CIT - Earnings call transcript Q4 2019

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Operator

Good morning, and welcome to CIT’s Fourth Quarter 2019 Earnings Conference Call. My name is Elisa, and I will be your operator today. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Barbara Callahan, Head of Investor Relations. Please go ahead.

Barbara Callahan

Elisa. you, Thank welcome call. and fourth XXXX quarter Good to conference earnings morning, CIT’s

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

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

Our disclosures question-and-answer Thank material, presentation prepared reconciliations and the and are earnings call. in today’s our forward-looking and These within cover of statements segment you. today’s materials our non-GAAP included SEC filings. comments

call the turn And to Ellen now I’ll over Alemany.

Ellen Alemany

Thank year of and foundation Omaha Bank. the the we you, Mutual of on thank you call. XXXX and Good morning, acquisition lay Barbara. everyone We for progress for future was for solid plan to joining a made value strategic pivotal creation our began the CIT. through

touch We per for expense XX% or operating with excluding $XXX year up our increase exceeded was of We First, goal over last the million common available our Earnings X%. our We million noteworthy income XXXX and achieved our average $XX which let a loans core performance share. year. a share to target diluted me net and leases achieved XXXX reported target is shareholders items, $X.X $X.XX early. for growth per year. on

and We base mix to continue optimize bank our grew customer direct our funding by XX%.

down for days Fitch. We closing. accelerated of improved loans our we acquisition strengthened signing XX and pace, regulatory And further We from risk Bank approval XXX investment and our bringing Omaha received rating credit an of criticized XX%. to profile completed grade on profile our days from an Mutual the

Omaha Mutual one. in full As quarter a a quarter will result, of Bank earnings for we of recognize

as was than is Omaha made the a of Bank. we XX% and repurchases the reduction the planned ratio that for in to decision Mutual higher share capital acquire Our due to year little

will help returned believe discussed, value. sustainable investment us shareholders acquisition $X.X over we create and billion the last in five previously years this longer-term to we As the

rate dividend return XX.X% acquisition. year X.X% a actions than forma equity preferred pro a Well, for original a was our and at not original were the the stronger on the related the is solid for this three start include plan It tangible of Overall, it on a the that of lower part the company. cuts enter bit year to took to allowed has does excluding Our as XXXX XXXX. target. was was we when us normalized basis, that

transforming testament to CIT last our progress just added and and fact, delivering steady for XXX results to week S&P the In is MidCap which the company another was Index, shareholders.

John activity saw take risk will a first prioritize diluted growth were common as shareholders in and highlights. touch Commercial share. loans to year-over-year we to Average disciplined asset strong we continue continue the adjusted and leases and direct the up account and we detailed a on But origination originations of segment to or for few of performance returns. relationships. $X.XX quarter. balance income primary net approach available a bank I’ll posted segment, In provide Banking million We per to financial $XXX the X%

number have XX% healthcare sole or XXXX. in in four and and XX lead. deals with deals energy sponsored fees we power Key number being were we market healthcare positions. up deals about XX leadership less power We of Capital three in in were the renewable those lead deals where sectors and and drivers XXXX in led and were

meaningfully growth doubled momentum. to number but in begin some under XX. to addition, we gaining to about time sponsored trajectory million. our We middle-market earnings, vehicles for moved to up contribute In $XXX the deals take XX It to assets management spots will is these

businesses. asset-backed origination defense and opportunities strong these technology seeing as in we’re further verticals presence are in the aerospace our these and areas capacity markets. added and as We’ve our enhance in to good Pipelines well

and trade rail manage cycle the in expect we the the continue agreement through to to We to business this be industry. beneficial

fleet demand our some costs to renewal maintenance of and high increased to softness rates. the and remains to helped have any respond improvements Our capacity in offset ready

Consumer to deposit mix innovative Banking banking the our for to and by costs In improving segment, delivering experience. continue we products digital looking customers optimize a

prior points Our compared decreased average costs deposit XX quarter. basis to the

our deposits to has which efforts of of aided Our the XX% increased this optimization total deposits, cycle. non-maturity part in about

some fully in expand a can retention We and customers products pricing to adjusted bank, with that relationship bank have offer their which the direct launched another direct continue levels. see leading product digital new at of account strong to CIT We a is our eChecking way Bank.

lower of businesses deposit earlier, mentioned cost chief deal complimentary and we is Omaha Mutual that the one the these is us at CIT the Bank is largely significantly well in year in to completed fully This to The business. I of new start grow community intend we integration for unlock of brings channel our the underway among years. acquisition association them franchises. the to new coming and value work the a As banking

Our more this goal competitiveness model business for kind addressable create and increase years. is and this will to market going funding of double next sustainable in five Creating our CIT a forward. in the the improvement deposits in profitable

relationship primary and bankers the that deposit historically. relationships create our profitable also deal expand addition, part a on that fee have holistic of is across our will will we and business. that more XX increase to bank the the income and regional growth, deals compliment and middle-market more focused transactional country project to This done us allow deliver we of business In added team as more

Commercial sustainable goals, efficiency. efforts underway improved and continue we will towards goals already fully We Banking capability, accelerate these to build to realize to To we our have the help in with drive these need us along operational overtime. expanding enable to divisions, believe our momentum

that additional million more. we XXXX, to Some more that details and expenses an share do we process, on this but will reduce through happen plan opportunity John To of end, will an in still shortly. $XX operating there’s to integration the believe by

the We is CIT in our bring line will one with it along time. other with peers. been believe business strongest some of us has this positions for in goals more

team the commercial of tools in country. to banks have the the and be top We the one

We’re to customers on are deliver for excited the focused and about shareholders. continuing our opportunities and ahead

With that, me let turn it John. to

John Fawcett

Omaha Thank priorities, mentioned, year, January you, strategic and finish to reported when signed acquisition Ellen, deliver Xst. closing the deal. quarter we and we morning, on And Mutual the everyone. another as We to continue on days just solid good a our strong XXX from of Ellen Bank including as

X% grew for the X% our quarter portfolios indicated, As and Ellen we over in last average and loans year. leases core

metrics reflect provision credit and continued and credit the Our profile improved environment risk continue discipline. to stable and an underwriting

balancing $XX of funding on exceeding to optimizing expenses for fund deposit and from operating portion Omaha after of pricing schedule. ahead issued quarter XX points, reduction by Fitch. XXXX acquisition, by Mutual at with adjusting This of average focus the costs accounting an and basis preferred full million and We investment subordinated we The we both our grade Omaha year received reduced a also stock Bank costs target million attractive a very noteworthy associated expense rate Mutual $XX needs. changes rating lease strategies Bank of debt we as levels to fell continue and items,

share We excluding A we And We $X.X. Series and by this tangible per grew XX% In grew posted noteworthy XX% grew items, full to preferred book it earnings for fourth we year per semiannual share return equity. normalizing the dividend. common continue equity XXXX value the return under to improve XX% tangible for XX% our on year the to on after quarter, common $XX.XX. tangible a just

adjust quarter common and of XX.X%. would also return Mutual on acquisition, tangible the the equity you have If support costs been fourth additional the for incurred of capital our Bank Omaha of buildup and

the While short XX% XX.X% original highlights cuts quarter of in continued XXXX, the noteworthy fourth three the improvement target of reflecting items. we last impact excluding posted in it our year, of unbudgeted over

discuss will this I quarter now There were quarter. results. fourth noteworthy no the items

otherwise I periods excluding our results to in noteworthy comparative will prior items refer However, unless noted.

rental cash driven interest interest decline the costs prior maintenance lower costs lower lower from income quarter, presentation. on securities. primarily rate declined Slide to Net revenue finance X market costs. of bearing interest modestly floating borrowing Turning the revenues and by lower loans, investment our lease higher deposit and from and this while Net rates quarter, benefited lower reflecting costs operating income from

another in our basis is total net May. and also Builder down, optimizing margin in Savings from X.XX% this Net basis basis finance remain we X margin from points current than reflecting guidance. came environment. We XX laser fourth better fourth a finance the XX Xst points Slide on our We XX basis X quarter decline the quarter costs reducing slightly deposit January CDs basis margin our a benefited cost the was points for just the and quarter. down deposit point last It rates focused our walk. rate reflecting rate quarter, by began mentioned. prior points well on trends in in I quarter reduced repriced since the of the X

quarter. more lower lower of non-recurring lower further Omaha deposit are predict. costs pricing balances also would Federal I declined generally purchase we $X our Loan mix with mention and point strategies. our in Bank from average and target Mutual than facility as accretion manage temporarily in reduced excess charges, quarter, to expect X fund Borrowing marketing banking We business maintenance and raise reflecting mileage acquisition. decline rail costs liquidity our Higher recoveries prepayments costs added as Home next difficult to our accounting and margin to this the interest and also and to million Bank to on continue basis balances we commercial which offset ABL that execute

the value portfolio. improved had the loans about had FICO a many scores. and XX. in legacy $XX consumer mortgages been reflecting modified compared million These gain were $XX of performing and Turning prior lower mortgage million non-interest to but Other book to Slide quarter, $X sold million income from

opportunities portfolio as for will risk management portfolio activities. to and selectively look consumer part XXXX our across of We results mortgage similar prove the to generate continue legacy

Compared reflects ago $XX market to increase million the capital fees. of year also quarter, the higher

we to customer these non-interest including markets to initiatives activities to income. In derivatives And XXXX, several expect new clients. we continue our providing Omaha XXXX, in to gross grow grew revenues of fees have by our and capital solutions Mutual improve We from Bank our XX%.

of asset activities. $X quarter, intangible merger of prior included amortization excluding for also Operating year in The related XX. this mostly expenses marketing and million lease $X.XXX the decreased of related acquisition a included Slide XXXX. merger Mutual our intangible related total deposit $XX of million current to excluding Omaha Mutual $XX asset We costs in advertising related driven to million the total from XXXX. to Omaha and by $X billion with Bank costs ended Operating of changes integration million Bank expenses, operating lower quarter million to and Turning from XXXX cost costs in amortization the integration transaction. and expenses, accounting to unchanged $XX gathering

our reduced exceeding we items, year XXXX cost base ahead these our target million by million, time. Excluding reduction XXXX cost $XXX compared $XX of one to to

Ellen illustrate an the will of achieve with improvement the our we cost to appendix to the continuous reductions couple We’ve XXXX. slides cost addition million in acquisition. committed $XX have are the and is Mutual We in Bank in additional as just This process. we a Omaha to announced presentation included of indicated, in synergies

modest quarter. sheet. our And quarter, growth mortgage negative X% Omaha secured reflecting continued cash temporarily modestly the pre-funding To carry reduced loans of and average growth interest our of facilities balance from offset the Average in the and bearing consumer Slide acquisition, the portfolio. prior were for of the legacy XX by Bank the from consolidated earning in we core and loans runoff assets up Mutual during sale leases. investments shows limit

was balance elevated of restricted cash the ahead million $XXX held transaction. in year-end Our cash and by

by on average leases division. Slide XX more detail provides and loans

highest and X% continue see strong. activity pipelines although seen activity businesses the our we origination to the market across new good In business in levels prepayment the drove years. We refinancing volume four commercial liquidity banking, are last have over and increased quarter, prior

asset and away to lower to fee approach recycle growth disciplined to risk-based income a opportunities, our expertise. capital growth, maintaining balancing leverage areas continue as relationships non-accretive we margins are We into returning, from

relatively flat year Commercial up Finance from X% quarter. the and leases were and average quarter this ago loans

Capital risk-adjusted our risk reflects is and to this lower remained and year sectors. as the profile. Growth The relatively decline quarter, Business portfolio LIBOR While, ago quarter, risk outpace we the repositioning from stable. industry, yields rates returning in improve spreads adjusted reduction from continue while in X% efforts to our this away quarter the up ongoing have flat in

be to continue in from the certain yields business New environment. and pressured competitive low areas swap rates

environment. competitive technology current in advantage remain Our helps the us in

LIBOR originations prepayments. yields from declined decline elevated a Real quarter this as of lower this reflecting a disciplined X% at levels and quarter year ago, result levels. Estate modestly Finance Portfolio of

grew in year, the industry more the loadings continued sales. in quarter Rail up depreciation end asset of at most Our to under pressure Rail than this remain portfolio excess capacity from sectors as the industrial deliveries offset beginning the North increase new to year. at American of fleet XX% XX% and in the

cars market Despite our the reprice down some environment, efforts have quarter, of been utilization, renewing. XX% costs to offset at year end, persistent Lease maintenance of weak Rail this weakness. repricing manage has the our reflecting team renewals fleet to mix and able reduce the XX%

XX% of year, the to above down lease slightly XX%. range guidance full renewals reprice For XX% our

weakness while sand continue the market. freight to most continue strength rates the in cars We see show lease car within tank to

fleet renewals XXXX, and cars expect we upon depending XX% to type to but in of on We reprice lease expect the vary XX% the to this down renewing. quarter-to-quarter total number

We current to young the average well well rest year. expect our our environment. XX% of of us market area, fleet, quarter the as management over customer diverse the little utilization strong in dipping navigate first improving position and the the in then service the be and in to a Quality positions our as team XXXX

increase We vigilant Phase we we ready industry, with Consumer growth flat, offset of on as In and business, loans readiness Ellen X the to by consumer reflecting the to the mortgage continued to be and average cars. agreement demand sale be meet trade to will and Banking, beneficial we core load expect ready remain were the the see this extent, asset to loans indicated, of portfolio. legacy that in runoff demand,

reflects average costs The reflects primarily Bank borrowings. highlights average The reflects lower offset funding lower – XX in costs. in borrowings, deposit structured Home mix. Loan cost reduction unsecured balances in higher by lower funding Slide borrowing our and Federal lower particularly costs borrowing our

The Mutual increase at bank sub-debt partial at notes and of of quarter fund million impact X.XX% X.XXX% million quarter of the in at $XXX full to in acquisition. unsecured Omaha borrowings September a includes the $XXX the end of a of raised Bank

earlier, mentioned the liquidity our deployed raised of and reduced Bank I to limit Home negative As Federal facilities carry. acquisition excess ahead Loan the we instruction

reduction mix deposit points, downward basis and channel. and Slide our repricing. Overall rates in non-maturity deposit XX in rates XX illustrates CD deposits the type by declined reflecting a

and With approximately blended HOA the points. immediately we approximately reduce basis deposit will Bank the Mutual Omaha of our Mutual of Omaha $X.X deposits closing the transaction, and rate of Bank XX deposits acquired stable The deposits. costs commercial $X.X current by billion of billion retail of of

quarter, increasing over the first into double another number As bottom initiatives our called existing years, Starting growth of Ellen channel the indicated, deposits deposit to HOA in the we as to of chart. we in to five commitment a place as relationships. well meet the HOA with will markets expanding as reported such of the wallet our have next add share new

able able will clearly progress. to We be be – our see to

of Turning our pending the to grew to Omaha due essentially the purchase the year, ratio retention the XX, reflecting of to of XX% at Tier end equity quarterly acquisition. capital Mutual earnings the the of end Slide which second and common on suspension X at ended activity, share quarter of the Bank

X quarter of Mutual million approximately XX% common qualifying which Omaha of closing the our XX%. In target for preferred million to Tier to fund XX%, of the included stock in Tier impact of raised the ratio lower of addition, both our forma the this including partially capital is acquisition, Pro of sub-debt, $XXX range we end $XXX is X Bank Tier of equity in transaction. the X CECL,

current Our target for intention We as we time at X to continue four well equity to of to as shares level the as approximately our a reach levels remain repurchase dividend range, ratio is order XX.X%, quarters common X common XX.X%, well. Tier common reevaluate will market time to common it at middle and our payout our the our estimate take in pay until levels. that to out the dividend will of our Tier of equity increase which target that share and level

our $XX trends. continued quarter and by the of modestly to XX be Commercial or Slide within charge-offs this points. highlights of provision midpoint of XX $XX guidance million basis below business to points, driven Capital. Net credit of charge-offs Finance our pockets The lending credit million, transportation-related million solutions million Business XX and small guidance primarily range and net was $XX our XX basis $XX were to

driven increased we notable loans any and Finance. non-accrual not loans in in mostly geographic portfolio by $XX industry the specific majority current unrelated Non-accrual Commercial be of was experiencing few The to a million, any trends or and by area. continues are

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

and commercial strong last at Xx reserves charge-offs. stable for the and Our net in total XX-month and X.XX% about of X.XX% remain loans reflects banking

on the ratio We basis marked fully billion tangible the adopted PCD, of of well. to we would book range, approximately loans the million the $XXX forma that added classified period day million purposes. adopt regulatory CETX a value on XX phase-in three-year to that although for points be CIT’s to pro to on impact $XX XX intend we million. from from basis, heavily portfolio from XXXX. Omaha perform the Based our at We phased-in CECL energy beginning $XX to and portfolio Mutual $X.X expect of of one as at apart and loans are impact We Bank estimate

to in price counting process the the on non-PCD of on purchase capital the Mutual on impact first from impact CECL as of reserve and loans, regulatory of the million, reduced acquisition allowance representing built. of reserve and no January to full we portfolio the This X, opportunity million with the will phase-in. loan Mutual the estimate P&L the double a in Bank’s provision We’re portfolio Omaha’s which closed both essentially incur be risk adoption flow through will $XX in to Omaha $XX reviewing capital. credit credit represents build and of the quarter the currently Because capital

relates the the million million increase reserve We million and currently flat increase, – to of to is the Mutual on an difference when portfolio the $XX CIT an $XXX by increase reserve on PCI PCD Bank’s the loans, to energy called where The offset incremental a CIT’s compared reserve which end. the total year related the be capital books will balance. portfolio to increase impact $XXX reflects million, legacy loan PCD Omaha to $XXX loans, Omaha when be estimate portfolio mortgages in an modest in consumer balance to the at primarily are compared The be PCD reserve to portfolio. Bank reserve of Mutual their formerly the which loan in to

growth, appendix and the a estimates current levels There illustrates that stable slide assume in low continued unemployment thoughts was moderate environment. economic a credit on CECL. Our of our latest

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

true-up tax XX% was quarter, local items discrete effective $X impacted in this driven taxes. Our by by and negatively million rate was state and of primarily

year XXXX Page and XXXX. commentary full our to targets, noted, compared on XX outlook will full XXXX. Unless year focus XX otherwise highlights for when my

results and by actual quarter. vary may Excluding noteworthy items

declining markets. levels current GDP growth at end unemployment Our credit of outlook and in stable cut the rate late assumes from XXXX, XXXX, stable one

$X.X corresponding commercial commercial middle estate The $X.X $X.X loans, to billion consumer billion Bank banking $X.X will banking loans, are Mutual and in commercial of in market which billion primarily of loans add C&I which mortgages. acquisition and in real loans billion includes Omaha

leases, which the area, and of of grow For average and runoff. the Omaha will offset by mid in Mutual be including loans $X.X slightly to loans sales after are expected loan billion LCM, portfolio single-digit

going in repricing reflects which our productivity portfolio X% to continued X% given XXXX margin while on This reflecting expect to higher is it finance pressure cars of X.XX% this maintenance year on to Net and number to off the initiatives, and the lease, rail expected X.XX%. costs down calls range were we industry churn. be be

all a on five Rail. Pulling estimate the we this from together, XX currently margin points to drag basis

the remains, there while is pickup uncertainty a rates, from impact a be could if However, there phase one positive agreement. renewal trade in

expect to asset to we side, sell the On continue disposition bank. railcars our the as manage outside fleet, we

to time XXXX. an actions cost extra these provide over million expect funding and additional in to $XX We on an gain $X of revenue reduce million sale

Excluding the and relatively margin finance number should with constant impact from a puts takes. of net remain Rail,

Omaha immediately margin points. about basis The by acquisition benefits Bank Mutual of of three

repricing, of on downward repricing of continued fourth well expect of the as CIT’s downward a of reflecting impacts, also rate the reductions January the deposit benefits quarter We the CD yields. as X in these full base, these quarter XXXX benefit impacts offsetting cuts

with continued to In addition, in other risk activities improve negatively expect our management we benefits our modestly to designed profile offsetting margin portfolio impact income. non-interest

repricing We quarter guidance area I net first mileage of costs to the revenue lower Rail benefited our fourth absence and just mid the excess as levels margin expect be maintenance well quarter. from mentioned, charge lease that the as of the in reflecting higher that operating to in low lower

loan to Omaha of channel. as be the the offset lower PAA portfolio online reduction impact from expect sale from the Bank the lower repricing LCM benefit October of and We the from rate in from cut loans benefits Mutual by well the full as of yields quarter a a

reflects expenses synergies of addition million and intangible expenses, Bank’s Mutual be amortization incurred to the This expected Omaha cost million. of in expenses costs and absence Operating $XX of the we with merger of excluding $X,XXX and the integration XXXX of associated acquisition. the million is operating $XX

million of items increase $XX noteworthy highlight costs, and Intangible operating quarter. we addition million to we In merger approximately this is as expected to to each $XX in which base, expect amortization to quarter. per core will expense acquisition incur asset

cost reductions and above As of synergies in over committed continuous improvement are XXXX I are planned. mentioned to before, targeting expense million net an the and already we $XX additional

the synergies the in these and and integration of merger costs. – the XX merger-related appendix integrated illustrate and and XX and impact changes Slides

benefit are the XXXX addition quarter, Mutual and first operating increase seasonal quarter when to For the of compared the expenses restarts. Bank Omaha expected with fourth to of

efficiency the ratio net to expect for noteworthy the last The XX% XX% mid Net benefit expected although between to the restarts. to remain XX to to items XXXX, to XX through increase are points, expected remain cycle in is year, expected risk elevated to in charge-offs we reflecting the quarter, are and excluding as area basis similar continue higher first the area it portfolio. assets

the that as will be the adoption driven will anticipate CECL provision We more volatile be in XXXX two many of day by impact factors. with the

estimate For average $XX the of increase to recent now, compared million quarter. implementation our post $XX quarter, of will million an we to $XX guidance most million to provision $XX per million to CECL per

The discrete and rate items. XX% effective excluding is XX% remain expected tax between to

We for are be earlier. ratio targeting as fourth to I CETX the quarter indicated XX.X%, the

targeting least on at equity, for focus be to are normalizing XXXX the improve the We return to of to at end preferred and on excluding XX% semi-annual further. tangible opportunities the items common dividends and continue noteworthy

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

Ellen Alemany

look John. started year momentum strong forward phase to plan. of we next with We Thanks, this and the the

to achieve of in common this profitability the focused our return closing on quarter peer and further we’re fourth on XX% year We’re with group. gap tangible the equity poised an

equity and frontends XX% of we will we the the believe more a the made With additional in lower the medium our XX% the operating business capital of business medium costs, additional mainly term. we of profitability deposit bank have tangible in for return in optimization, acquisition, to term from improvement investments additional fee come the set, targets we’ve in efficiency, income. and opportunities The common can on costs the the achieve funding, over improved

as this We take to stage of provide plan. will that, And on progress next happy to questions. continue we’re through with the go our updates we your

Operator

you. Thank

session. Ken We the Stanley. begin today first will go question And from of Zerbe now Instructions] Please comes ahead. Morgan [Operator the question-and-answer

Ken Zerbe

the $XX off, Great, numbers I in addition terms I XXXX Bank just I I savings. additional in thanks. think both also and to make want Omaha the Good I want think right, there. make that’s million because I got just cost starting of and of heard cost to because the XXXX. heard year morning. of I expenses, in sure right Maybe sure sure, make said want you Mutual the to I saves But to

is trying amortization XXXX, what we targeting? that just I’m the think right be what Thanks. – to in So and about expenses, we the the core out should figure is XXXX number when ex like

John Fawcett

Yes.

is So Ken, this John.

So elements this. to there’s two

the million, is we XX. the when consistent on deal $XX August we first is The what which with announced guided had

the I’m over $XX of motion. that’s So million, that the in course a a and there’s of XX, will but couple that slide And exactly back years. be is, actually and that what realized it XX the of deck, not sure page articulates

is So is that over expectation three phased the that The more years. $XX million in just of will come faster.

from synergies So Bank. that’s the cost to bit the Mutual that Omaha relates to it’s XXXX, and come

at still a that the would run separate up year, synergies as that $XX look we least will place And million at come $XX once I said XXXX. early $XX last on we another program Apart thing into whole actually together, for. million, get we’ve million from the larger embarked but to and it’s days, we’re signing that, there’s say

the two So discrete those are buckets.

in those necessarily said, sand. that Now the bright aren’t – bright lines

I think over-index over-index as done to and the to attempt we million we we’ve continue XXXX. in $XX and demonstrated, on will the will on million in $XX XXXX,

Ken Zerbe

Okay.

is the $X.XX – about those way and $X.XX the – items, clear all and though, then or course, ex just like think are like… that $X.X to are expenses charges, in billion, the right XXXX in to billion XXXX? including core And billion of be these numbers, So merger all-in

John Fawcett

Yes.

expenses you’d lower than expect million the operating expenses $X.XXX you of that. XXXX billion, be took to So $XX if core minimally

the at be you’d So $X.XXX billion.

Ken Zerbe

Got it.

helpful. expense million million $XX sure – $XX to Omaha think then verify terms this just when That please. sorry, ahead, of of in I expense, to due also, go Bank Okay. heard of make right. thought to And I about the quickly, first I I in provision quarter. CECL you to impact But Mutual number. want that the is just want very get provision actually I really

John Fawcett

No. Yes.

was it a my So script. mistake in

is it’s of is so in to Page with the the in $XX XX. whatever which $XX page terms million, the CECL back guidance, million And consistent

So to million, million it’s $XX not million to $XX $XX million. $XX

Ken Zerbe

Of provision? Omaha just Mutual of

John Fawcett

Correct.

Ken Zerbe

Is say, the you and a $XX normal the that, looking should to of of than about think take million, going down like be million million we $XX then dropping If quarter it? way provision $XX-something million, so it right to provision, midpoint you in forward? the roughly first add $XX that

John Fawcett

to well, to first Above provision going the going that’s in the through is be the – quarter noteworthy. come

catch-up. And kind so that’s going to be a of onetime to

for we’ve think the per that million to given Mutual including the – full it’s of Bank. year guidance $XX I million quarter, Omaha $XX is

Ken Zerbe

not But item? noteworthy the

John Fawcett

right, noteworthy, which in through the not the comes first But quarter.

we first quarter, through in through because closing pass – to actually fourth X, on equity. January the had it’s By it’s the kludgy able been that pass this little of a would it acquired So in going P&L. the have think virtue I to

Ken Zerbe

okay. helpful. All you. right, Understood, very Thank

Operator

The of next today Please question Credit Orenbuch from Suisse. Moshe comes go ahead.

Moshe Orenbuch

we how flesh margin you points. John, Is Are of you as guess Omaha, before? kind number that does changes accounting? the you And QX. bit? can by would of think a you what Thanks. grow? Great. Mutual does three I it when had that there thought – go walk consistent margin out about because like forward, kind with help about purchase talked of Like, into of a you little that of that lot maybe said basis the

John Fawcett

Yes.

working we’re purchase the still So through. motion, accounting

still by going of what all there. reflected there’s that the think the in But to time terms pieces ultimately I should file the in of accretion we is purchase accounting kind moving be. And be so K,

up has that that in their of of things in announced think CAB cost moved terms time deal I deposits the the happened one the the deposits. of we August, from

cost I so originally, basis said when benefit the It And would that deposit guided think to XX we out XX turns we at points. points. be basis

All floating of their rate. lending are activities essentially

So as so business. of that LIBOR goes, book goes

rates their were And little bit by similarly, we impacted adversely portfolio. a increasing on

a moving at basis, on there’s a I think few looking pieces. this, go-forward

and pretty right Rail going band, create there. ones a we from and – our not range expect would move big the think happens would is Rail around X% be going that are I just at what But to banking, interest to lot. net point Rail, potentially apart now, we And pure around margin kind deal right a to something, where opportunity the we’re worst-case – If X there it that’s of kind more some we believe clawback. scenario. trade actually manifests the drag. there’s at Phase least, of trade XX less, or five And into to looking of basis believe, be

we’re I to think that continue instance the our cost. here just going other important is online manage really to down that’s

is XX do in the XX a Fed into another we’re and points the We we the that that’s about out. And we’ll that basis notwithstanding January the basis expectation did online, non-maturity attrition so meaningful we’ve this all first cost aggressively of we X. of little most cuts. more haven’t is in particularly and deposits, thing in seen so tease levels holding But points and into script, fact to bit our the down quarter in kind that so on. five in important reduced deposit relationships, second any The we’ll against of continue quarter, say

Z. opportunistically again, that relatively the we’ve to kind reduction at there continue that will goes risk these baby one-time you’re apart or we the assets, to done we’ve we that’s flow the to and and the boomers then see the the net to LCM of finance gain sell two they’re increased that these To thing of of way interest extent margin, non-interest income. high-yielding from margin in And that look is margin depositors and offsetting of net And already to a mix profile the trades going assets, remixed out X, manage that, and Y, through business. generation only from other transitioning back

the a mindful at basis. And impact NIM quarter-to-quarter could, kind of of And margin, on that that. we’re so

Ellen Alemany

going John, I combined But of to addressable add, the really adding, addressable want also our just the to impact that market on we’re the going commercial that lower have an Bank Yes. Mutual us help expand cost going to helping to our that is lending and we’re from benefit is volumes. And really Omaha market. that of savings relationship et get deposit business with managers cetera, XX

John Fawcett

gross guess we we’ve higher If avail of. lending, handle actually I thing, we’re that the that there mortgages like would correspondent had presents in into ourselves mid-X kind in recycle able an of got on still commercial also And to billion last opportunity it. Yes. terms yields a lending probably of the correspondent $X.X on opportunity, that

Moshe Orenbuch

other about of against a following asset loan Right. lot fair whether think be kind And during when XXXX? of kind the kind of loan maybe might overall how about of those corollary, assets? you to on kind you growth earning seeing or growth up decreasing kinds of kind bit margin And be is the as much points, of talked those assumptions. kind I of which of that a calculated, any you mean as a increasing sales you’ll sense

Ellen Alemany

in Yes. mean, No, Commercial been is is relationships. low And profitability efficiency, – recycling We’ve we’ve pivoting business single-digit things our focus away of whole growth, the really growth. Banking credit-only our just returns leadership Rubino’s driving the really quarterly guidance with a been business. I Bob been doing we’ve lower-yielding from one in under and I general, just on capital

And continuing reduce to $X.X our loans criticized assets. and we level of which It’s in assets. our fourth roughly at billion, of is lowest X% our of were in We’re fact, kind around the commercial criticized leases. quarter,

growth business. consultative investing in In bankers. XX added selling a been good had we bankers customer We Capital, year industry relationships in capital momentum fee in We there. the We’ve we’ve in We’ve about about we new and channels. been really capital salespeople deepening new finish and Commercial improvements business, had in definitely of some markets strong in Business XX%. had new focusing investing There’s client on of hired lead the X in Banking, shift there. the had We a table added in markets. the through of some verticals and

the lot we business. good So a momentum frontend in have of

John Fawcett

Mortgage And Moshe, looking consistently opportunistically just I the to loan at of add a that we’re couple – out sales is where portfolio. of only Legacy things. The think Consumer thing

I to all places. just other be made to But potentially risk-weighted opportunistic in look Ellen strong is the continue suite across that very the remain assets, pipelines businesses. our of we points of or could think we at As capital follow-on on of one

only originations quarter beaten quarters, fourth second last by quarter strongest fourth of the XX our quarter in Our year. were

pretty one of everybody challenges the of face, I But So prepayment. levels. at level think remains origination elevated we the continue activity faces, to is

strongest while quarter that we’ve fourth seen quarter So XX quarters, of fourth second the in was XXXX out was of of our the quarter XX the level quarters. prepayments highest

still And tons in market. the of so there’s liquidity

Moshe Orenbuch

you. Got it. Thank

Operator

The Please Eric Wasserstrom next question of comes ahead. today go UBS. from

Eric Wasserstrom

much. very Thanks

CECL I on Slide discussion, I sure just understand at want John, looking make just impact hate to I to but XX this, capital So the do component. the

In Omaha direct terms upper Mutual the of the is portion correct CIT slide in the the guess, of Mutual phase-in, terms the that capital first Omaha but in of quarter. phased in the in, is Is it portion I that of contribution, is to that for correct?

John Fawcett

correct. Yes, that’s

over and in to the that you that on Omaha first, million through to present is basis $XX million million is to a years we’ll presumably noteworthy. P&L below to million $XX $XXX the – Mutual regulatory as see run $XX going the and So related CIT phased to three Bank of related our

Eric Wasserstrom

it. Got it. Got

guess of that’s slowing is I – renewal And some talked just that of maybe impression. Or be core the my But of then seems the that on the seemed it has reacceleration. question this improving. compression some in but lease about, guidance to And you if there way? is just it it’s, rates renewal my suggests changed was rates, Okay. sort some perhaps it in lease that

Ellen Alemany

I X% Business Capital really so Rail in for or quarter, business? the about that Capital, the would Business say talking Are year-over-year. but were we Well, you flat

Eric Wasserstrom

Sorry, the Rail. was sorry, I – on adjusting

John Fawcett

Yes.

Eric, for of while on the that the Rail market. tanks to been quarters been business, freight softness in continue messaging improve, So couple think a I we’ve there’s some

down. kind fairly extent the of of the XX%. last year, I it’s it was what You to is, XX% is messaging can kind to of see that trade that think, I here, with there silver in The consistent a think come utilization as the But deal. lining it’s benefit

Ellen Alemany

Yes, we’re momentum market the the pressured XXXX. to fleet we’ve right. But as continuing rates Rail year I mean sector into had in is are slow. the And and industrial and utilization production negative general, in heading

railcars to storage, railcars and One is and things about like at, the every take of is look that storage review I’d and a XX%. at

most we So that being a think segments in The But manage doing expecting are lot to declines. that. Rail. I pressured renewals are in we’re

And potentially I X that agreement beneficial be China the business. the to think trade could Phase

cars last year. to and management incremental second is volume team we’re I that we readiness, about this program our allow some hopper to on asset thing us ready-to-load had really think take with the our started being deal vigilant covered

lot we’re of we’re in down and maintenance drive continuing improvements of the I business some we’re shortening in our lease a rates, making think cars, operational to up and cost. the

think So the all I to things despite the team in doing is slowdown, mitigate the slowdown the the business. right

John Fawcett

concentration of cars years. diversified that average a larger It’s It has industries. serves it cycles. higher very more. mean a life, fleet. Yes, is I mean then. is, of young well-maintained a fleet couldn’t fleet, the we’ve of I of an agree goes long useful on XXX,XXX-pound this it’s from fleet life as I before, a our pretty times cars, reality look, It’s said think a XX dozens XX% many these life and long assets I GRL

strong more oriented. a is service it’s is the a put with around very to efficient extent larger management car. very a So efficiency, in PSR that that stuff And you operation can team

So good just – feel you the a it’s with we to the on and got business flows. go about long-cycle but ebbs business, and

Eric Wasserstrom

And John, question. if last one in I may, sneak

the it’s bit XX.X% than basis year suggests Just with end guidance the that the think a CETX that respect the an points less – quarter, provided, you contributing that. this is about XX.X trying just accretion XXXX, the I’m to to factors what to at of which past. maybe in obviously, been a through Because by

make puts and And so want sure through four next I math sort quarters. I the just takes the over understand to CETX of the

John Fawcett

Yes.

we’re to to million be going going driven integration that, through P&L. – go are principally going have charges of to forget, it’s to $XX in it’s earnings. be But look, going are the So that don’t Rail by that

to than be it way trying the out, but that, we the think if I a fourth that think, under-deliver. mindful we than little – don’t this we’re model I And think but even quarter, you overpromise that. could and sooner end be bit of probably I sooner

to guided we so that. pretty good we quarter, about So the feel fourth

transaction that a And that as and actually that that of at you we regulators, the is we parent, and in visibility I on to the Fed OCC. XX% very equity delivers to this think mindful the Omaha don’t the had $XXX CETX Eric, our that had hard have have we close be other to million point, floor we perfect Mutual committed

that. prepayments, of risk-weighted you’re as long at, so wind CETX to up fourth originations bit a XX.X% ratio. nobody very And which and And manage divining the is mindful might through trying little quarter, good we’re assets that really we

finish So even. could at if XX.X-ish we

depend to just and ending point. going not starting as well as point as – a as well the the it’s on lot So

Eric Wasserstrom

it. saying? Got XX.X% for you’re Jan X,

John Fawcett

the Well, end first quarter, XX.X% at of the yes.

Eric Wasserstrom

thank At for All the the explanation. end you right, the first, okay. of

John Fawcett

Eric. Thanks,

Operator

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

Chris Kotowski

said actually, the at XX coincidence, also August looking where your I’m book and presentation at were a book the value just Page August you at had morning. tangible $XX.XX, dilution. anyway, Good to book then as Page your in deck then from And Yes. projected tangible slide And Page looking in million. year-end you XX that at versus be when what August, dilution see tangible But of be $X.XX. million it out at turned the XX, in look would was. $XXX penny you I to goodwill I which to had $XX the

I Omaha’s just So assume pro what it’s $X trying $X.XX about Mutual to own should take charge. your And back should out figure that for we book a we $X.XX, $X.XX of also forma need I’m tangible then is. of roughly and the charge intangibles. into for extra we an CECL to CECL –

correctly? $XX getting under So just tangible Am thinking like something up I I book about end that that. a

John Fawcett

quite moving do Well, there I think parts. Look, still some it yet. are wouldn’t I just

and still available be we’ll work, for We’re value when should the case. the station have – done working fair submit we through it

your are mean, It’s right. But logic I So I of the of arithmetic is far wouldn’t of the terms a what get question points too in just numbers. starting ahead of myself.

difference time to the obviously don’t goodwill impact we had page between estimate be. have have going is you largely page, think would thing I the you’re divined the and CECL is that what difference but at $XX the the the that back $XXX and around other on I the million August seeing the XX, the between that million

we So between live as and we’re the visibility we $XXX it, visibility million. live getting portfolio, it. with million we better with that’s into getting big $XX it. We didn’t into difference CECL And we’re perfect – the live and the with their have as obviously

Chris Kotowski

between say CECL million And kind what allowance loss ongoing me like for have on additions. it. additional, would Okay. of it? Can to million you historically, next, to $X.X have the you’d $XX the to the if how it? impact reserve X.X% Omaha of of you it reserve Mutual Because loan then of like is just loss higher in to seems million Mutual loan addition Omaha to $XXX of growth, out the loan break that of And is with provision what the add

be that impact? Is $X will Now the it million. main

John Fawcett

It’s probably bit remains kind I of little of follow wildcard. with think up Barb Look, a something CECL on. a you better

Mutual what we’ve Omaha. is to bit modeling our through of think of as terms still CECL an it it’s portfolio, in done around on very I While days working extensive early that it relates we’re of

that a in same Omaha. to market unique that. it. which reserve-based with too, it’s of that face Bank of that with lending we portfolio the understand elements pretty over all what’s satisfied marked. Omaha I more But well the because to it I thing, think think something the other is our the the we’re way as exception challenges modest again, think seeing It’s from follow. with book of we’re space, extent coming not Mutual well through. We we’re of And the very that in especially in to kind Mutual portfolio, some going the just is very we’re to at It’s I much exposed of nothing

Chris Kotowski

Okay, all me. right. That’s Thank you. it for

Operator

Please question Our go next Citi. Instructions] comes [Operator ahead. from Arren today of Cyganovich

Arren Cyganovich

target improvement you Ellen, it’s XX% relative the big XXXX. return tangible your where for common equity end mentioned medium-target you. had to about is the for that of pretty to XX%, Thank

And can of efficiency? driving loans, to the XXX to But be years? mentioned the would how I’m I what years? business, do just Is will basis notable? that. more five medium three of expected get see the then particular it be points. in that scale refer that the you that things You to some cost as more is growing Is Is guess, trying we there XXX term? that anything

Ellen Alemany

Yes.

it’s where the it’s the So really company. to about three medium this term from one that we is with guidance parts refer just as – years. out think it’s I nice And new all over coming – of coming

investments about position I CIT of we the ever pivoted. we’ve of couple the transaction lot cetera. business, had a just the we’ve that the best years through the we’ve that of I is think made Omaha were where we with the a we And Mutual company, talked shrinking been. think been and right et in pivot And now

have in market And positions We most chart. so the of HOA leading acquisition one to of Mutual, with businesses. we’re number core business the we our getting business, that add another

balance We risk with improved sheet have a stronger profile.

past credit parent. a management size record team. a we it’s by Banking great still level lot days the to do that team been completed regulators regulatory execute. any don’t are signing the got because company. We’ve lot a the deal days ever quickly this year, XX this added from forget XXX and the separate at time, as of I can and from don’t We the deal in has approved closing. have approval. been we of to Our work I have in Commercial think lowest We’ve talent mean

really not just our and banking the middle market us getting XX expand then it’s normal integration. an teams It’s we’re it’s a And where a helps it’s acquisition. franchise. So an deal separation, banking that

at got So momentum of lot we’ve a company. the

get that was have first to this this medium-term this team acquisition in target is I management key doing. to levers the think reductions the is – OpEx. We we

was And the conservative. team very as to we’re John from the transaction. said, of saves trying some the think I expedite

more selling factoring lot bank, working strategy, shift of and whole the which efficiently. leading income We’re a will primary There’s fee initiatives management. and more deals, assets bank bank emphasis into getting treasury on be funded this on in

lower-yielding capital recycling relationships. from away We’re

lower deposit online as though online pressure the through away CAB going capital – share our channel. from take to rates our the deposits, to And hoping even risk from it’s company with primary costs. optimize work to we’re from then the continuing away the lastly, going going that’s to channel, take some improvement to now to in bank pressure able we’re And going and at profile stay, still that is We’re then our be the deposit repurchase.

So we’re about major market optimistic any we’re very absent conditions, about really optimistic our – future.

Arren Cyganovich

Great. Thank you.

Operator

Next comes ahead. question from Please today KBW. Brian Klock go of

Brian Klock

Hey, good morning, and Ellen John.

Ellen Alemany

Hi, Brian.

John Fawcett

Hi, Brian.

Brian Klock

the guidance I’m around average around gave wondering loan acquired I know from the say, guess should earning little then of Should $X.X growth of of coming portfolio? had, guess, guidance forma. so $XX.X you quarter specifically – assets of a of billion year about, single-digit if of I’d in could growth, runoff a let’s about average growth Mutual some Omaha. be like I the bit pro noncore if about assets of point Omaha, a core because fourth assets some you what you’ve the you think and just earning I I like and call earning I in I got the something billion it, Mutual the that adding billion. in low it’s, asset the average on $XX.X follow-up from think starting that’s add throughout and

John Fawcett

digits. mid-single is Well, guidance the

I pretty where at. we’re with comfortable think we’re

the think doing between as Omaha I Bank some before, strong. think said and are all what We’ve Mutual here. I synergies lending to actually the I see we’re of started business already pipelines

the from growth $XX to mean $XX bit, I million, in it. drops it. So significant. impact loan is apart $X.X billion runoff going sell The modestly it’s trunks, not at investment If – portfolio. little and be will million we million of a securities, it’s $XX or impact all but – it a your LCM that driving

And moving then there’s we’ll any see if pieces.

if well going between that into migrate the lending, higher be kind RWAs, yield $X.X risk you’ll XXX% I from to and of commercial XX% – think risk as that presumably billion increase from because weighted. correspondent provide lending lending some the weighted gross correspondent will we away recycle can in between

guidance terms particularly we that feel or average what more about given growth actually the of So in loan earning asset comfortable pretty we’ve growth.

Brian Klock

Okay.

assets. mid-single your guess, really, security loan average all way portfolio of your read earning So kind I stable, relatively of digits as through growth I through the to probably the the core remains –

John Fawcett

time, we’re to liquidity, where with Yes. substantial to The appreciably It’s the always and securities not portfolio efficient the putting return. balance opportunities And change. then same of the a going sheet looking is more we dollars mindful be for use of generate can at HQLA. being but

Brian Klock

it. That’s helpful. Got Thanks, John.

John Fawcett

Brian. Thanks,

Operator

like This management turn closing to concludes our over remarks. I would question-and-answer back to for conference any the session.

Barbara Callahan

Great. Thank you, joining morning. everyone, this for

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

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

Operator

The concluded. Thank presentation. today’s attending conference has now for you

You disconnect. now may

Cit (CIT) 28 Jan 202019 Q4 Earnings call transcript