CIT - Earnings call transcript Q3 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the CIT's Third Quarter 2019 Earnings Conference Call. My name is Keith, and I will be your operator today. At this time, all participants will be in 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, Keith. third quarter Good morning, and earnings call. welcome conference XXXX to CIT's

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

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

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

Thank to you I call and will now Ellen the turn over Alemany.

Ellen Alemany

you Thanks, of joining quarter Barbara. Good $XXX $X.XX per million our strategic share morning and that on another progress call. thank report pleased or the solid a we plan. continued had third common quarter. for to diluted We income I’m net for delivered and performance the posted

in you noteworthy net improved as a take will XX items result had by detail. more then income the We initiatives, their our of through in quarter those John strategic and few a million

continuing we or common diluted Excluding those per $X.XX income share. million XXX operations posted of items, from

the of X key highlight we Slide On drivers of some performance. presentation,

the from steady quarter core up continues leases average and X% period. year Our loans business X% and with growth post to from prior last

average remain of Our total to optimize pricing deposits grow prior from flat and relatively deposit XX% quarter up cost last continue to accounts our the from as year. about we non-maturity XX% deposit

XX% with to steps achieve more tangible on-track quarter compared $XX.XX and strong, expenses, to year. We for We strategic are on performance last is share, goal which of lending. value ended collateral and towards remain remains an per the disciplined our increase reflecting book our based the year credit

commercial funding expand strategic market-leading we And of addition with it also agreement a plan, our the of will products, market profile our acquire our footprint. scalable capabilities Homeowners broader transaction This announced technology with and accelerate business. banking Association additional Mutual an will cost lower through middle august a diversify further deposits To Omaha Bank. geographic to in banking

as OCC which submitted the an forward drive banking integration milestones. of joined CIT move and to under the We planned. professional continues Mike September a application XXth, transaction (Ph). office, management seasoned [White] is to lead leadership our and We the integration to The Mike this around was a who a established robust process has key deal. on effort

The opportunities from integration engaged full timely synergy in complete process transaction, the have and is team the that to growth the deliver on achieve we management identified. a

this expect value believe will in our for to As and tangible particular improve in starting on long-term EPS XXXX. generate accretion franchise, we we said create substantial overtime have return the equity opportunity we before, this common deal double-digit

year related deal. enhancement and includes basis addition through largely immediate the of the the will XX improvement point cost next an The excess to be Association by profitability realizing savings capital business. our deploying driven in This funding Homeowners deposit

growth in profile. other pressure Over leverage Expected our channel year a take and as the in continue the improve timeline, to allow returns we deposit HOA synergies we optimize begin HOA to further middle market some space in we can channels the us off believe our to funding growth two banking. should

teams income. lower integration fee regional for deposits market cost of middle our banking a addition of In addressable opportunity and market expand and should

investment can moving company. will the grade at also our the which more risk the With bank rating of real achieving overall deposits, lower improve we cost overall benefit grows, lower credit assets those are goal as bank into which expected should of this assets. to holding funding profile, of for cost contribute longer-term Other our deal include, to an

aligns additional capital to expand efficiency peers and to profiles better ratio our which ultimately, industry. free improve our through we Our aim the growth, operating in further up leverage risk will will as

To positively will unlock there affect value up, our business believe overtime. elements sum and that meaningful are several transaction this it of we

first our regulatory a on pending focused are quarter approval timely close, We and integration. smooth and

As pleased say added end we index, the CIT completed to at I'm a the KBW to the transformation of as national September, multiyear bank. to-date, that further we result have BKX a which recognizes were of

We among are glad listed on the industry banks to be in other our index.

in the growth and expertise remain Before environment the quarter, Markets and margins. to our in to few CIT We largely in Just put remain has from finance, pockets I appetite strong it pressure in drove rate capital a however, We comes where our of I market turn some on the origination competitive, the risk want and consumer key John, our business. prudent divisions. strength. our in volume touch has commercial highlights business

The commercial and quarter year. loans compared and last group leases to finance average last business

Our healthcare market we verticals, these as in strong expertise. aviation, position renewable industry C&I to and enable collateral and us the to back power, in deals areas win our leverage

lead and a over fees million in of track we significant relationships we finance management build healthcare business and where proven of treasury client. to cultivate markets relationship deal the in as records multiple This years. the ranger us capital deep enabled stream $XXX quarter, in this the is For an a leader agent deal administrative for and a business. example relationship served example, to our and the we long-term want This

the the third factoring technology capital business continues Core Originations however, posted were in volume. commercial another division prepayments estate industries elevated. due up solid, that business. was largely in in of quarter, seasonality growth volume be to driving in industrial business to with real The solid quarter the

[carrier] expectations but in-line result, the our for a business. As assets were in the down the [Ph] of quarter, with

believe but leases ongoing strong in modern a to the rail our were in of flat the rate diverse maintain quarter, division allowed fleet in us Rail the investment service utilization and our loans Average has key to their and our the slowed expertise XX%. Industrial in we production are quality and market. continue of rationalize fleet, the operations, market levels but advantages railroads

and in consumer down segment banking risk business mortgage our sale growth the loans profile. rent off continue reflecting lending the we continue and core our to operations, of as and were loans improve in average small We the to slightly nonperforming portfolio total strong leases post

made progress mentioned earlier, towards in deposits our and I non-maturity we strategically As deposit reducing our more accounts CD shifting volume. have

optimized the on have in environment and to product stable. pricing changes rate savings our the retention account builder this We remain reflect in also

We was good a on have had and very building the the strong have measured we growth to taken in more solid in Overall, deposit and half momentum been quarter. we our it a growth approach third quarter. first

John. me let that, turn it With to

John Fawcett

share. Thank to on make shareholders of per items our priorities. excluding you, we steady good another to had common and income $XXX We And strategic available continue everyone. progress Ellen noteworthy for morning, $X.XX common net quarter with solid million

average ago the costs grew core stable portfolios loans Credit X% by the and to despite a remain Bank We expenses year Mutual X% and we and slightly acquisition. from disciplined quarter remain operating our higher metrics of from quarter. Omaha in underwriting. related leases reduced our on We prior

have note grew per which We program five $XX.XX. value grade note had six year first investment from to up our launched share over a inside term bank S&P, non-core our tangible in an and rating X%.And we issued X% book by just unsecured pricing

and resulted noteworthy On priorities related tangible this in earnings book an items strategic for quarter benefit increase Page a to million. we X, a to value that $XX few net after-tax had to

the be reassertion from related Firstly, of reinvested that charge. our earnings resulted would in accrued which recognizing in our Canada $XX indefinitely, reversal million tax operations benefit to tax

If recall, for took you similar we decided businesses we and sell in when to finance charge the equipment amount a commercial XXXX, Canada. our in

concluded that and had restructuring analyzed remaining operations our completed, we indefinitely. we have reinvest Canada to in the With there our earnings expect

agreement where to a a building corporate functional Second, year office the during and XX entered Jersey into an the Livingston million is operations, sell Jersey, New lease. into which staff Morristown, our We entered our we of impairment took quarter, reflecting after-tax the New move charge, to $XX we Livingston mostly building.

to for efficient operational more Livingston the needs, building be the our move. exceeded keep the cost will for location new operating in and have increase costs would the The

$XX XXXX. also be million be next the realized year a In quarter $XX to took State months. to restructuring used Jersey to to third, starting improve over credit this we and the million tax addition, to XX a awarded initiatives after-tax efficiency XX relating expect we an And in operating over New charge, XX benefits period were

go on the I the results quarter, items. which financial further now noteworthy exclude for our will into detail

quarter Slide X lower to Turning by lower rates as was revenue prior this well income accounting declined costs interest maintenance expense driven the benefited interest on from flat. from of lower market the as purchase from lease quarter, accretion. presentation, rate revenues net finance loans, relatively Net operating while lower floating our

from our look. basis net our is was target prior seven X down Slide finance the Net X.XX%, finance points quarter and below margin rates. margin

target range upon environment. potential quarter, to last mentioned decline the further to bottom the margin pressure expected the As the I of for we rate depending with

across $X market recovery. down Yields businesses, on productivity lower were reflecting were our our lower some cash warranty at and Operating higher repricing yields in rates. all lower Net rail of million rates from as gross lease as were and as this our quarter, by yields offset maintenance well expense, investments loans reflecting lease initiatives a

CDs. offset As non-maturity quarter. benefits, were the of also a later. recoveries in second a which margin little deposit lower I pricing interest reflecting will the was the we and negatively anticipated our rates, by discuss bit impact deposit costs trends by The positive reduction flat in were prepayment elevated

risk our loans we In received LCM of as approximately in mentioned, the non-performing a profile, We of July. our $XXX continue recognized in be will remaining improve portfolio sold Consumer value, excess to of from carrying life pool. addition, as which Legacy the over million Mortgage or Ellen we proceeds

the in look risk On However, higher forma opportunities were reinvestment LCM basis considering a given reduces profile quarters. we and current in After higher the for basis, sales point. for margin one into additional a loans market credit the of stronger approximately the by coming new estimate sale pro are to continuing yielding. loans profile, with we rates, also mortgages these

decreased the commissions, off. revenues, $X will previously Turning on sale and by sale modestly. of life quarter, Slide factoring income which bank Other the income million a insurance was on a $X included our gain equipment recall the owned prior you increased gain lease loan non-interest million compared if program X. to written Fee from that

acquisition. to intangible Slide asset bank amortization the Turning expenses slightly quarter, million Mutual nearly prior of $X operating X, includes excluding relating from decreased but Omaha in expenses the to

quarter as fees. little related net integration. tied related included are expenses application normal legal Loss million well ongoing in including the the acquisition, and increase prior external support in a incurred, difference in as is process, under to reflected the the OCC to $X diligence, matters in to The and regulatory we course, professional

the in a deposits of marketing level more in reduced growth the significantly had related year. we prior our normalized and as a to Advertising excess increased deposit quarter costs earlier result spending as to this quarter

$X from We to that expense other the this expense of the that $X including adoption of tax approximately offset new estimate quarter in $X non-interesting standards, million income. resulted of million was property million accounting operating release

$XX approximately estimate include $XX to million expenses operating standard million be related million $XX expenses operating that other in will to in will new to now $XX Year-to-date, non-interest standard the $XX new million increase we XXXX income. million lease the by increase and offsetting accounting

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

XXXX While target have been ahead of for we costs, operating elevated our been have reductions. our and the schedule expenses running cost acquisition achieving operating

to expect to despite our higher we acquisition. Mutual costs result, a XXXX As Omaha related Bank of meet the guidance

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

of average we includes LCM grew and X% mentioned, as in previously the the investments and offset have our During sale increase loans by quarter portfolio. well An run by the continued off non-performing leases the core as X%. portfolio, growth of partially loans reduced that

on detail growth the our power Strong aviation healthcare, volume leases average most by various core grew within division. from quarter, verticals renewable of by more and prior growth across provides quarterly businesses portfolios. our loans XX finance and C&I. lending, driven in X% Slide origination Commercial

represented which financing lending collateral-based XX% origination of on commercial focus about to continue We volume.

seasonal In stable, adjusted in activity average have portfolio portfolios continued loans risk business our volume and in leases. business this financing higher capital reflect equipment yields remained business rate While decline relatively the in and quarter. increase reduction in new loans the floating and this drove an strong LIBOR spreads in factoring or rates

the Growth small industry. in finance to portfolios our outpace solution and business equipment continues

However, new in are and areas pressured business the yields to aggressively in being competitors rates from decline certain swap add looking from assets.

a occurred estate finance, good real and high continue In result, while the and as they quarter remained we see loans average prepayments later flat. origination to in activity are

business a LIBOR however as spreads stable, lower have relatively levels. result declined of New yields quarter remained portfolio this

portfolio our management fleet successfully rail activity. depreciation slowing continues sectors capacity to industry deliveries rail our mostly manage offset excess above fleet Despite this in as just quarter in declined new growing American industrial the which many increased team in Our North modestly in portfolio growth to XX%. utilization,

this Leases average re-priced down quarter. on X%

We chemical a for car This in continue and particularly pricing re-pricing tank, those to cars result the see improved has rates, and led certain expected. is faster closing lease demand strength markets. originally petroleum as and in gap than to

surplus As sand cars, re-pricing had increased freight downward with most market continues slowdown sector, to levels it in remain the relates XX% modest manufacturing our most freight show to weakness. re-pricing which The markets. to the persistent industry with car in

the demand season uncertainty trade grain harvest late for policies impacting export products. agricultural are and continued In addition, in other and the

we customer strengths and the environment. our fleet past, uncertain strong of in the our mentioned navigate management we in continue service As an key are market positions, have quality expertise, to portfolio as

We renewals continue lease fleet to on re-price XXXX. expect through down XXXX into to and XX% to XX% total the

While type cost and this of number we to upon the quarter-to-quarter depending expect vary renewing.

slightly average business. in consumer core reflecting the were banking, loans In down growth

offset the by continued of sales and the consumer portfolio. of will mortgage off non-performing loans We run legacy

origination little Total coming retail through our below the refinancing FICO have remains mortgage XXX over and scores of activity driven XX%, in XX% volume our by channel. new to digital continue area. originations LTV's Retail strong

Total Average deposits borrowing XX% remained prior end slightly the remained quarter, flat but our average unsecured but at funding. relatively Slide XX total the highlights of increased at from mix. funding portion of as the of the CIT's at needs market in strong the of took acquisition. Mutual of September quarter, we significant for Bank of Omaha funded advantage specific fundamentals end a and declined

below we year at $XXX It significantly As investment bank was million launched a X%. mentioned oversubscribed. notes program six offering our was just note grade by (Ph) and I unsecured earlier, [non-qualified] any rated issued rate S&P

the illustrates offset in flat, by deposits, deposit relatively and Slide increase channel. rates re-pricing in reflecting remain XX mix CDs. deposit non-maturity rates type a reduction Overall an by our from

continue We decline. were savings deposits, accounts. on continue and as perform especially balances that offset shift non-maturity money of in which average believe reduction with a to higher slightly rates down time will In-line better, to to market our we by strategy, deposits, portion partially reflecting increase deposit an

Xst, X%. reduction Bank, In quarter, another five over the by addition rate basis savings we rate the the in the our in reduced savings Direct points XX balanced builder to the points basis of by average on May course while growing deposit

rate moves. another We meaningful continue overall not and need are have rate seen efforts continue rate, to any reductions growth any the builder as of our on to a optimize reduce of the likely savings Notwithstanding attrition to XX points and from Xst, our result balancing we these optimize levels basis deposit to by fund our Fed, continuing costs. our to October funding

ratio elevated quarterly assets. earnings, Mutual growth at shares equity Slide pending remained ratio on stopped our tax relative we the XX.X% capital as Tier disallows targets a Capital decrease RWA in purchases and Omaha to X of deferred due the Bank remained common to acquisition. Turning to XX, reflecting

As now Tier by our X to of to remain a range we expect equity result, year. in high ratio the XX% the the common end mid

within months, our middle to the out to the X of is the which to expected our lower close ensuing the approximately remain the of to of intention our target equity our increase of Upon ratio target in shares X end range. in our After range. for closing market common XX% XX Tier decrease ratio equity common Tier is or order XX.X% is to in common acquisition, the our

our and net million The capital. finance our business highlights was XX credit to $XX guidance by continue driven and offs within below $XX offs solutions primarily charge this slightly basis be credit to business commercial provision quarter charge Slide declined as both Net trends. million XX points, range. well

in loans commercial of LCM total X% loans. from by an by remain non-accrual over driven million, the loans non-accrual partially total and $XX occurring little capital, by and XX% loans. reduction A business below a increased loans increase Non-accrual offset finance of

in Our the credit credit metrics environment stable. remains broad

profile risk at to New a of our portfolio. a business continue to reflect risk risk efforts a as ratings rating better our and in originations than the performing continued result enhance overall come

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

which and future CECL in at the life the upon of As conditions. September over I consider mentioned adopt next of credit will for entire will losses commitments macroeconomic loans allowance conference, credit changes expected must year, Barclays losses the the and cover the we remaining beginning in at

We have CECL for implementation test the continue we functional groups in forecasting preparation loss our models adoption and working methodologies. and develop cross and formed of to

value this is at from tangible be through. we Omaha the book expectation relatively the that are excludes Our Bank to on impact million $XX impact still modest working which today acquisition, million, will $XXX Mutual of any

perspective, the option From over in capital period. capital regulatory phasing we three the impact maintain year of a a

increase an $XXX our Credit by reserves, loss be or expect $XXX as million loans for the be portfolio. mortgage is allowance in We to around however, Impaired loan legacy in driven to expected Purchase the consumer to million largely PCI increase our

the value reserves emphasize tangible not I from by impacted book would be that loans. increase have an in PCI

replace essentially balance. loan As existing a the non-accrual reserve the corresponding with increase will discount the in

economic levels at the subject by the change. portfolios growth, environment. current estimated our low It to are range in will loan date, conditions Our credit adoption economic is also and be stable employment driven one moderate therefore continued assumes and a of composition

have our slide that appendix a included thoughts. We in illustrates current the

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

the slightly our Our noteworthy below which guidance. XX%, is effective excluding tax items, rate was

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

paid would ROTC for our second normalize that and been the quarters the fourth you have is dividend semi-annual If in preferred X.X%.

our fourth for highlights XX quarter. Page outlook the

in our For lower portfolio. quarter, the and quarterly core we and expect fourth to total continue single-digit to low slightly our growth growth portfolio

rate of our the our quarter target continue to we in margin decline between bottom to range. expect the the being our full-year X%, environment, challenging fourth resulting X.X% Given and margin for around

This takes expected re-pricing in million continue we a of is loans that in rail from decline $X decline investment yields the which to Net the securities. are account quarter into yields cut settlement reoccur. pressure continued fourth the a and Also, and warranty rate not leases. to quarter, to on renewed will impact expected of the third September had rate

deposit in the declines partially the to declines. rates expect offset We yield only asset

As XXXX expenses I expect the implies to earlier, slightly meet to the to we Mutual full-year the quarter. fourth acquisition, Bank operating mentioned our the should flat be when to costs third despite quarter additional expense down operating which guidance of related Omaha compared

the million million items and efficiency to discrete mid-XXs fourth rate be assets net million, be our our provision remain absent offset of level The markets outlook. $XX to ratio finance credit expected loan higher quarter $X on the is expectation $XX tax quarter, be next gain result, for reduction effective is a a the any sale $XX revenue. as reflecting is outlook. a around for our to with consistent Credit fees The of capital the previous expected and from strong and full-year performance million to to

in common remain ratio our Tier XX% range. high expect the We mid-to-high equity will X

XX%. normalized Omaha is we dividend impact capital be continuous the on transaction XXXX expected equity common the X.X% level, and improvement environment on the our update in call. quarter, of guidance return quarter remain tangible fourth We focused earnings fourth for the rate of the now our will Given for preferred our on to Bank Mutual closing and higher to

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

Ellen Alemany

Thanks, John.

our discipline. growing we our forward, and deposit our on costs, businesses, are core our maintaining managing expenses credit advancing focused optimizing priorities, Moving strategic

our of Bank are shareholders. drive significant and In approval. focused transaction We and addition, the on customers, potential we Mutual this for completing for pending CIT regulatory communities believe Omaha value will field unlock

to we With that, question. your happy are take

Operator

Yes, thank you.

session. Scott from question-and-answer question Instructions] And [Operator the Point. first comes begin now the Valentin will Compass with We

Scott Valentin

question. taking my everyone. Good Thanks for morning,

But a XQ but trying Just off looking Mutual for cadence? the cuts deposits, the holds rates XXXX XQ is that depends cadence the the again margin then on of improve we on given end margin assume what Bank look with then quarter obviously out with kind at Fed Omaha the fair and not in to if in could of exact in potentially the the into again guidance, of Obviously, XQ XXXX kind fourth does. the Fed cost closing then lower drop margin. of

John Fawcett

Yes.

is I a look, that to into think are Scott. to continue a cadence, XXXX. going it's to they series flow through cuts fair happen I going are the this reality mean you year, rate of have

and So December. September in knows you will happens July, we are who have October modeling and what

Bank scalable part deposit of fact obviously actually that an of that that, our are and your of benefit points spot Mutual of basis transaction terms so Omaha more scalable. value the than in cost the XX it's With deposit of instantaneous point on is important in from is funding provides then us lower and perspective, the that think I

look October to the rate builder already, So on so down of I so July, product And you that what the the of think in with early in September, had banks to yes, quarter. Mutual done expect and basis online to this rest points. by rest have of we impact XXXX savings first the at is I the lever have cuts, have on we the XX play coming our have if of pulled we deposits through then for benefit you rate we other work hopefully year, Omaha think

in the but space, We what which levers, competition rate the large can have you part keep have very November is deposit the wildcard, to expect as to and fed look at by change you of of move in the you early that actions with marketplace. do actually that again we so again kind would driven we in in the pace becomes

around. advertising also to be very and we have marketing, which circumspect And you have try

because the product. far, levels so so, any pretty we And in want builder of cut you haven't attrition don't savings hit meaningful I to we a and note, seen have good quickly think too

Scott Valentin

helpful. that just a loan know And factoring a I I question. core Thanks, one outlook, in than Is broad a very better is you are based terms X.X% of follow-up quarter. The maybe better - driver core seasonality. growth? average think seeing little little primary loan growth I expected that as linked is or mentioned you

Ellen Alemany

Scott, this is Ellen.

a going are customers We fourth solid into fears quarter pipeline. quarter cautious is actually really strong we an the me and with very, with are economic of had et spending, being slowdown, we a that very cetera. seeing, despite capital And

capital, I business. would finance. is performing include that and been in say commercial have But lending, In real that that business probably project the renewable finance, aviation strongest the healthcare, growth in key verticals estate, the

have In real been lot as estate, had expecting we really more real deals significant of John and we we we not syndicating any from had capital mentioned, some - prepayments, fees good are in but markets a growth estate. also

just seasonality very overall, the factoring wasn't business pipeline in is So and it strong.

Scott Valentin

Okay. Thanks very much.

Operator

Thank next with Eric you and question UBS. the Wasserstrom comes from

Eric Wasserstrom

much. very Thanks

Just two of please. clarification points

NPL also mentioned trend, the just then that is you also in first know it like ratio Can NPL but sold there? us the you you have increased. you occurring sequential level NPLs increased on walk what just looks through the The absolute the

John Fawcett

Yes.

basically I the million have have or XX been plus minus the at time or you So been NPLs are here so. $XXX that know least for

the impact portfolio. is LCM of a I confusion little probably think the of there around bit

is which for $XXX about all. included portfolio, So LCM part at not in the million. non-accrual most Those were loans a

back included and went LCM non-accrual. credit and portfolio So was of Most the in it's never came up. down like, purchased we impaired not

loans. is kind trending X% seeing right of non-accrual are you is what of So, around total

nothing been the changed has probably eight here. I quarters, to So in and last really have XX

Ellen Alemany

And downturn I talking lot this that credit this transformed type any the this been really profile a how want year, have a I we Company. see we that credit indicators think have specific suggests just reiterate and to we about of any don't of whole

this commercial here. the But billion, the like of level just now loans seen end Company totaled criticized of $X loans and of the right have ever I third that is quarter the is which leases. This at X% kind at lowest just

It down and a year to Company from at is billion ago debt. have, $X also about exposure a we less consumer the

underweight are mortgage. We on residential

are not business. flow of are Cash total the We XX% credit about exposure. only in loans card now our

really we good line. are in here I So, shape feel the on credit

Eric Wasserstrom

you Thank that. for Yes.

And NIM. so follow-up the to just on

heading it is short-term let's potentially and seems then and just some a is the year of or costs XX of guidance, expectation extrapolate for that the think the But current roll points let's the next not the for out benefit say into of impact I Mutual think the level that XX into trend expectation bit say the a look factor sort do with rise consensus is, in basis lower, next Omaha, directionally about how the say? just few of reflecting NIM of the but from periods over we maybe funding lower pushing from acquisition. of the forward let’s the from

John Fawcett

Mutual the planning in process same reality of because are You know analysis with are we act, bit the is our through now and juggling it I mean, is is we right that But on bearing look, And in went a Scott. will dimension little of the the will is huge the exactly close. rather think to it quarter, going sooner do is guidance. I to think be hopefully I a than midst that a later. Bank the trying of think when transaction we it we first NIM have Omaha

more to so the even I close. with than of are do guidance of will midst and we now hopefully our really and through I expect we comprehensive planning trade I when from some process perspective in in can't SEC the as terms so, fourth come have much that in say quarter the And right that. might the expect said, more we

Eric Wasserstrom

much. very Thanks Excellent.

Operator

this comes And Chris you. & Kotowski Company. question from Thank Oppenheimer with

Chris Kotowski

morning. good Yes

order in noticed text I somewhere book. have capital weighted of since a it being reading is But in that makes those, does went because assets risk increased it right and is how of take was sense share you now. suspended earning that how excess an kind buyback the and does And you is assets particularly the I this material you long involved? becomes As said the this much uptick I rail terms in order it how in RWAs the, and up hurry the guess how long the morning, take? A, before

John Fawcett

rigorous we look portfolio have management. program Yes, around a fairly

Chris gains doing we and have to quarter. accounting a as been you fresh million out HoldCo I think So is probably which $XX million to and have $XX know, been subject of taking realizing cars start we the

cars a we new the say come come, they I cars, basis I When XXX on in think about or buy but XXX want took they were most is XXX when you tank and cars to delivery - know we a of which those regular the space. of fairly quarter,

not a special event. so And it's really

is I RWAs The Omaha. across in going say of of going quarter, deliver to work of to because fourth the are that thing to very actually circumspect managing of terms RWAs the are shares extra we into that it's be calculation we to just amount would going about the Mutual

we think returns little the I on, in to customer. an are bit kind they they So we be risk they the we generating, weighted the the put have a mindful about very are, are of have we probably to going assets of where way in optionality think terms less. importance of assets might the terms And

we little we of shares bit Omaha know can to a of of Omaha, $XXX - which Mutual is So to Mutual equity kind you deliver parent. in is less which that provide the part common can million

Chris Kotowski

Thank me. alright, that is Okay. you. it from

Operator

Caintic Stephens. Instructions] from [Operator comes question with And you. the next Thank Vincent

Vincent Caintic

appreciate details I and fourth morning. there. guidance thanks the quarter Hey good the

note. XXXX, of then XXXX, items was just had jumping interest but the when you other mitigating kind remember when we we still asset I that you asset - thinking planning, early kind time, there and of is rates, of to think speaking, know there point it's again, last you focusing XXXX? yields if be about are should floors on I the broadly that fourth for of had about quarter kind think NIM for yields good are And should particular and low are a kind we there the for declining wondering, about Just you factors that any

Ellen Alemany

again. Listen

experienced has on Finance treasury team. very individual, work going the One And the who XXXX. side, One have run Phil we to integration we great Jim of to has for strengthened I run to think Robbins integration brought of have And a seasoned. the really Gifas done Mutual asset and commercial capital in Omaha shape lot the are we is Commercial management. into the one is running banking management is, further in then us. Bob run markets Group, management

So more traditional what thinking which is strategies. asset management is transactions, you are commercial side to on more we model Mutual Omaha, leading the banking integrate as of going see

that merchant and joint are our customers. our more we JV that credit can wouldn't but have from both into Orion management, commercial ventures. card, like them so cards, treasury be originate us Those Jim allow And generate revenue to We moved appetite, Northbridge running. these treasury we Gifas deals that and up management structures then running

from is of running kind is drop think changing a that of be us, just now. up landscape. terms where in competitive space allow commercial the in Omaha all in because points us we put game So play in land, to of banking going regular in below which in place today, probability to basis going default for us to the to more Mutual the deal And play deposits I is will XX not

So Omaha I Mutual of our days. positive, we in got really in application feel XX

in on We earlier gets the are approved but in as Obviously now, period that get John we this hoping first are we the quarter. shape. good the are common approval the this can which and Saturday said, we in for us, on better deal ends

John Fawcett

jump a QX questions being I And of is would Vincent, point, just not. definitely to it hit off say your good

aggressively going optionality. as have is for a transaction thus us. game Ellen cost an we bank said, enormous gives are of far. We us continue amount just I deposit It Mutual And the think as changer of our down, manage to Omaha to

So on we spend good go better a very feel. we trade forward looking and basis, it, feel at we the the more time think the I about

Vincent Caintic

are the on translating other that? the just there Okay, up yield how or typically is and factors mitigating great. about And that asset I directly there yield just to is on following close are side, we you other think that or or declining your guess LIBOR asset on factors floors side, to

John Fawcett

You know things. a contract-by-contract it's

floors, So them the I have lot of lot relationships don't. a of a think

it So depends.

interest or low so at net margin. the goes As LIBOR go

widen is, floating. to you incredibly to to but at bit other wonder hard are is now going out a I thing start think our to the it's of forecast. our some just XX% that, loans point, some little too of spread right offset

tied So essentially that commercial if all LIBOR. finance, you look at is all of to and month three one

basis were mortgage our you points to half looked I to If essentially floating that at is three in quarter. the XX And down is month commercial third then floating largely and of that real book LIBOR, rate. one XXX% XX think estate, a which consumer tied is

book. part the big it's So a of

Vincent Caintic

got Okay, on these things down. are read concerned maybe and customers. you gears And to Is I are the switching recession slow just a people you when as hearing? about are you. sort broadly, there of of kind reports know, we any talking a your then

get has then customers, of sense of the for good energy are watch since sorry sort been kind just banks, credit Thanks. or concern from into know industries you you hearing some Just any I a looking economy. of are to - has - probably been there. what read a your And nuance what your a at. concern wanting for U.S. list

Ellen Alemany

in you spending, think risk in is just say what a with that of would I general, kind slowdown. I geopolitical the there just is potential observing There are there. market customers are capital across that indicators out So macro the of we know obviously

are We are some affecting hearing our customers. tariffs anecdotally of that

are equipment because order now, some some longer much consumer customers, our of electronics is some really like really, XX book handling orders tariffs. leasing of to because actually had equipment we taking material right used strong is mean, equipment taking the on I months, new impact the market six and

we So seeing some are that. of

business. factoring the In

have the from we what but season. the aren’t season, potentially think affecting customers may spring I the is impact Christmas tariffs it heard

terms in and business and moved think as of renewable our space. we energy in obviously project lending have cleaner, U.S. I companies of the our leasing finance rail greener through really energy, production I in gas and But business. car energy lot as to finance has so oil and production mean, we exploration the been doing a

X% is energy loans. E&P midstream dollars, $X of and than our less its $XXX exposure than total services like less or million, think I billion loan

the think substantially I we in that energy so space. our exposure reduced And have

we on if really - be from years we think last I which side, think Company and have the international portfolio. the NACCO, we have commercial So, would certain air rail, done been derisked freedom, credit everything several the about businesses over have the you like financial

We standard in we processes we cetera, bank. in though all are those stress now even no portfolio are heightened CCAR a our place, longer et have bank, we testing have kept a

are now. We of build all review years have we that defense, out second not have were in line things credit several ago did in place place, CIT these have

have I than So downturn better ever we a feel think prepared are challenges in the market Company's history. of to we withstand the we in

Vincent Caintic

Thank Great. much. Very very helpful.

Operator

with And question you. Thank next the from Citi. comes Arren Cyganovich

Arren Cyganovich

Thanks.

back gears be earn deals the do of deal. One Mutual sort investors come after of longer diluting the shareholders with with got acquisition the and should future as speaking period. pushback in this things management up about coming a of team, these that expect I'm at But by kind to concerned of I this future of from I this that the of many of and we view Omaha view further seem how the was some positive about

is your the post future? requisition view this your additional deals in So what for appetite of

Ellen Alemany

was positive going of enhanced out and helped a funding banking We short-term it build really although it's XX of basis first deposit opportunity a dilutive, basis, feel like of points it ROTCE Mutual XX hundreds franchise. that a the unique on in thereafter. months And a to for CIT have really think impact our and market Omaha was and we middle it that us

But on we CIT is. if you, had that ever any feedback have

earnings those was to and so kind both that secondly solves opportunity in benefits deal long-term for challenges think long-term that good this the a implications this of fixing for had. of the really source more need really You And terms for going thought is it us. deal we of issues, of and Company those we more lower deposits data we have two

But this open for opportunities team the right shareholders. really a and value even a and that took this quickly would time to help again to are are do and it, that made team I as focused market of for little say going is And Company. here this that this have deal deal to this value time lot we showing the or long-term is said as has show team executing always the We that possible we on pain accelerate really now, more management but create execute going here. created short-term a decision the we though market really that to

Arren Cyganovich

you. Thank

Operator

this for return the management any you. would And to at to like Thank time, I floor comments. closing

Barbara Callahan

joining Great. for Thank morning. everyone you, this

follow-up any the If to have contact team. questions, free Investor you Relations feel please

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

Operator

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

Cit (CIT) 22 Oct 192019 Q3 Earnings call transcript