | ) |
| Depreciation on operating lease equipment | | | | | (157.8 | ) | | | (156.8 | ) | | | (157.3 | ) | | | (314.6 | ) | | | (306.1 | ) |
| Maintenance and other operating lease expenses | | | | | (49.4 | ) | | | (46.1 | ) | | | (49.0 | ) | | | (95.5 | ) | | | (100.6 | ) |
| Net finance revenue | | | | | 343.1 | | | | 337.4 | | | | 360.9 | | | | 680.5 | | | | 682.7 | |
| Other income | | | | | 63.5 | | | | 86.4 | | | | 93.7 | | | | 149.9 | | | | 164.8 | |
Total net revenues | | | | $ | 406.6 | | | $ | 423.8 | | | $ | 454.6 | | | $ | 830.4 | | | $ | 847.5 | |
Net Operating Lease Revenue | | | | | | | | | | | | | | | | | | | | | | |
| Rental income on operating leases | | | | $ | 531.7 | | | $ | 530.6 | | | $ | 519.6 | | | $ | 1,062.3 | | | $ | 1,011.5 | |
| Depreciation on operating lease equipment | | | | | (157.8 | ) | | | (156.8 | ) | | | (157.3 | ) | | | (314.6 | ) | | | (306.1 | ) |
| Maintenance and other operating lease expenses | | | | | (49.4 | ) | | | (46.1 | ) | | | (49.0 | ) | | | (95.5 | ) | | | (100.6 | ) |
Net operating lease revenue | | | | $ | 324.5 | | | $ | 327.7 | | | $ | 313.3 | | | $ | 652.2 | | | $ | 604.8 | |
(1) – (2) – | | See following page for footnote explanation. |
84 CIT GROUP INC
Table of Contents
Operating Expenses Excluding Restructuring Costs(3) (dollars in millions)
| | | | Quarters Ended
| | Six Months Ended |
|---|
| | | | June 30, | | March 31, | | June 30, | | June 30,
|
|---|
| | | | 2015
| | 2015
| | 2014
| | 2015
| | 2014
|
|---|
| Operating expenses | | | | $ | (235.0 | ) | | $ | (241.6 | ) | | $ | (225.0 | ) | | $ | (476.6 | ) | | $ | (458.5 | ) |
| Provision for severance and facilities exiting activities | | | | | 1.1 | | | | (1.0 | ) | | | 5.6 | | | | 0.1 | | | | 15.5 | |
| Operating expenses excluding restructuring costs | | | | $ | (233.9 | ) | | $ | (242.6 | ) | | $ | (219.4 | ) | | $ | (476.5 | ) | | $ | (443.0 | ) |
| Operating expenses excluding restructuring costs as a % of AEA | | | | | (2.74 | )% | | | (2.87 | )% | | | (2.64 | )% | | | (2.81 | )% | | | (2.71 | )% |
Earning Assets(4) (dollars in millions)
| | | | June 30,
2015
| | December 31,
2014
| | June 30,
2014
|
|---|
| Loans | | | | $ | 19,649.3 | | | $ | 19,495.0 | | | $ | 18,604.4 | |
| Operating lease equipment, net | | | | | 15,109.6 | | | | 14,930.4 | | | | 14,788.3 | |
| Assets held for sale | | | | | 1,086.8 | | | | 1,218.1 | | | | 1,328.9 | |
| Credit balances of factoring clients | | | | | (1,373.3 | ) | | | (1,622.1 | ) | | | (1,296.5 | ) |
| Total earning assets | | | | $ | 34,472.4 | | | $ | 34,021.4 | | | $ | 33,425.1 | |
Tangible Book Value(5) (dollars in millions)
| | | | June 30,
2015
| | December 31,
2014
| | June 30,
2014
|
|---|
| Total common stockholders’ equity | | | | $ | 8,807.1 | | | $ | 9,068.9 | | | $ | 8,617.6 | |
| Less: Goodwill | | | | | (565.9 | ) | | | (571.3 | ) | | | (403.1 | ) |
| Intangible assets | | | | | (21.4 | ) | | | (25.7 | ) | | | (16.6 | ) |
| Tangible book value | | | | $ | 8,219.8 | | | $ | 8,471.9 | | | $ | 8,197.9 | |
(1) | | Total net revenues is a non-GAAP measure that represents the combination of net finance revenue and other income and is an aggregation of all sources of revenue for the Company. Total net revenues is used by management to monitor business performance. Given our asset composition includes a high level of operating lease equipment, NFM is a more appropriate metric than net interest margin (“NIM”) (a common metric used by other bank holding companies), as NIM does not fully reflect the earnings of our portfolio because it includes the impact of debt costs of all our assets but excludes the net revenue (rental revenue less depreciation and maintenance and other operating lease expenses) from operating leases. |
(2) | | Net operating lease revenue is a non-GAAP measure that represents the combination of rental income on operating leases less depreciation on operating lease equipment and maintenance and other operating lease expenses. Net operating lease revenues is used by management to monitor portfolio performance. |
(3) | | Operating expenses excluding restructuring costs is a non-GAAP measure used by management to compare period over period expenses. |
(4) | | Earning assets is a non-GAAP measure and 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. |
(5) | | 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. Other companies may define or calculate this measure differently. |
FORWARD-LOOKING STATEMENTSCertain statements contained in this document are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements contained herein that are not clearly historical in nature are forward-looking and the words “anticipate,” “believe,” “could,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “potential,” “project,” “target” and similar expressions are generally intended to identify forward-looking statements. Any forward-looking statements contained herein, in press releases, written statements or other documents filed with the Securities and Exchange Commission or in communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls and conference calls, concerning our operations, economic performance and financial condition are subject to known and unknown risks, uncertainties and contingencies. Forward-looking statements are included, for example, in the discussions about:
n | | our liquidity risk and capital management, including our capital plan, leverage, capital ratios, and credit ratings, our liquidity plan, and our plans and the potential transactions designed to enhance our liquidity and capital, and for a return of capital, |
Item 2. Management’s Discussion and Analysis andItem 3.Quantitative and Qualitative Disclosures about Market Risk 85
Table of Contents
n | | our plans to change our funding mix and to access new sources of funding to broaden our use of deposit taking capabilities, |
n | | our pending or potential acquisitions plans and the integration risks inherent in such plans, including our acquisition of OneWest Bank, |
n | | our credit risk management and credit quality, |
n | | our asset/liability risk management, |
n | | our funding, borrowing costs and net finance revenue, |
n | | our operational risks, including success of systems enhancements and expansion of risk management and control functions, |
n | | our mix of portfolio asset classes, including changes resulting from growth initiatives, new business initiatives, new products, acquisitions and divestitures, new business and customer retention, |
n | | legal risks, including related to the enforceability of our agreements and to changes in laws and regulations, |
n | | our commitments to extend credit or purchase equipment, and |
n | | how we may be affected by legal proceedings. |
All forward-looking statements involve risks and uncertainties, many of which are beyond our control, which may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. Also, forward-looking statements are based upon management’s estimates of fair values and of future costs, using currently available information.
Therefore, actual results may differ materially from those expressed or implied in those statements. Factors, in addition to those disclosed in“Risk Factors”, that could cause such differences include, but are not limited to:
n | | capital markets liquidity, |
n | | risks of and/or actual economic slowdown, downturn or recession, |
n | | industry cycles and trends, |
n | | uncertainties associated with risk management, including credit, prepayment, asset/liability, interest rate and currency risks, |
n | | adequacy of reserves for credit losses, |
n | | risks inherent in changes in market interest rates and quality spreads, |
n | | funding opportunities, deposit taking capabilities and borrowing costs, |
n | | conditions and/or changes in funding markets and our access to such markets, including secured and unsecured term debt and the asset-backed securitization markets, |
n | | risks of implementing new processes, procedures, and systems, |
n | | risks associated with the value and recoverability of leased equipment and lease residual values, |
n | | risks of failing to achieve the projected revenue growth from new business initiatives or the projected expense reductions from efficiency improvements, |
n | | application of fair value accounting in volatile markets, |
n | | application of goodwill accounting in a recessionary economy, |
n | | changes in laws or regulations governing our business and operations, or affecting our assets, including our operating lease equipment, |
n | | changes in competitive factors, |
n | | customer retention rates, |
n | | the risks associated with dispositions of businesses or asset portfolios, including how to replace the income associated with such businesses or portfolios and the risk of residual liabilities from such businesses or portfolios, |
n | | the risks associated with acquisitions of businesses or asset portfolios and the risks of integrating such acquisitions, including the acquisition of OneWest Bank, and |
n | | regulatory changes and/or developments. |
Any or all of our forward-looking statements here or in other publications may turn out to be wrong, and there are no guarantees regarding our performance. We do not assume any obligation to update any forward-looking statement for any reason.
86 CIT GROUP INC
Table of Contents
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision of and with the participation of management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) as of June 30, 2015. Based on such evaluation, the principal executive officer and the principal financial officer have concluded that the Company’s disclosure controls and procedures were effective.
(b) Changes In Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 2. Management’s Discussion and Analysis andItem 3.Quantitative and Qualitative Disclosures about Market Risk 87
Table of Contents
Part Two—Other Information
ITEM 1. Legal Proceedings CIT is currently involved, and from time to time in the future may be involved, in a number of judicial, regulatory, and arbitration proceedings relating to matters that arise in connection with the conduct of its business (collectively, “Litigation”), certain of which Litigation matters are described inNote 14 — Contingencies ofItem 1. Consolidated Financial Statements. In view of the inherent difficulty of predicting the outcome of Litigation matters, particularly when such matters are in their early stages or where the claimants seek indeterminate damages, CIT cannot state with confidence what the eventual outcome of the pending Litigation will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines, or penalties related to each pending matter may be, if any. In accordance with applicable accounting guidance, CIT establishes reserves for Litigation when those matters present loss contingencies as to which it is both probable that a loss will occur and the amount of such loss can be reasonably estimated. Based on currently available information, CIT believes that the results of Litigation that is currently pending, taken together, will not have a material adverse effect on the Company’s financial condition, but may be material to the Company’s operating results or cash flows for any particular period, depending in part on its operating results for that period. The actual results of resolving such matters may be substantially higher than the amounts reserved.
For more information about pending legal proceedings, including an estimate of certain reasonably possible losses in excess of reserved amounts, seeNote 14 — Contingencies ofItem 1. Consolidated Financial Statements.
For a discussion of certain risk factors affecting CIT, seePart I, Item 1A: Risk Factors, of CIT’s 2014 Annual Report on Form 10-K, and Forward-Looking Statements of this Form 10-Q.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information related to purchases by the Company of its common shares.
| | | | Total Number
of Shares
Purchased
| | Average
Price Paid
per Share
| | Total Number of
Shares Purchased as
Part of the Publicly
Announced Program
| | Total Dollar Amount
Purchased Under
the Program
| | Approximate Dollar Value
of Shares that May Yet be
Purchased Under the Program
|
|---|
| | | | | | | | | | (dollars in millions) | | (dollars in millions) |
|---|
| First Quarter Purchases | | | | | | | | $ | 45.43 | | | | 7,298,793 | | | $ | 331.6 | | | | | |
| Second Quarter Purchases | | | | | | | | | | | | | | | | | | | | | | |
April 1 – 30, 2015(1) | | | | | 250,000 | | | $ | 44.85 | | | | 250,000 | | | $ | 11.2 | | | | | |
May 1 – 31, 2015(1) | | | | | 537,570 | | | $ | 45.73 | | | | 537,570 | | | $ | 24.6 | | | | | |
June 1 – 30, 2015(1) | | | | | 541,582 | | | $ | 46.48 | | | | 541,582 | | | $ | 25.2 | | | | | |
| | | | | | 1,329,152 | | | $ | 45.87 | | | | 1,329,152 | | | $ | 61.0 | | | | | |
June 30, 2015(1) | | | | | | | | | | | | | 1,329,152 | | | $ | 61.0 | | | $ | 139.0 | |
(1) | | Share repurchased are subject to a $200 million total. |
In 2014, the Board authorized the repurchase of approximately $1.1 billion of the Company’s common shares, which was completed in the first quarter of 2015. In April 2015, the Board authorized an additional $200 million share repurchase program. Management will determine the timing and amount of any share repurchases under the share repurchase authorizations based on market conditions and other considerations. The repurchases may be effected through open market purchases, through derivative, accelerated repurchase and other negotiated
88 CIT GROUP INC
Table of Contents
transactions, and through plans designed to comply with Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended. The repurchased common stock is held as treasury shares and may be used for the issuance of shares under CIT’s employee stock plans or for other purposes.
ITEM 4. Mine Safety Disclosure
Not applicable.
(a) Exhibits
| 2.1 | | Agreement and Plan of Merger, by and among CIT Group Inc., IMB Holdco LLC, Carbon Merger Sub LLC and JCF III HoldCo I L.P., dated as of July 21, 2014 (incorporated by reference to Exhibit 2.1 to Form 8-K filed July 25, 2014). |
| 2.2 | | Amendment No. 1, dated as of July 21, 2015, to the Agreement and Plan of Merger, by and among CIT Group Inc., IMB Holdco LLC, Carbon Merger Sub LLC, and JCF III Holdco I L.P., dated as of July 21, 2014 (incorporated by reference to Exhibit 2.1 to Form 8-K filed July 27, 2015). |
| 3.1 | | Third Amended and Restated Certificate of Incorporation of the Company, dated December 8, 2009 (incorporated by reference to Exhibit 3.1 to Form 8-K filed December 9, 2009). |
| 3.2 | | Amended and Restated By-laws of the Company, as amended through July 15, 2014 (incorporated by reference to Exhibit 99.1 to Form 8-K filed July 16, 2014). |
| 4.1 | | Indenture dated as of January 20, 2006 between CIT Group Inc. and The Bank of New York Mellon (as successor to JPMorgan Chase Bank N.A.) for the issuance of senior debt securities (incorporated by reference to Exhibit 4.3 to Form S-3 filed January 20, 2006). |
| 4.2 | | Framework Agreement, dated July 11, 2008, among ABN AMRO Bank N.V., as arranger, Madeleine Leasing Limited, as initial borrower, CIT Aerospace International, as initial head lessee, and CIT Group Inc., as guarantor, as amended by the Deed of Amendment, dated July 19, 2010, among The Royal Bank of Scotland N.V. (f/k/a ABN AMRO Bank N.V.), as arranger, Madeleine Leasing Limited, as initial borrower, CIT Aerospace International, as initial head lessee, and CIT Group Inc., as guarantor, as supplemented by Letter Agreement No. 1 of 2010, dated July 19, 2010, among The Royal Bank of Scotland N.V., as arranger, CIT Aerospace International, as head lessee, and CIT Group Inc., as guarantor, as amended and supplemented by the Accession Deed, dated July 21, 2010, among The Royal Bank of Scotland N.V., as arranger, Madeleine Leasing Limited, as original borrower, and Jessica Leasing Limited, as acceding party, as supplemented by Letter Agreement No. 2 of 2010, dated July 29, 2010, among The Royal Bank of Scotland N.V., as arranger, CIT Aerospace International, as head lessee, and CIT Group Inc., as guarantor, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets (incorporated by reference to Exhibit 4.11 to Form 10-K filed March 10, 2011). |
Item 6. Exhibits 89
Table of Contents
| 4.3 | | Form of All Parties Agreement among CIT Aerospace International, as head lessee, Madeleine Leasing Limited, as borrower and lessor, CIT Group Inc., as guarantor, various financial institutions, as original ECA lenders, ABN AMRO Bank N.V., Paris Branch, as French national agent, ABN AMRO Bank N.V., Niederlassung Deutschland, as German national agent, ABN AMRO Bank N.V., London Branch, as British national agent, ABN AMRO Bank N.V., London Branch, as ECA facility agent, ABN AMRO Bank N.V., London Branch, as security trustee, and CIT Aerospace International, as servicing agent, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2008 and 2009 fiscal years (incorporated by reference to Exhibit 4.12 to Form 10-K filed March 10, 2011). |
| 4.4 | | Form of ECA Loan Agreement among Madeleine Leasing Limited, as borrower, various financial institutions, as original ECA lenders, ABN AMRO Bank N.V., Paris Branch, as French national agent, ABN AMRO Bank N.V., Niederlassung Deutschland, as German national agent, ABN AMRO Bank N.V., London Branch, as British national agent, ABN AMRO Bank N.V., London Branch, as ECA facility agent, ABN AMRO Bank N.V., London Branch, as security trustee, and CIT Aerospace International, as servicing agent, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2008 and 2009 fiscal years (incorporated by reference to Exhibit 4.13 to Form 10-K filed March 10, 2011). |
| 4.5 | | Form of Aircraft Head Lease between Madeleine Leasing Limited, as lessor, and CIT Aerospace International, as head lessee, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2008 and 2009 fiscal years (incorporated by reference to Exhibit 4.14 to Form 10-K filed March 10, 2011). |
| 4.6 | | Form of Proceeds and Intercreditor Deed among Madeleine Leasing Limited, as borrower and lessor, various financial institutions, ABN AMRO Bank N.V., Paris Branch, as French national agent, ABN AMRO Bank N.V., Niederlassung Deutschland, as German national agent, ABN AMRO Bank N.V., London Branch, as British national agent, ABN AMRO Bank N.V., London Branch, as ECA facility agent, ABN AMRO Bank N.V., London Branch, as security trustee, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2008 and 2009 fiscal years (incorporated by reference to Exhibit 4.15 to Form 10-K filed March 10, 2011). |
| 4.7 | | Form of All Parties Agreement among CIT Aerospace International, as head lessee, Jessica Leasing Limited, as borrower and lessor, CIT Group Inc., as guarantor, various financial institutions, as original ECA lenders, Citibank International plc, as French national agent, Citibank International plc, as German national agent, Citibank International plc, as British national agent, The Royal Bank of Scotland N.V., London Branch, as ECA facility agent, The Royal Bank of Scotland N.V., London Branch, as security trustee, CIT Aerospace International, as servicing agent, and Citibank, N.A., as administrative agent, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2010 fiscal year (incorporated by reference to Exhibit 4.16 to Form 10-K filed March 10, 2011). |
| 4.8 | | Form of ECA Loan Agreement among Jessica Leasing Limited, as borrower, various financial institutions, as original ECA lenders, Citibank International plc, as French national agent, Citibank International plc, as German national agent, Citibank International plc, as British national agent, The Royal Bank of Scotland N.V., London Branch, as ECA facility agent, The Royal Bank of Scotland N.V., London Branch, as security trustee, and Citibank, N.A., as administrative agent, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2010 fiscal year (incorporated by reference to Exhibit 4.17 to Form 10-K filed March 10, 2011). |
| 4.9 | | Form of Aircraft Head Lease between Jessica Leasing Limited, as lessor, and CIT Aerospace International, as head lessee, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2010 fiscal year (incorporated by reference to Exhibit 4.18 to Form 10-K filed March 10, 2011). |
| 4.10 | | Form of Proceeds and Intercreditor Deed among Jessica Leasing Limited, as borrower and lessor, various financial institutions, as original ECA lenders, Citibank International plc, as French national agent, Citibank International plc, as German national agent, Citibank International plc, as British national agent, The Royal Bank of Scotland N.V., London Branch, as ECA facility agent, The Royal Bank of Scotland N.V., London Branch, as security trustee, and Citibank, N.A., as administrative agent, relating to certain Export Credit Agency sponsored secured financings of aircraft and related assets during the 2010 fiscal year (incorporated by reference to Exhibit 4.19 to Form 10-K filed March 10, 2011). |
90 CIT GROUP INC
Table of Contents
| 4.11 | | | Indenture, dated as of March 30, 2011, between CIT Group Inc. and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.1 to Form 8-K filed June 30, 2011). |
| 4.12 | | | First Supplemental Indenture, dated as of March 30, 2011, between CIT Group Inc., the Guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee (including the Form of 5.250% Note due 2014 and the Form of 6.625% Note due 2018) (incorporated by reference to Exhibit 4.2 to Form 8-K filed June 30, 2011). |
| 4.13 | | | Third Supplemental Indenture, dated as of February 7, 2012, between CIT Group Inc., the Guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee (including the Form of Notes) (incorporated by reference to Exhibit 4.4 of Form 8-K dated February 13, 2012). |
| 4.14 | | | Registration Rights Agreement, dated as of February 7, 2012, among CIT Group Inc., the Guarantors named therein, and JP Morgan Securities LLC, as representative for the initial purchasers named therein (incorporated by reference to Exhibit 10.1 of Form 8-K dated February 13, 2012). |
| 4.15 | | | Amended and Restated Revolving Credit and Guaranty Agreement, dated as of January 27, 2014 among CIT Group Inc., certain subsidiaries of CIT Group Inc., as Guarantors, the Lenders party thereto from time to time and Bank of America, N.A., as Administrative Agent and L/C Issuer (incorporated by reference to Exhibit 10.1 to Form 8-K filed January 28, 2014). |
| 4.16 | | | Indenture, dated as of March 15, 2012, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (incorporated by reference to Exhibit 4.1 of Form 8-K filed March 16, 2012). |
| 4.17 | | | First Supplemental Indenture, dated as of March 15, 2012, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 5.25% Senior Unsecured Note due 2018) (incorporated by reference to Exhibit 4.2 of Form 8-K filed March 16, 2012). |
| 4.18 | | | Second Supplemental Indenture, dated as of May 4, 2012, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 5.000% Senior Unsecured Note due 2017 and the Form of 5.375% Senior Unsecured Note due 2020) (incorporated by reference to Exhibit 4.2 of Form 8-K filed May 4, 2012). |
| 4.19 | | | Third Supplemental Indenture, dated as of August 3, 2012, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 4.25% Senior Unsecured Note due 2017 and the Form of 5.00% Senior Unsecured Note due 2022) (incorporated by reference to Exhibit 4.2 to Form 8-K filed August 3, 2012). |
| 4.20 | | | Fourth Supplemental Indenture, dated as of August 1, 2013, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 5.00% Senior Unsecured Note due 2023) (incorporated by reference to Exhibit 4.2 to Form 8-K filed August 1, 2013). |
| 4.21 | | | Fifth Supplemental Indenture, dated as of February 19, 2014, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 3.875% Senior Unsecured Note due 2019) (incorporated by reference to Exhibit 4.2 to Form 8-K filed February 19, 2014). |
| 10.1 | * | | Amended and Restated CIT Group Inc. Long-Term Incentive Plan (as amended and restated effective December 10, 2009) (incorporated by reference to Exhibit 4.1 to Form S-8 filed January 11, 2010). |
| 10.2 | * | | CIT Group Inc. Supplemental Retirement Plan (As Amended and Restated Effective as of January 1, 2008) (incorporated by reference to Exhibit 10.27 to Form 10-Q filed May 12, 2008). |
| 10.3 | * | | CIT Group Inc. Supplemental Savings Plan (As Amended and Restated Effective as of January 1, 2008) (incorporated by reference to Exhibit 10.28 to Form 10-Q filed May 12, 2008). |
| 10.4 | * | | New Executive Retirement Plan of CIT Group Inc. (As Amended and Restated as of January 1, 2008) (incorporated by reference to Exhibit 10.29 to Form 10-Q filed May 12, 2008). |
Item 6. Exhibits 91
Table of Contents
| 10.5 | * | | Form of CIT Group Inc. Long-term Incentive Plan Stock Option Award Agreement (One Year Vesting) (incorporated by reference to Exhibit 10.35 to Form 10-Q filed August 9, 2010). |
| 10.6 | * | | Form of CIT Group Inc. Long-term Incentive Plan Stock Option Award Agreement (Three Year Vesting) (incorporated by reference to Exhibit 10.36 to Form 10-Q filed August 9, 2010). |
| 10.7 | * | | Form of CIT Group Inc. Long-term Incentive Plan Restricted Stock Unit Director Award Agreement (Initial Grant) (incorporated by reference to Exhibit 10.39 to Form 10-Q filed August 9, 2010). |
| 10.8 | * | | Form of CIT Group Inc. Long-term Incentive Plan Restricted Stock Unit Director Award Agreement (Annual Grant) (incorporated by reference to Exhibit 10.40 to Form 10-Q filed August 9, 2010). |
| 10.9 | * | | Amended and Restated Employment Agreement, dated as of May 7, 2008, between CIT Group Inc. and C. Jeffrey Knittel (incorporated by reference to Exhibit 10.35 to Form 10-K filed March 2, 2009). |
| 10.10 | * | | Amendment to Employment Agreement, dated December 22, 2008, between CIT Group Inc. and C. Jeffrey Knittel (incorporated by reference to Exhibit 10.37 to Form 10-K filed March 2, 2009). |
| 10.11 | ** | | Airbus A320 NEO Family Aircraft Purchase Agreement, dated as of July 28, 2011, between Airbus S.A.S. and C.I.T. Leasing Corporation (incorporated by reference to Exhibit 10.35 of Form 10-Q/A filed February 1, 2012). |
| 10.12 | ** | | Amended and Restated Confirmation, dated June 28, 2012, between CIT TRS Funding B.V. and Goldman Sachs International, and Credit Support Annex and ISDA Master Agreement and Schedule, each dated October 26, 2011, between CIT TRS Funding B.V. and Goldman Sachs International, evidencing a $625 billion securities based financing facility (incorporated by reference to Exhibit 10.32 to Form 10-Q filed August 9, 2012). |
| 10.13 | ** | | Third Amended and Restated Confirmation, dated June 28, 2012, between CIT Financial Ltd. and Goldman Sachs International, and Amended and Restated ISDA Master Agreement Schedule, dated October 26, 2011 between CIT Financial Ltd. and Goldman Sachs International, evidencing a $1.5 billion securities based financing facility (incorporated by reference to Exhibit 10.33 to Form 10-Q filed August 9, 2012). |
| 10.14 | ** | | ISDA Master Agreement and Credit Support Annex, each dated June 6, 2008, between CIT Financial Ltd. and Goldman Sachs International related to a $1.5 billion securities based financing facility (incorporated by reference to Exhibit 10.34 to Form 10-Q filed August 11, 2008). |
| 10.15 | | | Form of CIT Group Inc. Long-Term Incentive Plan Performance Stock Unit Award Agreement (with Good Reason) (incorporated by reference to Exhibit 10.36 to Form 10-Q filed May 10, 2012). |
| 10.16 | | | Form of CIT Group Inc. Long-Term Incentive Plan Performance Stock Unit Award Agreement (without Good Reason) (incorporated by reference to Exhibit 10.37 to Form 10-Q filed May 10, 2012). |
| 10.17 | * | | Assignment and Extension of Employment Agreement, dated February 6, 2013, by and among CIT Group Inc., C. Jeffrey Knittel and C.I.T. Leasing Corporation (incorporated by reference to Exhibit 10.34 to Form 10-Q filed November 6, 2013). |
| 10.18 | * | | Form of CIT Group Inc. Long-Term Incentive Plan Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.36 to Form 10-K filed March 1, 2013). |
| 10.19 | * | | Form of CIT Group Inc. Long-Term Incentive Plan Restricted Stock Unit Award Agreement (Executives with Employment Agreements) (incorporated by reference to Exhibit 10.37 to Form 10-K filed March 1, 2013). |
| 10.20 | * | | CIT Employee Severance Plan (Effective as of November 6, 2013) (incorporated by reference to Exhibit 10.37 in Form 10-Q filed November 6, 2013). |
| 10.21 | | | Stockholders Agreement, by and among CIT Group Inc. and the parties listed on the signature pages thereto, dated as of July 21, 2014 (incorporated by reference to Exhibit 10.1 to Form 8-K filed July 25, 2014). |
| 10.22 | * | | Retention Letter Agreement, dated July 21, 2014, between CIT Group Inc. and Nelson Chai and Attached Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.4 to Form 8-K filed July 25, 2014). |
| 10.23 | * | | Extension to Term of Employment Agreement, dated January 2, 2014, between CIT Group Inc. and C. Jeffrey Knittel (incorporated by reference to Exhibit 10.33 to Form 10-Q filed August 6, 2014). |
| 10.24 | * | | Amendment to Employment Agreement, dated July 14, 2014, between CIT Group Inc. and C. Jeffrey Knittel (incorporated by reference to Form 8-K filed July 16, 2014). |
92 CIT GROUP INC
Table of Contents
| 10.25 | * | | Extension to Employment Agreement, dated January 16, 2015, between C.I.T. Leasing Corporation and C. Jeffrey Knittel (incorporated by reference to Exhibit 10.29 to Form 10-K filed February 20, 2015). |
| 10.26 | * | | Form of CIT Group Inc. Long-Term Incentive Plan Restricted Stock Unit Award Agreement (with Performance Based Vesting) (2013) (incorporated by reference to Exhibit 10.30 to Form 10-K filed February 20, 2015). |
| 10.27 | * | | Form of CIT Group Inc. Long-Term Incentive Plan Restricted Stock Unit Award Agreement (with Performance-Based Vesting) (2013) (Executives with Employment Agreements) (incorporated by reference to Exhibit 10.31 to Form 10-K filed February 20, 2015). |
| 10.28 | * | | Form of CIT Group Inc. Long-Term Incentive Plan Restricted Stock Unit Award Agreement (with Performance Based Vesting) (2014) (incorporated by reference to Exhibit 10.32 to Form 10-K filed February 20, 2015). |
| 10.29 | * | | Form of CIT Group Inc. Long-Term Incentive Plan Restricted Stock Unit Award Agreement (with Performance Based Vesting) (2014) (Executives with Employment Agreements) (incorporated by reference to Exhibit 10.33 to Form 8-K filed February 20, 2015). |
| 10.30 | * | | Form of CIT Group Inc. Long-Term Incentive Plan Performance Share Unit Award Agreement (2013) (filed herein). |
| 10.31 | * | | Form of CIT Group Inc. Long-Term Incentive Plan Performance Share Unit Award Agreement (2013) (Executives with Employment Agreements) (filed herein). |
| 10.32 | * | | Form of CIT Group Inc. Long-Term Incentive Plan Performance Share Unit Award Agreement (2014) (Executives with Employment Agreements) (filed herein). |
| 10.33 | * | | Form of CIT Group Inc. Long-Term Incentive Plan Performance Share Unit Award Agreement (2014) (filed herein). |
| 10.34 | * | | Form of CIT Group Inc. Long-Term Incentive Plan Performance Share Unit Award Agreement (2015) (with ROTCE and Credit Provision Performance Measures) (filed herein). |
| 10.35 | * | | Form of CIT Group Inc. Long-Term Incentive Plan Performance Share Unit Award Agreement (2015) (with ROTCE and Credit Provision Performance Measures) (Executives with Employment Agreements) (filed herein). |
| 10.36 | * | | Form of CIT Group Inc. Long-Term Incentive Plan Performance Share Unit Award Agreement (2015) (with Average Earnings per Share and Average Pre-Tax Return on Assets Performance Measures) (filed herein). |
| 10.37 | * | | Form of CIT Group Inc. Long-Term Incentive Plan Performance Share Unit Award Agreement (2015) (with Average Earnings per Share and Average Pre-Tax Return on Assets Performance Measures) (Executives with Employment Agreements)(filed herein). |
| 10.40 | | | Retention Letter Agreement, dated July 21, 2014, between CIT Group Inc. and Steven T. Mnuchin (incorporated by reference to Exhibit 10.2 to Form 8-K filed July 25, 2014). |
| 10.41 | | | Retention Letter Agreement, dated July 21, 2014, between CIT Group Inc. and Joseph Otting and Attached Restricted Stock Unit Award Agreements (incorporated by reference to Exhibit 10.3 to Form 8-K filed July 27, 2015). |
| 12.1 | | | CIT Group Inc. and Subsidiaries Computation of Ratio of Earnings to Fixed Charges. |
| 31.1 | | | Certification of John A. Thain pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Commission, as promulgated pursuant to Section 13(a) of the Securities Exchange Act and Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 | | | Certification of Scott T. Parker pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Commission, as promulgated pursuant to Section 13(a) of the Securities Exchange Act and Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1* | ** | | Certification of John A. Thain pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2* | ** | | Certification of Scott T. Parker pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101.I | NS | | XBRL Instance Document (Includes the following financial information included in the Company’s Annual Report on Form 10-Q for the quarter ended June 30, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements.) |
Item 6. Exhibits 93
Table of Contents
| 101. | SCH | | XBRL Taxonomy Extension Schema Document. |
| 101. | CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101. | LAB | | XBRL Taxonomy Extension Label Linkbase Document. |
| 101. | PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
| 101. | DEF | | XBRL Taxonomy Extension Definition Linkbase Document. |
* | | Indicates a management contract or compensatory plan or arrangement. |
| | | |
** | | Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission as part of an application for granting confidential treatment pursuant to the Securities Exchange Act of 1934, as amended. |
| | | |
*** | | This information is furnished and not filed for purposes of Section 18 of the Securities Exchange Act of 1934 and is not incorporated by reference into any filing under the Securities Act of 1933. |
94 CIT GROUP INC
Table of Contents
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, thereunto duly authorized.
| August 5, 2015 | | CIT GROUP INC. |
| |
| | | /s/ Scott T. Parker |
| | | Scott T. Parker |
| | | Executive Vice President and Chief Financial Officer |
| |
| | | /s/ E. Carol Hayles |
| | | E. Carol Hayles |
| | | Executive Vice President and Controller |
95
