CIT - Earnings call transcript Q2 2019

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Operator

Good morning, and welcome to the CIT is Second Quarter 2019 Earnings Conference Call. My name is Nicole, and I will be your operator today. At this time, all participants are in a listen-only mode. There will be a question-and-answer session later in the call. [Operator Instructions] As a reminder, this conference call is being recorded.

to Investor call Relations. like Callahan, to now of Head would turn over the Barbara I Please ma'am. proceed,

Barbara Callahan

Thank you, Nicole. is Second Good morning, and XXXX Conference welcome Earnings Call. Quarter to CIT

Chairwoman CFO. will by be Our and call our Ellen today Alemany, Fawcett, John and hosted CEO;

we referencing a call in is presentation website our be section Relations Investor of will at this that available During the cit.com.

prepared and within comments included in our material and our Our answer filings. today's are presentation the segment Forward today's call. and reconciliations material, Looking question and non GAAP Statement cover SEC disclosure These of earnings

to I will now Ellen turn Alemany. the call over

Ellen Alemany

Thanks, Barba. you joining the Welcome call. and thank for

pleased to am solid had a second quarter. I that report we

We Tangible X.X% as strategic second share in value are phase by the next delivered book also progress or increases to work net of in the $XX per income CIT. value plan quarter making per share. our XXX long-term create steady on we and million of

plan me touch to a related which few drive highlights Let our on can on Slide that performance X. help you see strategic to

We grow our compared solid loans X% the was up and Origination commercial to last with and business quarter. overall with finance driving asset business division growth. quarter prior leases compared to and X% across average volume capital to core the continue

to billion more We by debt of and secured growth, shareholders. bank capital balance billion, debt We made X.X deposits a shares. average the our returning $X XXX continued online deposit and grew repurchased progress sheet million reduced reduction additional by through in optimizing common funded in wholesale than in a average customers

our up deposits. and from XX% bank comprise now ago our funding XX% of in year a from the deposit funding total is XX% result, a As of

ratio, continue we to our operating which target. improve efficiency and Our in line efficiency with is XX% achieved also

place the more expenses processes balancing scale also in ability and to is which critical operating in business. future efficient to streamline and continue investment get technology success reduce market our We while to

and common we quarter strong underwriting. remains tangible ended credit the in a our equity. We remained Lastly, on disciplined with return second XX.X%

share competitive as it being the and are few last The winning year. and were Let a up lending commercial we highlights division business. still in finance me leases quarter from loans XX% Average the has business. for now while discipline from X% been market and from in remains last

expertise grow to be continue more based We of collateral in we where and the selective strong lending, do. have we in deals type can

our with rated asset We financing in through vehicle A management a also an announced company. an managed expansion capabilities insurance

us broader asset without leverage This us and for some committing clients serve fully will expertise take management we be but growth to source fee to to business expect of capital the income. Northbridge revenue to a like our allows time. It origination time structure up, significant a the over network ramp of create

largest that may allow broader completed to equipment revolving line just earlier that those be yet fit balance an offshore capital of month, We see for lead our and deal not a was Northbridge where deals sheet. credit company, in new referral CNC from market lot us this clients, the our they serve these a a their $XXX for a business. range structures including of million services

average There our and and X% capital growth were quarter the the prior post equipment X% space continue financing in differentiated second leases year. is offering competitive technology advantage. the with divisions The in to strong business up the volumes solid quarter and from from a loans prior

and certain are our trade volumes Factoring year, contemplate last but markets to down Across markets. businesses, issues volume optimistic, cautiously sentiment businesses is up. generally commercial customer starting feels from labor in is still core but modestly tight as soften

association XXXX. the finance estimate growth their and addition, reduce In equipment for leasing

remain our time. unchanged approach these watching other are growth closely and targets at and assessing this and factors We to risk

loans leases ago. the X% and division X% the from quarter were down and the prior year real Average and estate on

to in prepayments solid were quarter, a be originations headwind the the space. in While continue

relationship. Our process portfolio is client underwriting performing well as a result in rigor of strong and the our

average last and Real quarter X% an loans up from a remains Utilization fleet year leases diverse ago. X% from our and advantage. and are strong is core

industrial for slower manage growth are broader which fleet continue and Some monitor to trends the sectors cars. has exhibiting we closely. the But loading slowed certain actively economic

further driven grew segment legacy portfolio, in the last Banking loan. Consumer million mortgage by of Business a quarter Consumer non-performing Lending. about The month loans and earlier sale by completed from mortgage XXX core legacy we To X% reduce Small Mortgages this for average risk

albeit pace, growth we a off call, of tighten our Customer deposits our customers. retention and on bank, direct the savings at rate new more measured existing came customers quarter strong twice Since have first of earnings the last very leading continued at a product and builder strong of seen grew given we growth.

dynamics. Going forward also customer we are to a adjusting market while on focused maintaining value strong proposition

the hand I CIT to the of a member mention want team initiatives and joining month also management Gifas payments John, services addition Treasury the the Jim across Before to this with I to it of lead earlier new enterprise.

to be proven potential Jim in and more and the a team Bob holistic and products this be our space in he and integration will unlock of working set product growth in This these Rubino will strategy an Jim important services with driving is of leader is portfolio. advance the business. to our deliver services. area banking a the

turn of it With financial a for results. John me detailed to account let that,

John Fawcett

continue for share We the and strategy common fourth quarter per on you and equity target income year. as good or our another tangible morning solid everyone. this we net available Thank of of toward XX% with return on progress shareholders quarter execute to $X.XX common Ellen million to had common $XXX

by the quarter year businesses. activity grew our We and strong average leases by our continued from prior the was origination across core quarter, all portfolio loans in and X% ago which X% driven of in

loans. non-accrual and We reduced stay metrics credit underwriting, we disciplined in our stable, remain

elevated expenses ratio Our as improved seasonal from efficiency last net came quarter. down operating levels

book Federal this balance $XXX our repurchased there share further reduce now X.X% I to value per go our the Once tangible quarter. further results financial were Home again, on We our will quarter. book sheet. items contributed detail debt into Bank which of Loan noteworthy and growth we tangible for value, million no stock below common the And optimized

of X net the Slide prior secured Interest relatively declined lower which to finance was were by borrowing offset income revenue higher Turning costs, constant. presentation, by debt. deposit from driven costs on the partially quarter,

approximately in interest backed premium rates, interest reduction securities prepayments. Higher by from forecast driven by $X accelerated in the acceleration our actual The long-term and the amortization essentially the mortgage was on was loans million of on offset higher which resulted investments.

net resulting margin finance the down last by costs. X.XX%, of basis the our quarter is impact finance margin deposit reduction by partially deposit X costs lower borrowing prior seven The net walk, quarter driven strong full higher from Slide quarter. offset was was from points growth

from impacted was by on basis points the backed portfolio. five mortgage our approximately acceleration margin premium also the The negatively amortization of securities investment

average we the Federal quarter I about product. by ended percentage Home was of the normal redeployed investments, debt Loan X.X%. first As than since billion end a cash repaying or of excess about deposit strong our which We in an quarter, higher rate discussed $X savings driven cash with performance February the builder at last of Bank in by

Xst, quarter as our which Xst, more and opportunistically third options reduce at on then will on moves. Fed further savings rate basis non-maturity by we July benefit We to XX continue reduced rates five look deposit builder and the points will further basis May to points the

lower the by was yields on Loan count, backed day more than mortgage modestly from offset described but improved yields benefit an securities book increase in our above.

interest to and agreement offset of The higher expired prepayment by reduction that law recoveries share on was margin indemnification benefited related was on quarter, the a which which March benefits asset a XXst. in this level from interest the mostly

yields expense, productivity were by were lower in relatively constant lease initiatives. operating gross our as reflecting Net maintenance some rail lower offset yields of

increased to of compared written to X, million Turning loan increase The was and a that other finance income quarter. the included in on gain the prior sale off. was non-interest primarily a commercial previously Slide $X

but the than Capital markets this income commercial the reflecting offset fees middle-market derivative finance. higher more were was by decline in M&A quarter weaker customer driven environment sponsor down

intangible the $X prior down from to are cost, asset seasonally compensation benefit and X. levels. amortization the which expenses, from decreased of to elevated quarter. Operating Turning related excluding Slide million decrease $X million

our and quarter first marketing the reduced costs ahead offset our in this was related growth deposit significantly our this and We advertising as exceeded quarter maturities. quarter’s expectations to needed of to deposits, CD amount the

that resulting in expenses accounting of increased approximately $X several items, Other a of other quarter, the resulted operating for new was lease property income. estimate adoption tax we of from million million $X that including standard expenses million $X this the smaller offset non-interest from combination

the offsetting that expenses in non-interest million accounting million $XX new $X to benefit with included of will full-year quarter continue $XX million increase increase The by we estimate XXXX, to the income. million standard and $XX $XX million to a other operating lease

The efficiency and improved the increased points. ratio the by quarter, lease more operating XX% the to XX% than XXX last expenses resulting we reflects estimate from in changes from basis accounting rate reduction which net aforementioned little

We costs at target to reductions and achieve we on-track also operating to operating remain in our the cost when level. are compared committed while XXXX least to XXXX million of further through $XX reducing investing businesses our

Slide XX unchanged average essentially earning from were the sheet. Average assets consolidated balance quarter. shows our prior

loans debt excess consumer deployed investment Home and the Bank We runoff securities. includes legacy cash impact X%, average we mortgage Federal leases and the by quarter, portfolio. from During repay the of to the which grew fund Loan

assets cash in to investments at growth about quarter earning end. average our strong at and resulting Average first XX% quarter, rate run of from our but than interest-bearing declined deposit typical XX% the remained higher

two basis, yield book slowed quarter’s liquidity increased average quarter in full on last We securities of deposits this growth. duration flatness impact remains from higher investment average deposits the X% quarter, of reflecting growth of a our strong reflecting period years, basis, end the the level increased but around on the X%, deposit at curve. The

loans Commercial in quarter. Slide and Finance grew across XX, average all on origination our growth prior portfolios. X% leases drove core businesses provides volume our from more by division. of detail Strong the

see we commercial which to Given the lending to have volume. contributed finance diversity remained continue also which Prepayments XX% to growth. of based about our opportunities, the origination collateral contributed gorgeous of low business,

in strong financing mostly equipment across which our In offset factoring business new business. growth business drove continued volume reduction portfolios, capital, by a the was

this and yields increases in We improvement second small driven businesses with also last the an equipment quarter business the in technology an year driven by of in half experienced solutions. pricing finance

add continued in in but we a to in from In to high net starting quarter, last pressure aggressively origination pricing areas said, see decline the are and to from given increased reduction Real assets. resulted loans. activity a in level That rates some looking competitors certain Finance prepayment Estate swap average

management portfolio to our this Our rail modestly of deliveries as down XX% on repriced mostly quarter below offsets and Utilization leases increased declined XX% new activity. slightly portfolio quarter. as depreciation average this just

the We strength car markets. petroleum continue in see to driven tank chemical rates by and lease

industrial many fleet or within translating exhibiting environment, and growth, as some which weak is we into sand, these In are our pressure rail on freight sectors minerals markets. industry grain. coal expect and non-metallic slower loadings in this However, repricing such utilization

As management to we strong various expertise, our the key and customer continue service cycles. market in we strengths portfolio position, mentioned have the are past, market navigate through fleet as young

amount but We of fleet on to lease in renewing. cars XX% XXXX, the based type renewals total vary on expect quarter-to-quarter will to reprice the continue to XX% down and

portfolio. continued Banking mortgage Commercial legacy despite X% by the the loans we average runoff In consumer grew of

by an and the in environment, origination seen driven interest increase activity correspondent levels retail it have channels. but our driving lending in We stronger current also prepayment is rate

our XXX FICO continue origination and new have scores and of new LTVs to XX% our the XX% area. channel retail through came origination digital total in mortgage below

within further As book week, risk continued as portfolio. efforts value last we of our the sold $XXX Ellen million non-performing indicated, loans of part profile, approximately to improve LCM our in

proceeds in carrying value. excess received We

recognized or reside most on of where the PCI the characterized level were proceeds yield life typically the was a loans over pools on basis. the income as would excess a what pool. the be the in, given cash of remaining will they However, interest gain be loans, of Based recognized flows

average the reflects mentioned which highlights mix, funding I our earlier. XX Slice trends

continue our We funding optimize look including assets our with to of deposits. shrinking to increasing our mix, funded for company and bank mix ways holding

albeit the second the billion strong the quarter type illustrates in increased growth deposits slower from $XX.X XX continue growth quarter. deposits reflecting at to Average mix savings account throughout quarter online Slide $X our deposit and channel. billion, a last and prior by in

expectations. XX% first XX% The with cost from increased in the cumulative deposits last current since increased to of tightening the as December beta XXXX, hike consistent the quarter our cycle of

on especially focusing deposit rates costs declined. which of are we by optimizing will as proportion better, non-maturity We deposits, think increasing perform the

beginning XX moves. points as any our reduced of since and a builder levels We of meaningful rate have result also basis have attrition the seen May rate not savings of by these

any growth and we continue to costs. test Notwithstanding optimize Fed, from fund of need rate effort funding likely our to to to are balancing our rates, deposit the our reductions elasticity or continuing

Turning capital XX. Slide to on

$XXX consisting X.X of an tangible and the quarter, of approximately price million in shares. During value XX average we common repurchased $XX.XX. just under with million shares quarter at book the in shares, million Below

million. Our CETX approximately the the expiration FDIC, loss ratio agreement quarter the which $XXX at of RWA reflecting by the share the XX.X%, decline of end increased with to

HVCRE definition common adoption the Tier If had X you recall, to ratio Partially equity offset last of the accounting by quarter, regulatory net change in new increase the related lease of the standard. we the loans. in a

net was minimal. these both on aggregate, the ratios capital changes In of our impact from

We the XX.X% the Tier target by continue X have to at end beginning to ratio the XX% this XX% year year. equity the from common reduced and of of

XX this guidance quarter guidance below range. our XX was net or $XX $XX Slide credit basis our and within charge-offs provision credit million, points was range highlights our The trends. million modestly

charge-offs to were which from at and $XX capital. declined business prior reserved continue of previously small in million business for the finance, commercial primarily by driven Net quarter within solutions most be

and due approximately declined current. received or above been on non-accrual X% reduction had non-accruals. loans remaining by exited Non-accrual of book to other quarter $XX half previously charge-offs slightly are reserved the million we the of the this that value and was About loans XX%

broad the risk performing new business in overall the come environment and metrics continue originations better rating risk portfolio. credit stable credit Our than remains and to at the of ratings

last reserves to to at continue and slightly X.XX% loans months and remain Our for four and than stable the net X.XX% more times commercial strong charge-offs. XX banking, up of reflect total in

XX Slide discussed. performance key highlights we just reflecting metrics our the trends

tax from rate items business. driven debts was tax XX% local million, with by benefited in ordinary state of the authorities and effective several of was which Our to audit course settlements $X and fleet

Excluding have the our would effective items, been in-line those rate with guidance. discrete XX% tax

on XX.X%. continuing operations return equity from common was tangible Our

lower effective tax second a the semiannual to X.X% been expenses preferred and dividend the fourth prior quarter If our have common you would the is return quarters, that XX.X%, normalize paid tangible in in on equity and from reflecting operating up lower rate.

an continuing to and When the X.X% and XXXX. We increases by assumed are in of focused growth of fourth remain our we assumed targeting ROTCE XXXX, back committed achieving XX% our to quarter the or in to rate we fourth returns XX% initial on and improve no of outlook of quarter set decreases GDP X%. at January, least

and of starting we businesses, to uncertainty little see customer shift commercial from resulting primarily our As are sentiment some to in the related trade Ellen a discussions. mentioned, tariff

evolve and XXXX. continues and In addition, in now the environment multiple to obviously is XXXX reflecting cuts rate rate

would be week and to remain cut of interest rate While able on focused revenue, equity finance continuous still another common the improvement. XXXX tangible pressure our we next we later net return XQ target And believe basis XX%. would we point our on XX achieve this year

uncertain making remains The achieving equity on quarter to challenging the least environment of more predict, fourth XX% a target. at XXXX tangible XXXX is common but our in return

plan current XXXX we to call. on you keep as fourth will guidance quarter our earnings our update posted and through progress the navigate environment We on our

or highlights XX quarter. Page third outlook the for

legacy of that and in assets and continue lower sales in continued total the core reflecting runoff the mortgage quarterly of We growth our portfolio. expect low-single-digit to growth portfolio, portfolio consumer non-performing the slightly

be basis cut XXXX point one third another target the range and low our reflecting at of fourth will quarter XX the end think in in for a our We quarter. the now margin

is to and For quarter down as further, the and range pressured end the expected depending net be third for bottom of the continue on factors. other finance margin as to to deposits environment target trend rates well could the

And as We are be by predict interest but by down is continued offset difficult benefits to to potential a and next higher rate. our mostly higher rates depositors continue will offset yields lower maintenance this earlier of deposit in think recoveries in prepayment CD of a quarter. to - flat to be hand savings a I have reduction products reprice our rate expect level We relatively into migration which we had mentioned will costs. as quarter, builder

expect We quarter be expenses costs. next related to operating flat slightly to to higher marketing

items efficiency XX% I the mentioned, mid deposit As quarter metrics lease be any next reflecting activities tax normalize. discrete trends of net rate is changes. and the to remain our full-year to in absent expected just outlook. consistent with effective includes and the accounting the are Credit impact tax The ratio expected area

with will call turn over And the back that, Ellen. I to

Ellen Alemany

John. Thanks,

creating of we at achieving on value equity fourth least tangible the As in and mentioned, to quarter on year. goal XX% of this common focused are next committed XX% long-term return John remain in of a shareholder and the quarter year, fourth

We on the half progress the in and year potential deliver continuing first and the full of plan are focused with to the in are pleased the on CIT. unlock

we questions. to that, take happy your are With

Operator

you. Thank

We begin question-and-answer session. will [Operator the now Instructions].

question ahead. Moshe of first go Suisse. Our comes Please from Credit Orenbuch

Moshe Orenbuch

balance wondering kind detail. the for am that net if is the lot you you of within of Great. margins see moving could of parts interest Thanks little talk bit moving all because parts just there of how about, I a the a there. for John, year the

John Fawcett

I going to manage without biggest our Yes element Moshe, is actually deposits. mean to this the be question ability of

May, quarter Xst, cut our little and July points. think XX points cut we five got ahead second a bit then own basis in I we in we the in basis

betas we and can expected. fast I come most lower to I think it think how down, obviously, up think remains going seen were be I

But we possibly becomes as really the going to as linchpin. aggressive can. think be are we that I

portfolio kind closely freight, we in out that to some softness there a It that to see the in other an is are problem stand. it of of a I us, little in big element softness, thing but specifically out watching. think there of we for rail are the parts bit is is, the starting not is specifically

So I think those the wildcards. are two

asset thus we pretty the at sheet, business, entire rates, and been On think, origination look side balance originations of I across you think effective. the our have far, if book I of

which terms think changes in business. of quarter the in in year started the but I capital, mix been we have our third there business fastest yields, of last growing is

on been And to to have we able that. hold

that an in rates understanding of between the price think terms difference exercise becomes I and point.

As it down, rates be see to we competitive to can continue come a business interesting will how much maintain pressure capital.

In commercial so is Real still you terms our is are there. and holding it of conditions on. most aviation, own that In think are estate, are we new, we of going it and part, not it more is small finance, estate, I pretty in real competing because on consumer they the to a pockets think see health numbers. be unlikely care, again, are strength, move holding space, will than launching energy, for the I seems to lot have

a we non-maturity a vacuum, especially hard of deposits, this is to competition. which do with think portfolio started the back is it environment rates big just down what going driver to because ability broader So going loan the coming since I what to in quarter be function is on the I to predict, in in manage the especially is going our in can't

Moshe Orenbuch

Got it.

was that, adjusted mean, dividend is the nominally the XX% next on XX.X% getting I about the maybe that you guidance less two what quarter, follow-up, is a numerator sounds down. up back from to think Like tax do for that getting for like maybe the how and your you are in basis, coming but about over that the from as quarters. something what margin between the adjusted than but Just rate thinking XX.X%, actually

John Fawcett

Yes.

committed, remain XX%. So, I the remain Ellen’s look, and I in call script call to think script, we we think my committed

got pull. can we betas. and that deposit can fast the It rates back goes We is, to have how rates back leverage do? of certainly we And kind question the Pull some down.

May on July. in and we before, think, the we very the said terms I of moves were As first early of did on I in

are in the an we way a Loans Federal mix have Bank enormous Home think of elements amount I capacity of there fund we there. within deposits borrowers, the place terms between and

some faster. remains to kind spends. there OpEx more opportunities opportunities out And of take cost also there to In are delay

non-interest our in we added income, been We If terms and BOLI the on you to have have limit the growing BOLI. that. of some aggressive look over of very kind in to we third more quarter up

a which briefly kind new Ellen we launched, of just JV was that important. touched on

think generally can extent mortgage continue moving portfolio senior holdco which legacy between to points strategically assets differential is continue. do that and sale deposits. rail funding Our the the about And sales and the XXX that we look bank I that we at unsecured consumer debt to into basis and worth

levers. two have We

Ellen Alemany

Yes, week, the on I we there add another think it year, we is a mean, basis XX%. XX just want revenue. quarter that, that there put our could and if of hit still net next to would point finance target I this is fourth cut later pressure one But

line. have going do John think to higher room left. more to optimizing remaining assets bank operating some And here, putting some return income the we is continue trend spread to we and in do on We do have expense said to We more we And, a capital the now as at our are structure. little year. look funding there this expect drivers

Moshe Orenbuch

Got Thank you. you.

John Fawcett

question. Next

Operator

comes of question from Oppenheimer. Kotowski next Chris ahead. Our go Please

Chris Kotowski

secondly like on outs question. - long-term that rates backed. that And I you presumably if on as And that, down margin, seemed three Yes, the of one on agree you keep you ins have don't is mind. stabilize? kind the question rates as with the expanding guess, of away the one goes to that long premium do mean away I the things amortization just mortgage goes it is, then further. mentioned just on in Moshe's coming and soon

you said million, you that an gain. but as be, loan there not upfront mentioned and I was the then two are think question number you would PCI taking And $XXX sales

your as on the envision benefits does that done. just the to as then guidance it - two You guidance is has that we in cuts margin? XXXX are cuts an And are rate been based rate is thirdly, the or further see taking and ongoing we

John Fawcett

Alright.

that credit the yes, impaired is kind kind to that the So which the on million out so mean, of this to I portfolios. a the range. gain portfolio, is of gains, over sellout remaining of spread is purchase PCI $XX the million $XX It extent the in

if think it portfolio in the that in is be LCM essentially what will left is you context the years. So about spread it the probably life, XX a XX-year over out

of XXXX to think it then cuts. down to hikes, doing the the think, zero. And way incredibly we through we modeled plan. back we When plan I did hikes, is terms got In we is the We plan, no way time fluid. December, cuts, by had started November, that four I got look, the we the the the no

some coming depends think year, it July I a And rhetoric at the everybody points now quarter, is and whether the when And three. around end down, the lot beginning I XX remainder cuts but much, quarter we who points other sometime this in potentially basis the in July, knows. baked it - two is of of at are points is kind fourth think in quarter of of looking, maybe a I of on how guess the

got have other world seems two incredibly then are environment XXXX. think the be to and Because the fluid, be was I in remains we the And way incredibly this modeling, nimble about think if is, And question? it in the flexible. for And seems but we then change. way reason. to Is like constant even I more it think another no there one we

Chris Kotowski

the backed amortization Yes on mortgage the NIMs? of

John Fawcett

overtime, be only we to retrospective backed, but versus don't it it on we are depends smooth following not accounting, the on contractual forward which mortgage moves, think forward curve the and intends, we're intends, the basis a the think, lower, of I it rates, and so basis. existing moves the a into contemplates I modestly on out want So will will accounting, get weeds,

is you contractual, there why universe I is us and a might but of that that is difference a seeing be go the a suspect forward retrospect, I basis. us, And banks. on relatively a be smooth impact terms for pulls think is and in there universe on Because other that it should between

Chris Kotowski

I Do I And or secondarily, the Okay. then activity on of rates you mean, on or just, a are behavior in general front. payment slowdown see commercial action kind you that the guess, flagging portfolio? of rail reflected

John Fawcett

And early some think days, I I mean, and things in going is by is are cars, I lot it sand rail. in No. there We have forest look, rail coal. down on minerals, in agriculture is think script, that loadings a and do I said driven X% of year-to-date are my as products. coal non-metallic which

have of terms of is white sand I the debate terms of in sand going virtue drillers think I more fracking and in on geological in space, think the of there Northern sand and locally brown sourced drilling to the in be seen brown the sites. is deliver it geology to of the terms and how what of and remains productivity efficiency effectiveness and affects sand transitions cheaper kind to that

pressure one point. So that is

more margin. impacts railroad think shippers I conform service historically, of forcing it PSR, one the at schedules. kind again some just which levels, around to ridged the other But is is

are And so And in trade have customers import then, to tariffs of you export that point. you that activity, uncertainties. is the got generally a given pain have bit a to overhang of operations hesitant and I think with more the little and got so extent invest

repricing. you in levels re-pricing. the I first the And of get if difficult a is say have year, to two look so bit that we What making pretty gauge more lead would of little to modest quarters has actually had

normal would X.X it between got quarter, which second you about was average the car, first cars same for in XXX,XXX XXXX quarter years. and have the given of So course, in life you an thing expect a

about quarter. cars You every expect reprice XX,XXX a X,XXX cars would to year,

maybe bit is and ahead to but that. plan prior. the tanks far early is And plan, reprice where and And having below have the little to impact continue modestly the will it go we of below get a will What and as that of are quarters of the are reprice imports what see terms thus all on PSR out. how exports. visibility tariffs well more is seen in continuing under that is and we plains So days, freights we go, our we albeit this impact still

Chris Kotowski

it Thank you. me. for is great. Okay, That

John Fawcett

Thanks.

Operator

next go of ahead. Cyganovich Citi. Our Arren comes question Please from

Arren Cyganovich

Thanks.

As was costs even everything expected and bit we your rate up. quarter, kept catch obviously cost second now in the excluding the would kind think that have of about deposit the grows But, that that peaked? if cut a this deposit quarter say is you for of deposits you a equal

John Fawcett

would yes. say, I

have think a take and peaked the pulled modeled our I started as savings the for that six portfolio rate account. our typically deposits bank, we mind. the on we non-maturity you rates on I that in yes in say, rates think has online to at in to offer know, clearly have builder come on would environment, rising I back my down entire reprice, least months it

Arren Cyganovich

a loans you not rest And to a know next is to loans? is expect Okay. reprice? we that kind it assuming see then as as lag what a the aspect? would deposit, that your two the for the is repricing expectation would the in just out, resetting? terms the I move, as online the have expect just of up going net margin it catch would of you is you that I of cuts there guess rational timing that more market much to laid does between of But some be finance of there I pressure for mean, Or

John Fawcett

we tried think I get look, deposit pricing. ahead have the on to Well,

And Fed poised more we have think XX all. has are the done basis points cuts. at we So, I before for moved

we this that, So, do a say beta, Xst, points another if conceptually more, we they a If will quarter if in do XX XXX% August did could cut, would basis have I you respond point. think accordingly. they

But again, it depends.

X.XX, not the now are at There are we We rate X.XX, still in Right X.XX. X.XX. at the highest X.XX, market. banks are

And some were of big them banks.

of I be we watch what mindful competition carefully. we have But so And very doing. think the this to is

and balances the extent stickier The that transitioned thesis the balances. important that this to we were was they the have is thing other smaller segment is really customer portfolio, actually

these cycles essentially And have we have no seen so, as through rates, statement and we two actually attrition. cut gone

the side capital, and the sheet, of we absolutely the hand of the volume are think mindful markets left very specifically the competitive. mix remain business been price and has business I And between incredibly terrific. in balance volume The again, and

will be, we we to is to but tipping from closely. not that fact a at point, you some do and It day-to-day seeing the it to watch that so are as But a terms have the there pricing perspective respond point toned to market. tough that are very we in are to be going a environment. of in fluid literally just we is place it what others a is

Arren Cyganovich

additional bit And you adding and then asset just be Would on purely little is of partner's is income based what new kind that? that? the the there associated management talk a Okay. about Or JV. with size Maybe ongoing then this any And recurring on potential overtime? of on is fee volume?

Ellen Alemany

Yes.

that company. if project expanded structure options insurance new flow, [Orion]. to allows us an rated managed vehicle a loan cash by our announced a basically revolving just term through financing And A we So offer

vehicle is then our in this have also and we the place. JV cash flow ABL So Northbridge

in really customer's be just how on more volume, do done it to would now is is more us to early right long-term stages our at revenue stream. much probably being to type the done book our that serve to of also but able business are not for do, is BDCs is another that I it project in about going allowing us outlet basically is business. and and but it And recurring our customers a we million better capacity increase to this books, own to in financing three $XXX Northbridge, we we provide mean,

Arren Cyganovich

on is is to or volume - you have tap, that just the of And kind it based from that? will actual fees recurring some or

Ellen Alemany

both. really is It

Arren Cyganovich

you. Okay. thank alright,

Operator

Instructions] question Valentin ahead. Compass [Operator Research. Scott from go comes Point of Our next Please

Scott Valentin

my good Thanks morning. question. everyone for Yes, taking

there hit targets. year-end? the I you as for $XXX current have imply ROTCE one is And that the you think Ellen, before Does on additional of authorization forward management to of left John, ways to referred one going million additional the authorization. room capital

Ellen Alemany

No. I end was of September. mean, our authorization the through

John Fawcett

Yes.

that we cycle, - have I planning done October September Xst what done Scott, CCAR our now with have longer the So strategic aligned essentially we which we no what is, is XXth. we have mean, request our bank, runs Fed are to

$XXX approved will that Board million was our we exhausted Fed. by XXth, the have by September and on the So

XX% of We course the would in request us arithmetically three have of ratio, incremental for an quarter common been Fed, part the have fourth Tier the to quarters we down go the of that of first to X better over equity necessary which that the would weeks messaging cover expect the for coming that would that XXXX would year. would the actually to that the XXXX. we manage And be

Scott Valentin

quarter. Are any seeing any sector? And said helpful. any very stand you follow-up is linked the delinquencies are is you slowing it I issues increased know you sectors know or out in down. watch you credit Thanks, seeing that of a maybe just it improved in quality, economy one terms list on

Ellen Alemany

No.

that and I think have we we pretty the running good feel of million million. between the overall, it XX and provision about guidance out XX quarterly put

have going We major with the credits, mean, asset as Commercial I have regulatory a we been last businesses Air, Freedom, transition exited Financial including over years. a several risk, company higher NACCO. and through

I And been and assets strategy collateral commitments. quality and flow against reducing based. have flow are Our our loan are loans XX% we that only lending loans. our meaningfully higher our cash mean, now been cash lease has of

line so defense built operate second bank, a are and also, review We standard compliance. have, like, and credit we heightened

- capital are The lean all of first times. have testing longer We five levels leverage our place. times. at are in positions, SIFI, exposure kept levels total liquidity average the stress are we no And, average we robust with XX% cash loans less of senior even four than flow less the but than our leverage and

a lending we by have We so lot industry vertical, are of expertise. industry

last that, credits us. tiny So solid saw for remained little other the bit But operator wood smaller on small business more capital. and restaurants quarter, owner and transportation knock a really than in we a like in

Scott Valentin

color. very for Thanks much. that Okay, thanks

Operator

other no are There turn for questions management closing at over to to the this back time. any like I conference remarks. would

Barbara Callahan

everyone And Thank you, this us you, Nicole. for joining morning. thank

investor have relations the free follow-up team. you to please contact questions, If to get feel any

for with you and information our You have again information find your can time other a great Thank contact cit.com. on day. along

Operator

you today's That participating. call. for concludes Thank

Cit (CIT) 23 Jul 192019 Q2 Earnings call transcript